COMMISSION STAFF WORKING PAPER BOSNIA AND HERZEGOVINA  2011 PROGRESS REPORT
Date: 2011-10-12
Institutions: European Commission
Subjects: Bosnia and Herzegovina, accession criteria, pre-accession aid

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
SEC(2011) 1206 final 

COMMISSION STAFF WORKING PAPER 

BOSNIA AND HERZEGOVINA  2011 PROGRESS REPORT 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Enlargement Strategy and Main Challenges 2011-2012 

{COM(2011) 666 final} 
{SEC(2011) 1200 final} 
{SEC(2011) 1201 final} 
{SEC(2011) 1202 final} 
{SEC(2011) 1203 final} 
{SEC(2011) 1204 final} 
{SEC(2011) 1205 final} 
{SEC(2011) 1207 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 3 

Preface.......................................................................................................................... 3 

Context ......................................................................................................................... 3 

Relations between the EU and Bosnia and Herzegovina ............................................. 4 

Political criteria ............................................................................................................ 6 

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

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

Regional issues and international obligations ............................................................ 20 

Economic criteria ....................................................................................................... 23 

The existence of a functioning market economy ....................................................... 23 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 28 

4. 

European standards .................................................................................................... 30 

4.1. 

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

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

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

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

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

4.1.5.  Competition................................................................................................................ 37 

4.1.6.  Public procurement .................................................................................................... 37 

4.1.7. 

Intellectual property law ............................................................................................ 38 

4.1.8.  Employment and social policies, public health policy............................................... 38 

4.1.9.  Education and research .............................................................................................. 41 

4.1.10.  WTO issues ................................................................................................................ 42 

4.2. 

Sectoral policies ......................................................................................................... 42 

4.2.1. 

Industry and SMEs..................................................................................................... 42 

4.2.2.  Agriculture and fisheries ............................................................................................ 43 

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

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

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

4.2.6. 

Information society and media................................................................................... 49 

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

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

4.3. 

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

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

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

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

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

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

4.3.6.  Protection of personal data......................................................................................... 59 

Statistical Annex ...................................................................................................................... 60 

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1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
the  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 Interim 
Agreement/Stabilisation  and  Association  Agreement  and  the  European  Partnership 
priorities.  

This report covers the period from October 2010 to September 2011. Progress is measured on 
the basis of decisions taken, legislation adopted and measures implemented. As a general 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 enables 
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.  

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

1.2. 

Context 

Bosnia and Herzegovina is a potential candidate for EU membership.  

An international presence under UN auspices - the Office of the High Representative (OHR) - 
has been in place in Bosnia and Herzegovina since 1995. The Peace Implementation Council 
Steering Board has set objectives and conditions3 to be met for the closure of the Office of the 
High Representative. 

1 
2 
3 

The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
Enlargement Strategy and Main Challenges 2011-2012 - COM(2011) 666.  
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  award;  4)  Fiscal  sustainability  (promoted  by  an 

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The  country's  Constitution  was  drawn  up  as  part  of  the  internationally  agreed  1995 
Dayton/Paris Peace Agreement. It establishes a complex political structure that provides for 
governments at State, Entity and District levels. The State-level comprises 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  State-level 
Constitutional Court, with the State Court of Bosnia and Herzegovina and the High Judicial 
and Prosecutorial Council being established later. 

One year after the general elections of 3 October 2010, the process of establishing executive 
and  legislative  authorities  remains  to  be  completed  with  the  establishment  of  a  State-level 
Government.  The  failure  to  reach  a  political  agreement  on  the  formation  of  authorities  has 
hampered  Bosnia  and  Herzegovina's  progress  on  much  needed  reforms,  in  particular  as 
regards  the  harmonisation  of  the  Constitution  with  the  European  Convention  on  Human 
Rights (ECHR)4 and the adoption of a State Aid Law at State-level. Moreover, the adoption of 
the  State-level  Law  on  Household  and  Population  Census  remains  essential  for  the  socio-
economic development of Bosnia and Herzegovina and future EU integration steps. 

A  shared  vision  by  the  political  representatives  on  the  overall  direction  and  future  of  the 
country and its institutional setup is lacking. The EU accession process requires political will 
and  functional  institutions  at  all  levels  with  an  effective  coordination  mechanism  on  EU 
matters.  The  EU  has  reinforced  its  role  in  the  country  and  continued  to  implement  the 
objectives of the EU agenda, in line with the March 2011 Council Conclusions. The European 
Union  Special  Representative  (EUSR)  to  Bosnia  and  Herzegovina  and  Head  of  the  EU 
Delegation took up office in September as a single EU Representative.  

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 
Agreement  (SAA)  has  been  ratified  by  all  EU  Member  States,  but  has  not  yet  entered  into 
force.  Implementation  of  the  Interim  Agreement  by  Bosnia  and  Herzegovina  remained 
uneven, including as regards various measures introduced to protect the domestic market. The 
country  is  in  breach  of  the  IA  due  to  non-compliance  with  the  European  Convention  on 
Human Rights and with the rules on State aid.  

The overall pace of reforms has been very limited. Respect for democratic principles and the 
right to equal treatment without discrimination, as embodied in the ECHR, remain essential 
requirements of the IA and of the SAA. The lack of a credible process for the harmonisation 
of  the  Constitution  with  the  European  Court  of  Human  Rights'  (ECtHR)  decision5  of 
December 2009 in the Sejdic-Finci case, remains an issue of serious concern. 

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. 
The Sejdic-Finci vs. Bosnia and Herzegovina case, December 2009, regarding ethnic discrimination for 
representation in the institutions of the country for persons not belonging to one of the three Constituent 
Peoples.  
See footnote 4 

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Within the framework of the Stabilisation and Association Process, Bosnia and Herzegovina 
engaged  with  the  EU  on  a  Structured  Dialogue  on  Justice  in  June,  aiming  at  ensuring  an 
independent, effective, impartial and accountable judicial system. In reply to the request for 
technical  information  handed  during  the  first  meeting  of  the  structured  dialogue,  the 
authorities of Bosnia and Herzegovina submitted a detailed report on their judicial system.  

The  EU  provides  guidance  to  the  authorities  on  reform  priorities,  including  the  European 
Partnership.  Progress  on  these  reform  priorities  is  encouraged  and  monitored  by  the  bodies 
established  by  the  IA.  Six  Interim  Sub-Committee  meetings  and  one  Interim  Committee 
meeting  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  at  an  expert  meeting  in  May 
2011.  At  the  end  of  2010,  an  agreement  was  reached  on  the  supply  of  electricity  to  Brcko 
District and on the launch of a comprehensive review of electricity legislation. 

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.  In 
September, the EUSR mandate was transferred from the OHR to a single EU representative 
acting under a double-hatted mandate as EUSR and Head of the EU Delegation. The mandate 
includes a broad and balanced set of instruments to maximise the incentives provided by the 
EU. 

In March, the Foreign Affairs Council underlined the fact that the EU Police Mission (EUPM) 
and  EUFOR  Althea  are  important  elements  of  the  EU  overall  strategy  for  Bosnia  and 
Herzegovina.  The  mandate  of  the  EUPM  focuses  on  the  fight  against  organised  crime  and 
corruption. The EUPM has continued to monitor and assess implementation of police reform 
and  accountability,  and  to  provide  training.  The  mission  currently  has  273  officers  and  its 
current  mandate  will  end  in  December  2011.  The  EUFOR/ALTHEA  military  operation 
contributed  to  maintaining  a  safe  environment  in  the  country.  Particular  emphasis  has  been 
placed on providing capacity-building and training. EUFOR forces number about 1,300 troops 
in  theatre.  In  2010,  the  UN  Security  Council  extended  the  mandate  of  EUFOR  until 
November 2011. Both missions will be kept under regular review, including on the basis of 
the situation on the ground. 

Visa  liberalisation  for  citizens  of  Bosnia  and  Herzegovina  was  granted  by  the  European 
Parliament  and  the  Council  as  of  15  December  2010.  It  applies  to  holders  of  biometric 
passports  travelling  to  the  Schengen  area.  This  decision  was  based  on  fulfilment  of  the 
specific conditions set out in the roadmap for visa liberalisation. The rules for visa-free travel 
have  been  respected  by  the  vast  majority  of  travellers.  To  ensure  the  continued 
implementation  of  the  commitments,  a  post  visa  liberalisation  monitoring  mechanism  was 
established in view of increased numbers of asylum seekers from the region. The Commission 
presented its first monitoring report to the European Parliament and the Council in June 2011. 
A readmission agreement between the European Union and Bosnia and Herzegovina has been 
in force since January 2008. 

As  regards  the  common  foreign  and  security  policy  (CFSP),  during  the  reporting  period 
Bosnia  and  Herzegovina  aligned  itself,  when  invited,  with  45  out  of  66  relevant  EU 
declarations and Council decisions (68 % alignment).  

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 

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implementation  of  financial  assistance  in  the  country.  Little  progress  has  been  made  by  the 
the  necessary  structure  for  decentralised 
country's  authorities 
management of EU funds (DIS). 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 not agreed.  

towards  establishing 

The implementation of the 2007-2009 national IPA programmes is ongoing. The Multi-annual 
Indicative Planning Document (MIPD) for the period 2011-2013 has identified the following 
three priorities for IPA support: supporting the strengthening of the rule of law, improving the 
capacity  and  efficiency  of  the  public  administration  and  supporting  social  and  economic 
development.  

The  lack  of  agreement  between  stakeholders  in  the  country  regarding  the  projects  to  be 
financed  under  the  IPA  2011  national  programme6  delayed  the  completion  of  the 
programming exercise in 2011. The difficulties encountered during the programming exercise 
demonstrate the need to urgently address the issue of coordination on EU matters within the 
country's  institutions  at  every  level.  Strengthening  coordination  mechanisms  on  the 
programming  of  future  EU  financial  assistance  and  on  other  EU  matters,  is  an  issue  to  be 
addressed as a matter of urgency.  

Furthermore, Bosnia and Herzegovina benefits from the IPA multi-beneficiary programmes. 

Development of civil society in Bosnia and Herzegovina continues to be supported under the 
Civil Society Facility, with the emphasis on building the capacity of government institutions 
and civil society to engage in a dialogue, reinforcement of local democracy, environment and 
climate change. 

The implementation of the cross-border cooperation programmes 2007-2009 between Bosnia 
and Herzegovina and its neighbours Croatia, Montenegro and Serbia is ongoing. 

Bosnia and Herzegovina participates as a full member in the 7th Framework Programme for 
research, technological development and demonstration activities (FP7) and in the COST and 
the EUREKA networks. Bosnia and Herzegovina became an associate member of the Culture 
2007-2013  programme.  Bosnia  and  Herzegovina  is  preparing  for  its  participation  in  the 
Lifelong Learning Programme.  

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, 
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). 

6 

The IPA national allocation for 2011 is € 102.6 million. It includes the IPA 2011 national programme 
(€ 96.3 million) which will cover projects in a variet y of areas, including to support the judiciary, law 
enforcement, public administration reform, education, social inclusion, refugee returns, cultural heritage 
and  demining.  Other  sectors  include  support  for  local  economic  development,  water  sector,  waste 
management and energy efficiency. 

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2.1. 

Democracy and the rule of law 

Constitution  

The  Dayton/Paris  Peace  Agreement  put  an  end  to  the  1992-1995  war  and  brought  peace  to 
Bosnia and Herzegovina. However, Bosnia and Herzegovina's Constitution, which is Annex 4 
to the Agreement, established a complex institutional architecture, which remains inefficient 
and  is  subject  to  different  interpretations.  The  complicated  decision-making  process  has 
contributed  to  delay  structural  reforms  and  reduce  the  country's  capacity  to  make  progress 
towards  the  EU.  Few  credible  steps  have  been  taken  to  improve  the  adoption  of  key 
legislation relevant to EU integration and to harmonise legislation between the State-level and 
the Entities. 

The Constitution of Bosnia and Herzegovina prevents citizens who do not identify themselves 
as belonging to one of the three constituent peoples (Bosniak, Serb and Croat) from standing 
as candidates for the Presidency and the House of Peoples of the Parliamentary Assembly. No 
agreement has emerged to align the Constitution with the European Court of Human Rights 
(ECtHR) decision7 regarding discrimination against citizens on the grounds of ethnicity. The 
lack  of  a  shared  vision  by  the  political  representatives  on  the  direction  of  the  country  has 
hampered progress on this issue. The first inter-institutional working group which was set up 
to implement the ECtHR decision failed to reach an agreement. The establishment of a new 
Working Group, as recommended by the Council of Ministers in August, is outstanding.  

The  Republika  Srpska  National  Assembly  (RSNA)  adopted  Conclusions  and  a  decision  on 
holding a referendum challenging the State-level judiciary institutions and the legitimacy of 
some decisions by the High Representative. Following the EU facilitation, in June the RSNA 
repealed  the  decision  on  holding  a  referendum  and  amended  the  Conclusions.  Within  the 
established framework of the Stabilisation and Association Process, Bosnia and Herzegovina 
has engaged with the EU in a Structured Dialogue on Justice.  

The  Federation's  Constitution  entails  complex  and  costly  governance  structures  with 
overlapping  competences  between  the  Federation,  the  Cantons  and  the  municipalities. 
Regarding  the  harmonisation  of  legislation  with  the  acquis,  the  lack  of  harmonisation 
mechanisms between the different levels remains an issue to be addressed.  

On  the  basis  of  the  Dayton/Paris  Peace  Agreement  (DPA),  the  international  community 
continued  to  maintain  a  presence  in  Bosnia  and  Herzegovina.  Regarding  the  Brcko  Final 
Award,  which  is  one  of  the  objectives8  set  by  the  Peace  Implementation  Council  Steering 
Board for the closure of the Office of the High Representative (OHR), progress was made in 
resolving the electricity issue. Further efforts are needed to meet outstanding objectives and 
conditions. 

The  High  Representative  used  Bonn  powers9  on  several  occasions,  including  by  approving 
temporary  financing  of  the  2011  budget  in  the  Federation  and  suspending  two  decisions 

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9 

See footnote 4  
See footnote 3 
The Peace Implementation Council Conference in Bonn in December 1997 decided to "give to the High 
Representative the power to remove from office public officials not complying with the Dayton Peace 
Agreement, and to impose laws which he considers necessary if Bosnia and Herzegovina's legislative 
bodies fail to do so".  

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enacted  by  the  Central  Election  Commission  concerning  the  legality  of  the  constitutive 
session  of  the  Federation's  House  of  Peoples  and  the  election  of  the  President  and  Vice-
presidents. The HR also lifted all ICTY-related sanctions, including bans against a number of 
persons.  

Overall,  there  has  been  little  progress  on  addressing  the  European  Partnership  priorities, 
which require measures to achieve more functional and sustainable institutional structures and 
respect  for  human  rights  and  fundamental  freedoms,  including  by  harmonising  the 
Constitution with the ECHR. 

Parliament  

On 3 October 2010, general elections were held for the Presidency and the lower chamber of 
the  Parliamentary  Assembly  of  Bosnia  and  Herzegovina  (House  of  Representatives).  The 
establishment of the State-level legislative authorities was delayed until May for the House of 
Representatives  and  until  June  for  the  House  of  Peoples.  The  formation  of  parliamentary 
committees, including the Joint Committee for European Integration, was completed in June. 
As  a  result,  the  adoption  of  EU-related  legislation  or  appointments  have  been  very  limited. 
The  State  aid  law,  which  is  required  for  compliance  with  the  Stabilisation  and  Association 
Agreement,  was  adopted  by  the  Council  of  Ministers  in  August  but  adoption  by  the 
Parliamentary  Assembly  is  pending.  The  State-level  Law  on  Household  and  Population 
Census, which is required for the country's social and economic development, remains to be 
adopted. In August, a full-time director and two deputies at the Agency for the Prevention and 
Coordination of the Fight against Corruption were appointed by the State-level Parliamentary 
Assembly (see Chapter 2.1- Anti-corruption Policy). 

Regarding the harmonisation of legislation with the acquis, many EU-related laws remain to 
be  adopted.  The  amendments  to  the  rulebook  of  procedures  of  the  State-level  House  of 
Peoples  and  the  House  of  Representatives,  which  are  intended  to  introduce  a  fast  track 
mechanism for EU legislation, are outstanding.  

Further steps were taken to improve the functioning of the Parliamentary Assembly of Bosnia 
and  Herzegovina.  Allocation  of  human  resources  improved.  A  communication  strategy  was 
adopted. A training centre for Members of Parliament and a visitor centre were established.  

At Entity level, the overall functioning of the Parliamentary Assemblies has continued to be 
satisfactory. In the Federation, an EU Integration Committee of the Parliamentary Assembly 
has  been  established.  In  April,  the  Federation  Parliament  adopted  a  Resolution  in  favour  of 
EU Integration.  

The  Republika  Srpska  National  Assembly  (RSNA)  has  improved  the  legislative  process.  A 
revised  rule  of  procedure  aimed  at  streamlining  decision  making  was  adopted,  reducing  the 
quorum  needed  to  pass  legislation  from  50  percent  of  the  delegates  present  to  one  third.  A 
new  rulebook  of  internal  organisation  was  adopted  by  the  RSNA,  which  reorganised  the 
structure  of  the  parliamentary  committees.  The  EU  Integration  Committee  is  in  place. 
Moreover, the Republika Srpska Constitution was amended to increase the number of Deputy 
Speakers  at  the  RSNA  up  to  four.  This  allows  "others"  in  addition  to  the  three  Constituent 
People to be elected to this position.  

The two Entity Parliaments have continued cooperating with their respective governments but 
the  cooperation  between  the  Council  of  Ministers  and  the  State-level  Parliament  requires 

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further  strengthening.  In  September,  a  joint  meeting  between  the  State  and  Entity  level 
Parliamentary speakers took place in Sarajevo. However, an effective cooperation mechanism 
is  lacking  between  the  Parliament  of  Bosnia  and  Herzegovina  and  the  Entity  Parliaments, 
despite the fact that a legal framework for coordination is envisaged in the rulebooks.  

Overall,  the  administrative  resources  for  the  Parliamentary  Assembly  of  Bosnia  and 
Herzegovina,  the  Federation  Parliament  and  the  Republika  Srpska  National  Assembly  have 
improved. However, the lengthy process of establishing legislative and executive authorities 
and  the  lack  of  a  State-level  Government  hampered  their  ability  to  legislate.  Lack  of 
coordination  between  the  State  and  Entity  parliaments  and  political  discord  between  the 
Entities has continued to hamper the work of the Parliamentary Assembly. 

Government  

Following  the  elections,  the  Presidency  of  Bosnia  and  Herzegovina  was  established  in 
November 2010 and held a number of sessions since then. The newly elected Presidency has 
held a number of regular and emergency sessions. The three Presidency members improved 
efforts  at  joint  policy  formulation  and  implementation  but  foreign  policy  coordination 
remained  subject  to  disagreements  on  some  issues.  The  chair  of  the  tripartite  Presidency 
rotates every eight months. The Presidency conducts foreign and defence policy and proposes 
the State budget.  

One  year  after  the  elections,  there  is  still  no agreement  between  political  representatives  on 
the appointment of the State-level Council of Ministers. As a result, the Council of Ministers 
has  continued  to  function  in  a  caretaker  capacity  and  held  several  sessions.  It  adopted  a 
decision on the mechanisms and modalities for harmonisation of the legislation of Bosnia and 
Herzegovina with the EU acquis. In July, the Council of Ministers issued a recommendation 
on the establishment of a new working group for the implementation of the ECtHR decision 
in the Sejdic-Finci case.  

The  formation  of  authorities  at  the  Entity  level  has  been  a  lengthy  process,  except  for  the 
Republika  Srpska  authorities.  Divergent  political  and  ethnic  interests  adversely  affected  the 
governance  of  the  Federation.  One  year  after  the  general  elections,  some  Cantons  in  the 
Federation  remain  without  a  Government  in  place.  The  deadlines  for  establishment  of 
authorities as envisaged in the Constitution of Bosnia and Herzegovina were not met. 

The Government of the Federation of Bosnia and Herzegovina was formed in March based on 
a coalition agreement between a number of political parties. The Federation House of Peoples 
appointed  the  Federation  President  and  Vice-Presidents.  On  24  March,  the  Central  Election 
Commission  (CEC)  issued  two  decisions  concluding  that  the  elections  of  the  Federation 
President and Vice-Presidents were not in line with the Election Law and that the conditions 
for  the  formation  of  the  Federation  House  of  Peoples  had  not  been  met.  The  High 
Representative  then  issued  a  decision  suspending  the  CEC  decisions.  On  this  basis,  the 
Federation  executive  and  legislative  authorities  have  been  operating.  A  Croat  National 
Assembly, comprising of municipalities and Cantons with a Croat majority, was established, 
largely reinforcing the ethnic dimension of politics in those areas. The Federation budget for 
2011 was adopted following a decision by the HR on temporary financing of the budget. 

Regarding  coordination  on  EU  matters,  the  Directorate  for  European  Integration  (DEI)  has 
increased  its  staffing  levels  but  remains  without  the  necessary  authority  to  drive  the  EU 

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integration process forward. Its role in terms of coordination on EU-related matters between 
all authorities requires further strengthening.  

The  government  of  Republika  Srpska  transferred  the  European  Integration  department  from 
the  Prime  Minister  to  the  Ministry  of  Economic  Relations  and  Regional  Cooperation.  A 
harmonisation  unit  in  charge  of  screening  Republika  Srpska  laws  with  the  EU  acquis  was 
established, while other units dealing with EU integration and donor coordination were also 
established  within  the  same  ministry.  The  administrative  capacity  of  Republika  Srpska  to 
monitor  EU-related  laws  improved.  However,  an  effective  coordination  mechanism  remains 
to  be  established  with  the  State-level  authorities  on  EU  matters  in  order  to  harmonise  the 
transposition of the EU acquis throughout the country. 

The  Federation  government  has  established  an  EU  Integration  Unit  in  some  ministries. 
However, the Federation General Secretariat dealing with EU integration lacks the power to 
monitor  the  implementation  of  the  EU  approximation  action  plan.  The  lack  of  capacity  for 
coordination  of  EU-related  matters  within  the  Federation  government  and  between  the 
Entities and the State-level remains an issue of concern.  

In the Brcko District there is a procedure in place for the harmonisation of legislation with the 
acquis. However, the legislative office following this process requires strengthening in terms 
of human resources and of specialised training. 

As regards policy planning, the country development strategy and the social inclusion strategy 
were adopted by the Federation government and by Brcko District. However, adoption by the 
state-level  Council  of  Ministers  and  by  the  Republika  Srpska  government  remains  pending. 
Overall policy planning in Bosnia and Herzegovina as a whole remains impeded by the lack 
of up-to-date census data. The adoption of the Law on the population and household census 
remains an issue to be addressed as a matter of urgency.  

At  the  Entity  level,  legislation  is  largely  in  line  with  the  European  Charter  for  Local  Self-
Government. The Governments of the Federation and of the Republika Srpska have prepared 
a  code  of  relations  in  order  to  improve  coordination  between  the  different  levels  of 
government.  

Overall, little progress was made by Bosnia and Herzegovina in improving the functionality 
and efficiency of all levels of government. One year after the general elections, a State-level 
Council  of  Ministers  remains  to  be  appointed.  The  political  representatives  lack  a  shared 
vision  on  the  direction  to  be  taken  by  the  country.  An  effective  coordination  mechanism 
between  the  State,  the  Entities  and  Brcko  District  remains  to  be  established  as  a  matter  of 
urgency regarding EU matters and the harmonisation of EU related legislation.  

Public Administration 

Limited progress has been made in the area of public administration reform. 

The Public Administration Reform Coordinator's Office (PARCO) has sufficient human and 
financial resources to perform its task of coordinating and monitoring the implementation of 
the  Public  Administration  Reform  (PAR)  Strategy  and  Action  Plan.  However,  the 
coordinating structures at Entity and Cantonal levels for implementation of the PAR Strategy 
remain  insufficient.  The  implementation  of  the  strategy  is  constrained  by  PARCO's  weak 

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enforcement  powers.  Both  the  PARCO  and  the  PAR  process  lack  the  necessary  political 
support to bring about reforms.  

Bosnia  and  Herzegovina  has  made  no  progress  in  strengthening  the  administrative  capacity 
for  implementation  of  the  commitments  arising  from  the  IA  and  the  SAA.  The  country's 
administrative structures need to be strengthened substantially in order to be able to respond 
effectively  to  the  requirements  of  the  EU  accession  process.  These  structures  remain 
cumbersome  and  fragmented  and  there  is  an  unclear  division  of  responsibilities  across  the 
various levels of government. 

Key permanent 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  are  still  pending.  These  agencies  lack  the 
necessary  resources  and  political  support  to  become  fully  operational,  in  line  with  EU 
requirements.  

No progress has been made towards the development of a professional and de-politicised civil 
service.  State-level  institutions  have  stopped  using  a  single  human  resources  management 
information  system.  The  strengthening  of  the  civil  service  has  been  hampered  by  the 
enactment of separate laws on civil service in the Federation, some of them providing for the 
establishment of civil service agencies at Cantonal level. These developments pose the risk of 
further fragmentation of the civil service system across the country.  

The Ombudsman of Bosnia and Herzegovina has issued several recommendations concerning 
lengthy  administrative  and  judiciary  proceedings,  criteria  for  recruitment  and  access  to 
information. The Ombudsman also presented special reports on pension rights, the situation of 
elderly  people,  persons  with  disabilities  and  the  rights  of  children  with  special  needs. 
However,  most  of  the  recommendations  have  not  been  implemented  by  the  relevant 
authorities  at  State,  Entity  and  Cantonal  level,  due  to  weak  enforcement  capacity  and 
insufficient  political  will.  Only  a  limited  number  of  cases  were  lodged  regarding  anti-
discrimination issues. Financial and staffing resources for the functioning of the Ombudsman 
institution need to be further increased.  

Overall, limited progress was made in the area of public administration. The implementation 
of the public administration strategy has continued, but the coordinating  structures at Entity 
and  Cantonal  levels  remain  insufficient.  The  public  administration  reform  process  lacks  the 
necessary  political  support.  Continued  fragmentation  and  politicisation  of  the  civil  service 
system  remain  issues  of  concern.  The  establishment  of  a  professional,  accountable, 
transparent  and  efficient  civil  service  based  on  merit  and  competence  requires  further 
attention.  

Judicial System  

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

The political authorities of Bosnia and Herzegovina, as well as representatives from judicial 
institutions at the various levels, have engaged in a Structured  Dialogue on Justice with the 
EU. This dialogue was launched in June 2011, within the framework of the Stabilisation and 
Association Process, to facilitate the revision of legislation and functioning of institutions in 
line  with  relevant  European  standards  and  aiming  at  ensuring  an  independent,  effective, 
impartial  and  accountable  judicial  system.  A  first  set  of  preliminary  recommendations  were 

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issued  as  a  basis  for  the  continuation  of  the  dialogue.  In  August,  replies  to  the  technical 
information  questions,  handed  over  during  the  inaugural  meeting  of  the  dialogue,  were 
submitted. 

A  general  lack  of  political  will  and  adequate  planning  continued  to  hamper  the  effective 
implementation  of  the  Justice  Sector  Reform  Strategy  (JSRS)  2009-2013.  The  gaps  include 
insufficient  allocation  of  human  and  financial  resources,  together  with  a  generally  weak 
coordination amongst relevant institutions.  

Independence of the judicial system is not yet ensured. Political pressure and verbal attacks on 
the judiciary have intensified. In particular, the legitimacy and role of the High Judicial and 
Prosecutorial  Council  (HJPC),  the  Court  and  the  Prosecutor's  Office  of  Bosnia  and 
Herzegovina  have  been  challenged  by  political  representatives,  particularly  from  Republika 
Srpska. The attempt to undermine the independence of the judicial system remains an issue of 
serious concern. The complexities of four separate judicial systems (the State-level, Republika 
Srpska, the Federation and its ten Cantons, the Brcko District) continued to pose challenges to 
the proper functioning of the overall judicial system. Harmonisation of budgetary procedures 
and streamlining of competences amongst the fourteen responsible authorities continues to be 
an issue seriously affecting the independence of the judiciary. In 2010, the financial resources 
allocated for Courts and Prosecutors' Offices represented approximately 0.79% of GDP.  

As  regards  to  accountability,  the  work  of  the  Office  of  the  Disciplinary  Council  for  judges 
and prosecutors improved, and the number of outstanding cases was further reduced. In June, 
the  Chief  Prosecutor  of  Bosnia  and  Herzegovina  was  suspended  and,  in  the  meantime,  an 
interim  Prosecutor  appointed.  In  Republika  Srpska,  the  Chief  Prosecutor  was  appointed 
following a two-year delay. The Federation Constitutional Court remains short of three judges 
out of nine. 

Concerning efficiency, there has been moderate progress in addressing the backlog of cases. 
The  HJPC  continued  to  support  courts  across  the  country  to  tackle  this  issue  effectively, 
including  through  the  establishment  of  a  special  unit  addressing  efficiency  in  the  judiciary. 
The  HJPC  adopted  a  Decision  regarding  regular  and  reserve  judges  which  increased  the 
number  of  posts.  However,  due  to  the  lack  of  financial  resources  only  few  of  the  positions 
created by the HJPC have been filled. The HJPC adopted measures to reduce the backlog of 
cases related to claims for unpaid utility bills and of business registry cases. In the Federation, 
the  backlog  was  reduced.  However,  the  backlog  remains  high  throughout  the  country,  with 
approximately 2 million cases still pending, the majority of which are court cases related to 
unpaid utility bills.  

Progress has continued in the consolidation of information technology resources in courts and 
Prosecutors'  offices.  Judicial  staff  in  courts  and  Prosecutors'  offices  throughout  Bosnia  and 
Herzegovina has access to the respective case management systems. The judicial web portal is 
fully accessible and provides access to a substantial amount of court decisions, in addition to 
legal  opinions  issued  by  the  Entities'  Supreme  Courts.  Furthermore,  digital  access  to  court 
cases  has  improved  in  most  courts  and  is  now  used  extensively.  The  Care  of  Court  Users 
Strategy,  which  encompasses  outreach  activities,  is  in  place  in  most  courts  throughout  the 
country. 

The  condition  of  a  number  of  courts  and  Prosecutors'  offices  throughout  the  country  has 
improved  due  to  renovations.  During  2010,  despite  the  different  assessment  by  the  HJPC, 
amendments to the Law on Courts were adopted in the Federation providing for reopening of 

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some municipal courts that were previously closed. However, reopening of those courts has 
not  yet  taken  place.  Training  for  the  judiciary  is  provided  by  the  Judicial  and  Prosecutorial 
Training Centers (JPTCs) of the two Entities.  

Limited progress was made in the area of juvenile justice and implementation of the relevant 
national  strategy  remained  uneven.  A  revised  national  strategy  for  the  period  2011-2014 
remains to be adopted. In Republika Srpska, a revised Juvenile Justice Law entered into force 
in January 2011. In the Federation, the adoption of the  Juvenile  Justice Law is outstanding. 
The  capacities  of  the  social  welfare  services  and  of  lower  level  judiciary,  which  have  been 
given  extensive  responsibilities  for  children  and  juveniles'  protection  under  the  new  law, 
require strengthening.  

Moderate progress has been made in processing the large backlog of unresolved war crimes 
cases. Some progress has nevertheless been registered in the implementation of the National 
War Crimes Strategy, although delays have continued in the referral of cases from the state 
judiciary to the Entities and Brcko District. Implementation of the strategy requires enhanced 
cooperation between the courts and Prosecutors' offices, particularly at the State-level.  

The processing of war crime cases by the Court of Bosnia and Herzegovina has continued to 
be  satisfactory.  However,  the  processing  of  war  crime  cases  in  the  Cantonal  and  District 
courts  remains  limited  and  uneven.  The  ability  of  the  Entities  and  the  Brcko  District  to 
prosecute  war  crime  cases  continues  to  be  hindered  by  the  lack  of  human  resources  in  the 
various  Prosecutors'  offices,  as  well  as  by  limited  facilities  and  lack  of  adequate  witness 
protection and support services. Moreover, diverging practices on the applicability of different 
criminal codes between courts at different levels remains an issue to be addressed in order to 
guarantee equality of citizens before the law. With a case pending before the European Court 
of  Human  Rights,  the  application  of  different  criminal  codes  continued  to  result  in  uneven 
sentencing. 

The prosecution of war crime cases involving sexual violence remains low. Further efforts are 
needed  to  investigate  and  prosecute  these  crimes,  as  well  as  to  enhance  the  protection  and 
support  for  victims  and  witnesses.  A  comprehensive  approach  to  improving  the  status  of 
victims of rape and sexual violence remains an issue to be addressed. A State-level strategy 
for  improving  the  status  of  victims  of  war  crimes  involving  sexual  violence  has  yet  to  be 
adopted. 

The  drafting  of  a  new  State-level  law  on  Witness  Protection  Programme  has  started.  The 
current  legal  framework  on  witness  protection  remains  fragmented  and  provisions  for  the 
protection  of  witnesses  during  and  after  the  criminal  proceedings  are  limited  and  largely 
inadequate. The lack of human and financial resources is an issue to be addressed.  

Overall, the development of an impartial, independent, effective and accountable judiciary in 
line  with  European  standards  remains  at  an  early  stage.  The  implementation  of  the  Justice 
Sector Reform Strategy and of the National War Crimes Strategy needs to be stepped up. The 
fragmented legal framework across all jurisdictions places significant legislative and financial 
burdens  on  the  judiciary.  The  lack  of  streamlined  budgetary  responsibilities  continues  to 
affect  the  independence  and  effectiveness  of  the  judiciary.  The  frequent  political  attacks  on 
the judiciary and the backlog of cases remain causes for serious concern. 

Anti-corruption policy  

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Bosnia  and  Herzegovina  has  made  very  limited  progress  in  tackling  corruption,  which 
remains  widespread  throughout  the  public  and  private  sector.  The  legal  framework  for 
fighting  corruption  is  largely  in  place.  However,  implementation  of  existing  legislation  is 
insufficient  and  remains  to  be  fully  aligned  to  ensure  harmonisation  of  sanctions  across  the 
country. Corruption continues to negatively impact all spheres of life, economic development 
and the rule of law. 

Very  limited  steps  have  been  taken  in  the  implementation  of  the  2009-2014  anticorruption 
strategy  and  action  plan.  Awareness  raising  campaigns  have  been  launched.  Awareness 
among institutions about the strategy and their respective roles in its implementation remained 
low.  The  implementation  of  the  action  plan  is  not  monitored  because  the  Agency  for  the 
Prevention  of  Corruption  and  Coordination  of  the  Fight  against  Corruption  is  not  yet 
operational. The Director and two deputies of the Agency were appointed but the allocation of 
permanent premises and staff is outstanding.  

The  Law  on  Conflicts  of  Interest  is  in  place.  The  Central  Election  Commission  (CEC)  has 
continued to perform its duties and has monitored asset declarations and conflicts of interest. 
However,  the  implementation  of  the  law  remains  uneven.  No  steps  have  been  taken  to 
harmonize  the  legislative  provisions  at  State  and  Entity  level  and  to  ensure  a  uniform 
application of the law in the country. The CEC competence to deal with conflict of interest 
covers the State-level and the Federation while Republika Srpska has its own Commission.  

The 3rd evaluation report of the Group of  States  against Corruption (GRECO) highlighted a 
number  of  deficiencies  in  the  legal  framework  to  fight  corruption.  The  relevant  legal 
provisions continue to be dispersed in different legislative texts and at different levels across 
the country. As regards political party financing, infringements of political finance rules need 
to be clearly defined and sanctions need to be more effective. Asset declarations by political 
parties remain voluntary. The institutional independence of the CEC is largely ensured and it 
has kept an active role but its financial and human resources need further reinforcement. The 
country  does  not  fulfil  the  requirements  for  participation  in  the  OSCE  working  group  on 
bribery  in  international  business  transactions,  which  is  a  precondition  for  accession  to  the 
OECD Anti-Bribery Convention. According to the addendum to the 2nd evaluation report of 
GRECO, only 7 of the 16 recommendations issued have been implemented or dealt with in a 
satisfactory manner, while nine are still only partially implemented.  

Effective  investigation,  prosecution  and  conviction  of  corruption  cases  remained  low.  Some 
law enforcement operations led to the arrest of a number of civil servants suspected of various 
forms  of  corruption  including  favouring  smuggling  and  customs  fraud.  However,  the 
prosecution  of  corruption  focused  too  often  on  minor  cases,  while  a  number  of  high  level 
corruption  cases  have  ended  in  the  dropping  of  the  charges,  acquittals,  or  suspended 
sentences. A number of training events for police and prosecutors have taken place. However, 
further specialisation of prosecutors and improved coordination with the police is needed.  

Overall,  Bosnia  and  Herzegovina  is  still  at  an  early  stage  in  the  fight  against  corruption. 
Corruption  remains  prevalent  in  many  areas  and  is  a  serious  problem  throughout  the  public 
and  private  sectors.  A  legal  framework  to  tackle  corruption  is  in  place,  but  political  will  to 
tackle  the  issue  and  improve  institutional  capacity  remain  weak.  The  implementation  of  the 
strategy and action plan needs to be stepped up. More decisive efforts are needed in order to 
establish a convincing track record in investigating and prosecuting of high level corruption 
cases.  

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2.2. 

Human rights and the protection of minorities  

Observance of International Human Rights Law  

As regards ratification of international human rights instruments, Bosnia and Herzegovina 
has ratified all major UN and international human rights conventions. However, in a number 
of cases, the decisions of the Constitutional Court of Bosnia and Herzegovina have not been 
enforced,  which  led  to  cases  being  lodged  before  the  European  Court  of  Human  Rights 
(ECtHR). During the reporting period, the ECtHR delivered 2 judgements finding that Bosnia 
and  Herzegovina  had  violated  rights  guaranteed  by  the  European  Convention  on  Human 
Rights  (ECHR).  A  total  of  507  new  applications  were  filed  with  the  ECtHR  since  October 
2010.  In  September  2011,  1350  allocated  applications  regarding  Bosnia  and  Herzegovina 
were pending before the Court.  

Little progress has been made in the promotion and enforcement of human rights. Despite 
the fact that the Constitutional  Court  of Bosnia and Herzegovina has been confirmed  as the 
competent  body  to  review  the  proper  implementation  of  the  outstanding  decisions  of  the 
Human  Rights  Chamber  (HRCh)  and  the  Human  Rights  Commission  (HRCom),  the 
enforcement of pending decisions remains an issue to be addressed.10  

Overall, the legal and institutional framework for the observance of human rights is in place. 
However,  Bosnia  and  Herzegovina  made  little  progress  in  improving  the  enforcement  of 
international  human  rights  legislation.  Credible  efforts  towards  the  implementation  of  the 
ECtHR decision in the Sejdic-Finci case in order to comply with the ECHR remains essential 
(see Chapter 2.1-Democracy and the Rule of Law-Constitution)  

Civil and political rights  

The death  penalty is  prohibited  by the  Constitution  of Bosnia  and Herzegovina and by the 
Constitution of the Federation. The death penalty provision in the Constitution of Republika 
Srpska is not applied, but needs to be repealed. 

With regard to torture and ill-treatment and the fight against impunity, the legal framework 
is  in  place  and  is  generally  respected.  Little  progress  has  been  made  to  address  the  ill-
treatment of detainees highlighted by the Council of Europe Committee on the Prevention of 
Torture (CPT). Bosnia  and Herzegovina  has  still not appointed a representative to the CPT. 
Ill-treatment  and  poor  health  services,  particularly  as  regards  vulnerable  prisoners,  have 
continued. Despite some progress to improve the procedures for investigating cases of alleged 
ill-treatment, in particular in the Zenica and Doboj prisons, further efforts are needed in this 
regard. 

Little  progress  was  made  regarding  the  prison  system.  A  Law  on  Execution  of  Criminal 
Sanctions  was  adopted  in  the  Federation  and  is  in  place  at  State-level  and  in  Republika 

10 

The Human  Rights  Chamber  was  established  by Annex 6  to  the  Dayton/Paris  Peace Agreement,  as  a 
judicial body dealing with complaints on human rights violations in relation to the ECHR. The mandate 
of  the  HRCh  expired  in  2003,  without  having  resolved  all  the  cases  it  received  (15,191).  In  order  to 
resolve the outstanding cases, the HRCom  was created within the Constitutional Court of Bosnia and 
Herzegovina. HRCom's mandate expired in 2006. The Constitutional Court of Bosnia and Herzegovina 
became the competent body to review implementation of these cases in 2010. 

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Srpska. Bosnia and Herzegovina's prison system is fragmented and lacks a uniform legislative 
framework for implementing criminal sanctions. 

There  has  been  some  further  improvement  in  prison  conditions.  In  both  Entities,  prison 
accommodation was further expanded with new or upgraded buildings. Efforts to introduce a 
system of electronic bracelets for house arrests continued. However, overcrowding remains an 
issue  to  be  addressed.  The  situation  remains  problematic,  in  particular  in  the  Federation 
where,  on  average,  there  is  a  gap  of  five  years  between  a  final  conviction  and  actual 
imprisonment.  Alternative  sanctions  are  still  not  widely  applied.  There  have  been  further 
delays  in  the  construction  of  a  high-security  State  prison  which  has  not  yet  started.  This 
continues to affect the country's capacity to deal with high-security prisoners. 

Limited progress was made in improving the conditions of vulnerable prisoners. Construction 
of a new psychiatric facility in Sokolac is contributing to improving specialised facilities for 
psychiatric prisoners. However, psychiatric inmates continue to lack facilities in the prisons of 
both the Federation and the Republika Srpska. Greater efforts are needed to reinforce prison 
inspections.  There  is  no  effective  coordination  between  the  fifteen  prison  administrations  in 
the country. 

Limited progress was made in the area of access to justice in civil and administrative trials. 
The legal framework formally guarantees equality before the law. However, there have been 
some  cases  when  the  presumption  of  innocence  and  equal  treatment  have  not  been  ensured 
during  legal  proceedings.  The  system  of  free  legal  aid  in  Bosnia  and  Herzegovina  remains 
fragmented. The framework Law on Free Legal Aid has yet to be adopted. Free legal aid in 
civil cases continues to be mainly provided by privately funded NGOs.  

Bosnia and Herzegovina's Constitution provides for freedom of expression. However, threats 
and  violence  against  journalists  have  continued.  Follow  up  by  police  and  the  judiciary 
remains  insufficient.  Political  pressure  on  all  media  continued.  The  media  continue  to  be 
highly  fragmented  and  polarised  along  political  and  ethnic  lines.  The  statute  of  the  Public 
Broadcaster BHRT was amended in order to increase the control of the Steering Board over 
the editorial management, thus affecting editorial independence. Political pressures affecting 
the  financial  and  political  independence  of  the  Communication  Regulatory  Agency  (CRA) 
have continued. Amendments to the Law on Ministries and Other Bodies of Administration in 
Bosnia  and  Herzegovina  remain  to  be  adopted  in  order  to  ensure  the  CRA's  independence. 
The appointment of a Director General and two Board Members of the CRA and of the CRA 
Council remains pending.  

The  Press  Council  of  Bosnia  and  Herzegovina  is  functioning  and  cooperates  with  judiciary 
institutions.  It  reported  an  increase  in  the  number  of  complaints  filed  by  citizens  regarding 
violations  of  the  Press  Code,  indicating  increased  awareness  among  citizens  of  their  legal 
right  to  react  to  unfair  or  inaccurate  reporting,  including  hate  speech.  However,  the  lack  of 
financial and human resources continues to hamper the efforts of the Press Council to enforce 
professional standards.  

Implementation  of  the  Freedom  of  Access  of  Information  Act  remains  uneven  among  the 
public institutions subject to the law. Reporting to the Ombudsman Institution as stipulated by 
the  law  and  compliance  with  Ombudsman's  opinions  and  recommendations  in  related  cases 
remained weak. (See Chapter 4.2.6. – Information Society and Media)  

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Freedom  of  assembly  and  freedom  of  association  are  enshrined  in  the  country's 
Constitution and are broadly respected. However, cases of intimidation and violence against 
human rights advocates and civil society organisations continued, mostly involving activists 
investigating alleged corruption. An institutional mechanism for cooperation with civil society 
organisations is in place in the Brcko District but remains to be established at State-level and 
in both Entities. The administrative capacity for cooperation with NGOs and the development 
of  Civil  Society  remained  weak.  The  consultation  process  with  civil  society  during  the 
legislative drafting  process  is not fully enforced. Resources for the Civil Society Board and 
funds  allocated  to  civil  society  organisations  dealing  with  environment  and  human  rights 
issues  remain  inadequate.  The  development  of  civil  society  in  Bosnia  and  Herzegovina 
requires further support and greater transparency in the criteria used for funding allocations. 

The constitutional and legal guarantees of freedom of thought, conscience and religion are 
generally respected. Cases of discrimination on religious grounds continued. Incidents aimed 
at religious symbols, clerics, believers and property affected in particular those who constitute 
a religious minority in certain communities.  

Overall,  civil  and  political  rights  in  Bosnia  and  Herzegovina  are  broadly  respected.  Some 
progress  has  been  made  in  improving  prison  conditions,  but  a  comprehensive  reform  of  the 
prison system has not started. Access to justice and equality before the law remain hampered 
by the fragmented legal and institutional framework in the country. Very little progress was 
made  as  regards  freedom  of  expression,  freedom  of  assembly,  association  and  freedom  of 
religion.  Political  pressure  on  the  media  has  continued.  The  continuing  challenges  to  the 
independence  of  the  Communication  Regulatory  Agency  and  of  the  Public  Broadcaster 
remain issues of concern. Further efforts are needed in order to support the development and 
funding of the civil society sector.  

Economic and social rights (see also Chapter 4.1.8 – Social policies, employment and public 
health) 

Legal provisions guaranteeing women's rights and gender equality are in place. Bosnia and 
Herzegovina  adopted  an  Action  Plan  on  the  implementation  of  the  UN  Security  Council 
Resolution 1325 regarding Women, Peace and Security. Political participation of women has 
further increased, but remains low. Despite an increase of female members in Parliamentary 
Assemblies  established  following  the  2010  elections,  the  40%  quota  for  women  within  the 
public  administration,  as  stipulated  in  the  Gender  Equality  Law,  has  not  been  reached. 
Limited progress was made to increase female participation in the labour market. 

Harmonisation of the Entity and Cantonal laws with the State-level Law on Gender Equality 
made  very  slow  progress.  In  spite  of  increased  funding,  the  administrative  capacity  for 
ensuring  gender  equality  at  State  and  Entity  levels  remains  weak.  This  hampers  adequate 
monitoring  and  implementation  of  the  Gender  Equality  Law  and  the  Gender  Action  Plan. 
Very  limited  progress  has  been  made  as  regards  awareness  raising  campaigns  and  in 
promoting specialised training for civil servants.  

As  regards  domestic  violence,  some  progress  was  registered  in  Republika  Srpska  with  the 
adoption  of  a  new  Strategy  for  combating  domestic  violence.  Progress  in  implementing  the 
State-level Strategy to prevent and combat domestic violence remains slow, in particular with 
regard to harmonisation of legislation and data collection. Further specialised training for law 
enforcement officers and the judiciary is needed.  

EN 

17 

   EN 

 
Some progress has been made in the area of children's rights. Early childhood development 
policies have been adopted in both Entities. A revised State-level Action Plan for Children for 
2010-2014 was adopted. Implementation of the child protection strategy for children without 
parental care in Republika Srspka has started. Monitoring of children's rights by civil society 
has been strengthened. A revised Strategy to Combat Violence against Children remains to be 
adopted. Disparities remain between the child allowances of the Entities and Cantons and the 
allowances  do  not  correspond  to  the  needs  of  children  and  families.  Children  continued  to 
suffer from domestic violence and trafficking. 

Some  progress  has  been  made  in  improving  the  general  framework  for  education.  The 
Council  of  Ministers  adopted  an  initial  Baseline  Qualifications  Framework  for  life-long 
learning.  (See  Chapter  4.1.9  -  Education  and  Research)  However,  the  Conference  of 
Education  Ministers,  which  was  established  to  improve  coordination  amongst  the  14 
ministries of education, has not met since mid 2010. Little progress was achieved in making 
schools  more  inclusive.  Some  municipalities  throughout  the  country  started  applying  the 
Index  for  Inclusion,  which  is  a  self-assessment  tool  allowing  schools  to  improve  inclusion, 
with  the  support  of  the  community.  In  the  Federation,  a  coordination  body  for  Cantonal 
Education  Ministers  was  established  in  order  to  consider  the  issue  of  divided  schools. 
However, much more needs to be done to effectively address the number of divided schools 
(or '2 schools under 1 roof'). Separation of children within schools along ethnic lines and the 
existence of '2 schools under 1 roof' in three Cantons and mono-ethnic schools continued. De 
facto ethnic-based separation and discrimination in public schools remain a serious concern. 
Ethnically based and divided education systems remain an obstacle to sustainable returns.  

Little  progress  was  made  in  improving  conditions  for  the  socially  vulnerable  and  people 
with disabilities. In the Federation, the Strategy for people with disabilities has been adopted. 
In  Republika  Srpska,  the  Strategy  for  persons  with  disabilities  is  being  implemented.  The 
entitlement  to  rights  and  benefits  for  disabled  persons  is  not  based  on  needs.  As  a  result, 
certain categories of persons with disabilities do not receive adequate financial benefits. The 
lack  of  harmonisation  between  the  social  protection  systems  of  the  Entities  and  Cantons 
remained. The Social Inclusion Strategy in Republika Srpska and at State-level have yet to be 
adopted. The Council of Disabled Persons has still not been established.  

With regard to anti-discrimination policies, an anti-discrimination law is in place. However, 
it  does  not  include  age  and  disability  and  allows  for  a  broad  range  of  exceptions.  Little 
progress  was  made 
law. 
Implementation  of  the  anti-discrimination  law  remained  weak.  Very  few  complaints  about 
discrimination have been registered. Awareness among citizens of the legal remedies that are 
available in case of discrimination needs to be strengthened.  

the  anti-discrimination 

in  harmonising  other 

laws  with 

Discrimination  against  lesbian,  gay,  bisexual  and  transgender  (LGBT)  people  remains 
widespread. LGBT activists have been subjected to threats and harassment. Hate speech and 
intolerance towards LGBT persons by media and politicians remain issues of concern. 

As  regards  labour  and  trade  unions  rights,  legislation  was  amended  to  ensure  that 
employees  in  the  Federation  obtain  social  benefits  during  maternity  leave.  However,  the 
overall legal framework remains to be harmonised across the country. The fragmentation of 
the legislative framework for social benefits and pensions remains an issue to be addressed. 
The establishment of a State-level Economic and Social Council is still outstanding. Criteria 
and legal framework for the recognition of social partners at State-level are outstanding.  

EN 

18 

   EN 

 
With regard to property rights, the vast majority of cases of property repossession requests 
have  been  resolved.  However,  some  repossession  requests  remain  outstanding  since  the 
mandate  of  the  Commission  for  Real  Property  Claims  of  Displaced  Persons  and  Refugees 
ended. There is no database regarding outstanding claims and funding is insufficient. Property 
registers are largely unreliable. 

Overall, economic and social rights are broadly respected. Bosnia and Herzegovina adopted 
an  Action  Plan  on  the  implementation  of  UN  Security  Council  Resolution  1325.  However, 
more efforts are needed in order to ensure implementation  of the Gender  Equality  Law  and 
the  Gender  Action  Plan,  to  address  domestic  violence  against  women  and  children  and  to 
make schools more inclusive. Implementation of the anti-discrimination law remained weak. 
Greater efforts are needed to improve conditions for the socially vulnerable and people with 
disabilities,  and  to  strengthen  labour  rights  and  social  dialogue,  as  well  as  the  role  of  trade 
unions.  

Respect for and protection of minorities, cultural rights  

The legal framework for the protection of minorities11 is largely in place. Little progress has 
been made in implementing the laws on national minorities. The National Minority Councils' 
influence over policy making remains limited, in part due to the lack of political and financial 
support. The cultural rights of national minorities, including their participation in public life, 
need to be strengthened. 

Because  national  minorities  do  not  belong  to  the  three  constituent  peoples,  they  have 
continued  to  be  excluded  from  representation  in  the  State-level  House  of  Peoples  and  the 
tripartite  Presidency  (see  Chapter  2.1–  Constitution).  No  progress  has  been  made  in 
implementing  the  European  Charter  for  Regional  or  Minority  Languages.  Representation  of 
minorities in the media continued to be weak. The nomination of the members from Bosnia 
and  Herzegovina  to  the  Council  of  Europe  Advisory  Committee  under  the  Framework 
Convention for Protection of National Minorities remains outstanding.  

Some progress was achieved as regards the Roma minority. Four action plans under the Roma 
Strategy are in place. Progress was made in the implementation of the Roma action plans on 
housing and employment. However, there is only little progress to report in implementing the 
action  plan  on  health.  Efforts  to  ensure  effective  implementation  of  the  action  plan  on  the 
educational needs of Roma and other minorities need to be stepped up, and adequate financial 
resources  for  implementation  need  to  be  ensured.  Sustainability  in  implementing  all  four 
action plans should be further addressed. Coordination among authorities at State and Entity 
level  and  with  lower  levels  needs  to  be  reinforced  in  order  to  ensure  that  the  Roma  Action 
Plans  are  implemented  in  a  transparent  and  efficient  manner.  Bosnia  and  Herzegovina  is 
participating  in  the  Roma  Decade  of  Inclusion.  However,  there  is  still  no  established 
mechanism for monitoring the implementation of the action plans and the allocation of funds 
at all levels. Limited steps have been taken by Cantons and municipalities to adopt, analyse 
and revise by-laws and introduce provisions to protect the Roma in the areas of employment, 
health, housing and education.  

11 

According to the Law on the protection of rights of persons belonging to national minorities, there are 
17 national minorities in Bosnia and Herzegovina. The three constituent peoples – Bosniaks, Croats and 
Serbs – do not constitute national minorities. 

EN 

19 

   EN 

 
                                                 
The State-level social inclusion strategy for 2008-13, which targets the Roma population as a 
priority group, has not yet been adopted. Greater efforts are needed on birth registration and 
on the provision of free legal aid for civil registration. Measures need to be taken to address 
the  situation  of  the  Roma,  mainly  women,  who  are  at  risk  of  statelessness.  Participation  of 
Roma  representatives  in  the  decision-making  process  remains  very  low.  The  situation  of 
Roma women and children is particularly difficult. Many Roma children are not registered at 
birth  and  therefore  cannot  enrol  in  school,  have  no  health  insurance  and  are  subject  to 
trafficking and exploitation. The Roma continue to be the most vulnerable minority. 

As regards refugees and internally displaced persons, at the end of 2010, 113,365 internally 
displaced  persons,  including  7,492  in  collective  centres,  and  7,000  refugees  were  living  in 
Bosnia and Herzegovina. Some steps have been taken to implement the revised Strategy for 
implementation  of  Annex  7  to  the  Dayton/Paris  Peace  Agreement,  particularly  regarding 
funding  for  vulnerable  groups  living  in  collective  centres.  Some  progress  was  made  in  the 
allocation  of  the  budget  for  sustainability  measures  under  the  revised  Strategy.  However, 
procedures for allocating return assistance are not fully in place. Discrimination in access to 
employment, health care, pension rights and the slow pace of demining, remain barriers to the 
sustainable return and local integration of internally displaced persons.  

With  regard  to  landmines  from  the  1992-1995  conflict,  some  progress  was  made  in  the 
implementation of the Mine Action Strategy, but some areas have still not been cleared. As of 
August 2011, 3 persons were killed and 4 injured in 6 landmine accidents. The Law on anti-
mine actions has yet to be adopted. In order to meet the goal of clearing the country of mines 
by 2019, the law needs to adequately address fundraising responsibilities, administrative and 
management capacity and coordination of demining measures.  

Overall, the framework for the protection of minority rights is in place and minority rights are 
broadly  respected.  Despite  good  progress  in  implementing  the  action  plans  on  housing  and 
employment, Roma continue to face very difficult living conditions and discrimination. More 
efforts  are  required  in  order  to  implement  the  action  plans  on  health  and  education  and  as 
regards  registration  of  births.  Access  to  pension  rights,  health  care  and  social  protection  for 
refugees needs to improve. Limited steps have been taken to implement the revised strategy 
for  implementation  of  Annex  7  to  the  Dayton/Paris  Peace  Agreement.  Difficulties  with 
economic reintegration, access to health care, social protection, pensions and employment of 
minority returnees remain major obstacles to sustainable return and local integration.  

2.3. 

Regional issues and international obligations 

the  Dayton/Paris  Peace  Agreement  continued  but  political 
Implementation  of 
representatives  in  Republika  Srpska  frequently  challenged  the  territorial  integrity  of  the 
country. (See Chapter 2.1 – Constitution).  

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
has continued to be satisfactory. At the operational level, cooperation between the ICTY and 
the  State-level  and  Entity  authorities  was  adequate,  and  access  to  witnesses  and  archives 
remained  good.  The  local  prosecution  of  war  crimes  cases  has  continued.  All  the  cases 
transferred by the ICTY to the Special War Crimes Chamber of the State Court under the 11-
bis  rule12  have  now  been  completed.  During  the  reporting  period  the  State  Court  and 

12 

Cases transferred by the ICTY for local prosecution 

EN 

20 

   EN 

 
                                                 
Prosecutor's Office have continued to perform their duties well. A significant number of war 
crimes  cases  and  indictments  have  been  launched  by  the  prosecutors'  offices  in  Bosnia  and 
Herzegovina.  Some  progress  has  been  made  in  implementing  the  National  War  Crimes 
Strategy. (See Chapter 2.1-Judicial System)  

Cooperation  between  the  courts  and  the  Prosecutors'  offices  from  Bosnia  and  Herzegovina, 
Croatia  and  Serbia  is  ongoing.  Implementation  of  their  bilateral  agreements  on  the  mutual 
execution  of  sentences  in  criminal  matters  and  enforcement  of  court  rulings  is  underway. 
Efforts  to  prosecute  war  crimes  cases  continued  to  be  hampered  by  legal  obstacles  to 
extradition  in  the  Criminal  Procedure  Code,  but  some  practical  steps  have  been  taken  to 
overcome them. The first cases have been pursued under an agreement with Croatia whereby 
persons sentenced for war crimes in Croatia who fled to Bosnia and Herzegovina  can  serve 
their sentences there.  

Bosnia and Herzegovina has aligned with the Council Decision advancing universal support 
for  the  International  Criminal  Court  and  promoting  the  widest  possible  participation13. 
However,  it  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) monitors the progress made by 
Bosnia  and  Herzegovina  in  fulfilling  the  obligations  and  commitments  relating  to  its 
membership  of  the  CoE.  Bosnia  and  Herzegovina  has  appointed  members  to  the  CoE 
Parliamentary  Assembly,  but  not  to  the  advisory  bodies.  The  implementation  of  the 
requirements stemming from the CoE Conventions remains insufficient. 

Significant  progress  was  made  with  regard  to  the  Sarajevo  Declaration  Process,  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 who were 
displaced  as  a  result  of  the  armed  conflicts  in  ex-Yugoslavia  between  1991  and  1995. 
Countries  have  continued  to  progress  on  a  number  of  outstanding  issues  such  as  data 
exchange,  civil  documentation,  public  information,  pensions  and  trust  fund  mechanisms,  in 
the  framework  of  the  established  regional  working  groups.  Following  the  meetings  of  June 
and September 2011, Bosnia and Herzegovina, Croatia, Montenegro and Serbia agreed on a 
number  of  issues,  including  on  the  text  of  a  joint  declaration  to  be  signed  at  a  ministerial 
conference  in  November  2011  in  Belgrade.  A  regional  multi-year  programme  aimed  at 
addressing  the  needs  of  the  most  vulnerable  refugees, has also been  agreed,  together  with a 
donors' conference to be held in the first half of 2012 in Sarajevo.  

As  regards  missing  persons,  as  of  September  2011,  there  were  still  approximately  14,000 
people  missing  from  the  conflicts  in  the  region.  Of  these,  some  10,000  were  related  to  the 
conflict  in  Bosnia  and  Herzegovina,  2,000  to  the  conflict  in  Croatia  and  over  1,800  to  the 
conflict  in  Kosovo.  In  January  2011,  the  State  Prosecutor's  Office  took  over  responsibility 
from  local  prosecutors  for  conducting  exhumations  of  mass  graves.  Limited  progress  was 
made in the implementation  of the  Law  on Missing  Persons.  The  International  Commission 
on missing persons (ICMP) and the State-level Missing Persons Institute (MPI) launched the 

13 

Council Decision 2011/168/CFSP of 29 March 2011. 

EN 

21 

   EN 

 
                                                 
database  of  the  Central  Records  on  Missing  Persons  (CEN).  Adequate  funds  were  allocated 
by the Council of Ministers to support the work of the MPI. However, political pressures and 
attempts to undermine the work of the MPI have continued. The existence of secondary mass 
grave sites continues to pose a challenge for the identification of missing persons in Bosnia 
and Herzegovina.  

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,  the  European 
Common  Aviation  Area  Agreement  and  the  EU  Strategy  for  the  Danube  region.  In  March, 
within the framework of the SEECP, Bosnia and Herzegovina endorsed the Regional Strategic 
Document and Action Plan on Justice and Home Affairs 2011-2013. Many regional activities 
organised by the RCC Secretariat, which is based in Sarajevo, have been carried out. Bosnia 
and  Herzegovina  adopted  a  decision  to  recognise  the  Kosovo  customs  stamps,  which  is 
important for CEFTA implementation. Bosnia and Herzegovina continues to actively support 
the  Igman  initiative  on  reconciliation,  which  brings  together  NGOs  from  Bosnia  and 
Herzegovina, Croatia, Serbia and Montenegro and the RECOM initiative. 

Bilateral  relations  with  other  enlargement  countries  remained  stable.  As  a  follow  up  to 
bilateral agreements on police cooperation between Bosnia and Herzegovina and countries in 
the  region,  a  decision  was  adopted  to  establish  a  network  of  police  officers  of  Bosnia  and 
Herzegovina in the countries in the region, EUROPOL and certain EU countries. In April, the 
Presidents of Bosnia and Herzegovina, Turkey and Serbia met in Belgrade. This format was 
repeated in other meetings at different ministerial levels.  

Relations  with  Albania  have  remained  good.  The  implementation  of  existing  bilateral 
agreements and protocols has continued to proceed smoothly.  

Relations  with  Croatia  have  intensified.  The  Presidency  of  Bosnia  and  Herzegovina  visited 
Croatia on several occasions during the reporting period. Croatia has expressed its support for 
the  European  integration  of  Bosnia  and  Herzegovina.  Limited  progress  was  achieved  in 
resolving  outstanding  issues,  including  on  the  use  of  the  port  of  Ploce,  border  demarcation, 
property issues, dual citizenship and refugee return. The inter-state Commission for Borders 
continued  to  meet  but  failed  to  agree  on  the  outstanding  border  demarcation  issues.  The 
countries  signed  two  agreements  linked  to  the  Sava  river.  A  readmission  agreement  with 
shortened  procedure  and  a  police  cooperation  agreement  on  fighting  trans-border  crime, 
which  provides  for  the  exchange  of  information  on  investigations  and  the  appointment  of 
police  liaison  officers,  were  signed.  The  first  meeting  of  a  joint  working  group  was  held  in 
April  in  Sarajevo  to  discuss  the  revision  of  the  Local  Border  Traffic  Agreement  and  the 
Agreement  on  free  transit  through  the  port  of  Ploce  and  Neum  in  Bosnia  and  Herzegovina. 
The President of Croatia attended the July commemorations in Srebrenica. 

Relations  with  the  former  Yugoslav  Republic  of  Macedonia  continued  to  be  good. 
Negotiations started on agreements on cooperation in the field of health and medical sciences, 
mutual  enforcement  of  court  decisions  in  criminal  matters  and  in  legal  aid  in  civil  and 
criminal matters. 

Relations with Montenegro have continued to improve. Three agreements were signed in the 
area  of  border  crossings  for  local  transport,  border  crossings  for  international  transport  and 

EN 

22 

   EN 

 
defence. Agreements on cooperation in the field of tourism and exchange of data with regard 
to social insurance entered into force. The delimitation of the border remains pending. 

Relations with Serbia have improved further. An agreement in the field of education, culture 
and sport entered into force. Five agreements were signed in the field of tourism, protection 
from natural and other disasters, veterinarian cooperation, police cooperation and exchange of 
data with regard to social insurance. An agreement on the temporary employment of Bosnia 
and Herzegovina citizens in Serbia was signed. In July, President Tadic paid an official visit 
to Sarajevo and met with Presidency members. However, the border demarcation remains an 
open issue. 

In the framework of the Special Parallel Relations Agreement between the Republika Srpska 
and  Serbia,  the  Republika  Srpska  Ministry  of  Economic  Affairs  and  Regional  Cooperation 
and the Ministry of Foreign Affairs of Serbia signed Memoranda of Understanding in several 
areas of cooperation. The government of Republika Srpska and the government of Serbia held 
a joint government session in Banja Luka.  

There are no official relations with Kosovo14, as Bosnia and Herzegovina has not recognised 
Kosovo  as  an  independent  state.  The  country  does  not  recognise  Kosovo  passports  and  no 
steps have been taken to set up procedures for citizens of Kosovo to obtain visas comparable 
to those issued by the EU Member States that have not recognised Kosovo.  

Relations with Turkey intensified. A cooperation agreement in the field of health entered into 
force.  Negotiations  to  amend  the  bilateral  Free  Trade  Agreement  began.  The  text  of  a  first 
readmission  agreement  was  initialled.  In  October  2010  and  in  September  2011,  the  Turkish 
Foreign  Minister  visited  Bosnia  and  Herzegovina  to  encourage  bilateral  economic  co-
operation and foreign direct investment.  

Overall,  Bosnia  and  Herzegovina's  cooperation  with  the  ICTY  has  continued  to  be 
satisfactory and a number of significant steps have been taken to process war crimes and to 
find  the  missing  persons  from  the  1992-1995  conflict.  The  country  has  continued  to 
participate actively in regional cooperation and to maintain good neighbourly relations. More 
decisive efforts are needed in order to settle the remaining border and property issues and to 
remove 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 

14 

Under UNSCR 1244/1999 

EN 

23 

   EN 

 
                                                 
Difficulties  with  forming  governments  at  State  and  Federation  levels  after  the  general 
elections in October 2010 and the failure of the Fiscal Council to adopt the Global Framework 
for Fiscal Policies for 2011-13 had a bearing on economic and fiscal policy. In a situation of 
increased  uncertainty  over  the  short-  and  medium-term  path  of  fiscal  policy,  the  authorities 
submitted  their  fifth  Economic  and  Fiscal  Programme  for  2011-13  in  January  2011.  The 
programme is thus fragmented and does not reflect 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  performance  under  the 
International  Monetary  Fund  (IMF)  Stand-By  Arrangement  remained  broadly  satisfactory 
until  October  2010  when  the  IMF  Board  approved  the  second  and  third  reviews.  However, 
due  to  the  difficulty  of  forming  a  government  at  State-level,  further  programme  discussions 
were  delayed.  The  first  World  Bank  Development  Loan  was  disbursed  in  October  2010. 
Overall, the consensus on economic and fiscal policy essentials has weakened.  

Macroeconomic stability 

After  the  recession  in  2009  with  a  drop  in  real  GDP  of  2.9%,  the  country  moderately 
recovered in 2010. It recorded a positive real growth rate of 0.7%, driven by external demand. 
Domestic demand picked up, supported by a relatively stable inflow of remittances. Industrial 
production  increased  slightly  in  2010  led  by  export-oriented  industries,  but  unemployment 
remained very high. Per capita income, measured in purchasing power standards (PPS), fell to 
30%  of  the  EU-27  average  in  2010  from  31%  in  2009.  As  a  result  of  fiscal  adjustment 
measures  implemented  under  the  IMF  programme  and  increased  revenues,  the  budgetary 
situation  eased.  Due  to  improvements  in  the  trade  and  current  account  deficits  and  the 
comfortable  level  of  foreign  reserves,  the  external  financing  needs  decreased  in  2010.  The 
indicators  available  for  2011  suggest  that  the  economic  recovery  is  gaining  strength  as 
industrial  production  increased  by  8.1%  year-on-year  in  the  first  seven  months  of  the  year. 
Overall,  the  economy  is  slowly  gaining  steam  after  the  2009  recession,  but  the  recovery  is 
fragile.  

The current account deficit fell further from 6.2% of GDP in 2009 to 5.6% in 2010. The trade 
deficit  fell  by  4.8%,  shrinking  from  27.8%  of  GDP  in  2009  to  25.9%  in  2010,  which 
contributed to the improvement of the current account. Exports rose by 27.7% nominally, and 
imports  by  10.2%.  Surpluses  in  the  services  and  income  accounts  decreased  by  8.6%  and 
23.2%, respectively, while that of the current transfer account increased by 3.1%, supported 
by the relatively stable flow of remittances. The current account deficit was financed mainly 
by new loans from abroad. However, the trend of an improving trade balance was reversed in 
the second half of 2010 when the nominal increase of imports exceeded that of exports. This 
deterioration continued in the first half of 2011 when the trade gap increased by 18.3% year-
on-year. Imports and exports increased both by 18.3%, mining and manufacturing being the 
main  sectors  recording  export  growth.  Bosnia  and  Herzegovina's  external  public  debt 
increased by 20.2% in 2010, from 21.8% of GDP in 2009 to 25.7% in 2010, mainly due to the 
disbursements made in the context of the IMF and World Bank programmes. In the first half 
of  2011,  the  external  public  debt  decreased  slightly  by  1.5%.  Public  international  creditors 
account for 89% of the country's external public debt. The largest creditor remains the World 
Bank  group.  Official  foreign  exchange  reserves  decreased  by  5.7%  in  the  first  half  of  2011 
from  end-2010,  though  still  covering  around  five  months  of  imports.  Overall,  external 
imbalances have slowly started to rise after the sharp contraction experienced in 2009 and the 
first  half  of  2010,  although  the  current  account  deficit  is  still  much  lower  than  before  the 
crisis.  

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The  average  unemployment  rate  in  2010  stood  at  a  very  high  27.2%.  Registered 
unemployment  reached  43.1%  in  June  2011,  while  according  to  the  Labour  Force  Survey 
(LFS)  following  the  International  Labour  Organisation  (ILO)  methodology  conducted 
annually  in  April/May,  unemployment  increased  to  27.6  %  in  2011  from  27.2%  in  2010.  It 
was  particularly  high  among  the  young  population  (57.9%  for  people  aged  between  15  and 
24,  according  to  the  LFS).  In  the  first  half  of  2011  the  highest  year-on-year  growth  in 
employment  was  registered  in  education,  real  estate  and  health,  while  employment  fell  in 
agriculture, mining and manufacturing industries, as well as in trade and construction. Despite 
the  already  large  size  of  the  public  sector  in  Bosnia  and  Herzegovina,  the  number  of 
employees in the public administration increased further, by 2.1% year-on-year in the first six 
months  of  2011.  Average  monthly  nominal  gross  wages  increased  by  1.8%  in  2010  and 
remained relatively stable in the first seven months of 2011. Structural rigidities such as the 
high rates of social contributions, poorly targeted social transfers and low labour mobility, are 
continuing  to  hamper  job  creation  and  the  propensity  to  work.  Overall,  labour  market 
conditions remained poor and were not supported by the weak growth dynamics.  

Annual  inflation  reached  2.1%  in  2010,  up  from  -0.4%  in  2009.  The  inflationary  trend  was 
mainly driven by the rise in food and transport prices towards the end of the year. Inflation 
continued  to  rise  in  the  first  seven  months  of  2011,  reaching  3.9%  in  July,  pushing  the  12-
month  moving  average  inflation  rate  up  to  3.1%.  The  monetary  policy  of  the  Central  Bank 
continued to be conducted under a currency board arrangement, with the euro as the anchor 
currency,  enjoying  a  high  level  of  confidence  and  credibility.  Monetary  policy  settings 
remained  unchanged  throughout  2010.  As  of  February  2011  the  minimum  reserve 
requirement for short-term deposits was lowered from 14% to 10%. Nevertheless, the banking 
system's  reserves  with  the  Central  Bank  remain  significantly  above  the  minimum  required 
level. The M2 monetary aggregate increased by 6% year-on-year in July. Overall, monetary 
and financial stability have been preserved while inflation is picking up. 

The  fiscal  performance  in  2010  benefitted  from  the  recovering  economic  activity,  which 
resulted  in  increasing  revenues,  and  from  the  adjustment  measures  implemented  under  the 
IMF programme. The consolidated budget deficit fell to 2.5% of GDP, which is well below 
the 2009 outcome of 4.5%. However, the share of general government in GDP remains high, 
with 2010 revenues at 44.4% of GDP. Adjustment measures on the expenditure side included 
cuts in wages and benefits in the public sector, which resulted in only a marginal 0.5% rise of 
the consolidated wage bill in nominal terms. Consolidated revenues increased by 5% in 2010. 
44%  of  the  revenues  originated  from  indirect taxes which increased by 6.7%, driven by the 
recovering economic activity, the development of imports and import prices and the increase 
of excise duties on tobacco and oil derivatives which counteracted the continuous reduction of 
duties  and  tariffs  as  set  out  in  the  Interim  Agreement  on  trade,  in  force  since  mid-2008. 
Expenses  increased  by  1.6%  year-on-year  in  2010.  Current  spending  dominates  the  budget 
with wages accounting for 29.2% of overall expenditure and subsidies and transfers (mainly 
social benefits) for 39.2%. The balance of the collected social contributions against the paid 
out  social  benefits  returned  on  the  positive  side  due  to  the  simultaneous  rise  of  the 
contributions  and  drop  of  the  benefits.  The  flat  income  tax  rate  in  Republika  Srpska  was 
raised  from  8%  to  10%  as  of  2011  and  the  non-taxable  income  threshold  was  abolished. 
Following amendments to the Law on Social Contributions in Republika Srpska, the overall 
social contribution rate increased from 30.6% to 33% of the gross salary as of January 2011. 
Excise duties on tobacco were raised as of 2011. 

Budget  planning  for  2011  and  beyond,  as  well  as  the  sustainability  and  credibility  of  fiscal 
policy  in  Bosnia  and  Herzegovina,  were  seriously  hampered  by  the  non-adoption  of  the 

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Global  Framework  for  Fiscal  Policies  for  the  periods  2011-2013  and  2012-2014.  The 
Parliament  of  Republika  Srpska  adopted  the  Entity's  2011  budget  in  December  2010.  It 
planned the same nominal expenditure as the budget for 2010. In the Federation, a temporary 
budget was  in place in the first quarter. The  Federation  2011  budget was  adopted  in March 
and  showed  a  total  amount  of  expenditure  planned  9%  lower  than  in  2010,  with  high 
uncertainties  surrounding  its  financing.  At  the  State-level,  temporary  budgets  were  in  place 
during  the  first  three  quarters  of  2011.  The  2011  State-level  budget  was  adopted  by  the 
Presidency  in  April,  showing  an  increase  in  volume  by  2%  compared  to  2010.  However,  it 
remains  to  be  adopted  by  the  Parliament.  All  budgets  were  established  in  the  absence  of  a 
medium-term budgetary strategy. The Federation revised in July its 2011 budget to allow for 
some  increase  of  specific  social  benefits,  partly  compensated  by  cuts  in  investment  and  the 
wage  bill.  Republika  Srpska  is  planning  to  rebalance  its  2011  budget  in  October.  In  May 
2011,  the  distribution  coefficients  for  the  allocation  of  indirect  revenues  from  the  Single 
Account of the Indirect Taxation Authority were corrected for the first time since 2008. The 
share  for  the  Federation  was  lowered  slightly  from  64.39%  to  63.98%  in  the  benefit  of 
Republika  Srpska's  share  which  went  up  slightly  from  32.06%  to  32.47%.  The  share  for 
Brcko District remained at 3.55%. The shares are based on final consumption data. Overall, 
the reliability and predictability of fiscal policy in Bosnia and Herzegovina suffered from the 
failure  to  agree  on  Global  Fiscal  Frameworks  which  is  a  serious  obstacle  for  medium-term 
budgetary planning and sustainability. 

General  government  debt,  both  domestic  and  foreign,  stood  at  38.8%  of  GDP  in  2010,  up 
from 34.5% in 2009. External debt accounts for 25.7% of GDP and domestic debt for 13.1%. 
Domestic  public  debt  is  managed  and  served  by  the  Entities  (49.5%  Federation,  49% 
Republika Srpska, 1.5% Brcko District). Verification of claims related to old foreign currency 
savings has advanced. Both Republika Srpska and the Federation continued issuing bonds in 
2010  and  2011  to  service  the  debt.  In  addition,  Republika  Srpska  issued  for  the  first  time 
short-term T-bills in May and June 2011 serving as temporary financing to Republika Srpska 
cash-based  budget  deficit.  The  offers  were  met  by  high  demand  and  achieved  relatively 
favourable conditions. Overall, even though the debt-to-GDP ratio is still relatively moderate, 
its upward trend needs to be monitored carefully. 

Although there is evidence of an ongoing trend of economic recovery, the incomplete reform 
process acts as an impediment to laying the foundations for solid and more domestic-driven 
growth  in  Bosnia  and  Herzegovina.  The  growing  trade  gap  and  increasing  current  account 
deficit suggest that external imbalances are again taking shape. The productive capacity and 
competitiveness  of  the  economy  remain  weak,  as  domestic  sources  of  growth  are  not 
adequately  exploited  and  national  savings  remain  low.  The  currency  board  arrangement 
enjoys  a  high  level  of  confidence  and  credibility,  while  the  failure  to  agree  on  a  Global 
Framework  for  Fiscal  Policies  for  2011-2013  and  2012-2014  severely  threatens  the 
transparency, reliability and sustainability of public finances and is a serious impediment for 
short-  and  medium-term  budgetary  and  general  economic  planning.  Overall,  the  worsening 
quality of budgetary processes is putting a strain on the viability of macroeconomic policies, 
even though 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 2010. In Republika Srpska there has been no further progress in the privatisation agenda. 
Following a government decision not to initiate their privatisation, strategic companies such 
as the power utility, Banja Luka airport and the postal company remain public. Around 69% 

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of  the  initial  stock  of  State-owned  capital  intended  for  privatisation  had  been  sold  by 
September  2011,  unchanged  from  a  year  earlier.  In  the  Federation,  only  one  out  of  nine 
companies  included  in  the  revised  privatisation  plan  has  been  partly  privatised  by  stock 
exchange transactions with the achieved price being less than half of the company's estimated 
value. Attempts to privatise the remaining eight companies were unsuccessful, in some cases 
in spite of repeated offerings. None of the companies considered "strategic" such as the power 
utility  and  a  tobacco  factory  were  subject  to  privatisation.  The  planned  restructuring  and 
liquidation of socially-owned enterprises has made slow progress. Most prices are liberalised, 
even  though  a  number  of  administered  prices  remain  (e.g.  for  utilities,  including  electricity 
and gas). Overall, the planned privatisation process did not advance for the third consecutive 
year. 

Market entry and exit 

Following the economic crisis, the number of newly registered companies dropped by around 
50%  in  2010.  Property  registration  procedures  were  significantly  shortened  during  2010  in 
some courts, for example from 84 to 33 days in the Sarajevo Court. The time needed to start a 
business was reduced from 60 to 55 days, on average, over 2010. Court registration timelines 
and  costs  are  harmonised  between  the  Entities,  including  the  notary  fees.  However,  the 
process for obtaining all the necessary documents and permits remains lengthy and companies 
must still register in both Entities if they want to do business in the whole country. Under the 
second stage of the "legislative guillotine" project in the Federation, seven bylaws have been 
adopted  in  various  ministries  to  streamline  109  business-related  administrative  procedures, 
and some administrative improvements have also been implemented at Canton and municipal 
levels.  Labour  tax  procedures  have  been  streamlined.  Overall,  some  improvements  can  be 
reported, particularly in registration procedures.  

The legal system 

The legal system in Bosnia and Herzegovina remains complex. Even though the standard of 
legislation is relatively high in some areas, implementation and application of laws in practice 
is often poor due to the weak enforcement capacity of key institutions. The average time to 
resolve a dispute before court in order to enforce a contract remains high at 595 days. The rule 
of  law  is  weak  and  the  judicial  system  often  does  not  function  efficiently,  is  subject  to 
obstruction by the parties and does not cover commercial activities adequately. Overall, weak 
rule of law, corruption and unreliable contract enforcement continue to hamper the business 
environment.  

Financial sector development  

The financial sector is dominated by banks that are engaged mainly in traditional credit and 
savings activities. The share of claims on the private sector in relation to GDP decreased to 
around 55% in early 2011, from 58% a year earlier. Twenty-nine banks are operating in the 
country,  one  less  than  in  the  previous  year  as  one  bank  in  the  Federation  is  undergoing  a 
liquidation procedure. Two banks are under provisional administration. Twenty-one banks are 
under foreign ownership, seven under domestic private ownership and one is majority State-
owned. Despite losing some 2.4% of their share, the five largest still account for more than 
half  of  the  total  assets  of  the  banking  sector.  Banks  with  foreign  ownership  accounted  for 
approximately  90%  of  the  total  banking  system  assets  in  2010.  Banking  sector  assets 
remained relatively stable between the third quarter of 2010 and the second quarter of 2011. 
The  capital  adequacy  ratio  decreased  slightly  from  15.6%  in  the  third  quarter  of  2010  to 

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15.5% in the second quarter of 2011, comfortably above the legal minimum of 12%, which 
itself is significantly higher than the 8% required in the Basel II Accord.  

After an aggregate net profit of some € 12.6  million in 2009, the banking sector finished 2010 
with  an  aggregate  net  loss  of  € 63.6  million.  The  quality  of  the  loan  portfolio  continued  to 
deteriorate.  The  share  of  non-performing  loans  to  total  loans  reached  11.8%  in  the  second 
quarter of 2011, the highest level since 2001, up from 9.2% in the third quarter of 2010, while 
the  volume  of  loans  increased.  Nevertheless,  banking  profitability  indicators  showed  a 
remarkable  upward  trend  in  the  second  quarter  of  2011.  The  return  on  average  equity 
increased from -3.5% in the third quarter of 2010 to 3.5%, while the return on average assets 
rose  from  -0.4%  to  0.4%.  Liquidity  indicators  deteriorated  slightly  during  the  same  period 
with  the  rates  of  liquid  to  total  assets  falling  from  29.3%  to  26.2%  and  of  liquid  assets  to 
short-term  financial  liabilities  from  50.3%  to  46.2%.  Twenty-five  banks  are  participating  in 
the deposit guarantee scheme. Its coverage level remained unchanged at around € 18,000. In 
March  2011,  Republika  Srpska  amended  the  Law  on  the  Banking  Agency,  establishing  a 
banking  system  ombudsman  and  widening  the  Agency's  responsibilities  for  supervision  and 
protection against money laundering and financing of terrorism. The amendment also assigns 
the  Agency  customer  protection  functions.  Overall,  despite  the  increasing  non-performing 
loan ratio, financial stability was safeguarded. 

Annual credit growth continued its upward trend and reached 6.7% in July 2011, though from 
a  low  base.  Loans  to  households  grew  slightly  by  2.8%,  while  those  to  private  enterprises 
increased by 7.7%. The recovery of deposits has lost pace in an annual comparison, growing 
by 2.2% in July. Households remained the main contributors to this development, increasing 
their  savings  by  10.7%,  while  the  corporate  sector  reduced  its  deposits  by  6.6%.  As  a 
consequence  of  these  developments,  the  loans-to-deposits  ratio  climbed  from  113.5%  in 
October  2010  to  120%  in  July  2011.  The  spread  between  average  loan  and  deposit  interest 
rates of commercial banks decreased by 18 base points in the fourth quarter of 2010 compared 
to the previous quarter, reaching 7.87 percentage points, mainly due to reduced lending rates. 
This  level  points  to  still  high  intermediation  costs.  Overall,  after  the  sharp  correction 
experienced  during  the  financial  and  economic  crisis,  credit  activities  are  gaining  strength 
again.  

In the first half of 2011, local stock markets regained some previously lost ground, recording 
an upswing of 4% and 7.2% for the main indices of the Sarajevo and the Banja Luka stock 
exchanges, respectively. Their combined market capitalisation recovered somewhat to around 
47% of GDP in the first seven months of 2011, up from 44% in mid-2010. The cumulative 
turnover almost doubled year-on-year in January-July 2011, mainly influenced by two T-bills 
issues  of  Republika  Srpska  (May-June  2011).  The  insurance  sector  remained  small  and 
relatively  weak,  accounting  for  1.9%  of  GDP  in  2010,  representing  marginal  increase.  The 
annual growth of premiums picked up slightly to 2.9%, as compared to 1.4% annual rise in 
2009.  The  market  was  dominated  by  the  non-life  insurance  segment,  which  accounted  for 
84.2% of the total. The number of companies active on the market decreased to 25 at the end 
of  2010,  after  the  Federation's  Insurance  Supervisory  Agency  revoked  the  licence  of 
Hercegovina  Osiguranje.  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 

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External  imbalances  have  been  increasing  and  fiscal  imbalances  remain  high,  even  though 
adjustment  measures  made  under  the  international  support  programmes  contributed  to  some 
fiscal consolidation. The failure to adopt the Global Framework for Fiscal Policies for 2011-
2013 and the delays in forming governments at State and Federation levels weakened not only 
the soundness, transparency, sustainability and reliability of public finances and of economic 
policies,  but  also  the  planning  and  decision-making  of  economic  agents.  The  sluggish 
progress  in  the  reform  of  the  social  benefits  system,  the  still  slow  pace  of  economic 
restructuring, especially in the Federation, prevailing obstacles to private sector development 
and the composition of budgetary expenditures, increasingly dominated by current spending, 
at the expense of growth-enhancing activities, continue to undermine a more growth-oriented 
allocation  of  resources  and  a  strengthening  of  domestic  sources  of  growth.  Unemployment 
remains very high. Progress towards creating a single economic space within the country has 
been  limited.  Overall,  the  functioning  of  market  mechanisms  remained  hampered  by 
distortions,  the  excessive  role  of  the  State  and  lack  of  competition,  not  allowing  efficient 
allocation of resources. 

Human and physical capital  

Progress  in  the  field  of  education  and  training  has  been  limited.  The  Council  of  Ministers 
adopted the concept of the Qualifications Framework (Baseline Qualifications Framework) in 
Bosnia  and  Herzegovina.  However,  the  mismatch  between  the  qualification  needs  of  the 
labour  market  and  the  profile  and  number  of  graduates  coming  out  of  the  vocational  and 
educational training system adds to other structural weaknesses, such as low labour mobility, 
and remains a concern. Cooperation between the education sector and employers is still weak 
and information on human capital endowment remains scarce. Overall, the proper functioning 
of  the  labour  market  continues  to  be  hampered  by  structural  rigidities  and  the  weak 
performance of the education and training system. 

Activities  to  improve  the  railway  infrastructure  in  pan-European  corridor  Vc  progressed 
during  2010.  The  Railways  Regulatory  Body  introduced  a  set  of  regulations  in  compliance 
with the EU railway directives. Maintenance and upgrading of roads continued, but progress 
was slow, as some of the construction planned did not take place due to financial difficulties 
on  the  part  of  some  of  the  contractors.  Both  Republika  Srpska  and  the  Federation 
governments terminated contracts with Slovenian companies at end-2010 after several months 
of  inactivity  on  important  highway  projects.  Net  foreign  direct  investment  (FDI)  flows 
dropped further by more than 70% in 2010, falling to a mere 0.4% of GDP. Outflows were 
recorded in financial intermediation and wholesale trade, while the manufacturing sector was 
the  main  source  of  inflows.  FDI  outflows  were  nevertheless  reversed  in  the  third  quarter  of 
2010  and  there  are  indications  that  net  FDI  was slowly  recovering  in  the  first  half  of  2011. 
Overall,  in  an  admittedly  difficult  market  environment,  domestic  and  foreign  investors 
became  more  hesitant.  Infrastructure  improved  slightly,  but  continues  to  require  repairs  and 
modernisation. 

Sector and enterprise structure 

Electricity  and  gas  utilities  continue  to  be  public  stock  companies.  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.  Progress  towards  a  competitive 
telecommunications market has been limited. The incumbent operators continue to act as de 
facto  monopolies  in  their  fixed-line  market  segments  and  as  oligopolies  in  the  mobile 

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segment. The incumbent operators published their reference unbundling offers, however, and 
four  contracts  were  signed  with  alternative  operators  over  the  last  two  years.  New  licences 
were  granted  for  Internet  services  and  network  operators.  The  level  of  broadband  Internet 
access  has  increased.  Overall,  little  progress  was  achieved  on  the  liberalisation  of  network 
industries. 

Due  to  the  impact  of  the  economic  crisis,  the  sector  structure  of  the  economy  continued  to 
experience a shift towards an increase in services in 2010, and industrial production improved 
slightly.  Services  accounted  for  67.7%  of  gross  value  added,  industry  and  construction  for 
27% and agriculture for 8.6%. The traditionally high share of public administration, education 
and  health  declined  slightly  to  22.8%.  The  large  informal  sector,  which  is  fuelled  by 
weaknesses  in  tax  and  expenditure  policies  and  in  law  enforcement,  including  the  fight 
against corruption,  is  an important challenge. Overall,  there  have  been  no  major  changes  in 
the structure of the economy. The informal sector remains an important challenge. 

State influence on competitiveness 

Direct budget subsidies to industry and agriculture remained at 1.7% of GDP in 2010. Indirect 
subsidies continue to be sizeable. In Republika Srpska, for example, the government approved 
a  loan  to  Banja  Luka  airport  in  March  2011.  Bosnia  and  Herzegovina  has  not  established  a 
State aid authority as required by Article 36 of the Interim Agreement, an obligation due for 
more than a year. Overall, State influence over competitiveness remains high.  

Economic integration with the EU 

Bosnia  and  Herzegovina  remains  an  open  economy.  Total  trade  (the  sum  of  the  volume  of 
exports and imports) increased to 85.5% of GDP in 2010, after a drop to 75.3% in 2009. The 
EU continues to be the country's largest trading partner, with shares of 56.5% of total exports 
and 45.6% of total imports in the first seven months of 2011 (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  33.2%  of 
exports and 24.9% of imports. In 2010, the real effective exchange rate based on the country's 
20 largest trading partners appreciated by 1%. Overall, the level of trade integration with the 
EU remained high. 

4. 

EUROPEAN STANDARDS 

This  section  examines  Bosnia  and  Herzegovina's  capacity  gradually  to  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 Interim Agreement (IA) / 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. 

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4.1. 

Internal market 

4.1.1.  Free movement of goods 

There  was  some  progress  in  the  area  of  free  movement  of  goods.  However,  a  development 
strategy for the quality infrastructure as a whole and a horizontal coordination mechanism are 
not in place. A public-private dialogue on the market needs remains to be established. 

Some  progress  can  be  reported  in  the  field  of  standardisation.  The  Institute  for 
Standardisation of Bosnia and Herzegovina (BAS) adopted 2,695 European standards (ENs) 
as  national  standards,  bringing  the  total  to  12,306  ENs.  Altogether,  there  are  49  technical 
committees.  The  BAS  performed  the  first  annual  check  of  its  quality  management  system. 
However,  a  comprehensive  strategy  and  an  action  plan  for  becoming  a  full  member  of  the 
European  Committee  for  Standardisation  (CEN)  and 
the  European  Committee  for 
Electrotechnical Standardisation (CENELEC) remain pending.  

There  was  little  progress  on  conformity  assessment.  A  decision  on  recognition  of  foreign 
conformity  assessment  documents  was  adopted.  The  system  for  type  approval  of  motor 
vehicles  was  put  in  place.  However,  the  Law  on  technical  requirements  for  products  and 
conformity  assessment  remains  to  be  revised  to  comply  with  the  acquis.  Conformity 
assessment is not being performed on either locally manufactured or imported products before 
they  are  released  onto  the  market.  Appropriate  procedures  for  designation  of  conformity 
assessment bodies remain to be established.  

Some progress was made as regards accreditation. The Institute for Accreditation of Bosnia 
and Herzegovina so far accredited a total of 40 conformity assessment bodies. The Institute's 
scope of work was extended to product certification and four new technical committees were 
established. However, the Law on accreditation is not fully in line with the horizontal acquis. 
The conditions for future international recognition of tests, calibration results and certification 
remain to be fulfilled. The role of accreditation in authorising conformity assessment bodies 
at both State and Entity levels needs further consideration and a clear policy. 

There  was  some  progress  in  the  area  of  metrology.  The  State-level  Institute  of  Metrology 
(IMBiH)  proceeded  with  establishing  and  equipping  national  laboratories  to  realise  and 
maintain measurement standards for mass, temperature, length, electric current and time and 
frequency, as well as hardness, humidity, heat measurements, density and viscosity, velocity 
of air and gas flow and systems for measuring volume and flow of liquids other than water. 
Bosnia and Herzegovina became an associate member of the General Conference on Weights 
and  Measures  and  the  IMBiH  became  a  signatory  of  the  Mutual  Recognition  Agreement  of 
the International Committee for Weights and Measures. The IMBiH hosted the fifth General 
Assembly  of  the  European  Association  of  National  Metrology  Institutes  (EURAMET). 
However,  a  development  strategy  for  the  metrology  system  and  the  new  draft  Law  on 
metrology,  merging  the  existing  legislative  framework  and  creating  the  basis  for  the 
implementation  of  the  acquis,  remain  to  be  adopted.  The  IMBiH  needs  further  human 
resources  to  fulfil  its  tasks  even  though  it  increased  its  staff.  Cooperation  and  coordination 
between  the  IMBiH  and  the  metrology  institutes  of  the  Entities  that  would  help  to  create 
harmonised competence criteria for laboratories dealing with verification remained weak.  

Some progress was made on market surveillance. The market surveillance strategy for non-
food consumer products in Bosnia and Herzegovina for 2011-2015 was adopted. The Market 
Surveillance  Agency  increased  its  staff.  It  coordinated  proactive  and  reactive  market 

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surveillance activities. The Agency regularly publishes RAPEX (Rapid Alert System for Non-
Food Products) notifications on its website. It participates in the PROSAFE (Product Safety 
Enforcement  Forum  of  Europe)  General  Assembly  as  a  full  member.  However,  the  market 
surveillance  system  remains  largely  based  on  mandatory  standards  and  pre-market  control. 
Framework  legislation  is  not  based  on  the  horizontal  acquis  for  harmonised  products.  The 
framework for non-harmonised products requires further improvement, as does coordination 
between  the  relevant  authorities.  Further  efforts  need  to  be  made  regarding  institutional 
capacity to ensure efficient market surveillance.  

Little progress was made as regards the 'New and Global Approach' acquis. The Directives on 
non-automatic weighing instruments and pressure equipment were transposed. However, line 
ministries and institutions in charge of transposing and implementing directives do not have 
sufficient  capacity  to  perform  these  tasks.  A  proper  mechanism  is  needed  for  internal 
consultation before adopting new technical regulations that would have an impact on trade.  

Little  progress  was  made  as  regards  the  'Old  Approach'  acquis.  The  State-level  Agency  for 
Medicines  and  Medical  Devices  adopted  a  policy  on  medicines  and  medical  devices  and  a 
rulebook on the examinations for pharmaceutical inspectors. The Federation adopted bylaws 
implementing  the  Law  on  pharmaceutical  activity.  Generally,  the  national  system  for 
authorisation,  distribution  and  use  of  veterinary  medicinal  products  offers  guarantees 
equivalent  to  EU  rules.  However,  further  efforts  remain  to  be  undertaken  regarding  the 
labelling of such products, resulting residue problems and the streamlining of the institutional 
responsibilities. The capacity of the Agency for Medicines and Medical Devices remains to be 
strengthened.  The  division  of  responsibilities  for  transposing  the  'old  approach'  acquis 
remains to be further clarified.  

There  was  progress  in  the  area  of  consumer  protection.  The  2011  State-level  annual 
consumer protection programme as well as the report on the execution of the 2010 State-level 
annual consumer protection  programme was adopted. The technical capacity of the relevant 
State-level  and  Entity  institutions  and  their  information  activities  to  the  public  increased. 
Relations  between  the  government  and  non  governmental  organisations  improved.  The 
Ombudsman's  Office  for  Consumer  Protection  was  sufficiently  strengthened  to  fulfil  the 
duties  laid  down  by  the  Consumer  Protection  Law.  The  efficiency  and  output  of  the  Office 
increased.  In  2010  the  Ombudsman  handled  317  cases,  of  which  295  were  resolved.  The 
Ombudsman delivered 35 expert opinions, provided 880 items of legal advice and answered 
1,515  requests  for  information.  The  Ombudsman  issued  recommendations  and  guidelines  in 
the  Telecommunications  sector,  a  special  report  in  the  sector  of  consumer  credits  after  the 
adoption of guidelines, as well as recommendations to consumers in the area of food safety. 

Overall,  preparations  in  the  fields  of  standardisation,  accreditation,  conformity  assessment, 
metrology,  market  surveillance  and  consumer  protection  are  moderately  advanced.  Further 
efforts are needed to adopt a legislative framework harmonised with the horizontal acquis and 
to  continue  transposing  the  product-specific  acquis.  Strengthening  the  institutional  capacity 
and  creating  structures  for  coordination  between  the  relevant  institutions  are  essential. 
Prioritisation  of  legal  alignment  and  related  capacity-building  remains  to  be  done  in 
accordance  with  market  needs.  Major  steps  need  to  be  taken  to  achieve  a  fully  functioning 
single economic area.  

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4.1.2.  Movement of persons, services and right of establishment 

No  progress  can  be  reported  on  movement  of  persons.  Different  labour  legislations  and 
social  security  systems  between  the  Entities  and  also  between  Cantons  continue  to  be  an 
obstacle to the movement of workers within the country. Alignment with European standards 
remains at an early stage.  

Little  progress  was  made  in  the  area  of coordination  of  social  security  systems between the 
Entities  and  between  the  Cantons.  An  agreement  amending  the  social  insurance  agreement 
between  Bosnia  and  Herzegovina  and  the  Republic  of  Slovenia  was  signed.  However,  an 
agreement  between  Bosnia  and  Herzegovina  and  the  Republic  of  Slovenia  regarding  the 
employment  of  citizens  of  Bosnia  and  Herzegovina  in  the  Republic  of  Slovenia,  a  step 
towards coordinated systems, remains to be ratified. 

As  regards  freedom  to  provide  services,  no  progress  was  achieved  in  the  preparations  for 
transposing the Services Directive.  

Some progress can be reported in the area of financial services. Republika Srpska amended 
the Law on the Banking Agency to expand the regulatory/supervisory functions of the Agency 
and  established  an  Ombudsman  for  financial  services.  Both  Entities  adopted  implementing 
legislation  governing  credit,  operational  and  market  risks  and  new  charts  of  accounts  for 
financial  institutions.  The  Entities'  banking  supervisory  agencies  extended  the  temporary 
measures  on  loan  repayments  for  another  year.Recommendations  on  banking  laws  and 
regulations  issued  by  the  Basel  Banking  Supervision  Committee  (Basel  II)  remain  to  be 
implemented  in  both  Entities.  Coordination  of  banking  supervision  improved.  Joint 
supervision  teams  conducted  inspections  of  branches.  The  Financial  Coordination  Unit  was 
established within the Ministry of Finance and the Treasury of Bosnia and Herzegovina and 
staff was appointed to it (See Section 3.1 - The existence of a functioning market economy). 

However, the legislation on the Banking Ombudsman is not harmonised. The Federation did 
not adopt amendments to the Law on the Banking Agency, the Law on banks and the Law on 
micro-credit organisations to align them with the Law on prevention of money laundering. As 
Republika  Srpska  is  implementing  the  new  chart  of  accounts  but  the  Federation  is  not, 
reporting  is  not  harmonised  between  the  Entities.  Further  improvements  are  required  in 
coordination  and  cooperation  between  the  Entity  Ministries  of  Finance  and  Banking 
Agencies.  Memoranda  of  understanding  with  supervisors  of  foreign  banks  present  in  the 
country remain to be signed. Further alignment with the acquis is required. 

Little  progress  was  made  towards  creating  a  single  economic  space  for  insurance  services. 
Republika Srpska adopted implementing legislation regarding intermediation in insurance and 
insurance  companies.  The  number  of  requests  for  mediation  increased  in  Republika  Srpska. 
On-site  inspections  proceeded  smoothly.  Out  of  fourteen  insurance  companies  registered  in 
the Federation, nine have branch offices in Republika Srpska. Five out of the eleven insurance 
companies from Republika Srpska have branch offices in the Federation.  

However, the legislation remains partially harmonised with the acquis. Parts of the Solvency 
II Directive and the motor insurance acquis remain to be transposed. The legal gap between 
the Entities is widening because legislative amendments are at different stages. The Law on 
the  Insurance  Agency  of  Bosnia  and  Herzegovina  remains  to  be  amended  to  reinforce  the 
Agency's regulatory powers. The Federation's Insurance Ombudsman's Office remains to be 
established.  State-level  capacity  to  conduct  arbitration  in  case  of  litigation  between  the 

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Entities' Insurance Agencies remains to be established. There is no effective mechanism for 
enforcement of decisions of the State-level Insurance Agency. Memoranda of understanding 
with foreign supervisory authorities remain to be signed. The licence of one company in the 
Federation  was  revoked.  An  insurance  company  registered  in  one  Entity  can  operate  in  the 
other  only  if  it  establishes  a  branch  there.  The  branch  office  reports  to  the  supervisory 
authority  of  the  host  Entity,  which  is  not  in  line  with  EU  requirements.  The  insurance 
supervisor from the home Entity has no powers to perform inspections on the branches.  

There  was  some  progress  in  the  area  of  capital  markets.  The  legislative  framework  in  the 
Entities is partly in line with the acquis and to some extent harmonised between the Entities. 
A  State-level  working  group  was  established  to  review  existing  legislation  on  market 
transparency,  market  abuse  and  prospectuses  and  to  identify  areas  that  require  further 
alignment  with  the  acquis.  Republika  Srpska  further  streamlined  procedures  and  conditions 
for  securities  issues  with  the  Company  Law  and  specified  conditions  for  emission  of  bonds 
issued  by  the  Republika  Srpska  government.  The  Republika  Srpska  Securities  Commission 
signed  the  International  Organization  of  Securities  Commissions  (IOSCO)  Multilateral 
Memorandum of Understanding.  

However,  amendments  to  relevant  legislation  remain  to  be  adopted  in  both  Entities.  Brcko 
District  did  not  adopt  a  Law  on  the  securities  market.  Regulatory  authority  and  oversight 
remain fragmented. Participants in the securities market with their head office in one Entity 
can operate in the other Entity only after obtaining a license there.  

Uneven progress can be reported in the field of postal services. The Agency for Postal Traffic 
adopted general conditions for the provision of postal services. However, a postal strategy at 
State and Federation levels does not exist. The State-level Law on postal services remains to 
be revised to ensure further harmonisation with the acquis. The administrative capacity at the 
State-level  Ministry  of  Transport  and  Communications  regarding  postal  services  remained 
weak. The Federation Law on postal traffic was not adopted. Entity postal legislation remains 
to be harmonised to ensure legal clarity for potential market entrants who at the moment often 
need to comply with different sets of rules. The universal service obligation is set above the 
minimum requirement of the postal acquis and, in Republika Srpska, also above the threshold 
set  in  the  current  State-level  law.  The  situation  is  the  same  as  regards  the  scope  of  the 
reserved area, which is broad in comparison to the postal acquis.  

No progress was made on the right of establishment. Internal harmonisation of legislation is 
pending.  A  single  economic  space  regarding  registration  of  foreigners  to  conduct  business 
throughout the entire country does not exist, which continues to hamper business activity. The 
reciprocity principle is not fully applied for natural persons acquiring ownership. Bosnia and 
Herzegovina made no progress towards recognition of EU professional qualifications.  

Limited  progress  was  made  in  the  area  of  company  law.  The  Entities'  Laws  on  business 
companies are partly in line with the acquis and to some extent harmonised with each other. 
The  legislation  on  corporate  accounting  and  auditing  is  broadly  in  line  with  the  acquis  and 
almost  fully  harmonised  between  the  Entities.  Coordination  between  the  Entities  in  their 
legislative  work  improved.  Some  business  registration  procedures  were  harmonised.  The 
Federation  established  a  Chamber  of  Auditors  to  undertake  quality  assurance  reviews  of 
audits; its 2011 work and financing plans were adopted and members to its quality assurance 
review committee appointed.  

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In Republika Srpska, the Federation of Certified Auditors and Accountants conducts quality 
assurance reviews and the Ministry of Finance performs the independent oversight of audits in 
line  with  the  adopted  annual  work  programme.  The  Entities  apply  International  Financial 
Reporting  Standards  (IFRS)  to  all  companies  irrespective  of  their  size.  Since  January,  in 
Republika Srpska IFRS for small and medium-sized enterprises may be used on a voluntary 
basis  by  commercial  companies  with  public  responsibility  which  are  still  required  to  apply 
IFRS.  

However,  further  alignment  with  the  EU  acquis  is  needed  on  cross-border  mergers  for 
Republika Srpska and on take-over bids for Republika Srpska and the Federation. A Law on 
takeovers  of  joint  stock  companies  remains  to  be  adopted  in  Brcko  District.  There  is  no 
system for sharing data between different institutions keeping registers containing company-
related  information  and  data.  The  systems  for  quality  control  and  independent  oversight  of 
auditors remain to become fully operational. An independent Public Oversight Board remains 
to be set up in the Federation. 

Overall, preparations in the area of movement of persons, services and right of establishment 
remain at an early stage. Some progress was made on simplifying the business environment 
and  ensuring  a  harmonised  framework  across  the  country  in  the  area  of  company  law, 
corporate  accounting  and  auditing.  Alignment  of  the  legislative  framework  for  financial 
services  remains  to  be  completed.  Enforcement  and  supervision  mechanisms  need 
strengthening. Further steps remain to be taken to establish the legal framework for providing 
universal postal services across the whole country. 

4.1.3.  Free movement of capital 

No progress can be reported in the free movement of capital.  

Republika  Srpska  adopted  amendments  to  the  Law  on  foreign  investments  aligning  its 
legislative framework with the State-level law, further liberalizing investments in the field of 
military  industry,  shortening  deadlines  and  reducing  administrative  procedures,  thereby 
simplifying  the  procedure  of  foreign  investment  registration.  Bosnia  and  Herzegovina 
continues  to  apply  relatively  liberal  rules  on  inward  capital  flows.  However,  restrictions 
remain  on  outward  transfers  by  residents.  Residents  may  hold  accounts  abroad  only  for 
specific purposes and the amounts that may be transferred are restricted. The legal framework 
is  not  harmonised.  In  both  Entities  the  legislation  limits  the  amount  that  non-residents  may 
freely  transfer.  When  it  comes  to  attracting  foreign  investment,  throughout  the  country, 
coordination  for  designing  and  implementing  legal  reform  in  this  area  is  lacking.  Capital 
markets in Bosnia and Herzegovina are not fully functional.  

Foreign  investment  in  the  banking  sector  reached  85%.  Overall,  foreign  direct  investment 
further decreased in 2010. Restrictions on foreign direct investment continue to apply in the 
media  sector,  where  a  49%  limit  on  foreign  capital  exists.  Privatisation  of  State  enterprises 
came to a standstill. 

Within  the  Central  Bank,  Bosnia  and  Herzegovina  has  a  modern  payment  system  for  giro 
clearing and real-time gross settlement operations. In 2010 giro clearing and real-time gross 
settlement operations accounted for 31% of the number of transactions and 36% of the value 
of internal traffic in the country. Within the commercial bank system they made up 69% of 
the number of transactions and 64% of the value of transactions between clients with accounts 
in the same bank. 

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Overall,  preparations  in  the  area  of  free  movement  of  capital  remain  moderately  advanced. 
Further  measures  are  required  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 

Good,  but  uneven  progress  was  made  in  the  customs  field.  The  customs  tariff  was  fully 
harmonised  with  the  2011  EU  Combined  Nomenclature.  Rules  of  origin  are  used  in 
accordance  with  the  Interim  Agreement.  Operational  instructions  on  use  of  the  ATA  carnet 
(international  customs  document)  were  prepared  and  the  Indirect  Taxation  Authority  (ITA) 
staff  trained.  Operational  instructions  for  vehicles  subject  to the  approval  procedure  were 
issued  and  implementation  started.  However,  the  Customs  Law  needs  to  be  in  line  with  the 
EU Customs Code and the legislation on free zones and intellectual property rights with the 
acquis. The number of traders applying for simplified procedures remained relatively  small. 
Further  efforts  are  needed  to  facilitate  trade.  Customs  controls  are  too  frequent  and  not 
targeted  well  due  to  the  lack  of  a  fully  developed  risk  analysis  system.  Enforcement  of 
intellectual property rights (IPR) remains weak. 

Little progress can be reported in the case of taxation. An agreement on avoidance of double 
taxation  related  to  income  and  property  tax  with  Austria  was  ratified.  Republika  Srpska 
introduced  the  system  of  fiscal  cash  registers.  However,  the  Federation  postponed 
implementation of this system and Brcko District did not introduce it. Although a tax rate of 
10%  is  being  applied  in  all  Entities,  the  personal  income  tax  systems  are  not  harmonised 
between  the  Entities.  Different  procedures  persist,  leading  to  a  complex  tax  environment, 
which makes the country less attractive for foreign investors. Rules and procedures on direct 
taxation remain to be harmonised. A permanent formula for allocation of indirect tax revenue 
between  the  State,  the  Entities  and  Brcko  District  remains  to  be  agreed.  Further  alignment 
with the VAT acquis and the EU excise legislation is needed. In the area of business taxation, 
some measures do not comply with the EU Code of Conduct (e.g. legislation on free zones). 

As  regards  administrative  and  operational  capacity,  little  progress  was  made.  The  ITA 
prepared a Business Change Management Plan. However, its organisational structure needs to 
be  further  strengthened,  including  appointment  of  a  permanent  top  management  and 
establishment  of  a  strategy  unit.  The  ITA  is  operating  without  a  business  strategy  and 
associated  IT,  human  resources  and  comprehensive  training  strategies.  Its  IT  systems,  in 
particular regarding customs, remained weak. The role of the Internal Audit Unit needs to be 
enhanced.  Advanced  training  on  intelligence  techniques  for  tax  staff,  risk  analysis,  IPR 
enforcement, customs laboratories and internal audit remains to be delivered. Cooperation and 
coordination within the ITA and with other authorities remains weak. The ITA is not sharing 
sufficient data with the Agency for Statistics of Bosnia and Herzegovina, which hampers the 
production  of  reliable  statistics  (See  Section  4.2.8  –  Statistics).  The  functions  performed  by 
customs laboratories remain limited.  

Overall, preparations in the area of customs and taxation are limited. Positive developments 
include the use of the ATA carnet, introduction of a customs-related approval procedure and 
the  improved  knowledge  and  use  of  rules  of  origin.  Substantial  efforts  are  required  to  align 
legislation  more  closely  with  the  acquis  and  ensure  effective  implementation  of  legislation 
and the Interim Agreement. Strategies remain outstanding. The Law on customs enforcement 
of  IPR  remains  to  be  agreed.  The  free  zones  arrangements  remain  to  be  aligned  with  the 
acquis. The use of an intelligence system for the tax authorities remains to be enhanced. The 
ITA's  administrative  capacity  needs  strengthening  and  a  permanent  director  remains  to  be 

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appointed. Closer cooperation is essential, particularly between the ITA and the Agency for 
Statistics of Bosnia and Herzegovina. IT systems are not fully in line with EU requirements. 

4.1.5.  Competition 

Some progress was recorded in the area of antitrust. The Competition Law is mostly in line 
with  the EU acquis, but needs further alignment. The Competition Council's (CC) activities 
focussed on mergers and abuses of dominant market positions. The CC adopted five antitrust 
decisions  and  thirteen  merger  decisions.  The  CC  imposed  fines  totalling  approximately 
 40,000  on  companies  that  had  infringed  the  competition  rules.  Seven  mergers  were 
prohibited,  five  authorised  subject  to  remedies  and  six  were  authorised  unconditionally. 
However, the CC's administrative capacity with a total of 26 staff appears insufficient to carry 
out  the  tasks  assigned  to  it.  CC  staff  needs  further  training  to  increase  the  authority's 
investigative capacity.  

Republika  Srpska  adopted  the  Law  on  amendments  to  the  Law  on  public  enterprises. 
However,  Bosnia  and  Herzegovina  did  not  fulfil  its  commitment  under  the  Interim 
Agreement,  to  apply,  by  1  July  2011,  Community  principles  to  public  undertakings  and 
undertakings to which special and exclusive rights were granted.  

Little progress was made in the field of State aid. The Council of Ministers adopted a draft 
State  Aid  Law.  However,  it  remains  to  be  adopted  by  the  Parliament.  A  State-level 
operationally  independent  authority  for  the  control  of  State  aid,  in  line  with  the  Interim 
Agreement,  remains  to  be  established.  Transparency  of  all  State  aid  granted  in  Bosnia  and 
Herzegovina is not ensured.  

Overall,  preparations  in  the  area  of  competition  remain  at  an  early  stage.  Bosnia  and 
Herzegovina needs to intensify its efforts to adopt State aid legislation in line with the acquis 
to comply with the Interim Agreement and to set up the institutional framework necessary for 
effective  control  of  State  aid.  The  country's  commitment  under  the  Interim  Agreement  with 
regard to public undertakings remains to be fulfilled. 

4.1.6.  Public procurement 

No  progress  was  made  in  the  area  of  public  procurement.  Guidelines  on  electronic  public 
procurement were adopted and the technical preparations for electronic publication of tender 
notices on the Public Procurement Agency (PPA) website were completed. The PPA and the 
Public  Procurement  Review  Body  (PRB)  retained 
levels.  However, 
implementation of the strategy for development of the public procurement system for 2010-
2015  is  delayed.  The  2004  and  2007  public  procurement  acquis  remains  to  be  transposed. 
Provisions  concerning  public-private  partnerships  and  services  and  works  concessions  at  all 
levels guarantee neither competitive and transparent procedures nor an independent review of 
the procedure in line with the acquis. The legislation and the system of awarding concessions 
remain  fragmented.  The  administrative  set-up  for  regulating  and  managing  concessions  is 
very  complex.  Issues  such  as  overlapping  powers,  high  administrative  costs  and  lack  of 
formal cooperation between the levels of authority require attention. 

their  staffing 

Neither the PPA nor the PRB are sufficiently proactive in disseminating information on the 
public procurement system and providing contracting authorities and economic operators with 
practical assistance. Cooperation between the PPA and the PRB is not functioning efficiently. 
The PRB is not implementing all its rules of procedure, which resulted in a prolonged conflict 

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€
within  the  PRB.  In  several  instances  the  PRB  issued  contradictory  rulings  in  similar 
situations.  Although  between  December  2010  and  March  2011,  the  PRB  implemented  the 
legal  requirement  to  publish  its  decisions,  this  stopped  since.  Monitoring  of  public 
procurement  procedures  across  the  country  requires  further  strengthening,  along  with  the 
capacity of contracting authorities to apply the law. The professional ability of procurement 
officers to implement  public procurement procedures properly is unsatisfactory. The cost of 
publishing  contract  notices  in  the  Official  Gazette  remains  disproportionately  high  for 
contracting authorities. 

Overall,  preparations  in  the  field  of  public  procurement  remain  at  an  early  stage.  A  new 
Public Procurement Law fully incorporating the acquis remains to be adopted. Coordination 
and  cooperation  mechanisms  between 
require  significant 
the 
improvement, as do the operations of the PRB. 

institutions 

relevant 

4.1.7. 

Intellectual property law 

Progress  was  made  in  intellectual  property  rights.  State-level  laws  governing  industrial 
property  and  copyright  and  related  rights  entered  into  force  and  implementing  regulations 
were  adopted.  Three  Councils  were  established  as  advisory  and  coordination  bodies  of  the 
Institute for Intellectual Property and began to implement their work programmes. Training of 
these Council members was initiated. Further measures were taken to improve the functioning 
of  the  Institute  for  Intellectual  Property  and  to  disseminate  information  about  intellectual 
property. The institute expanded its premises and increased its staff from 48 to 50. However, 
another 22 posts remain to be filled.  

Some  progress  can  be  reported  in  the  area  of  industrial  property  rights.  The  Institute  for 
Intellectual Property received 49 patent applications and processed 270, including some from 
previous  years.  When  it  comes  to  trademarks,  the  Institute  received  716  applications  and 
processed  1.345,  including  ones  from  previous  years.  The  Institute  received  22  industrial 
design  applications  and  issued  10  decisions  granting  industrial  designs.  One  application  for 
protection  of  geographical  indications  was  received  and  a  decision  regarding  registration 
issued. The Board of Appeal of the Institute received 12 new applications and completed 27 
appeal proceedings out of a total of 90 applications.  

The  Indirect  Taxation  Authority  referred  two  files  to  the  Prosecutor's  Office  and  seized 
counterfeit  goods.  The  Bosnia  and  Herzegovina  Court  ruled  for  the  first  time  on  a  case  of 
copyright violation. However, high levels of counterfeiting and piracy persist in the country. 
A reliable system for collecting, analysing and exchanging data among the various institutions 
involved is lacking. Enforcement remains to be improved; an enforcement strategy involving 
all relevant stakeholders does not exist. Coordination between enforcement bodies at various 
levels is lacking.  

Overall, preparations in the area of intellectual, industrial and commercial property rights are 
well advanced. Further efforts are required to improve enforcement and coordination between 
all stakeholders. 

4.1.8.  Employment and social policies, public health policy 

There was little progress on employment policy. Republika Srpska adopted its Employment 
Strategy  for  2011-2015.  The  Entities  finalised  plans  for  implementing  the  Bosnia  and 
Herzegovina  Employment  Strategy  and  action  plans  to  implement  strategic  documents. 

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However,  no  employment  strategies  exist  in  Brcko  District.  A  new  Law  on  mediation  in 
employment and entitlements during unemployment remains to be adopted in the Federation. 

There  was  no  improvement  regarding  the  labour  market  situation.  The  high  unemployment 
level further increased and hardly any jobs were created. According to administrative data, in 
June the unemployment rate was 43.1%, an increase of 0.6 percentage points compared to a 
year  earlier.  A  cooperation  agreement  between  the  State-level  Labour  and  Employment 
Agency  and  the  State-level  Agency  for  Statistics  was  signed  to  improve  cooperation  in  the 
field  of  labour  market  statistics.  All  Entities  are  implementing  programmes  for  young 
graduates to facilitate  their entry  into the labour  market.  The  Federation  committed  itself  to 
financing  and  implementing  the  Social  Safety  Nets  and  Employment  Support  Project  from 
2010 to 2014. The Federation adopted a new plan on inspection of the informal labour market 
for  all  Cantons.  A  more  integrated  approach  to  employment,  encompassing  all  relevant 
sectoral  policies  would  be  needed  to  address  the  country's  considerable  labour  market 
challenges. Entity governments continue to lack the capacity to implement appropriate active 
labour  market  measures.  The  large  number  of  labour  and  employment  institutions  at  State, 
Entity  and  Canton  levels  and  the  lack  of  coordination  between  them  remains  a  cause  for 
concern.  Considerable  efforts  remain  to  be  made  to  develop  reliable  labour  market  data,  a 
prerequisite for developing labour market policy (See Section 3.1 – Macroeconomic stability). 

Modest steps were taken to improve the functioning of employment services. The rulebook on 
internal organisation of the State-level Labour and Employment Agency was adopted. Based 
on the Republika Srpska Law on mediation in employment and rights of unemployed persons, 
the  Republika  Srpska  Employment  Bureau  was  established  as  a  public  institution.  This  is  a 
first step towards the reform of the employment service. Several rulebooks were adopted on 
mediation in employment and active job-seeking. However, unified standards and methods for 
data  collection  are  lacking.  Employment  services  are  focusing  on  activities  related  to 
unemployment benefits rather than on mediation and services for job-seekers. There was no 
improvement in coordination between the education and labour market sectors to develop an 
education and training system that will meet the needs of the labour market. 

There  was  no  progress  in  social  policies.  Existing  labour  laws  in  the  Entities  remain  to  be 
aligned with the acquis.  

No progress can be reported regarding health and safety at work. In the Federation no Law on 
health and safety at work is in place. Labour inspectorates remained understaffed and unable 
to monitor compliance with health and safety at work standards. Reliable data on accidents at 
work are not available. This is a particular problem in the Federation, where records are held 
at Canton level.  

No  progress  can  be  reported  in  the  social  dialogue.  The  Federation  adopted  legislation 
establishing the Agency for Peaceful Resolution of Collective Labour Disputes. However, the 
State-level  Law  on  social  partners'  representativeness  remains  to  be  adopted.  No  agreement 
was reached on the membership criteria for a State-level Economic and Social Council. The 
legal framework is not in place and the rules for recognition and registration of social partners 
need to be clarified. Social dialogue remains hampered by the complex system of government 
and the fragmentation of legislation. 

Little progress can be reported in the area of social inclusion, including anti-discrimination. 
Both Entities and  the  Brcko District adopted programmes to promote employment  and self-
employment  of  Roma.  Brcko  District  adopted  a  decision  establishing  a  Social  Inclusion 

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Council  to  provide  assistance  to  socially  excluded  persons.  However,  the  social  inclusion 
strategies of Republika Srpska and at State-level remain to be adopted. Implementation of the 
Republika Srpska Law on professional  rehabilitation, training and employment  remains  low 
considering the number of employed persons with disabilities. No steps were taken to remedy 
the shortcomings of the Anti-Discrimination Law, notably the absence of age- and disability-
related provisions and the broad scope of the exceptions. Implementation of the law needs to 
improve. Implementation of the UN Convention on the rights of persons with disabilities was 
weak (See Political criteria 2.2 - Human Rights and the Protection of Minorities). 

Little progress was made in the area of social protection. Republika Srpska adopted a pension 
reform  strategy.  However,  Republika  Srpska's  new  Pension  System  Law  remains  to  be 
adopted.  There  was  no  progress  towards  pension  system  reform  in  the  Federation.  The 
pension  system  remained  fragmented.  Implementation  of  framework  legislation  to  reform 
social  protection  systems  towards  a  needs-based  approach  did  not  advance.  The  legal 
framework  does  not  provide  the  most  vulnerable  categories  with  adequate  assistance  (See 
Political criteria 2.2 - Human Rights and the Protection of Minorities). The discrepancies in 
social assistance, services and entitlements across the country add to the widespread inequity. 
No  steps  were  taken  to  end  the  disparities  between  Entity  social  protection  systems  and 
between Cantonal systems within the Federation.  

Good but uneven progress can be reported in public health policy. The Council of Ministers 
adopted a revised roadmap for EU integration for the health sector. The Federation adopted a 
strategy  on  sexual  and  reproductive  health.  The  Federation  and  Republika  Srpska  adopted 
legislation  implementing  the  laws  on  healthcare  and  organ  transplantation.  The  Federation 
adopted  amendments  to  the  Law  on  health  insurance  harmonised  with  the  provisions  of  the 
Law on the unified system and registration control and collection of contributions. It amended 
the Law on limited use of tobacco products in line with provisions of Framework Convention 
of the WHO on Tobacco Control. It adopted amendments to the Law on the improvement of 
quality, safety and accreditation in health care. The Federation adopted bylaws implementing 
the Law on blood and blood components. Republika Srpska adopted a rulebook on infectious 
diseases.  The  conference  of  health  ministers  met  regularly.  The  institutional  capacity  to 
produce reliable statistical data on health improved and a common set of reporting indicators 
harmonised with European standards was developed.  

However, the Entities made no progress with implementing their healthcare reform strategies. 
Harmonisation  and  coordination  of  reform  activities  between  Entities  need  to  be  improved. 
The  revised  EU  roadmap  is  not  facilitating  the  alignment  process.  It  outlines  a  list  of 
obligations  without  specifying  the  action,  deadlines  and  responsibility  for  implementation. 
The  institutional  and  legislative  framework  remains  fragmented.  No  steps  were  taken  to 
address  the  problems  of  inadequate  coverage  of  health  insurance  and  non-transferability  of 
health  funds.  Implementation  of  international  health  regulations  is  slow.  There  was  no 
progress regarding mechanisms for reporting and exchanging information  on communicable 
diseases. An action plan for meeting core capacity requirements in the event of outbreaks of 
diseases remains to be adopted.  

Progress  can  be  reported  in  the  area  of  mental  health.  The  Federation  amended  the  Law  on 
protection  of  persons  with  mental  disorders  improving  the  protection  of  human  rights  and 
dignity  of  persons  with  mental  disorders  as  well  as  the  legal  protection  of  legally 
incapacitated  adults.  The  Regional  Health  Development  Centre  for  Mental  Health  in  South-
Eastern Europe in Sarajevo became operational. However, further actions remain to be taken 
towards promoting inclusion of people with mental health problems and their empowerment. 

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Community  based  mental  health  services  of  high  quality  that  are  focused  on  recovery  need 
further support. 

Overall,  preparations  in  the  areas  of  employment,  social  policy  and  public  health  are  at  an 
early  stage.  Further  efforts  need  to  be  made  on  anti-discrimination  and  social  protection. 
Legislative  approximation  remains  to  be  intensified  and  social  inclusion  strategies  to  be 
adopted.  

4.1.9.  Education and research 

Little progress can be reported in the field of education.  

The  Council  of  Ministers  adopted  the  concept  of  the  Qualifications  Framework  (Baseline 
Qualifications  Framework),  which  defines  qualifications  levels  based  on  learning  outcomes 
for  all  qualifications  in  Bosnia  and  Herzegovina  and  establishes  the  basis  for  further  work. 
Eight out of ten Cantons harmonised their laws on pre-school education with the framework 
legislation. Sarajevo Canton introduced mandatory pre-school education.  

However,  pre-school  attendance  across  the  whole  country  remained  very  low.  Ethnic-based 
separation in public schools remains an issue of serious concern (See Political criteria 2.2 - 
Human Rights and the Protection of Minorities). 

No  progress  can  be  reported  in  the  Federation  on  harmonisation  of  the  laws  on  vocational 
education and training with the Framework Law as eight Cantons did not pass new legislation. 
State-level  strategies  and  framework  laws  remain  to  be  implemented.  There  are  no 
Framework  laws  on  recognition  of  qualifications  in  line  with  the  Lisbon  Recognition 
Convention  and  adult  education.  There  are  no  harmonised  procedures  in  place  to  recognise 
qualifications  obtained  abroad.  Implementation  of  the  higher  education  qualifications 
framework  remained  at  a  pilot  level.  Two  Cantons  did  not  harmonise  their  laws  with  the 
Framework Law on higher education.  

The  State-level  Agency  for  Development  of  Higher  Education  drafted  guidelines  and 
standards  to  accredit  higher  education  institutions  and  trained  experts.  Republika  Srpska 
established  the  Agency  for  Accreditation  in  Higher  Education  in  line  with  the  Framework 
Law on higher education. However, the accreditation process did not start as mandated by the 
Framework  Law  on  Higher  Education.  Despite  a  staff  increase,  the  State-level  Agency  for 
Pre-school, Primary and Secondary Education is not fully operational. The State-level Centre 
for  Information  and  Recognition  of  Documents  in  the  Field  of  Higher  Education  is  not 
operational.  The  Republika  Srpska  Institute  for  Adult  Education  is  not  fully  operational. 
There is no similar structure in the Federation.  

There was some progress in the area of culture. Bosnia and Herzegovina started to participate 
in the Culture Programme. Focal points were established at State and Entity levels. Mapping 
of  the  cultural  sector  and  development  of  statistical  indicators  in  line  with  EUROSTAT 
methodology were completed with the support from the UN Millennium Development Goals 
Culture  for  Development  Programme.  Communication  with  relevant  international  agencies 
intensified.  In  cooperation  with  UNESCO  and  UN  MDG  the  capacity  of  the  State 
Commission  for  cooperation  with  UNESCO  within  the  Ministry  of  Civil  Affairs  was 
strengthened.  Republika  Srpska  established  a  cultural  council  as  an  advisory  body  to  the 
Ministry of Education and Culture to follow up the implementation of the Republika Srpska 

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Development  Strategy  for  culture.  However,  the  Bosnia  and  Herzegovina  action  plan  for 
culture remains to be adopted. 

Some progress was made in the area of research and innovation policy. Participation in the 
Seventh  EU  Research  Framework  Programme  (FP7)  slightly  increased.  Cooperation  with 
COST and EUREKA started. The Ministry of Civil Affairs provided financial assistance for 
Entities  preparing  projects  for  FP7,  COST  and  EUREKA.  However,  the  administrative  and 
research  capacity  to  fully  take  advantage  of  association  to  FP7  and  the  means  to  actively 
stimulate  the  scientific  community  remained  weak.  Participation  and  success  rate  in  Marie 
Curie actions is weak as well as the involvement of the private sector.  

Some efforts were made to integrate into the European Research Area (ERA) and contribute 
to the Innovation Union (IU). The country joined the EURAXESS network aiming at mobility 
of  researchers;  the  bridgehead  organisation  coordinating  the  national  EURAXESS  network 
was  established  at  the  University  Banja  Luka.  The  funding  slightly  increased  mainly  for 
researchers,  modernization  of  infrastructure  and  equipment  and  publications  notably  by 
joining  the  COBISS  library-information  system.  Republika  Srpska  and  other  Entities 
increased investment in research and development. However, overall, investment in research 
remained low, in particular by the private sector. As Entities and Cantons fund their policies 
through their budgets, it is difficult to streamline research policies and avoid fragmentation, 
one of the key ERA objectives. Accurate statistics on science and technology are missing. 

Overall, alignment with European standards in the areas of education and culture is at an early 
stage. Strategies and framework laws need to be implemented and the Baseline Qualifications 
Framework to be further developed and implemented. State-level agencies for education and 
quality  assurance  structures  need  to  be  made  operational.  The  country's  participation  in  the 
Culture  Programme  contributes  to  the  implementation  of  the  EU  acquis.  In  the  area  of 
research and innovation, preparations for future integration into the ERA and the Innovation 
Union started but serious efforts remain to be made and close monitoring is required. 

4.1.10.  WTO issues 

Progress was made in the negotiations for accession to the World Trade Organisation (WTO). 
The WTO working party met for the eighth time. Bosnia and Herzegovina proceeded with its 
bilateral negotiations on market access for goods and services (bilateral agreements in the area 
of  services  were  concluded  with  Canada,  Norway  and  Switzerland)  and  with  multilateral 
negotiations on domestic support for agriculture and export subsidies. 

4.2. 

Sectoral policies 

4.2.1. 

Industry and SMEs 

Little progress was made in the area of industry and SMEs. 

There  was  little  progress  in  industrial  policy.  The  Entities  implemented  industrial  policies 
based  on  action  plans.  Republika  Srpska  introduced  measures  to  stimulate  exports  and 
maintain employment levels in sectors affected by the economic crisis. However, the country 
development strategy including industrial policy elements remains to be adopted. The absence 
of harmonised statistics does not allow for the creation of an effective strategic framework for 
industrial policy planning. 

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Little progress can be reported on SMEs. With the appointment of its members, the council 
for development and promotion of entrepreneurship became operational as an advisory body 
to  the  Council  of  Ministers.  The  Republika  Srpska  SME  council  came  into  operation.  The 
Department  for  Entrepreneurship  within  the  Ministry  of  Foreign  Trade  and  Economic 
Relations (MoFTER) was reinforced. Both Entities provided assistance to SMEs in the form 
of financial support measures. Bosnia and Herzegovina participated in the implementation of 
the Small Business Act.  

However, implementation of the State-level SME strategy was weak. The State-level Law and 
a revised Federation Law on promotion of SMEs and entrepreneurship remain to be adopted. 
Amendments to the Law on the Foreign Investment Promotion Agency (FIPA) providing for 
the  establishment  of  an  SME  support  unit  within  the  FIPA  remain  to  be  adopted  by  the 
the  Brcko  District  council  for  development  and 
Parliament.  The  nomination  of 
entrepreneurship promotion is outstanding. Preparations for setting up a State-level business 
register for the production of business statistics are at an early stage. Despite some progress 
made by the Federation on creating an information system, a single SME registration system 
for  the  whole  country  to  simplify  conducting  business  in  both  Entities  remains  to  be 
established. 

The  export  promotion  strategy,  harmonised  with  the  development  strategy  and  the  social 
inclusion  strategy,  remains  to  be  finalised.  No  funding  was  allocated  for  export  support 
programmes  implemented  by  the  Export  Promotion  Agency.  The  Department  for  Export 
Promotion within the MoFTER lacks resources. 

Some  progress  was  made  in  the  area  of  tourism.  Republika  Srpska  adopted  the  Strategy  of 
Tourism Development 2010-2020 and adopted new legislation on tourism and sojourn tax. 

Overall,  Bosnia  and  Herzegovina's  preparation  in  the  fields  of  industrial  policy  and  SMEs 
remained  at  an  early  stage.  The  country  lacks  a  comprehensive  industrial  policy.  A  sound 
framework for SME policy is being developed. Coordination between the Entities is essential 
to promote economic development. 

4.2.2.  Agriculture and fisheries 

Little  progress  was  made  on  alignment  with  European  standards  in  the  field  of  agriculture 
and rural development policy.  

Legislation  implementing  the  Framework  Law  on  agriculture,  food  and  rural  development 
was  adopted.  The  Federation  approved  the  extension  of  the  Mid-term  Agriculure 
Development  Strategy  (2006-2010)  for 
two  years.  However,  a  country-wide  rural 
development  strategy  and  the  Law  on  wine  remain  to  be  adopted.  Implementation  of  the 
State-level  strategic  plan  and  the  harmonisation  programme  for  agriculture,  food  and  rural 
development  is  pending.  The  Republika  Srpska  rural  development  strategy  and  action  plan 
and  the  Federation  harmonisation  programme  for  agriculture,  food  and  rural  development 
remain  to  be  harmonised  with  the  State-level  framework.  An  overall  lack  of  implementing 
legislation is impeding coordination of harmonised strategies and legislation in this area. 

The Entities' Ministries of Agriculture hired new staff. However, administrative capacity and 
coordination structures at State-level remain to be strengthened. There was no staff increase 
within  the  Agriculture,  Food,  Forestry  and  Rural  Development  Sector  of  the  Ministry  of 
Foreign  Trade  and  Economic  Relations,  which  is  responsible  for  coordinating  agricultural 

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policymaking.  Coordination  of  rural  development  policy  remained  weak.  No  progress  was 
made in preparations for the Instrument for Pre-Accession Assistance for Rural Development 
(IPARD).  An  agreement  on  the  institutional  structures  for  decentralised  management  is 
outstanding. Although the Director of the Office for Payment Harmonisation was nominated, 
the  Office  is  not  yet  operational.  Inter-sectoral  coordination  and  participation  by  the  non-
governmental sector remained weak. 

The amended Law on financial support to agriculture and rural development of the Federation 
defines  the  types  of  incentives  between  Cantons  and  the  Federation.  However,  due  to  the 
absence  of  a  rural  development  strategy,  product  subsidies  feature  more  prominently  in  the 
financial  support  structure  than  rural  development  measures.  There  is  no  clear  policy  for 
providing subsidies, which are product-based and not aligned with the EU agricultural policy 
type of measures. The budget for agriculture and rural development in the Entities remained 
low.  The  lack  of  an  efficient  administration  and  effective  rural  credit  schemes  impedes  the 
competitiveness of farmers and the agri-processing industry throughout the country.  

Pilot research on farm structures took place. However, the Agricultural Information Strategy 
and  the  Law  on  the  agricultural  census  remain  to  be  adopted.  Agricultural  statistics  and  the 
agricultural  information  system  remain  to  be  improved.  Land  registration  systems  are  not 
harmonised  and  land  management  requires  strengthening.  The  lack  of  reliable  statistics 
hampers the development of agricultural policy. 

There was little progress in the field of food safety. Implementing legislation on certain food 
products,  materials  coming  into  contact  with  food,  ionizing  radiation  and  quick-frozen 
foodstuffs  was  adopted.  However,  the  State-level  legislation  was  transposed  with  differing 
provisions at Entity and Brcko District levels. The national food laboratory plan remains to be 
drawn  up.  Reference  laboratories  have  yet  to  be  designated.  Responsibilities  in  the  field  of 
food  safety  remained  fragmented.  There  was  no  progress 
in  upgrading  agri-food 
establishments.  The  capacity  to  implement  official  controls,  including  laboratory  capacity, 
remains weak. 

Some progress can be reported in the field of veterinary sector. Implementing legislation on 
infectious  diseases,  control  measures  for  animal  diseases,  trichinella,  residues  of  veterinary 
medicinal  products  and  prohibited  substances  was  adopted.  A  Decision  on  by-products  of 
animal  origin  was  adopted.  The  national  residue  control  plan  was  significantly  improved. 
Vaccination  campaigns  against  brucellosis  and  classical  swine  fever  were  conducted. 
However, the State-level Veterinary Law remains to be amended to align it with the acquis 
and  to  harmonise  legislation  at  Entity  level.  The  financing  for  implementing  the  national 
residue  control  plan  is  not  sustainable.  National  laboratories  need  further  improvements  to 
gain  accreditation  and  to  establish  quality  control  systems  for  an  effective  residue  control 
system.  Coordination  between  the  authorising  bodies  to  ensure  controls  on  the  distribution 
and use of veterinary medicinal products on farms is limited.  

There  was  some  progress  in  the  phytosanitary  sector.  Implementing  legislation  on  the 
establishment of a phytosanitary register and plant passports, measures for control of harmful 
organisms  in  plants,  plant  products  and  regulated  facilities  and  phytopharmaceuticals  was 
adopted.  The  programme  for  monitoring  the  quarantine  arrangements  for  potatoes  is  being 
implemented.  However,  legislation  and  inspection  activities  are  not  performed  uniformly 
across the Entities, Brcko District and border inspection points. Human resources at all levels 
are  not  adequate  to  implement  the  legal  provisions.  The  Entities  use  different  pieces  of 
legislation  on  the  approval  and  registration  of  plant  protection  products,  which  are  not 

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harmonised  with  EU  rules.  Reference  laboratories  for  monitoring  residues  were  not 
designated.  

There was little progress in the area of genetically modified organisms (GMO). Activities to 
improve the system for controlling the use of GMOs started. 

Little progress was made on fisheries. State-level legislation transposing the acquis remains 
to be drafted. In terms of quantity and value, imports of fish and fishery products from the EU 
decreased.  Exports  of  these  products  to  the  EU  increased.  However,  responsibilities  for  the 
fisheries sector remained fragmented. 

Overall,  preparations  in  the  fields  of  agriculture  and  rural  development,  food  safety, 
veterinary and phytosanitary policy and fisheries remain at an early stage. No comprehensive 
strategy exists for aligning with the acquis on agriculture and rural development. State-level 
capacity for policymaking and coordination is weak. Development of a functioning system to 
implement the food safety acquis remains a priority to increase trade in agricultural products. 
Official  control  capacity  for  the  food  safety,  veterinary  and  phytosanitary  fields  and  GMOs 
needs strengthening.  

4.2.3.  Environment 

Progress in the field of environment remained limited. 

There  was  little  progress  in  horizontal  legislation.  The  parties  to  the  Aarhus  Convention 
approved  Bosnia  and  Herzegovina's  first  national  report  on  implementation  of  the 
Convention.  The  Federation  published  state  of  the  environment  reports.  However,  no  such 
reports  exist  at  State-level,  in  Republika  Srpska  or  in  Brcko  District.  Further  efforts  are 
required to transpose and implement the acquis through horizontal legislation. A Framework 
Law  on  Environment  remains  to  be  adopted.  Transposition  of  the  Strategic  Environmental 
Assessment  Directive  is  at  an  early  stage.  The  Environmental  Impact  Assessment  Directive 
remains  to  be  fully  implemented.  Bosnia  and  Herzegovina  did  not  start  implementing  the 
Espoo  Convention  on  Environmental  Impact  Assessment  in  a  Transboundary  Context.  The 
poor  quality  of  environmental  data  and  the  lack  of  dissemination  of  data  to  the  public  and 
policymakers  remain  causes  for  concern.  The  active  involvement  of  civil  society  in  the  law 
drafting process needs to be improved.  

Little  progress  can  be  reported  on  air  quality.  Republika  Srpska  adopted  an  air  protection 
strategy.  The  Federation  adopted  its  Integrated  Environmental  Protection  Strategy  which 
includes  the  air  protection  strategy.  However,  the  air  quality  monitoring  systems  in  the 
Entities need further development.  

There was little progress on waste management. Implementing legislation on management of 
animal  by-products  was  adopted.  The  Federation  adopted  a  decree  on  packaging  and 
packaging waste. In Republika Srpska, a decree on the management of packing and packaging 
waste came into force. However, the waste management infrastructure remains to be further 
developed.  Organisations  for  the  recovery  of  packaging  waste  to  implement  the  extended 
producer responsibility do not exist in the Entities. The lack of coordination on implementing 
packaging waste management systems remains a concern. Investment in waste management is 
insufficient. No practical steps were taken to establish systems for recycling and recovery of 
other waste streams. Capacity to manage industrial and hazardous waste is limited.  

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There  was  little  progress  in  transposing  the  acquis  on  water  quality.  However,  most  of  the 
legislation is not in place. Implementation of water laws, monitoring and river-basin planning 
is not harmonised between the Entities. Inadequate administrative capacity and lack of ready-
made  projects  caused  considerable  delays  in  sectoral  investment.  Access  to  drinking  water, 
untreated discharges of wastewater and flood management remain key challenges.  

There was some progress on nature protection. Bosnia and Herzegovina adopted the National 
Biodiversity Strategy and an action plan (2008 - 2015). Republika Srpska adopted a Law on 
national  parks  and  a  nature  protection  strategy.  However,  key  obligations  under  the 
Convention on International Trade in Endangered Species of Wild Fauna and Flora were not 
implemented. Alignment with the Habitats and Birds Directives remains at an early stage.  

There was limited progress in the fields of industrial pollution control and risk management. 
Bosnia  and  Herzegovina  ratified  the  Convention  on  the  Transboundary  Effects  of  Industrial 
Accidents.  However,  the  permit  process  is  fragmented  due  to  complex  administrative 
procedures and structures. Due to scarce information public participation in decision-making 
is  low.  The  administrative  capacity  for  inspection  activities  needs  to  be  significantly 
strengthened.  

There was some progress in the field of chemicals. Republika Srpska adopted implementing 
legislation  regarding  biocidal  products  and  the  import  and  export  of  certain  hazardous 
chemicals and products. There was no progress in the field of noise.  

Regarding  climate  change,  there  was  no  progress  on  general  policy  developments  despite 
nominating  a  focal  point  for  the  Working  Group  on  Climate  Change.  However,  significant 
awareness-raising  is  required  at  all  levels.  Climate  change  is  not  integrated  into  sectoral 
policies and strategies and there is no comprehensive strategy for climate change.  

No  progress  was  made  on  aligning  with  EU  climate  policies  and  legislation.  The  country 
needs  to  take  practical  steps  to  gradually  take  a  greenhouse  gas  (GHG)  reduction/limitation 
target to be able to implement the acquis, especially the EU emission trading scheme, and to 
join the EU effort-sharing. 

Little  progress  was  made  at  the  international  level.  Bosnia  and  Herzegovina  ratified  the 
Beijing Amendment to the Montreal Protocol of the Vienna Convention on the Protection of 
the Ozone Layer. The country associated itself with the decision taken at the 22nd meeting of 
the  Parties  to  the  Montreal  Protocol  on  the  global  transition  away  from  HCFCs  and  CFCs. 
However,  further  steps  remain  to  be  taken  to  align  with  EU  legislation  on  ozone-depleting 
substances  and  fluorinated  gases.  Although  associated  with  the  Copenhagen  Accord,  the 
country has no plans to formulate pledges for reducing its GHG emissions. The first National 
Communication  under  the  United  Nations  Framework  Convention  on  Climate  Change 
(UNFCCC) was submitted, covering only the greenhouse gas inventory. The country did not 
participate  in  the  climate  work  under  the  Regional  Environmental  Network  for  Accession 
(RENA).  Convergence  with  the  EU  Monitoring  Mechanism  Decision  remains  to  be 
strengthened. 

in 

Administrative  capacity 
the  environment  sector  remained  weak.  A  State-level 
Environmental  Protection  Agency  remains  to  be  established.  Administrative  capacity  within 
the Ministry of Foreign Trade and Economic Relations on environmental and climate change 
issues  is  limited.  Environmental  institutions  do  not  have  the  capacity  to  implement  and 
enforce legislation at Entity, Canton and local levels. Integration of environmental concerns in 

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other sectors remains weak. There was no progress on the administrative capacity to address 
climate change, with no staff and resources allocated to climate work. The national authority 
designated  to  implement  the  Kyoto  Protocol's  Clean  Development  Mechanism  is  not  yet  in 
operation. 

Overall, preparations in the field of environment remain at an early stage. Establishment of a 
harmonised legal framework for environmental protection, the State Environmental Protection 
Agency  and  a  functioning  environmental  monitoring  system  remain 
the  priorities. 
Improvements remain to be made to horizontal and vertical communication and exchanges of 
information  on  environmental  and  climate  change  issues  between  all  authorities.  Regarding 
climate  change,  considerable  efforts  are  required  on  awareness-raising,  aligning  with  and 
implementing the acquis, as well as strengthening administrative capacity.  

4.2.4.  Transport policy 

Progress can be reported on trans-European transport networks. Bosnia and Herzegovina 
is  implementing  and  monitoring  the  multi-annual  plan  for  2011-2015  of  the  South-East 
Europe Transport Observatory. It is actively participating in implementing the Memorandum 
of  Understanding  on  the  development  of  the  South-East  Europe  Core  Regional  Transport 
Network. 

Work  continued  on  additional  sections  of  pan-European  corridor  V-c.  The  overhaul  of  the 
track and signalling on the Ploce-Bradina section is completed. A pre-feasibility study on the 
railway link to Montenegro was completed. 

Good progress can be reported in the case of road transport. Republika Srpska adopted the 
Law  on  road  traffic  safety.  Implementing  legislation  necessary  for  introducing  the  digital 
tachograph system was adopted; the equipment is in place and the system operational. Bosnia 
and  Herzegovina  started  issuing  ATA  carnets  (See  Section  4.1.4  -  Customs  and  taxation). 
Maintenance and upgrading of roads continued. However, the Law on transport of dangerous 
goods remains to be adopted. 

Some  progress  can  be  reported  in  the  area  of  rail  transport.  The  Bosnia  and  Herzegovina 
Railways  Regulatory  Body  issued  licences  under  its  responsibility  and  prepared  acquis-
compliant railway regulations. The condition of the rolling stock improved. The railways of 
the Federation published their network statement. However, the railways of Republika Srpska 
did  not.  Although  the  Entity-level  railway  companies  were  transformed  into  vertically-
integrated  railway  companies,  both  are  in  a  critical  financial  situation  and  infrastructure 
management  remains  to  be  fully  separated  from  railway  undertaking.  The  acquis  on  public 
service obligations (PSO) remains to be transposed and a PSO award authority to be set up. 

No  progress  was  made  on  maritime  transport.  Bosnia  and  Herzegovina  is  not  a  party  to 
major International Maritime Organisation conventions such as the International Convention 
for  the  Safety  of  Life  at  Sea  (SOLAS),  including  the  International  Ship  and  Port  Facility 
Security  Code,  or  the  International  Convention  for  the  Prevention  of  Pollution  from  Ships 
(MARPOL).  

Good, but uneven progress can be reported in the area of inland waterways. Demining and 
rehabilitation of the River Sava waterway started. The Presidency of Bosnia and Herzegovina 
adopted an agreement between the Government of the Republic of Serbia and the Council of 
Ministers  of  Bosnia  and  Herzegovina  on  navigation  by  inland  waterway,  a  precondition  for 

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reestablishment of the River Sava route. However, the river information system remains to be 
introduced. No progress was made in the area of combined transport. 

Good progress was made on air transport. Bosnia and Herzegovina is implementing the first 
phase  of  the  European  Common  Aviation  Area  (ECAA)  Agreement.  Transposition  of  the 
Single European Sky I legislation was almost completed. The Director of the air navigation 
services-provider  was  appointed.  However,  to  ensure  full  compliance  with  the  transposed 
acquis, the Aviation Law remains to be adjusted. 

Overall,  Bosnia  and  Herzegovina  is  on  track  in  the  areas  of  trans-European  transport 
networks,  road,  rail  and  air  transport  as  well  as  inland  waterways,  but  is  lagging  behind  on 
maritime  transport.  Further  efforts  need  to  be  made  towards  aligning  legislation  with  the 
acquis.  Transport  infrastructure  strategies  remain  to  be  prepared  and  upgrading  of  transport 
infrastructure to be intensified. 

4.2.5.  Energy 

There  was  uneven  progress  regarding  oil  stocks  and  security  of  supply.  The  Energy 
Community acquis on security of gas and electricity supply has not been implemented. The 
Federation Law on oil remains to be adopted. No official figures are available on the country's 
level  of  oil  stocks.  A  State-level  energy  development  strategy  remains  to  be  adopted.  This 
would  also  address  the  security  of  supply  of  oil,  gas  and  electricity.  The  Entities  have  their 
own  strategic  planning  without  harmonised  criteria  or  a  common  approach  to  investment 
priorities. 

No progress was made regarding the internal energy market. The principle of a competitive 
and transparent electricity market, as required by the Energy Community Treaty, is included 
in  the  law  of  Brcko  District.  The  State  Electricity  Regulatory  Commission  became  the 
electricity regulatory authority for Brcko-District. A comprehensive review of the electricity 
legislation applicable at the various levels of government was launched with a view to making 
the legislation compliant with the acquis and enabling the country to fulfil the requirements of 
the Energy Community Treaty (See Section 1.3 - Relations between the EU and Bosnia and 
Herzegovina).  

However,  the  Federation's  new  Electricity  Law  was  not  adopted.  Existing  laws  do  not  fully 
comply  with  the  acquis  nor  allow  for  an  effective  development  of  a  competitive  wholesale 
market. Tendering procedures and transparency issues remain to be addressed. The situation 
of  the  State-level  transmission  company  (TRANSCO)  did  not  improve.  No  business  or 
investment plans were approved. The company's management operates in an acting capacity 
only. Only technical operations and minor maintenance tasks are being carried out. There was 
no  improvement  in  communication  with  the  independent  system  operator  or  its  level  of 
transparency.  Cross-border  capacity  is  allocated  on  an  ad  hoc  basis  rather  than  by  open 
competition. The viability of TRANSCO as a country-wide enterprise and the fragmentation 
of the electricity market are causes for concern and pose an obstacle to full implementation of 
the  Energy  Community  Treaty.  The  2009  amendments  to  the  legislative  framework  for 
electricity  are  not  in  compliance  with  the  acquis.  The  independence  of  the  regulatory 
commissions  is  not  ensured.  Republika  Srpska  and  the  Federation  revised  tariffs,  but  they 
remain below market prices.  

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No  progress  can  be  reported  in  the  gas  sector.  There  is  no  State-level  Gas  Law.  Entities' 
provisions establish different rules for market participants, unbundling, third-party access or 
market opening, and are not fully in line with the EU acquis. 

There was no progress as regards energy efficiency. The development of a State-level energy 
efficiency  action  plan  to  meet  obligations  under  the  Energy  Community  Treaty  was  further 
delayed.  

There  was  little  progress  on  renewable  energy.  The  Entities  introduced  incentives  (feed-in 
tariffs)  for  producers  of  energy  that  use  renewable  sources.  However,  they  are  not 
harmonised. A strategic approach to promote renewable energy is pending. The complexity of 
the  organisational  structure  and  decision-making  system  hinders  effective  promotion  of 
renewable  energy  at  State-level.  More  efforts  are  needed  to  create  a  regulatory  environment 
that  would  foster  increased  use  of  renewable  energy  sources  in  all  sectors.  Bosnia  and 
Herzegovina  needs  to  make  further  efforts  to  improve  the  share  of  renewable  energy  in  the 
country's energy consumption and to promote the use of biofuels in transport. 

No  significant  progress  can  be  reported  in  the  area  of  nuclear  safety  and  radiation 
protection.  The  State  Regulatory  Agency  for  Radiation  and  Nuclear  Safety  is  without  a 
Director. A national emergency plan and a strategy for radioactive waste management are yet 
to be developed, which remains a critical safety issue in Bosnia and Herzegovina. Compliance 
of the regulations in force with the EU acquis still needs to be verified. 

Administrative capacity for energy issues within the Ministry of Foreign Trade and Economic 
Relations remained weak. 

Overall, preparations in the field of energy are at an early stage. Further efforts are needed for 
the  country  to  meet  requirements  under  the  Energy  Community  Treaty,  improve  security  of 
supply  and  establish  a  functioning  transmission  company  and  an  integrated  energy  market. 
The lack of cooperation and coordination between the Entities hampers the development of a 
fully functioning energy market and compromises improvements in security of supply. Bosnia 
and Herzegovina lacks a fully functioning transmission company and is still at the early stages 
of  implementing  the  acquis  on  the  internal  gas  and  electricity  markets.  Development  of  a 
comprehensive  energy  strategy,  including  promotion  of  energy  efficiency  and  renewable 
energy  sources,  remains  essential.  Further  efforts  are  needed  on  oil  stocks.  Transposition  of 
the nuclear safety and radiation protection acquis remains limited.  

4.2.6. 

Information society and media 

Good, but uneven progress can be reported in the areas of electronic communications and 
information technologies. The Electronic Communications Law is largely based on the 1998 
EU  regulatory  framework  and  partly  on  the  2002  framework.  The  continued  discussions 
between the Entities and the State on their respective powers are delaying further alignment of 
legislation  with  the  EU  regulatory  framework  and  weakening  the  position  of  the 
Communications Regulatory Agency (CRA).  

The  CRA  issued  a  set  of  instructions  aiming  to  lower  barriers  to  market  entry.  The  market 
share  of  the  three  incumbent  fixed-line  operators  decreased  to  85%  for  inbound/outbound 
international  traffic  and  to  98%  for  national  traffic.  They  continued  to  operate  as  de  facto 
monopolies in their geographical areas. In terms of total service revenue, the market share of 
the three incumbent operators is about 90%.  

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The competitive situation regarding provision of fixed broadband services improved slightly, 
thanks to the presence of cable and fixed wireless access (FWA) networks. The CRA allowed 
mobile  operators  to  use  the  GSM  spectrum  for  the  provision  of  3rd  generation  mobile 
telecommunications  (3G)/Universal  Mobile  Telecommunications  System  (UMTS)  services. 
However,  potential  price  squeezes  remained  as  regards  mobile  virtual  network  operators 
(MVNOs). The framework envisaged for MVNOs remains to be put into practice. 

Local  loop  unbundling  is  at  an  early  stage.  One  additional  'local  loop  unbundling'  contract 
was signed, taking the total number of contracts between incumbents and alternative operators 
to  four.  Implementation  of  competitive  safeguards  progressed  at  a  very  slow  pace.  Six 
operators offer carrier selection services and one pre-select services. Carrier pre-selection is 
available, but fixed number portability is not. New licences were granted for Internet services 
and  network  operators.  The  CRA  amended  the  assigned  blocks  of  numbers  for  telephone 
services.  

The CRA can collect and analyse market data from operators. The draft analysis of the market 
concerning  wholesale  voice  call  termination  on  mobile  networks  ('relevant  market  7')  was 
prepared and includes suggested Significant Market Power (SMP) obligations. Three mobile 
operators  published  their  reference  interconnection  offers.  Initial  steps  were  taken  to 
rebalance tariffs, a key component for creating a competitive market. 

The  level  of  broadband  Internet  access  increased,  as  cable  broadband  and  FWA  offered  a 
strong  competitive  alternative  to  Digital  Subscriber  Line  (xDSL)  services.  However,  the 
broadband market remained underdeveloped. 

The  institutional  and  financial  independence  and  adequate  human  resources  of  the  CRA 
remained  a  serious  concern.  The  administrative  capacity  in  the  State-level  Ministry  of 
Transport and Communication is particularly weak (See Political criteria - Human Rights and 
the Protection of Minorities). 

On  information  society  services,  no  progress  can  be  reported.  The  State-level  Law  on  the 
Agency  for  the  Development  of  Information  Society  remains  to  be  adopted.  The  e-commerce 
Directive and implementing legislation on conditional access services remain to be transposed. 
Implementation of the e-signature Law was slow. 

Some  progress  can  be  reported  on  audiovisual  policy  and  media.  The  CRA  started 
transposing  the  Audiovisual  Media  Services  Directive  (AVMSD).  The  draft  code  on 
audiovisual  and  radio  programmes  and  the  draft  code  on  audiovisual  commercial 
communications  partially  implement  the  AVMSD.  Bosnia  and  Herzegovina  ratified  the 
European  Convention  for  the  protection  of  the  Audiovisual  Heritage.  The  CRA  issued  a 
decision  on  use  of  multiplex  A  (MUX  A)  for  digital  terrestrial  broadcasting.  A  Committee 
established  by  the  Ministry  of  Transport  and  Communication  published  a  tender  for 
broadcasting  and  transmitting  equipment  for  public  broadcasting  services.  The  CRA  is 
developing entry criteria for the existing TV stations to the commercial MUX and documents 
for licensing MUX operators. The members of the expert committee of the forum on digital 
television  were  appointed  and  developed  an  action  plan  for  the  transfer  from  analogue  to 
digital terrestrial broadcasting. The digital switchover is planned to be finalised by end 2011. 

However, the remaining provisions of the AVMSD remain to  be incorporated by  additional 
legal instruments. Entity laws on public broadcasting services are not in line with the State-
level law. Although members of the expert secretariat of the forum on digital television were 

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appointed, it is not operating. The statute of the Public Broadcaster BHRT was amended (See 
Political  criteria  2.2  -  Human  Rights  and  the  protection  of  minorities).  The  statutes  of  the 
public  broadcasting  corporation  (PBS)  remain  to  be  adopted.  PBS  was  not  registered.  The 
reform of the public broadcasting sector was further delayed.  

Overall, preparations in the fields of the information society and media are advancing slowly. 
Implementation of the legal framework for public broadcasting is necessary for reforms in this 
sector.  Continued  challenges  to  the  CRA's  functional  independence  and  lack  of  adequate 
human resources remain a serious concern. 

4.2.7.  Financial control 

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

Further  efforts  were  made  to  introduce  public  internal  financial  control  (PIFC).  Central 
Harmonisation Units (CHUs) exist at both State and Entity levels. Staffing levels at the State-
level  and  Republika  Srpska  CHUs  were  strengthened.  The  coordination  board  of  all  CHUs 
provides a single platform for PIFC. However, the drafting of legislation implementing public 
internal  audit  and  legislation  on  financial  management  and  control  advanced  slowly.  The 
Federation's CHU requires additional staff to implement PIFC. The number of skilled internal 
auditors available throughout the country remains small.  

As  regards  external  audit,  the  four  Supreme  Audit  Institutions  (SAIs)  (State,  Entities  and 
Brcko  District)  continued  to  improve  audit  methods  and  external  audit  quality.  Republika 
Srpska  introduced  obligatory  consideration  of  negative  audit  reports  in  the  Parliamentary 
Assembly's  new  rules  of  procedure.  However,  there  was  no  progress  on  ensuring  the 
independence of the State-level SAI from the executive. 

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  area  of  financial  control  are 
progressing, albeit slowly. The lack of skilled staff is an impediment to further development 
of PIFC. Financial management and control systems need to be further developed. The issue 
of independence of the State-level SAI remains to be addressed.  

4.2.8. 

Statistics 

Limited progress can be reported in the area of statistics. 

Little progress was made on statistical infrastructure. The constructive cooperation between 
the State-level Agency for Statistics (BHAS) and the State Electricity Regulatory Commission 
resulted  in  an  increased  data  coverage  transmitted  to  Eurostat.  However,  despite  some 
progress, the cooperation between the BHAS and the Entity institutes for statistics remained 
unsatisfactory.  Neither  the  State-level  Statistics  Law  nor  the  agreement  on  cooperation  and 
coordination in the area of statistics are being implemented correctly. The Indirect Taxation 
Authority  does  not  provide  the  BHAS  with  the  data  required  from  administrative  sources. 
This leads to low-quality business, macroeconomic and external trade statistics. The Law on 
indirect taxation remains to be amended to allow the BHAS to use all available administrative 
data for statistical purposes. 

Some  progress  was  made  regarding  classifications  and  registers.  Approximation  to  the 
NACE  Rev.  2  statistical  classification  of  economic  activities  was  finalised  and  the 
classification is being applied. Application of the classification of products by activity (CPA 
2008)  and  the  nomenclature  of  industrial  products  (PRODCOM)  started.  The  statistical 

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business register is in operation. However, it is incomplete due to limited access to relevant 
administrative data sources. 

Some progress was made in sector statistics. Dissemination of statistical data improved via 
the  new  BHAS  website,  incorporating  industrial  production  and  consumer  price  indices.  In 
foreign trade statistics monthly releases are processed and published according to NACE Rev 
2.  Technical  preparations  for  the  population  and  household  census  and  the  pilot  census 
advanced.  However,  the  law  on  the  population  and  household  census  was  not  adopted  and 
further work cannot continue. Due to the absence of a Census Law, no pilot census took place 
and implementation of the census is delayed. 

Limited  progress  can  be  reported  in  the  area  of  macroeconomic  statistics.  The  annual  GDP 
estimates for 2010 were published. However, the Republika Srpska Institute for Statistics is 
not  fully  implementing  the  multi-annual  masterplan  for  developing  national  accounts. 
Quarterly  national  accounts  cannot  be  developed  until  the  relevant  short-term  indicators  are 
produced and the requisite cooperation between all parties involved is in place.  

Field work for the household budget survey started. Preparations were completed. The labour 
force survey was implemented in 2011 and preliminary data were published. Preparations for 
the  agricultural  census  continued  (See  Section  4.2.2  –  Agriculture  and  fisheries). A  pilot 
agricultural census was conducted.  

Overall, preparations in the field of statistics are moderately advanced. Sector statistics such 
as  national  accounts,  business  and  agricultural  statistics  remain  to  be  improved.  The 
population  and  household  census  will  not  be  conducted  during  2011  as  originally  planned. 
The  Census  Law  remains  to  be  urgently  adopted  to  avoid  further  delays.  Technical 
preparations for the population and household census advanced, but are on hold as there is no 
legal  basis  to  implement  the  census.  Closer  cooperation  between  the  BHAS  and  the  Entity 
Statistical Institutes and also between the BHAS and the relevant State-level agencies remains 
essential. Implementation of the BHAS development plan will be a key factor in this.  

4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

Progress was made in the field of visa policy and in the visa liberalisation dialogue. Positive 
and negative lists remained fully harmonised with the EU visa list. In the first half of 2011, 
133 visas were issued at the border, a decrease of 8.27% compared with the same period of 
2010.  

Visa  liberalisation  for  citizens  of  Bosnia  and  Herzegovina  was  granted  as  of  15  December 
2010.  It  applies  to  holders  of  biometric  passports  travelling  to  the  Schengen  area.  This 
decision  was  based  on  substantial  progress  in  the  area  of  justice,  freedom  and  security  and 
fulfilment of the specific conditions set out in the roadmap for visa liberalisation. The rules 
for visa-free travel were respected by the vast majority of travellers. To ensure the continued 
implementation  of  the  commitments,  a  post-visa  liberalisation  monitoring  mechanism  was 
established  in  view  of  the  increased  numbers  of  asylum  seekers  from  the  region.  The 
Commission presented its first monitoring report to the European Parliament and the Council 
in June 2011.  

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

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Progress was made in border management. Most of the legislation related to the integrated 
border management (IBM) is mainly based on the relevant acquis. Legislation implementing 
the  Law  on  border  control  was  adopted.  The  IBM  Commission  established  a  joint  working 
body,  made  up  of  members  of  the  institutions  involved  in  the  IBM,  with  the  task  of 
implementing an agreement on mutual cooperation. 

The revised IBM strategy and action plan were adopted. The IBM Commission approved an 
analysis of movements of people and goods across the border crossing points. The aim of the 
analysis is to be one of the indicators for determining the priority border crossing points. A 
manual for the work at border crossings is pending adoption by the institutions involved in the 
IBM.  A  link  between  the  Joint  Risk  Analysis  Centre  and  the  databases  of  the  agencies 
involved is being established. 

Infrastructure  at  existing  border  crossing  points  further  improved,  in  particular  surveillance 
and  equipment.  Establishment  of  two  new  inspection  posts  at  the  border  with  Croatia  was 
agreed  upon  between  the  two  countries.  Out  of  55  border  crossing  points  for  international 
traffic, 29 are covered by video surveillance. 49 are equipped with biometric passport readers 
and  connected  to  the  integrated  system  of  control  of  State  border  crossings  (CSBC)  and  all 
organisational  units  of  the  border  police.  An  advanced  new  application  for  the  integrated 
system of CSBC is being developed and the application is being tested.  

The number of joint patrols with neighbouring countries increased, resulting in a decrease in 
illegal border crossings. Illegal crossings of the border with Montenegro were identified. The 
manual  for  joint  border  patrols  between  Bosnia  and  Herzegovina  and  Serbia  is  being 
implemented. However, the agreement on border demarcation with Montenegro remains to be 
finalised. 

Bosnia and Herzegovina and the Republic of Croatia started the process of revising bilateral 
agreements related to border crossing points between the two countries. Implementation of the 
working  arrangement  with  Frontex  is  well  on  track  and  Bosnia  and  Herzegovina  is 
participating in the Western Balkans risk analysis network. 

There  was  limited  progress  on  management  and  maintenance  of  Border  Crossing  Points 
(BCPs). Amendments to the internal rulebook of the Indirect Taxation Authority (ITA), which 
are  necessary  to  increase  the  number  of  posts  for  management  and  maintenance  of  BCPs, 
remain to be adopted by the ITA governing board.  

Overall, Bosnia and Herzegovina's preparations in the area of border management advanced. 
Efforts need to focus on improving border crossing management and maintenance. 

There was some progress in the area of asylum. Bosnia and Herzegovina is implementing the 
2008 Law on movements and stays of aliens and asylum and the asylum and migration action 
plan.  The  asylum  sector  in  the  Ministry  of  Security  is  almost  fully  staffed  and  relevant 
training  was  provided.  The  asylum  module  of  the  migration  information  system  (MIS)  is 
being fully utilised. The Ministry for Human Rights and Refugees was connected to the MIS 
and application of  the system is  being  expanded. The temporary asylum centre in Rakovica 
has  13  staff  and  houses  27  asylum-seekers.  Work  on  a  permanent  asylum  centre  in  Trnovo 
continued to progress. However, a new migration and asylum strategy and the related action 
plan remain to be finalised.  

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The number of asylum applications in 2010 decreased to 31 (38 people) in comparison with 
32 applications (71 people) in 2009. In 2010, the State-level Ministry of Security rejected 152 
asylum applications. In the first eight months of 2011 24 new asylum-seekers were registered.  

All  asylum-seekers  from  Kosovo,  whose  temporary  protection  status  expired  in  2007, 
received first-instance decisions from the asylum sector. In 2011, only eight families were still 
involved in appeal Court proceedings. Rejected asylum-seekers were resettled or voluntarily 
repatriated.  409  irregular  migrants  were  registered  for  the  Assisted  Voluntary  Return 
Programme during 2010 and 107 during the first six months of 2011.  

Overall, the asylum and international protection system in Bosnia and Herzegovina is well on 
track.  Additional  human  and  financial  resources  need  to  be  allocated  to  guarantee  the  full 
efficiency of the system. 

Good  progress  was  achieved  on  migration.  The  centre  for  temporary  detention  of  irregular 
immigrants is in operation. It is financed and managed by the State-level Ministry of Security 
and the Service for Foreigners' Affairs (SFA). The centre employs 53 professional staff and 
has  120  beds.  In  2010,  a  total  of  312  foreign  nationals  were  accommodated.  493  foreign 
nationals were relocated outside Bosnia and Herzegovina. 474 of them returned voluntarily to 
their home countries, the other 19 were forcefully repatriated. During the first six months of 
2011,  88  third-country  nationals  were  accommodated,  of  whom  70  were  repatriated.  41  of 
these  were  repatriated  through  Assisted  Voluntary  Return  programme  while  29  returned  to 
other countries. 

Implementation of the readmission between the European Union and Bosnia and Herzegovina 
was  smooth.  Bosnia  and  Herzegovina  continues  to  readmit  a  large  number  of  individuals 
under the agreement with Croatia. The number of persons readmitted decreased from 311 in 
2009 to 295 during 2010. Of these, 119 were foreign nationals and 176 citizens of Bosnia and 
Herzegovina.  In  accordance  with  readmission  agreements  with  the  EU  and  Switzerland, 
Bosnia and Herzegovina accepted 189 of its citizens in 2010, in comparison with 173 in 2009. 
In  the  first  half  of  2011,  65  citizens  were  readmitted,  a  decrease  of  22.6%  compared  to  the 
same period of 2010.  

Bosnia and Herzegovina continued its efforts to conclude readmission agreements with non-
EU countries. Bilateral negotiations with North African countries are continuing, while a text 
of  the  agreement  with  Turkey  was  finalised.  However,  no  new  readmission  agreement  was 
signed  yet.  The  strategy  for  the  reintegration  of  returnees  remains  to  be  implemented. 
Difficulties with economic reintegration, access to healthcare, social protection, pensions and 
employment  of  minority  returnees  are  the  main  obstacles  to  sustainable  return  and  local 
integration (See Political criteria 2.2 - Human Rights and the Protection of Minorities). 

There  was  a  decrease  in  the  number  of  interceptions  of  attempts  to  unlawfully  cross  the 
border.  In  2010,  a  total of  322  people  were  intercepted  trying to  illegally  enter  or  leave  the 
country, compared with 381 in 2009. In the first half of 2011, 159 people were intercepted, an 
increase of 11.2 % compared to the same period of 2010. 

The SFA improved its administrative capacity and stepped up its cooperation with other law 
enforcement  agencies.  The  SFA  makes  full  use  of  the  Migration  Information  System  (MIS) 
and granted access to its databases to relevant agencies at all levels. In 2010, the SFA issued 
8,131  permits  for  temporary  stays,  an  increase  of  8%  in  comparison  with  2009  (7,512).  In 
2010,  315  permits  for  permanent  stays  were  also  issued,  a  decrease  of  12%  compared  with 

EN 

54 

   EN 

 
359 during 2009. The SFA issued 410 expulsion decisions in 2010, a decrease of 13 % from 
474 in 2009. In the first half of 2011, the SFA issued 3,744 permits for temporary stays and 
167 for permanent stays. In  addition,  149 expulsion decisions were  taken. However,  further 
capacity-building is required. 

The  coordination  body  for  implementing  the  asylum  and  migration  strategy  and  action  plan 
improved  inter-agency  cooperation  and  published  its  2010  annual  report.  The  unit  for 
monitoring migration flows was established within the State-level Ministry of Security. The 
third  migration  profile  of  Bosnia  and  Herzegovina  was  published.  The  MIS  is  used  for 
statistical reporting for the migration profile.  

A  working  group  consisting  of  representatives  from  the  State  and  Entity  levels  was 
established  to  set  up  a  mechanism  for  collecting  migration  data  in  line  with  EUROSTAT 
regulations.  However,  the  oversight  over  migration  flows  remains  to  be  established.  Bosnia 
and Herzegovina legislation on legal migration encompasses the discipline of right to family 
reunification, long-term residence and conditions of admission of third-country nationals for 
the purposes of studies. 

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

4.3.2.  Money laundering 

Very little progress was made in the fight against money laundering. Implementation of the 
strategy  and  action  plan  for  the  prevention  of  money  laundering  and  financing  of  terrorist 
activities in Bosnia and Herzegovina remains limited. 

The  existing  provisions  within  the  legal  framework  on  confiscation  are  not  fully  used  and 
seizures of criminally gained assets across the country remain low. Structures for management 
and  maintenance  of  seized  assets  are  missing.  Amendments  to  the  Law  on  prevention  of 
money laundering and financing of terrorist activities, addressing shortcomings identified by 
the  MONEYVAL  Mutual  Evaluation  Report  and  including  measures  to  transform  the 
Financial Intelligence Department (FID) within the State Investigation and Protection Agency 
into an administrative agency remain to be adopted by the Parliament.  

The  FID  operated  in  isolation  from  other  law  enforcement  agencies  and  its  investigative 
capacity  remained  weak.  Its  current  staffing  level  still  stands  at  approximately  66%. 
Operationally, the FID lacks strategic guidance and systematic financial intelligence support. 
The method of recording reports of suspicions within the FID is weak. It does not provide the 
statistical information necessary for risk assessment and decision-making. During 2010, only 
two out of 215 reports on money  laundering were transmitted to the  prosecutors' office.  No 
reports were made on financing of terrorist activities. 

Most of the transaction reports are from the banking sector. No significant changes were made 
to the reporting structure, methodology and analysis applied. A report and recommendations 
for the remainder of the persons liable to be directed to use the electronic reporting process 
for  all  suspicious  transaction  reports  are  pending.  The  number  of  reports  on  transactions 
above the threshold decreased. 

Overall, Bosnia and Herzegovina is at an early stage in implementing its policy on preventing 
and fighting financial crime. Its objectives in the area of combating money laundering require 

EN 

55 

   EN 

 
substantial efforts. Implementation of the relevant strategy and action plan remains weak. The 
unresolved issue of the institutional position of the FID continues to weaken the performance 
of Bosnia and Herzegovina in these areas. 

4.3.3.  Drugs  

Little progress was made in the fight against drugs. Bosnia and Herzegovina remains a transit 
country  for  international  trafficking  of  narcotics.  Organised  crime  groups  linked  with  drug 
trafficking  continued  to  operate  through  its  territory.  Local  drug  consumption  remained 
relatively low compared with other European countries. 

Law enforcement agencies improved cooperation with countries in the region, resulting in a 
better  and  quicker  flow  of  information.  Bosnia  and  Herzegovina  further  improved 
international cooperation and reported regularly to the International Narcotics Control Board. 
However,  reporting  to  the  European  Monitoring  Centre  for  Drugs  and  Drug  Addiction 
(EMCDDA) in line with the required standards remains a problem. 

The  database  on  perpetrators  of  drug-related  offences  improved  with  the  aid  of  new 
equipment.  State-level  law  enforcement  agencies  and  the  Federal  police  administration  are 
using it and Cantons were also connected. Republika Srpska is not connected to the database. 
A drug-user  database integrating  existing registries at rehabilitation centres is established in 
Republika Srpska. 

The level of implementation of the strategy and action plan for the prevention and suppression 
of drug abuse remained very low. A mechanism for coordinating implementation is missing, 
since the State-level Office for Drugs provided for in the strategy and action plan remains to 
be  established.  Amendments  to  the  Law  on  prevention  and  suppression  of  the  abuse  of 
narcotic  drugs,  which  establish  the  State-level  Office  for  Drugs  and  improve  control  over 
precursors remain to be adopted by the Parliament.  

Coordination  between  the  different  enforcement  agencies  remained  on  a  case-by-case  basis. 
Effective  judicial  follow-up  and  a  deterrent  policy  on  crime  are  missing.  The  rulebook  on 
safekeeping  and  destruction  of  seized  narcotic  drugs,  agreed  between  the  Entities,  Brcko 
District  and  State-level  law  enforcement  agencies,  was  not  adopted  because  of  financial 
constraints. Large amounts of illicit substances confiscated since the Law on prevention and 
suppression of abuse of narcotic drugs was adopted are still awaiting destruction.  

Overall,  Bosnia  and  Herzegovina  remains  at  an  early  stage  in  the  fight  against  drug 
trafficking,  as  well  as  in  taking  effective  action  on  reducing  drug  demand.  Without  the 
establishment  of  the  Drug  Office,  the  institutional  capacity  to  coordinate  and  systematically 
implement  the  policy  framework  remains  weak.  The  performance  of  law  enforcement 
agencies in the fight against drug trafficking is still uneven across the country.  

4.3.4.  Police 

Some  progress  was  made  in  police  matters.  Implementation  of  the  police  reform  laws  is 
slowly  advancing.  Police  reform  agencies  and  boards  started  to  be  operational.  During  the 
reporting  period,  the  Directorate  for  coordination  of  police  bodies  (DPC)  was  regularly 
reinforced.  Amendments  to  the  State-level  Law  on  police  officials  were  adopted,  including 
extension of the transitional provisions for recruitment of active police officers to State-level 
police bodies. This allows the DPC to recruit high-ranking police officers from other police 

EN 

56 

   EN 

 
agencies. The DPC incorporated the Office for Cooperation with Interpol and took over the 
Department  for  protection  of  people  and  buildings,  which  was  previously  under  the  State 
Protection  and  Investigation  Agency  (SIPA).  Republika  Srpska  adopted  amendments  to  its 
Law  on  police  officials,  which  includes  changes  to  recruitment,  promotions  and  transfer  of 
police  personnel  to  other  institutions.  However,  these  changes  represent  a  step  back  from 
harmonised provisions in the laws on police officials.  

The  Law  on  DNA  regulating  the  duration  of  DNA  storage  in  the  database  and  the 
centralisation  of  database  profiles  remains  to  be  adopted  by  the  Parliament.  Federation  and 
Cantonal  authorities  continued  to  work  on  updating  the  legislation  on  internal  affairs  to 
increase  the  operational  and  budgetary  independence  of  police  commissioners  from  their 
Ministries of the Interior.  

The Agency for Forensic Examination was equipped with additional specialised expertise. Its 
new  Deputy  Director  was  appointed.  The  Agency  for  Education  and  Advanced  Training  of 
Personnel completed 95% of the recruitment planned. The Agency for Police Support set up a 
joint  human  resources  database  for  the  SIPA,  the  border  police  and  the  DPC.  A  working 
group consisting of representatives of State-level law enforcement agencies, the DPC and the 
Ministry of Security was set up to address issues linked to procurement and standardisation of 
equipment. The Public Complaints Board, the Board  for Complaints of Police  Officials  and 
the Independent Board are operational. The SIPA slightly increased its staff and all heads of 
unit were recruited. However, the Law on restructuring the SIPA remains to be adopted.  

investigative  measures  are  used  and 

interception  of 
Special 
telecommunications, including regional listening stations, is fully functional. Preparations for 
establishment of a data exchange system between police and prosecutors continued.  

system 

the 

for 

A  road  map  for  an  operational  agreement  was  submitted  to  Europol  for  assessment.  The 
communication link with Europol is not yet operational.  

Operational  cooperation  between  law  enforcement  agencies  continued  on  a  case-by-case 
basis.  At  strategic  level,  regular  informal  meetings  between  Directors  of  police  agencies 
continued to take place, in the presence of the Chief Prosecutor and representatives from the 
State-level Ministry of Security. However, exchange of intelligence information between law 
enforcement agencies remained weak. 

Out  of  200  cases  received  by  the  Public  Complaints  Board,  none  resulted  in  disciplinary 
sanctions. 

Overall,  Bosnia  and  Herzegovina  made  some  progress  in  the  field  of  police,  albeit  uneven. 
Institutions  created  by  the  police  reform  laws  were  established  at  a  slow  pace.  The  lack  of 
institutionalised  cooperation  between  all  law  enforcement  agencies  and  the  limited  strategic 
guidance remain challenges to achieve more efficient policing. 

4.3.5.  Fighting organised crime and terrorism 

There was little progress in fighting organised crime. Organised crime networks continue to 
operate throughout Bosnia and Herzegovina and have a negative impact on political structures 
and  the  economy.  A  number  of  large-scale  operations  were  nevertheless  successfully 
conducted,  thanks  to  the  cooperation  amongst  different  law  enforcement  agencies. 

EN 

57 

   EN 

 
Implementation of the strategy for the fight against organised crime continued. However, lack 
of adequate resources limits its effectiveness. 

There was a slight increase in special investigative measures. Legal and institutional obstacles 
to more systematic use started to be addressed.  

The  Council  of  Ministers  adopted  a  decision  allowing  the  establishment  of  a  network  of 
police liaison officers in neighbouring countries, with Europol and in some EU countries. The 
aim of this network is to improve international cooperation and exchanges of information on 
fighting transnational organised crime.  

Several legislative measures remain to be adopted. Bosnia and Herzegovina is not a party to 
the Council of Europe Convention on the international validity of criminal judgments or the 
additional protocol to the Council of Europe Convention on the transfer of sentenced persons. 
Its legislation is not harmonised with the Council of Europe Convention on cybercrime. The 
implementation of the laws on witness protection remains insufficient. The legal framework 
on  confiscation  of  assets  is  not  fully  implemented  and  seizures  of  criminally  gained  assets 
remain  uneven  across  the  country.  Efficient  structures  for  management  and  maintenance  of 
seized assets are missing (See Section 4.3.2. ─ Money laundering). 

Cooperation between police and prosecutors remains weak. Specialisation of prosecutors and 
judges on organised crime cases is uneven and needs further strengthening, particularly in the 
Entities.  The  Memorandum  of  Understanding  on  the  establishment  of  an  international  law 
enforcement  coordination  unit  signed  between  the  Directorate  for  coordination  of  police 
bodies  (DPC),  the  State  Protection  and  Investigation  Agency  (SIPA),  the  border  police,  the 
Republika  Srpska  Ministry  of  Interior,  the  Federation  Police  Administration,  the  Brcko 
District police and the Indirect Taxation Authority (ITA) remains to be implemented. 

Overall, Bosnia and Herzegovina is at an early stage of addressing the fight against organised 
crime.  Effective,  sustainable  and  institutionalised  mechanisms  for  cooperation  between 
different law enforcement agencies are missing. Strategic coordination and priority-setting in 
tackling organised crime continue to be sporadic.  

Some  progress  can  be  reported  on  combating  trafficking  in  human  beings  (THB). 
Implementation  of  the  relevant  action  plan  continued.  The  State-level  Criminal  Code 
regulating THB is fully in line with international standards.  

The national coordinator's office continued an educational campaign targeting social workers, 
teachers,  NGOs  and  high-risk  populations  (e.g.  in  asylum  and  immigration  centres).  The 
State-level  government  secured  funds  for  three  'safe  houses'.  A  database  of  perpetrators  is 
maintained by the SIPA.  

The number of THB victims identified decreased, as did the number of related investigations. 
This is, though, in line with the regional trend. The majority of trafficking was done for the 
purpose  of  labour.  To  tackle  the  problem  of  trafficking  for  the  purpose  of  child  begging, 
Bosnia and Herzegovina organised State-wide inter-agency actions against child exploiters. 

However, Bosnia and Herzegovina continues to be a country of origin, transit and destination 
for  trafficking  in  women  and  girls.  Provisions  on  THB  in  the  Entity  and  Brcko  District 
Criminal  Codes  are  neither  fully  harmonised  with  the  State-level  Criminal  Code  nor  with 
international  instruments  ratified.  The  Department  for  combating  THB  within  the  national 

EN 

58 

   EN 

 
coordinator's office and the database on THB victims are not fully operational. Deficiencies in 
identification  of  victims  of  trafficking  remain  a  serious  concern.  There  is  no  proactive 
approach  to  identify  victims.  The  issue  of  unrecorded  THB  victims  remains  to  be  tackled. 
Implementation of the national action plan on combating THB is financed mainly by donors 
and, thus, is not sustainable. 

Overall, Bosnia and Herzegovina remains at an early stage in the fight against trafficking of 
human  beings.  Further  work  needs  to  be  done  to  tighten  coordination  and  form  effective 
partnerships,  both  between  all  competent  authorities  across  all  policy  areas  and  with  NGOs 
dealing with human trafficking within the country and the region. Proactive identification of 
victims and an effective and well-functioning national referral mechanism are crucial. Further 
strengthening of criminal prosecution is needed.  

Some  progress  was  made  in  the  fight  against  terrorism.  A  rulebook  was  prepared  on 
implementation  of  restrictive  measures  established  by  the  UN  Security  Council  Resolutions 
regarding persons and entities associated with Osama Bin Laden, the Al-Qaida network and 
the  Taliban.  This  allows  for  implementation  of  the  Law  on  restrictive  measures  regarding 
terrorism  and  financing  of  terrorism.  The  Joint  Task  Force  to  fight  terrorism  made  up  of 
representatives  of  the  Prosecutor's  Office  and  eight  police  agencies  was  re-established.  An 
operational working group within this task force was set up. The legislation on terrorism was 
reviewed. However, an amendment to the Law on protection of classified information, 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.  

The level of implementation of the strategy for preventing and combating terrorism remains to 
be enhanced. 

Overall,  Bosnia  and  Herzegovina  remains  at  an  early  stage  in  the  fight  against  terrorism. 
Practical efforts are needed in the fight against financing of terrorism. 

4.3.6.  Protection of personal data 

There was some progress in the field of personal data protection. Amendments to the Law on 
protection of personal data to further harmonise the law with the relevant acquis were adopted 
by the House of Representatives. Essential elements of this legislation include the recognition 
of  internal  data  protection  officials,  the  regulation  of  data  from  the  former  Yugoslavia  and 
further steps towards implementing the legal requirement concerning the independence of the 
Data Protection Commissioner. The country ratified the Council of Europe Convention for the 
Protection of Individuals with regard to Automatic Processing of Personal Data. The Personal 
Data  Protection  Agency  raised  its  staffing  level  to  a  third  of  its  targeted  strength  and  is 
increasingly capable of addressing its priorities.  

However, legislation and implementing legislation in various sectors remain to be brought in 
line with EU data protection requirements. The Council of Ministers rules for participation of 
the Personal Data Protection Agency in relevant legislative processes are not satisfactory. The 
principle of dedicated use and sub-legal regulations for data protection in the police remain to 
be fully implemented. The Law on personal data protection does not apply to the Bosnia and 
Herzegovina Intelligence Agency. 

Overall,  preparations  for  protection  of  personal  data  remain  at  an  early  stage.  The 
independence of the Personal Data Protection Agency remains to be ensured.  

EN 

59 

   EN 

 
STATISTICAL DATA (as of 30.09.2011) 
Bosnia and Herzegovina 

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

Note

2001 

2000 
2005 
2010 
2009 
3 844p  3 844p 
3 753s  3 790s 3 813s 3 830s 3 837s 3 843s 
51 209  51 209 51 209 51 209 51 209 51 209  51 209  51 209  51 209  51 209  51 209 

2008 
3 844 

2006 
3 843 

2007 
3 844 

2002 

2003 

2004 

Statistical Annex 

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 (%) 

2008 

2007 

2004 

2001 

2003 

2002 

2000 

2006 

Note
2010 
2005 
11)  11 789  12 641 13 946 14 689 15 946 17 157  19 272  21 778  24 717  24 004e  24 486 
11 135  12 638  12 273e  12 519 
8 772 
3 258 
2 898 
2 283 
7 400 
7 100 
5 500 
30 
28 
25 
0.7 
6.2 
3.9 
: 
: 
: 
: 
7.9 
: 
: 
: 
: 
: 
: 
: 

6 028  6 463  7 131  7 510  8 153 
1 594  1 702  1 863  1 960  2 122 
: 
: 
5.1 
: 
: 
: 
: 

9 854 
2 564 
6 300e 
27 
6.0 
: 
-1.4 
: 
: 

3 194e 
7 300 
31 
-2.9e 
: 
8.0 
: 
: 

3 289 
7 600 
30 
5.7 
: 
7.5 
: 
: 

: 
: 
6.3 
: 
: 
: 
: 

: 
: 
2.4 
: 
: 
: 
: 

: 
: 
3.9 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

2009 

1) 
1) 
1) 
1) 

10.9 
20.1 
6.9 
62.1 
: 
: 
: 
: 
: 

10.8 
19.8 
6.2 
63.2 
: 
: 
: 
: 
: 

10.5 
18.8 
5.6 
65.1 
: 
: 
: 
: 
: 

9.5 
20.0 
5.3 
65.2 
: 
: 
: 
: 
: 

10.3 
20.3 
5.0 
64.3 
112.4 
23.8 
2.9 
27.8 
66.8 

10.1 
20.4 
5.2 
64.2 
112.4 
26.3 
0.1 
30.6 
69.3 

10.3 
20.1 
5.3 
64.4 
106.1 
21.4 
-0.9 
33.2 
59.8 

9.8 
20.4 
5.9 
63.9 
101.8 
25.2 
1.3 
33.3 
61.6 

8.9 
21.0 
6.4 
63.7 
100.5 
26.9 
1.4 
32.3 
61.0 

8.6e 
20.2e 
6.2e 
65.1e 
99.2e 
21.4e 
-0.4e 
27.5e 
47.6e 

8.6 
21.6 
5.4 
67.5 
: 
: 
: 
: 
: 

Industry 
Industrial production volume index (2005=100) 

Note

2000 
69.1 

2010 
2001 
72.8e  77.7e  81.6e  91.8e  100.0e  112.5e  119.9e  128.7e  130.6e  135.4e 

2002 

2003 

2005 

2006 

2004 

2007 

2008 

2009 

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

Note
2) 

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 

2010 
2.1 

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) 

EN 

Note

60 

2004 
2003 
2002 
2001 
2000 
-833 
-1 253 -1 439 -1 319
-429 
-3 308 -3 524 -3 671 -3 678
-3 000 
347 
232 
203 
641 
408 
540 
1 727  1 626  1 500  1 462  1 604 
261 
347 
338 
566 
282 
159 

255 
595 

297 
473 

298 
338 

450 
133 

2005 
-1 500 
-3 962 
446 
377 
1 639 
251 
493 

2006 
-783 
-3 406 
534 
312 
1 775 
237 
608 

2007 
-1 191 
-4 142 
639 
336 
1 976 
193 
1 499 

2008 
-1 771 
-4 823 
664 
457 
1 930 
186 
673 

2009 
-768 
-3 410 
572 
416 
1 653 
167 
176 

2010 
-766 
-3 248 
525 
251 
1 705 
138 
142 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (%) 

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 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 in employment (%) 
Employment by main sectors (%) 
Agriculture 

Note

Note

3) 
4) 

5) 

Note

Note

Note

0 
0 
159 
0 

0 
0 
133 
0 

0 
0 
282 
0 

0 
0 
338 
0 

-1 
0 
567 
340 

2000 
: 
34.7 

2001 
: 
35.2 

2002 
: 
31.0 

2003 
0.7 
27.7 

2004 
1.6 
25.3 

: 

2004 
: 
: 

2001 
: 
: 

2003 
: 
: 

2002 
: 
: 

2000 
: 
: 
717 
1 377b 1 538  1 592  1 808 
1 262  2 387b 2 593  2 810  3 493 
: 
1 543  1 707  2 189  2 619  3 031 
: 
12.6 
1.5 
1.956  1.956  1.956  1.956  1.956 
: 

: 
10.3 
1.1 

: 
10.9 
1.2 

: 
: 
: 

: 
: 
: 

: 

: 

: 

: 

: 

: 

1 385  1 270  1 428  1 779 

: 
525 

-0,4 
0 
493 
410 

2005 
2.4 
25.3 

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

-3 
0 
611 
448 

2006 
2.9 
21.1 

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

-21 
0 
1 520 
531 

2007 
1.2 
18.2 

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

-11 
0 
684 
348 

2008 
-2.2 
17.2 

2008 
: 
: 
3 066 
6 464 
: 
7 442 
: 
7.0 
0.4 
1.956 
: 
3 219 

-4 
0 
180 
43 

2009 
-4.5 
21.8 

2009 
: 
: 
3 011 
6 601 
: 
7 210 
: 
7.9 
0.3 
1.956 
: 
3 176b 

-32 
0 
174 
0 

2010 
-2.5 
25.7 

2010 
: 
: 
3 221 
7 066 
: 
7 455 
: 
7.9 
0.2 
1.956 
: 
3 302 

2000 
: 
: 
: 
: 
: 
: 

2000 
2.4 
9.7 
: 
: 

2000 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2001 
1.9 
7.6 
: 
: 

2001 
: 
: 
: 
: 
: 

2002 
: 
: 
: 
: 
: 
: 

2002 
1.5 
9.2 
: 
: 

2002 
: 
: 
: 
: 
: 

2003 
: 
: 
: 
: 
: 
: 

2003 
0.9 
7.7 
: 
: 

2003 
: 
: 
: 
: 
: 

2004 
: 
: 
: 
: 
: 
: 

2004 
0.6 
7.4 
: 
: 

2004 
: 
: 
: 
: 
: 

2005 

2006 

2007 

2008 

2009 

2010 

5 716.7 5 823.0 7 106.1 8 330.2  6 317.1  6 961.9 
1 934.3 2 640.5 3 035.3 3 431.6  2 828.1  3 627.9 
-3 782.4 -3 182.5 -4 070.8 -4 898.6  -3 489.0  -3 334.0 

: 
53.3 
50.7 

2005 
0.1 
6.7 
: 
: 

2005 
: 
: 
: 
: 
: 

: 
57.6 
47.8 

2006 
0.2 
7.5 
: 
: 

2006 
51.3 
35.0 
46.1 
24.0 
30.6 

: 
57.3 
47.8 

2007 
-0.3 
6.8 
: 
: 

2007 
52.2 
36.8 
48.7 
25.0 
31.9 

: 
55.0 
48.0 

2008 
0.0 
6.9 
: 
: 

2008 
53.5 
40.7 
52.9 
28.7 
34.4 

: 
54.0 
49.1 

2009 
-0.1 
6.5 
: 
: 

2009 
53.2 
40.1 
51.2 
29.3 
34.0 

: 
54.4 
45.9 

2010 
-0.2p 
5.9p 
: 
: 

2010 
54.0 
39.0 
49.6 
28.6 
26.8 

6) 

: 

: 

: 

: 

: 

: 

20.5 

19.8 

20.6 

21.2 

19.7 

EN 

61 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
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/HICP) 
(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 (%) 

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) 

6) 
6) 
6) 
7) 

Note

Note

Note

Note

Note

Note

8) 

: 
: 
: 
39.7 
: 
: 
: 
: 

: 
: 
: 
40.0 
: 
: 
: 
: 

: 
: 
: 
41.1 
: 
: 
: 
: 

: 
: 
: 
41.6 
: 
: 
: 
: 

: 
: 
: 
41.8 
: 
: 
: 
: 

2001 

2000 
2004 
2002 
372.0  408.0  446.0  484.0  505.0 
: 

2003 

: 

: 

: 

: 

: 
: 
: 
43.9 
: 
: 
: 
: 

2005 
538.0 
: 

22 
8.8 
48.4 
31.1b 
28.9 
34.9 
62.3 
26.7 

2006 
575.0 
: 

22.9 
9.6 
47.3 
29.0 
26.7 
32.9 
58.4 
25.0 

21.7 
10.8 
46.7 
23.4 
21.4 
26.8 
47.5 
20.2 

21.2 
10.3 
47.1 
24.1 
23.1 
25.6 
48.7 
20.0 

21.9 
9.1 
49.1 
27.2 
25.6 
29.9 
57.5 
22.3 

2007 
645.0 
: 

2008 
752.0 
: 

2009 
790.0 
: 

2010 
798.0 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

2000 
: 
49.6 

2000 
: 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
92.6 

2001 
: 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 
51.0 

2001 
: 
: 
: 
: 
: 
: 
: 

2002 
: 

2003 
: 
176.2  271.8  366.7 

2004 
: 

2005 
: 
414.6 

2006 
162.6 
491.3 

2007 
171.7 
637.4 

2008 
178.7 
769.5 

2009 
180.5 
830.4 

2010 
188.6 
784.1 

2002 
19.7 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 
52.0 

2002 
: 
: 
: 
: 
: 
: 
: 

2003 
18.2 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 
53.0 

2003 
: 
: 
214 
: 
369 
: 
: 

2004 
20.3 
: 

2004 
: 
: 
6.6 

2004 
: 
: 
: 
53.0 

2004 
: 
: 
211 
: 
478 
: 
: 

2005 
20.1 
: 

2005 
: 
: 
: 

2005 
: 
: 
: 
43.0 

2005 
: 
: 
230 
: 
627 
: 
: 

2006 
20.1 
: 

2006 
: 
: 
: 

2006 
: 
: 
: 
54.0 

2006 
: 
: 
: 
: 
681 
: 
: 

2007 
19.9 
: 

2007 
: 
: 
10.9 

2007 
: 
: 
: 
62.0 

2007 
: 
: 
: 
: 
: 
: 
13.0 

2008 
19.9 
: 

2008 
: 
: 
: 

2008 
: 
: 
: 
60.0 

2008 
: 
: 
: 
: 
: 
: 
14.8 

2009 
19.9 
: 

2009 
: 
: 
: 

2009 
: 
: 
: 
63.0 

2009 
: 
: 
3 629bp 
: 
: 
: 
15.7 

2010 
: 
: 

2010 
: 
: 
: 

2010 
: 
: 
: 
62.0 

2010 
: 
: 
: 
: 
: 
: 
: 

EN 

62 

EN 

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

Note

9) 

10) 

2000 
: 
: 
: 
: 
: 
: 
930 
: 
176 

: = not available 
p = provisional 
e = estimated value 
s = Eurostat estimate 
b = break in series 
* = Europe 2020 indicator 

2001 
: 
: 
: 
: 
: 
: 

: 
190 

2004 
: 

2002 
: 

2003 
: 
1 697  1 722  1 722 
453 
: 
596 
: 
965 
: 
583 
: 
1 439 
793 
: 
: 
276 
204 

: 
247 

: 
: 
: 
: 

1 139  1 309 

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

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

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

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

2009 
: 
1 656 
458 
529 
1 125 
734 
1 391 
: 
280 

2010 
: 
1 649 
462 
590 
1 109 
693 
1 105 
: 
286 

The  balance  of  payments  sign  conventions  are  used  for  FDI.  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. 

Footnotes:  
1) 
2) 
3) 
4) 
5) 
6) 
7) 
8) 
9) 
10) 
11) 

Data according to NACE Rev 1.1. 
Until 2005 the growth rate of retail prices is presented, from 2006 onwards growth rate of the consumer price index (CPI). 
Short-term lending rates in national currency to private enterprises and cooperatives (weighted average). 
Demand deposit rates in national currency to households (weighted average). 
Since 2009 gold has been included in reserve assets. 
Data according to NACE rev 2. 
2000–2005, data from the Bureau for Employment. 
2009, primary production of lignite and brown coal included. 
Data refer to harvested year (for example -harvested production for 2010: autumn 2009 and spring 2010), not calendar year; [2009-2010, including triticale and buckwheat. 
Data refer to harvested year (for example -harvested production for 2010: autumn 2009 and spring 2010), not calendar year; including lettuce and melons after 2009. 
In 2011, the calculation method for GDP was improved and figures were revised. 

. 

EN 

63 

EN