COMMISSION STAFF WORKING DOCUMENT BOSNIA AND HERZEGOVINA 2012 PROGRESS REPORT accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2012-2013
Date: 2012-10-10
Institutions: European Commission
Subjects: Bosnia and Herzegovina, Community acquis, accession criteria, economic reform, political reform

EUROPEAN 
COMMISSION 

Brussels, 10.10.2012  
SWD(2012) 335 final 

COMMISSION STAFF WORKING DOCUMENT 

BOSNIA AND HERZEGOVINA 2012 PROGRESS REPORT 

accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2012-2013 

{COM(2012) 600 final}

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

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

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

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

Relations between the EU and Bosnia and Herzegovina ............................................. 6 

Political criteria ............................................................................................................ 8 

Democracy and the rule of law .................................................................................... 8 

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

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

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 

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

Internal market ........................................................................................................... 30 

4.1.1.  Free movement of goods............................................................................................ 30 

4.1.2.  Movement of persons, services and right of establishment ....................................... 32 

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

4.1.4.  Customs and taxation ................................................................................................. 35 

4.1.5.  Competition................................................................................................................ 36 

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

4.1.7. 

Intellectual property law ............................................................................................ 37 

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

4.1.9.  Education and research .............................................................................................. 40 

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 and climate change ............................................................................... 44 

4.2.4.  Transport policy ......................................................................................................... 46 

4.2.5.  Energy ........................................................................................................................ 47 

4.2.6. 

Information society and media................................................................................... 48 

4.2.7.  Financial control......................................................................................................... 49 

4.2.8.  Statistics ..................................................................................................................... 50 

4.3. 

Justice, freedom and security ..................................................................................... 51 

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4.3.1.  Visa, border management, asylum and migration...................................................... 51 

4.3.2.  Money-laundering ...................................................................................................... 53 

4.3.3.  Drugs .......................................................................................................................... 54 

4.3.4.  Police.......................................................................................................................... 54 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 55 

4.3.6.  Protection of personal data......................................................................................... 57 

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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 2011 to September 2012. 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 information gathered and analysed by the Commission. Many sources 
have been used, including contributions from the government of Bosnia and Herzegovina, the 
EU Member States, European Parliament reports1 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.  The  Stabilisation  and 
Association Agreement (SAA) has been ratified but has not yet entered into force.  

The  process  of  consultation  between  the  representatives  of  the  main  political  parties,  which 
started  in  December,  initially  produced  a  shift  of  focus  towards  EU  integration.  A  new 
political momentum emerged, without external interference, reinforcing domestic ownership 
of  the  political  process.  This  momentum  was  not  maintained  and  political  disagreements  in 
the  governing  coalition  emerged  well  ahead  of  the  municipal  elections  in  October.  The 
political  consensus  that  had  emerged  was  lost  and  progress  on  the  EU  agenda  stalled.  The 
tensions linked to the reshuffling of the governments at State level and in the Federation have 
not  been  conducive  to  progress  on  the  implementation  of  the  Sejdić-Finci  ruling.  A  shared 
vision by the political representatives on the overall direction and future of the country and its 
institutional set up remains to be agreed as a matter of priority. In order for such a vision to 
materialise,  the  political  representatives  of  Bosnia  and  Herzegovina  need  to  anchor  the  EU 

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The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
Enlargement Strategy and Main Challenges 2012-2013, COM(2012) 600.  

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agenda  at  the  heart  of  the  political  process  and  translate  political  agreements  into  concrete 
action.  

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 (PIC SB) has set objectives and conditions to be met for the closure 
of the Office of the High Representative3.  

Since the decoupling of the European Union Special Representative’s (EUSR) mandate from 
the  OHR,  the  EU  has  reinforced  its  role  in  the  country  in  line  with  the  relevant  Council 
Conclusions4.  The  enhanced  presence  of  the  combined  EUSR  and  the  EU  Delegation  in 
Bosnia and Herzegovina has become instrumental in communicating EU priorities to citizens 
and in implementing the objectives of the EU agenda in key areas.  

The  High  Level  Dialogue  on  the  Accession  Process  (HLDAP)  was  launched  in  Brussels  in 
June with representatives of the authorities and political parties of Bosnia and Herzegovina. 
The  purpose  of  the  HLDAP  is  to  start  a  process  of  explaining  what  EU  accession  requires 
both  in  political  and  technical  terms.  The  need  for  an  effective  coordination  mechanism 
between various levels of government for the transposition, implementation and enforcement 
of EU laws remains to be addressed as a matter of priority, so that the country can speak with 
one voice on EU matters and make an effective use of the EU’s pre-accession assistance. The 
country’s  political  representatives  agreed  to  joint  conclusions  and  a  roadmap  on  EU 
integration  to  implement  the  conditionalities  for  the  entry  into  force  of  the  SAA  and  for  a 
credible  membership  application,  as  defined  by  the  relevant  Council  Conclusions.  The  first 
timeline  of  the  June  HLDAP  Roadmap  was  not  met:  an  agreed  proposal,  based  on  political 
consensus, amending the Constitution to ensure compliance with the European Convention on 
Human  Rights  (Sejdic-Finci  case)  remains  to  be  submitted  to  the  Parliamentary  Assembly. 
(See Chapter 2.1 – Constitution) 

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. 

After  16  months  of  political  stalemate  following  the  October  2010  general  elections,  the 
process of establishing executive and legislative authorities was completed with the formation 
of a State-level Government in February. The establishment of the new Council of Ministers 
and the adoption in February of two key EU-related laws, the Law on State Aid and the Law 
on the Household and Population Census, initially brought new dynamism. In May, following 
the  adoption  of  the  2012  State  budget,  disagreements  between  parties  in  the  governing 
coalition emerged. This started a process of reshuffling at the State, Federation and cantonal 

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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 through an 
agreement  on  a  permanent  ITA  coefficient  methodology  and  establishment  of  a  National  Fiscal 
Council); and 5) entrenchment of the rule of law (demonstrated by adoption of a National War Crimes 
Strategy, of a Law on Aliens and Asylum and of a National Justice Sector Reform Strategy), as well as 
two specific conditions: 1) signing of the SAA and 2) a stable political situation. 
Council Conclusions of March, October and December 2011 and of June 2012. 

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levels.  Due  to  political  disputes  and  ongoing  legal  challenges,  the  outcome  of  this  reshuffle 
remains uncertain.  

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 force since July 2008. Implementation of the IA remained 
uneven.  The  country  is  still  in  breach  of  the  IA  due  to  non-compliance  with  the  European 
Convention  on  Human  Rights  (ECHR)  and  with  its  obligations  on  State  aid.  The  State  Aid 
Law  has  been  adopted  but  the  establishment  of  the  State  Aid  Council,  compliance  with  EU 
principles  on  public  undertakings  and  the  comprehensive  inventory  of  aid  schemes  are  still 
pending. Some recent measures introduced at Entity-level to protect the local market, remain 
to be addressed. The Stabilisation and Association Agreement (SAA) has been ratified by 
all EU Member States, but has not yet entered into force.  

Within the framework of the Stabilisation and Association Process, Bosnia and Herzegovina 
continued  to  engage  constructively  with  the  EU  on  a  Structured  Dialogue  on  Justice,  with 
plenary  meetings  held  in  November  and  July.  The  process  was  established  with  the  aim  of 
further consolidating the judicial system to ensure it is independent, effective, impartial and 
accountable, in line with the relevant EU standards and acquis. The HLDAP launched in June 
is another forum for engagement on requirements for the EU integration process. 

An inter-parliamentary meeting between Members of the European Parliament and Members 
of  the  Bosnia  and  Herzegovina  Parliamentary  Assembly  took  place  in  December  2011.  In 
May,  the  Western  Balkans  Working  Group  of  the  Committee  of  Regions  held  a  meeting  in 
Sarajevo. 

The overall pace of reforms remained uneven. The EU provides guidance to the authorities on 
reform  priorities.  Progress  on  these  priorities  is  encouraged  and  monitored  by  the  bodies 
established  by  the  IA.  Six  Interim  Sub-Committee  meetings  and  one  Interim  Committee 
meeting  were  held.  Furthermore,  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 2012. 

The  single  EU  representation  —  EUSR/EU Delegation  —  continued  to  facilitate  political 
dialogue  and  to  apply  a  broad  and  balanced  set  of  instruments  to  maximise  the  incentives 
provided  by  the  EU.  The  EU  has  continued  to  deploy  considerable  resources  in  Bosnia  and 
Herzegovina under the Common Foreign and Security Policy and the Common Security and 
Defence Policy. 

The mandate of the EU Police Mission (EUPM) focused on the fight against organised crime 
and  corruption.  The  EUPM  monitored  and  assessed  implementation  of  police  reform  and 
accountability,  and  provided  training  over  the  last  10  years.  The  mission  officially  closed 
down on 30 June 2012. The EU remains committed to strengthening the rule of law in Bosnia 
and  Herzegovina  through  other  instruments,  including  the  reinforced  EUSR  Office  and  the 
Instrument for Pre-accession Assistance (IPA).  

The  EUFOR Althea  military  operation  contributed  to  maintaining  a  safe  and  secure 
environment  in  the country. In 2011, the UN Security Council extended EUFOR’s mandate 
until November 2012. The Operation was reconfigured and reduced to 600 troops in theatre as 
of 1 September, focusing on capacity-building and training, while also retaining the means to 
contribute  to  the  Bosnia  and  Herzegovina  authorities’  deterrence  capacity.  A  reserve  force 
outside the country will conduct regular in-country reconnaissance and training. 

Visa  liberalisation  for  citizens  of  Bosnia  and  Herzegovina  travelling  to  the  Schengen  area 
has  been  in  force  since  December  2010.  The  Commission  set  up  a  post-visa-liberalisation 

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monitoring  mechanism  to  assess  whether  the  implementation  of  reforms  introduced  by  the 
country was consistent with the visa roadmap and sustainable. This was complemented by an 
alert mechanism to prevent abuses. The Commission presented its second monitoring report to 
the European Parliament and the Council in December 2011 and adopted the third in August 
2012. 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  39  out  of  705  relevant  EU 
declarations and Council decisions (56% 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 
implementation  of  financial  assistance  in  the  country.  The  country’s  authorities  have  made 
little progress on setting up the necessary structure for decentralised management of EU funds 
(DIS).  The  legal  bases  for  the  operating  structure,  the  appointment  of  the  necessary 
programme  officers  and  the  adoption  of  the  roadmap  for  a  decentralised  implementation 
system have still not been agreed.  

The implementation of the 2007-2009 national IPA programmes is ongoing. The Multiannual 
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  2012  national  programme6  delayed  the  completion  of  the 
programming exercise in 2012. The difficulties encountered during the programming exercise 
demonstrate  the  need  to  urgently  address  the  issue  of  coordination  on  EU  matters  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.  

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

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  dialogue,  reinforcing  local  democracy,  and  tackling 
environmental and climate change issues. 

As regards participation in EU Programmes, Bosnia and Herzegovina  participates as a full 
member in the Seventh Framework Programme for research, technological development and 
demonstration  activities  (FP7)  and  in  the  COST  and  the  EUREKA  networks.  The  country 
became an associate member of the Culture 2007-2013 programme and joined the Europe for 
Citizens  Programme.  A  single  contact  point  is  instrumental  for  enhanced  participation  by 
citizens across the country in the Culture and Europe for Citizens programmes. Coordination 

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The data refers to declarations issued by the High Representative for CFSP and Vice-President of the 
European  Commission  on  behalf  of  the  EU,  as  well  as  to  Council  Decisions  on  restrictive  measures, 
between  September  2011  and  August  2012.  Figures  do  not  include  alignment  taking  place  in 
multilateral contexts. 
The IPA national allocation for 2012 is € 102.7 million. It includes the IPA 2012 national programme 
(€ 84.8  million)  which  will  cover  projects  in  a  variety  of  areas,  including  support  for  the  judiciary, 
transport,  law  enforcement,  public  administration  reform,  education,  refugees  and  displaced  persons, 
and demining.  

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mechanisms in view of establishing a single contact point endorsed by all stakeholders remain 
to be agreed.  

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). 

2.1. 

Democracy and the rule of law  

Constitution 

The  Dayton/Paris  Peace  Agreement  (DPA)  put  an  end  to  the  1992-1995  war  and  brought 
peace to Bosnia and Herzegovina. 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 
continued to have a negative impact on structural reforms and the country’s capacity to make 
progress  towards  the  EU.  As  a  matter  of  priority,  the  need  for  an  effective  coordination 
mechanism  between  various  levels  of government for the transposition, implementation and 
enforcement  of  EU  laws  remains  to  be  addressed,  to  enable  the  country  to  speak  with  one 
voice on EU matters.  

Some political representatives are questioning Bosnia and Herzegovina’s capacity to function 
as  a  country  and  are  calling  for  an  Entity-level  EU  agenda  separate  from  the  Bosnia  and 
Herzegovina state.  

The Federation’s Constitution entails costly and complex governance structures with certain 
overlapping competences between the Federation, the Cantons and the municipalities.  

The Constitution of Bosnia and Herzegovina prevents citizens who do not declare themselves 
as 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. An Interim Joint 
Parliamentary Committee was set up in October 2011 and tasked with drafting amendments to 
the  Constitution  of  Bosnia  and  Herzegovina  and  the  Election  Law  to  comply  with  the 
European Convention on Human Rights (ECHR) and the judgment of the European Court of 
Human Rights (ECtHR) regarding discrimination against citizens on the grounds of ethnicity. 
An  internal  Roadmap  on  EU  integration  aimed  at  meeting  the  conditions  for  the  entry  into 
force  of the Stabilisation and Association Agreement  (SAA) and for  a credible membership 
application was agreed at the HLDAP. The first timeline (31 August) set in the Roadmap for 
submission of a joint proposal to comply with the European Court of Human Rights (ECtHR) 
decision in the Sejdic-Finci case, was not met. (See Chapter 1.2 – Context) 

On  the  basis  of  the  DPA,  the  international  community  continued  to  maintain  a  presence  in 
Bosnia  and  Herzegovina.  The  High  Representative  used  the  Bonn  Powers7  to  issue  three 
Decisions.  The  first  one  lifted  an  earlier  ban  by  the  High  Representative  on  an  official 
removed in July 2005, which was preventing him from standing as candidate for elections and 

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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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holding certain executive offices. The other two decisions repealed the High Representative’s 
Decision  of  10  July  2007  to  seize  the  travel  documents  of  individuals  suspected  of 
involvement in war crimes in and around Srebrenica.  

With regard to meeting the outstanding objectives and conditions for the closure of the Office 
of  the  High  Representative  (OHR),  a  high-level  political  agreement  was  reached  on  the 
principles  for  distributing  defence  and  state  property  in  March.  In  September,  the 
Constitutional Court adopted a decision regulating property distribution, but it remains to be 
implemented.  Following  the  endorsement  by  the  Peace  Implementation  Council  Steering 
Board in May 2012, of the decision by the High Representative to close the office in Brcko by 
31 August, the Brcko Supervisor suspended his mandate. The EU opened an office in Brcko 
to  facilitate  Brcko’s  adoption  of  reforms  needed  for  advancement  on  the  EU  path.  The  EU 
also opened an office in Mostar and reinforced the office in Banja Luka. 

Overall, there has been little progress in compliance with the ECtHR judgement in the Sejdic-
Finci case and in establishing functional and sustainable institutions. Establishing an effective 
coordination  mechanism  between  various  levels  of  government  for  the  transposition, 
implementation and enforcement of EU laws so that the country can speak with one voice on 
EU matters, remains an issue to be addressed 

Parliament  

The Parliamentary Assembly of Bosnia and Herzegovina has made some progress in adopting 
EU-related legislation. The Parliamentary Assembly adopted 2 key EU related laws8 and 20 
sets of amendments to existing legislation and rejected 21 laws. Delays in forming the State-
level  Council  of  Ministers  and  the  ongoing  reshuffle,  following  disagreements  within  the 
governing  coalition,  have  hampered  the  ability  of  the  Parliamentary  Assembly  to  legislate 
efficiently.  Cooperation  between  the  Council  of  Ministers  and  the  Parliamentary  Assembly 
remains insufficient. 

The rules of procedure of the House of Peoples and the House of Representatives have not yet 
been amended to introduce a fast-track mechanism for EU legislation.  

There  has  been  some  progress  in  the  functioning  of  the  Parliamentary  Assembly.  A 
reorganisation of the Secretariat of the Parliamentary Assembly has been adopted, setting up 
two new sectors in the Secretariat9. A general lack of political will continued to hamper the 
efficiency  of  the  Parliamentary  Assembly’s  work.  Temporary  financing  of  State-level 
institutions  held  back  the  strengthening  of  the  Parliamentary  Assembly’s  administrative 
capacity.  

At Entity level, the overall functioning of the Parliamentary Assemblies has continued to be 
satisfactory,  with  the  EU  Integration  Committees  focusing  more  on  IA/SAA-related 
obligations. However, the political reshuffle in the Federation hampered the functioning of its 
Parliamentary Assembly.  

In  the  Federation,  the  Parliamentary  Assembly  organised  a  thematic  session  on  EU 
integration. The functioning of the Parliamentary Assembly has been hampered by a lack of 
systematic coordination with other legislators in the Entity and by efforts to establish a new 
parliamentary majority. The work of the parliamentary committees was affected by frequent 
lack of quorum and inadequate premises.  

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The State Aid Law and the Law on the Household and Population Census. 
The  Finance  and  Budget  Sector  and  the  Sector  for  other  Parliamentary  bodies–  to  provide 
administrative  assistance  to  the  Council  of  National  Minorities,  the  Independent  Board,  the  Citizens 
Complaints Board and the Independent Committee, and the Parliamentary Military Commissioner. 

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In  Republika  Srpska,  the  EU  Integration  Committee  of  the  National  Assembly  cooperated 
with  the  government  in  assessing  the  level  of  compliance  of  proposed  legislation.  The 
appointment  procedure  of  the  Bosniak  Vice-Chairman  of  the  Council  of  Peoples  was 
completed.  

The  two  Entity  Parliaments  have  continued  to  cooperate  closely  with  their  respective 
governments. Three joint meetings of the State-level and Entity Parliamentary Committees for 
European Integration took place. 

Overall,  the  Parliamentary  Assembly  has  made  some  progress  in  adopting  EU-related 
legislation.  Delays  in  setting  up  the  State-level  Council  of  Ministers  and  disagreements 
amongst  the  parties  of  the  governing  coalition  hampered  legislative  activities.  Cooperation 
between  the  Entity  Parliaments,  the  State-level  Parliamentary  Assembly  and  the  State-level 
Council  of  Ministers  regarding  EU-related  matters  needs  to  improve  in  order  to  ensure 
coordinated and harmonised alignment with EU legislation throughout the territory of Bosnia 
and Herzegovina. 

Government 

The new State-level Government took office in February. The tripartite Presidency of Bosnia 
and  Herzegovina  continued  to  meet  regularly.  The  Presidency  adopted  its  first  eight-month 
work plan, which calls for the setting of strategic foreign policy priorities, one of which is to 
submit  an  application  for  EU  membership.  The  formulation  of  foreign  policy  remained 
subject to different positions within the Presidency of Bosnia and Herzegovina on some key 
issues.  
The  leaders  of  six  political  parties10  reached  a  political  agreement  in  December  on  the 
formation of the State-level Council of Ministers, on the 2011 State-level budget and on laws 
related to EU integration. The delay in adopting the 2011 State budget delayed the disbursal 
of funds to cover outstanding obligations under foreign loans. The State budget for 2012 was 
adopted  only  in  May  and  was  followed  by  the  break-up  of  the  governing  coalition.  The 
temporary financing which remained in place until then did not enable adequate financing of 
the  State-level  institutions  required  for  the  EU  accession  process.  This  particularly  affected 
the State Aid Council, the Agency for the Prevention and Fight Against Corruption, and the 
preparation of the household and population census. (See Chapter 4.2.8 – Statistics) 

The  Chairman  of  the  Council  of  Ministers  of  Bosnia  and  Herzegovina  was  appointed  in 
January  and  the  appointments  of  the  other  members  of  the  Council  of  Ministers  were 
concluded  in  February.  The  Council  of  Ministers’  Chairman  has  attached  high  priority  to 
activities  linked  to  EU  integration.  The  Council  of  Ministers  adopted  the  Action  Plan  for 
addressing the  EU integration roadmap, the Action Plan  for overcoming the implications of 
Croatia’s EU membership, the 2012 Economic and Fiscal Programmes and the 2012-14 and 
2013-2015 Global Fiscal Framework.  

The  State-level,  Federation  and  Cantonal  authorities  began  to  be  reshuffled  in  June  due  to 
diverging party interests within the governing coalition. The outcome of this process remains 
uncertain due to political disputes and on-going legal challenges.  

As regards policy planning, the development strategy and the social inclusion strategy are in 
place in the Federation and in Brcko but need to be adopted at State level and in Republika 
Srpska. Overall, policy planning in Bosnia and Herzegovina remains hampered by the lack of 
up-to-date  census  data.  Preparations  for  the  census  are  hampered  by  organisational  and 

10 

The SDP, SDA, SNSD, SDS, HDZ BiH and HDZ 1990. 

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financial  constraints.  The  implementation  of  the  Law  on  the  Household  and  Population 
Census remains a priority.  

Regarding  coordination  on  EU  matters,  the  Directorate  for  European  Integration  (DEI) 
strengthened  its  cooperation  with  State  and  Entity-level  parliaments  and  governments.  The 
Directorate’s coordinating role on EU matters among all levels of authorities requires further 
reinforcement.  The  Directorate’s  capacity  to  assess  compliance  with  the  IA/SAA  remains 
weak, notably because its mandate is limited to State level and does not include amendments 
introduced during the legislative process. 

The  Government  of  Republika  Srpska  often  provided  analysis  and  opinions  on  the  level  of 
approximation of draft legislation with the acquis. Its administrative capacity to monitor EU-
related  legislation  remained  satisfactory.  There  was  little  coordination  and  cooperation  with 
the State-level Council of Ministers or the Federation Government on harmonising legislation 
with EU standards. 

In the Federation, the formation of Cantonal governments was completed and the 2012 budget 
adopted in 9 out of the 10 Cantons. The Federation government strengthened coordination of 
EU-related matters across ministries by setting up a single coordinator’s office and European 
integration  units  in  all  ministries.  EU  coordination  with  Cantonal  governments  was 
established through a unit for European integration in the Government’s General Secretariat. 

The  Brcko  District  has  developed  a  procedure  for  harmonising  legislation  with  the  acquis. 
The  Office  for  European  Integration  remains  understaffed  due  to  a  halt  on  public  service 
recruitment. 

Entity legislation is largely in line with the European Charter for Local Self-Government. The 
Cantons have not harmonised their legislation with the Federation Law on Principles on Local 
Self-Government. The 2010 Constitutional Court decision on the Mostar statute remains to be 
implemented. As a result, local elections will not be held in October in Mostar City. 

Overall, little progress was made by Bosnia and Herzegovina in improving the functionality 
and  efficiency  of  all  levels  of  government,  which  continued  to  be  affected  by  fragmented, 
uncoordinated  policy-making.  The  delays  in  the  formation  of  the  Council  of  Ministers  and 
political disagreements between parties in the governing coalition delayed progress on the EU 
agenda. The development strategy and the social inclusion strategy need to be adopted at State 
level and in Republika Srpska.  

Public administration  

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

The  Public  Administration  Reform  Coordinator’s  Office  (PARCO)  revised  the  2006  Action 
Plan  under  the  Public  Administration  Reform  (PAR)  Strategy,  providing  a  framework  for 
reforms over the next five years. The public administration reform process lacks the necessary 
political  support.  There  has  been  little  progress  in  strengthening  administrative  capacity  for 
legal harmonisation and implementation of the acquis. The issue of financial sustainability of 
public administration at all levels needs to be addressed. 

With  regard  to  appointments  to  State-level  bodies,  the  directors  of  the  Indirect  Taxation 
Authority  (ITA),  the  State  Investigation  and  Protection  Agency  (SIPA)  and  the  State 
Veterinary  Office  have  been  appointed.  The  members  of  the  Central  Election  Commission 
were  re-appointed.  Appointments  to  some  key  agencies  are  still  awaited,  in  particular  the 
Communications Regulatory Agency, the State Aid Council, and the electricity transmission 
company TRANSCO. These agencies still lack the necessary resources and political support 
to become fully operational in line with EU requirements.  

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The State-level Law on Civil Servants has been amended to allow the Civil Service Agency to 
handle civil servants’ personal data and thus make use of the human resources management 
information  system.  There  has  been  no  improvement  in  recruitment  procedures  that  would 
ensure the application of objective and merit-based criteria for appointments.  

Civil  service  systems  have  been  amended  in  different  directions  across  the  country.  In  the 
Federation,  amendments  to  the  Law  on  the  Civil Service  were  adopted,  aligning  it  with  the 
FBiH  Constitutional  Court  decisions  and  ensuring  compliance  with  the  Bologna  Process  on 
recognition  of  diplomas.  Republika  Srpska  amended  its  Law  on  Civil  Servants,  clarifying 
conditions  for  appointments  and  setting  retirement  age  for  civil  servants  at  65.  The  Brcko 
District has prepared a set of amendments to the Law on Civil Servants. There has been very 
little coordination between the State level, the Entities and the Brcko District when preparing 
amendments to their legislation to ensure a more harmonised approach.  

Following  a  decision  by  the  Federation  Constitutional  Court,  a  framework  law  harmonising 
the  Cantonal  legislation  was  drafted.  The  adoption  in  two  Cantons  of  separate  laws  on  the 
civil  service,  which  are  not  fully  in  line  with  the  framework  law,  contributed  to  the 
fragmentation  of  the  civil  service  system  and  the  establishment  of  separate  civil  service 
agencies at Cantonal level.  

The  Ombudsman  of  Bosnia  and  Herzegovina  has  issued  reports  to  the  UN  and  the 
Parliamentary  Assembly  of  Bosnia  and  Herzegovina  on  the  status  of  human  rights  in  the 
country  and  on  the  implementation  of  the  anti-discrimination  law.  Several  of  the 
recommendations, e.g. regarding the judiciary, access to information and discrimination, have 
not been implemented due to weak enforcement capacity and a lack of political support. The 
reduction in funding had a negative impact on the functioning of the Ombudsman.  

Overall, little progress was made in the area of public administration reform. The Action Plan 
under  the  PAR  Strategy  was  revised,  providing  a  framework  for  reforms  over  the  next  five 
years. The coordinating structures at Entity and Cantonal level remain insufficient. The cut in 
budgetary  resources  hampered  the  functioning  of  the  Ombudsman.  Fragmentation  and 
politicisation  continued  to  hamper  the  establishment  of  a  professional,  accountable, 
transparent and efficient civil service based on merit and competence. 

Judicial system  

Limited  progress  has  been  achieved  in  the  area  of  judicial  system  reform.  The  Structured 
Dialogue  on  Justice  has  had  a  positive  effect  on  the  implementation  of  the  Justice  Sector 
Reform Strategy (JSRS) 2009-2013. Increased political support resulted in better coordinated 
planning  among  stakeholders  and  the  allocation  of  more  adequate  human  and  financial 
resources. 

The High Judicial and Prosecutorial Council of BiH (HJPC) completed a review  of  its own 
Law. Draft amendments provide for a restructuring of the HJPC into sub-councils of judges 
and  prosecutors,  new  procedures  for  recruitment  and  judicial  review  of  appointments,  in 
accordance with European standards of independence and professionalism.  

A new Law on the Courts of Republika Srpska entered into force in May, not yet harmonised 
with  the  Law  on  the  HJPC.  Solutions  regarding  prerogatives  of  the  Court  of  BiH  and  the 
coordination  between  this  and  other  instances  throughout  the  country,  including  the 
harmonisation  of  court  practice  in  criminal  matters,  continued  to  be  explored  in  line  with 
recommendations of the Structured Dialogue. A debate on the matter was coordinated by the 
HJPC. 

Some shortcomings persist in relation to independence and impartiality. Political  attacks on 
the  State-level  judiciary  continued  and  the  independence  of  the  judicial  system  is  not  yet 

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ensured. Draft laws repealing the Law on the Courts of BiH and the Law on the Prosecutor’s 
Office  of  BiH  were  submitted  to  the  Bosnia  and  Herzegovina  Parliamentary  Assembly  in 
February, contrary to the spirit of cooperation agreed in the Structured Dialogue on Justice. 
By May, the adoption procedure for both laws had been halted.  

Independence  is  also  affected  by  budgetary  fragmentation.  The  issue  of  streamlining 
budgetary  competences  is  being  discussed  by  the  Federation,  the  judicial  professional 
community and the relevant authorities. In 2011, the total financial resources allocated to the 
judiciary  in  Bosnia  and  Herzegovina  was  € 100  million,  which  represented  approximately 
0,79% of the country’s GDP. The management of cases, particularly their transfer for issues 
of  capacity  and  lack  of  human  resources  in  the  Federation,  has  sometimes  threatened  the 
principle of the ‘natural judge’. 

As regards accountability, the Office of the Disciplinary Council has performed well reducing 
the  number  of  unresolved  cases  and  increasing  the  number  of  disciplinary  actions.  The 
disciplinary case involving the former Chief Prosecutor of BiH was concluded in May 2012 
with  a  plea  agreement.  Vacant  positions  of  the  three  judges  within  the  FBiH  Constitutional 
Court have still not been filled after more than three years.  

As regards efficiency, there has been some progress in addressing the backlog of cases. The 
HJPC  adopted  a  new  ‘Rulebook  on  time  measurements  for  the  work  of  judges,  judicial 
associates  and  other  employees  in  BiH  Courts’  which  is  a  significant  improvement  on  the 
previous  one.  The  results  of  implementing  the  backlog  reduction  plan  for  older  cases  have 
been  positive.  The  majority  of  unresolved  cases  (53%  of  the  total)  still  pertain  to  unpaid 
utility bills. The HJPC has taken measures to reduce the number of new cases.  

Further  progress  has  been  made  in  developing  the  information  and  communication  system 
across the judiciary with the expansion of the case management system (CMS) in courts and 
prosecutors’ offices throughout the country. CMS is increasingly used for statistical analysis 
and  strategic  policy  by  court  presidents.  Parties  to  proceedings  can  access  case  information 
online, which facilitates efficiency and transparency and prevents the loss of documentation. 
The Care of Court Users Strategy is in use throughout the country. All courts and prosecutors’ 
offices have their own website. The Judicial Documentation Centre ensures online availability 
of a considerably high number of court decisions.  

Whilst  a  comprehensive  assessment  of  the  infrastructure  investment  needs  of  courts  and 
prosecutors’ offices across the country has been completed, the physical conditions of several 
courts  at  State  and  Entity  levels  have  improved.  Due  to  budgetary  constraints,  many  of  the 
positions identified in the HJPC decisions on regular and reserve judges have not been filled. 

In consultation with the HJPC, the Tuzla Canton is planning to reopen two municipal courts 
in December, in line with the FBiH Law on the Courts. The new Law on the Courts adopted 
by  Republika  Srpska  in  December  2011  included  the  opening  of  eight  new  basic  courts, 
pending the approval of the necessary financial means.  

Moderate, but steady progress has been made in processing the large backlog of unresolved 
war  crimes  cases.  Implementation  of  the  National  War  Crimes  Strategy  accelerated  with  a 
significant increase of the transfers of war crimes cases from the State level to the Entities and 
the Brcko District, with 127 cases transferred in the first six months of 2012. Good progress 
was  made,  with  enhanced  cooperation  between  the  courts  and  prosecutor’s  office  of  Bosnia 
and Herzegovina, on the final settlement of jurisdiction based on objective criteria. 

The processing of war crimes cases by the Court of Bosnia and Herzegovina has continued to 
be satisfactory. Following the increasing number of war crimes cases transferred from State 
level to other instances, additional human resources and facilities are needed in the Cantonal 

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and  District  courts.  The  lack  of  sufficient  investigative  capacity,  as  well  as  human  and 
financial resources at all levels, remain issues to be urgently addressed.  

Diverging practices regarding the applicability of different criminal codes between courts at 
different  levels  continued  to  be  an  issue.  With  two  cases,  now  merged,  pending  before  the 
European  Court  of  Human  Rights,  the  application  of  different  criminal  codes  continued  to 
result  in  uneven  sentencing.  Increased  coordination  between  the  competent  instances 
throughout the judiciary of Bosnia and Herzegovina is necessary. 

The  level  of  prosecution  of  war  crimes  cases  involving  sexual  violence  remains  low, 
particularly in the Entities and the Brcko District. Efforts to investigate and prosecute  these 
crimes and to protect victims and witnesses need to be stepped up. A comprehensive approach 
to  improving  the  status  of  victims  of  rape  and  sexual  violence  remains  outstanding.  The 
adoption  of  a  State-level  programme  for  improving  the  status  of  victims  of  war  crimes 
involving sexual violence is pending. 

Witness  protection  and  support  services  are  unevenly  put  in  place,  though  there  is  some 
improvement connected to the process of referral of war crimes cases from the State to other 
levels.  The  current  legal  framework  remains  inadequate  and  fragmented  and  varies  greatly 
between District and Cantonal courts and prosecutors’ offices.  

Overall,  there  was  limited  progress  in  the  area  of  judicial  system  reform.  A  constructive 
attitude  to  the  need  for  a  comprehensive  reform  of  the  judiciary  emerged  in  the  Structured 
Dialogue  on  Justice,  based  on  domestic  ownership,  including  in  the  implementation  of  the 
Justice  Sector  Reform  Strategy  and  of  the  National  War  Crimes  Strategy.  Further  measures 
were introduced to reduce the backlog of cases, particularly of utility bill cases, but the overall 
backlog  remains  very  high.  Lack  of  investigative  capacities  and  appropriate  resources  is 
affecting the reduction of the war crime cases backlog. The need to harmonise the application 
of  criminal  laws  throughout  the  country  and  the  fragmentation  of  organisation  and  budgets 
remain  issues  to  be  addressed.  Political  attacks  continued  to  affect  the  independence  of  the 
judiciary.  

Anti-corruption policy  

Bosnia and Herzegovina has made limited progress in addressing corruption, which continues 
to  remain  widespread  in  the  public  sector  and  the  public-private  interface.  The  legal 
framework  is  largely  in  place  but  sanctions  need  to  be  harmonised  across  the  country. 
Corruption continues to affect all spheres of life, economic development and the rule of law. 

The  implementation  of  the  anticorruption  strategy  and  action  plan  2009-2014  has  been 
delayed.  The  rulebook  regulating  the  organisation  and  structure  of  the  Agency  for  the 
prevention of corruption and coordination of the fight against corruption was adopted in July. 
However, the agency is not yet fully operational. Anti-corruption strategies are in place in the 
two  Entities  and  the  Brcko  District.  Three  bodies  were  set  up  with  mandates  to  prevent 
corruption and to develop and implement anti-corruption strategies.  

The  Law  on  Conflicts  of  Interest  is  in  place.  Amendments  governing  public  officials’ 
participation  in  company  boards  were  introduced.  The  harmonisation  of  conflict  of  interest 
legislation across the country is pending. In addition, judicial review of decisions on conflicts 
of interest is not equally guaranteed at all levels of authority.  

Control  of  political  party  financing  remains  weak.  Registration  of  political  parties  has  not 
been harmonised across the country. Infringements of party financing rules are not effectively 
prosecuted. The Central Election Commission continues to report asset declarations, but the 
origin  of  assets  cannot  be  checked  as  long  as  the  anti-corruption  agency  is  not  operational. 

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The  competent  prosecutor  rarely  acts  upon  false  declarations,  and  the  misuse  of  residence 
registration for the purpose of drafting electoral lists continues to be a serious problem.  

Insufficient  implementation  of  legislation  and  coordination  problems  between  Entities 
continue  to  cause  concern.  Measures  are  still  required  to  implement  the  outstanding 
recommendations  made  in  the  third  evaluation  report  of  the  Group  of  States  against 
Corruption (GRECO). 

The  level  of  effectiveness  of  investigation,  prosecution  and  conviction  of  corruption  cases 
remained low. Both criminal law sanctions and prosecution capacity are weak and ineffective. 
Proactive investigation into abuse of authority in the public sector is at an early stage. Very 
few high-level corruption cases involving public officials are pursued. Further specialisation 
of  prosecutors  and  improved  coordination  with  the  police  is  needed.  The  level  of  judicial 
follow-up to corruption cases remained low. Only a limited number of high-level cases led to 
prosecution.  Nepotism  continues  to  hamper  professional  performance  throughout  the  public 
sector  at  all  levels  of  authority.  Access  to  information  remains  uneven.  Whistleblower 
protection is not in place. 

Corruption in public procurement is widespread and a matter of concern. Areas of special risk 
of  corruption  are  the  issuing  of  permits  and  public  services  such  as  public  health  and 
education.  

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. A legal framework is in 
place  but  the  political  will  to  tackle  the  issue  and  to  improve  institutional  capacity  remains 
weak. The implementation of the strategy and action plan needs to be stepped up. Sustained 
efforts  are  needed  to  establish  a  convincing  track  record  of  proactive  investigation, 
prosecution and conviction of high level corruption cases. 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law  

As regards international human rights instruments, Bosnia and Herzegovina has ratified all 
major  UN  and  international  human  rights  conventions.  The  principles  of  the  European 
Convention  on  Human  Rights  (ECHR)  are  entrenched  in  the  Constitution  of  Bosnia  and 
Herzegovina,  which  also  guarantees  the  supremacy  of  this  Convention  over  national 
legislation.  

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 judgments on 39 
applications  finding  that  Bosnia  and  Herzegovina  had  violated  rights  guaranteed  by  the 
European Convention of Human Rights. A total of 423 new applications have been submitted 
to the ECtHR since September 2011, bringing the total of pending applications to 1433.  

Little  progress  has  been  made  in  the  promotion  and  enforcement  of  human  rights.  The 
enforcement  of  the  outstanding  decisions  of  the  Human  Rights  Chamber  (HRCh)  and  the 
Human  Rights  Commission  (HRCom),  which  is  now  the  competence  of  the  Constitutional 
Court of Bosnia and Herzegovina, remains to be addressed.11  

11 

The Human Rights Chamber was established under Annex 6 to the Dayton/Paris Peace Agreement as a 
judicial  body  dealing  with  complaints  about  human  rights  violations  in  relation  to  the  ECHR.  The 
mandate of the HRCh expired in 2003, without its having resolved all the cases it received. In order to 
resolve the outstanding cases, the HRCom  was created within the Constitutional Court of Bosnia and 

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Overall, the legal and institutional framework for the observance of human rights is in place 
and  the  main  elements  of  international  human  rights  laws  have  been  incorporated  into  the 
legal  system.  The  implementation  of  human  rights  standards  remains  uneven  and  delays  in 
reporting obligations have continued. It remains essential to implement the ECtHR judgement 
in the Sejdic-Finci case in order to comply with the ECHR (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. Although there is a moratorium, the death penalty provision in 
the Constitution of Republika Srpska remains in place. A package of constitutional changes, 
including this amendment, was adopted by the Republika Srpska National Assembly in 2009 
but adoption was subsequently blocked during the legislative procedure. The relevant Article 
11(2) of the Constitution of Republika Srpska has to be repealed in line with key principles of 
the EU human rights policy. 

With regard to the prevention of torture and ill-treatment and the fight against impunity, 
the legal framework is in place and is generally respected. Measures against ill-treatment by 
police  officers,  need  to  be  addressed12.  The  appointment  of  Bosnia  and  Herzegovina’s 
representative to the CPT is still pending.  

Some  progress  was  made  regarding  the  prison  system.  The  Republika  Srpska  amended  the 
Law on the Execution of Criminal Sanctions to harmonise it with the State-level law. A new 
draft Law on the Execution of Criminal Sanctions remains to be adopted by the Federation.  

Prison  conditions  have  improved.  The  female  ward  of  Istocno  prison  was  expanded.  Some 
progress has been made to reduce inter-prisoner violence, particularly in Zenica prison. Some 
cases  of  ill-treatment  have  been  reported.  Procedures  for  investigating  cases  of  alleged  ill-
treatment have improved, particularly in Zenica and Doboj prisons. Some progress was made 
regarding the use of alternative sanctions. Overcrowding in the country’s prisons is an issue to 
be further addressed. The construction of a high-security State prison 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. While a new 
psychiatric facility has been built in Sokolac, it is not yet operational. Prison inspections need 
to  be  reinforced.  Bosnia  and  Herzegovina  still  lacks  an  effective  coordination  mechanism 
among the 15 prison administrations in the country.  

Some progress was made in the area of access to justice in civil and administrative trials. A 
web-based  free  legal  aid  providers’  network  including  governmental  and  non-governmental 
organisations was set up. Additional free legal aid agencies have been established. The system 
of  free  legal  aid  in  Bosnia  and  Herzegovina  remains  fragmented  and  unregulated  in  some 
Cantons  of  the  Federation.  The  adoption  of  a  State-level  Law  on  Free  Legal  Aid  is  still 
pending.  Free  legal  aid  in  civil  cases  continues  to  be  mainly  provided  by  privately  funded 
NGOs. Free legal aid for administrative cases remains problematic.  

The  Constitution  of  Bosnia  and  Herzegovina  provides  for  freedom  of  expression. 
Intimidation and threats against journalists and editors  have continued. Political pressure  on 
the media and the polarisation of the media along political and ethnic lines remain of concern. 

12 

Herzegovina. HRCom’s mandate expired in 2006. The Constitutional Court of Bosnia and Herzegovina 
became the body that is competent to review implementation of these cases in 2010. 
Ill  treatment  of  suspects  by  police  officers  some  police  stations  are  also  reported  by  the  Council  of 
Europe  Committee  on  the  Prevention  of  Torture  (CPT)-Report  to  the  Government  of  Bosnia  and 
Herzegovina- 26 April 2012. 

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Attempts  to  undermine  the  independence  of  the  Communication  Regulatory  Agency  (CRA) 
have  increased.  The  current  Law  on  Communication  provides  legal  safeguards  to  ensure 
independence  of  the  CRA  and  of  its  management.  However,  an  amendment  to  the  Law  on 
Communications tasking an ad hoc Committee of the Parliament to appoint the CRA Council 
was  submitted  in  June.  The  appointments  of  the  CRA  Director-General  and  of  the  Council 
Members  are  still  pending.  In  July,  the  Federation  Parliament  attempted  to  appoint  a 
provisional steering board for the FBiH public service broadcaster. This is not in line with the 
appointment procedure set out in the Law on RTV FBiH and raises concerns about political 
interference with the independence of the media. 

The  Press  Council  has  continued  to  work  closely  with  judicial  institutions  and  journalists’ 
associations to improve the quality of reporting and raise awareness among citizens of their 
legal  rights.  It  has  contributed  to  enforcing  professional  standards  and  to  improving  the 
quality  of  the  media  by  involving  citizens  in  providing  feedback  on  media  practices.  Few 
efforts  have  been  made  to  improve  the  implementation  of  the  Freedom  of  Information  Act. 
Compliance with recommendations by the Ombudsman of Bosnia and Herzegovina remained 
limited.  

Freedom  of  assembly  and  freedom  of  association  are  broadly  respected.  Cases  of 
intimidation and violence against human rights advocates continued.  

An institutional mechanism for cooperation with civil society has been established in the two 
Entities but is not fully operational yet. It is in place in the Brcko District but has yet to be 
established  at  State  level.  A  National  Civil  Society  Development  Strategy  is  under 
preparation. A process for consulting civil society during the legislative drafting process is in 
place but has not been fully enforced. The lack of transparency in the allocation of funds for 
civil society organisations remains to be addressed, particularly in the areas of human rights 
and the environment.  

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 continued and in particular affected those 
who  constitute  a  religious  minority  in  certain  communities.  An  international  Meeting  for 
Peace involving the main inter-religious leaders took place in Sarajevo in September.  

Overall,  civil  and  political  rights  in  Bosnia  and  Herzegovina  are  broadly  respected.  Further 
progress  has  been  made  in  improving  prison  conditions  but  comprehensive  reform  of  the 
prison system remains outstanding. Some progress took place as regards access to justice but 
the  legal  and  institutional  framework  in  the  country  remains  fragmented.  Intimidation  and 
threats against journalists and editors have continued. Political pressure on the media and the 
polarisation  of  the  media  along  political  and  ethnic  lines  remain  of  concern.  Attempts  to 
undermine  the  independence  of  the  CRA  and  appointments  affecting  public  service 
broadcasters  are  of  concern.  The  development  of  civil  society  requires  further  support. 
Transparency in the allocation of funds for civil society organisations needs to be enhanced. 

Economic and social rights 

Legal  provisions  guarantee  women’s  rights  and  gender  equality  are  in  place.  The 
implementation  of  the  Action  Plan  on  UN  Security  Council  Resolution  1325  regarding 
Women,  Peace  and  Security  continued  but  awareness  and  financial  resources  for  its 
implementation need to be strengthened. Political participation by women remains low. The 
40% quota for women within the public administration, as stipulated by the Gender Equality 
Law, has not been reached. Women continue to face unequal access to the labour market and 
the level of female participation in the workforce remains low. 

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Limited progress was made to harmonise Entity and Cantonal laws with the State-level Law 
on  Gender  Equality.  Institutional  mechanisms  for  ensuring  gender  equality  continue  to  face 
resource constrains. The availability of statistical data on gender equality remains insufficient. 
Discrimination in employment with regard to maternity rights remains widespread. 

Some  progress  was  made  in  combating  violence  against  women.  In  Republika  Srpska,  the 
implementation of the Strategy Against Domestic Violence continued and police training was 
launched. In the Federation the Law on Domestic Violence remains to be amended to enhance 
victim protection. The implementation of the State-level strategy remains weak. Financing of 
shelters for victims is not sufficient.  

Some  progress  has  been  made  in  the  area  of  children’s  rights.  An  Early  Childhood 
Development Policy was adopted at State level and is in place in both Entities. Some progress 
was made in strengthening systems of social inclusion and protection. Child allowances vary 
between  Entities  and  Cantons  and  are  not  based  on  needs.  A  State-level  Action  Plan  for 
Children for 2010-2014 is in place but its implementation remained uneven. A universal birth 
registration  system  has  not  yet  been  established.  The  percentage  of  children  immunised 
against preventable diseases remains low.  

Some  progress  was  made  in  promoting  alternative  care  but  institutionalisation  remains  the 
primary  response.  A  revised  State-level  Strategy  to  Combat  Violence  against  Children 
remains  to  be  adopted.  Domestic  violence  against  children,  trafficking  and  organised  child 
begging remain issues to be addressed.  

Limited  progress  was  made  in  the  area  of  juvenile  justice,  particularly  in  terms  of  social 
protection. Implementation of the relevant national strategy, which is to be revised, remained 
uneven.  The  enforcement  of  the  Juvenile  Justice  Law  in  Republika  Srpska  has  progressed 
slowly.  In  the  Federation,  the  adoption  of  the  Juvenile  Justice  Law  is  pending.  A  Juvenile 
Justice  Law  was  adopted  by  the  Brcko  District  in  November.  The  Brcko  District  and 
Republika Srpska laws are not fully harmonised.  

Limited  progress  was  made  in  the  field  of  education.  The  Conference  of  Ministers  of 
Education in Bosnia and Herzegovina, which was established to improve coordination among 
the  14  ministers  of  education,  resumed  its  activities  in  March  but  without  adopting 
conclusions.  An  efficient  coordination  mechanism  on  education  between  Cantonal 
governments  in  the  Federation  remains  to  be  established.  Little  progress  was  achieved  in 
making schools more inclusive. The number of Cantons applying the Index for Inclusion has 
further  increased.  Only  limited  efforts  have  been  made  to  reduce  the  number  of  divided 
schools (‘2 schools under 1 roof’). In some Cantons of the Federation, children continue to be 
separated along ethnic lines within schools, while mono-ethnic schools continue to be present 
throughout  the  country.  De  facto  ethnic-based  separation  and  discrimination  in  some  public 
schools in the Federation remain a serious concern. Following a complaint by civil society, a 
judgement by the Mostar Court against school segregation and the issue of ‘2 schools under 1 
roof’ was raised and this ruling was appealed.13  

Little progress was made in improving conditions for the socially vulnerable and/or people 
with disabilities. The Council of Disabled Persons began its work and set up mechanisms for 
implementing the Convention on the Rights of Persons with Disabilities. In Republika Srpska, 
a  Law  on  Social  Protection  entered  into  force.  In  the  Federation,  a  Law  on  Payment  of 
outstanding  benefits  was  adopted.  However,  the  implementation  of  the  entities  strategies 

13 

The Mostar Court judgement ruled in May that two schools in Herzegovina-Neretva Canton breached 
the  Anti-discrimination  Law  by  dividing  children  based  on  their  ethnicity.  The  ruling  obliges  the 
defendants to take specific measures and actions to end discrimination by 1 September 2012. 

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remained weak. Entitlement to rights and benefits for disabled persons is not based on needs 
but  on  status.  As  a  result,  certain  categories  of  persons  with  disabilities  do  not  receive 
adequate  financial  benefits.  No  significant  steps  have  been  taken  to  harmonise  the  social 
protection systems of the Entities and Cantons.  

With regard to anti-discrimination policies, an anti-discrimination law is in place but it does 
not include age and disability as categories for discrimination and allows for a broad range of 
exceptions. Only limited steps have been taken to ensure its effective implementation. This is 
partly due to the lack of resources of the Ombudsman of Bosnia and Herzegovina, which has 
a central role in implementing the law. Public awareness of the legal remedies provided by the 
law remains  weak  and the number  of discrimination cases brought by citizens remains low. 
There is still no State-level database of discrimination cases.  

Discrimination  against  lesbian,  gay,  bisexual  and  transgender  (LGBT)  persons  remains 
widespread. LGBT activists continue to be subjected to threats and harassment. Hate speech 
and intolerance towards LGBT persons by media and politicians remain an issue of concern.  

With regard to labour and trade unions rights, little progress was made. The fragmentation 
of  the  legal  framework  for  social  benefits  and  pension  rights  remains  to  be  addressed.  No 
significant  steps  have  been  taken  to  establish  a  State-level  Economic  and  Social  Council. 
There are no criteria or legal framework for the recognition of social partners at State level. 

As regards property rights, the vast majority of cases of property repossession requests have 
been resolved. The work of the Commission for Real Property Claims of Displaced Persons 
and Refugees (CRPC) on the remaining requests has not resumed since its mandate expired in 
2009.  As  a  result  there  are  still  over  110  unresolved  cases  and  approximately  300  cases 
pending before the Court of Bosnia and Herzegovina in which the CRPC is a respondent party 
in administrative dispute procedures. There is still no reliable database on outstanding claims 
and property registers.  

Overall, economic and social rights are broadly respected. Some progress has been made on 
combating  violence  against  women  and  in  the  area  of  early  childhood  development  albeit 
unevenly.  Little  progress  was  achieved  on  making  schools  more  inclusive.  Ethnically  based 
and divided education systems remain an obstacle to achieving inclusiveness in education and 
to  sustainable  returns.  The  implementation  of  the  anti-discrimination  law  remains  to  be 
stepped  up.  Discrimination  against  LGBT  persons  remains  widespread.  The  existing 
discrimination  in  the  social  protection  system  for  persons  with  disabilities  is  an  issue  to  be 
addressed. Labour rights and social dialogue require further strengthening. 

Respect for and protection of minorities, cultural rights 
The legal framework for the protection of minorities14 is largely in place, but implementation 
remains  uneven.  The  National  Minority  Councils’  influence  over  policy-making  remained 
limited,  partly  due  to  the  lack  of  political  and  financial  support.  The  appointment  of  the 
members  of  the  State-level  National  Minority  Council  is  still  pending.  Some  progress  was 
achieved  in  the  Federation  with  the  adoption  of  the  Law  on  National  Minorities  and 
appointment  of  Minority  Council  members  in  one  Canton  with  large  minority  populations. 
The  cultural  rights  of  national  minorities,  including  participation  in  public  life,  need  to  be 
strengthened.  

As  the  Constitution  has  not  been  amended  to  comply  with  the  ECtHR  ruling,  minorities 
continue  to  be  excluded  from  representation  in  the  State-level  House  of  Peoples  and  the 

14 

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

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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  needs  to  be  strengthened.  Bosnia  and  Herzegovina  has  not  yet 
appointed  representatives  to  the  Council  of  Europe  Advisory  Committee  under  the 
Framework Convention for Protection of National Minorities.  

Limited progress was made as regards the Roma minority, who still live in very vulnerable 
conditions. Legislation on registry books harmonising civil registration in the whole country 
was adopted by both Entities. Bosnia and Herzegovina is participating in the Roma Decade of 
Inclusion. Four action plans under the Roma Strategy are in place. While some progress was 
made with regard to housing, only limited steps have been taken on health, employment and 
education. The process of revision of the actions plans on housing, employment and health to 
better  reflect  the  needs  of  the  Roma  population,  in  line  with  the  recommendations  of  the 
Roma  Inclusion  Seminar  of  July  2011,  has  been  launched.  Implementation,  in  particular 
proper budget allocation, remains to be thoroughly assessed. 

The financial resources for the implementation of the action  plans need to be  increased and 
levels  strengthened.  Participation  by  Roma 
coordination  among  authorities  at  all 
representatives in the decision-making process remains very low. Very little progress has been 
made on improving the situation of Roma women and children who continue to suffer from 
discrimination and domestic violence. A large number of Roma children are not registered at 
birth  and  therefore  cannot  attend  school  and  have  no  health  insurance.  Organised  child 
begging remains an issue of concern. A number of Roma remain at risk of statelessness. 

As  regards  refugees  and  internally  displaced  persons,  at  the  end  of  2011  there  were 
approximately  113,000  internally  displaced  persons  in  Bosnia  and  Herzegovina,  including 
approximately 8,000 residing in collective centres, and 7,000 refugees. Some steps were taken 
to  implement  the  revised  Strategy  for  the  Implementation  of  Annex  7  to  the  Dayton/Paris 
Peace  Agreement,  primarily  as  regards  housing  and  the  future  closure  of  a  number  of 
collective centres. Little effort has been made to address access to other rights such as social 
protection, education and employment. Discrimination with regard to access to employment, 
healthcare  and  pension  rights  continued.  Transparent  procedures  for  allocating  funds  to 
support return based on need have yet to be established. The country still lacks a coordinated 
policy  mechanism  to  address  legislative  gaps  hampering  sustainable  return  and  local 
integration. 

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 
September  2012,  seven  persons  were  killed  in  landmine  accidents.  The  Law  on  anti-mines 
actions has yet to be adopted. In order to meet the goal of clearing the country of mines by 
2019, fundraising responsibilities, administrative and management capacity and coordination 
of demining measures remain issues to be addressed.  

Overall,  respect  for  and  protection  of  minorities  are  broadly  ensured.  Some  progress,  albeit 
uneven,  was  made  on  implementing  the  Roma  action  plans.  The  Roma  continue  to  be  the 
most  vulnerable  minority  in  Bosnia  and  Herzegovina.  As  regards  refugees  and  internally 
displaced  persons,  some  progress  was  made  on  implementing  the  revised  strategy  for  the 
implementation  of  Annex  7  to  the  Dayton/Paris  Peace  Agreement,  primarily  as  regards 
housing  and  collective  centres.  Difficulties  with  access  to  pension  rights,  health  care  and 
social protection for returnees and internally displaced persons remain a significant obstacle 
for sustainable return and local integration.  

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2.3. 

Regional issues and international obligations 

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  not  yet  appointed  the  chair  of  its 
delegation to the CoE Parliamentary Assembly. Bosnia and Herzegovina has yet to appoint its 
representatives  to  the  CoE  advisory  bodies.  Implementation  of  the  requirements  stemming 
from the CoE Conventions remains insufficient. 

Implementation  of  the  Dayton/Paris  Peace  Agreement  continued.  In  the  framework  of  the 
Special  Parallel  Relations  Agreement  between  the  Republika  Srpska  and  Serbia,  a  joint 
session  took  place  in  Belgrade  in  December,  leading  to  the  signing  of  four  agreements  on 
internal affairs, IT, the environment and agriculture. 

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
is generally satisfactory in most areas. The re-arrest in January 2012 of Radovan Stankovic, 
who was tried and sentenced in Bosnia and Herzegovina under ICTY Rule 11bis15, represents 
a significant step forward. Courts and Prosecutors offices across the country have continued 
to  process  war  crimes  cases,  but  are  still  behind  the  schedule  set  out  in  the  war  crimes 
strategy.  Good  progress  has  been  achieved  with  the  increased  number  of  war  crimes  cases 
transferred  from  the  State  level  to  the  Entities  and  the  Brcko  District.  The  provision  of 
adequate resources is needed to secure timely and effective completion of the cases.  

Cooperation between the Courts and the Prosecutors’ offices from Bosnia and Herzegovina, 
Croatia and Serbia is ongoing. Extradition agreements with Montenegro, the former Yugoslav 
Republic  of  Macedonia,  Croatia  and  Serbia  have  been  initialled  in  July.  The  scope  of  these 
bilateral agreements does not include war crimes cases. The Protocol on sharing information 
and evidence in war crimes cases between the Prosecutors’ offices of Bosnia and Herzegovina 
and Serbia has yet to be signed. This would represent a significant step forward in terms of 
regional cooperation and the fight against impunity. 

Bosnia and Herzegovina still maintains a 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.  

Significant  progress  has  been  made  as  regards  the  Sarajevo  Declaration  Process,  which 
brings together Bosnia and Herzegovina, Croatia, Montenegro and Serbia and aims at finding 
sustainable solutions for the refugees who were displaced as a result of the armed conflicts in 
ex-Yugoslavia  during  the  1990s.  The  four  countries  signed  a  ministerial  declaration  in 
November 2011 in Belgrade, renewing their political commitment to bringing this chapter to a 
close. They agreed on a Regional Housing Programme assisting some 27,000 households or 
74,000  individuals.  The  programme  was  presented  for  international  donor  support  at  the 
Sarajevo April 2012 donors’ conference, which resulted in some € 265 million being pledged. 
Programme implementation is at an early stage. Good cooperation needs to continue between 
the  four  countries  on  all  outstanding  issues  in  the  process,  including  data  exchange  and 
statistics, civil documentation and pension rights.  

The unresolved fate of missing persons from the conflicts in the 90s remains a humanitarian 
concern  in  the  Western  Balkans.  As  of  August  2012,  there  were  still  approximately  13,250 
people  missing  from  the  conflicts  in  the  region.  Of  these,  some  9,550  were  related  to  the 
conflict in Bosnia and Herzegovina, approximately 1,900 to the conflict in Croatia and over 

15 

Cases transferred by the ICTY for local prosecution. 

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1,800 to the conflict in Kosovo∗. In the past year approximately 1,100 remains were identified 
at regional level. The State Prosecutor’s Office took over responsibility from local prosecutors 
for conducting exhumations of mass graves in January 2011, but it has not been provided with 
the  necessary  resources  to  perform  this  additional  task.  Full  implementation  of  the  Law  on 
Missing Persons needs to be ensured, especially as regards families’ access to economic and 
social benefits. The verification of the data in the database of the Central Records on Missing 
Persons  is  ongoing.  The  State-level  Missing  Persons  Institute  (MPI)  was  provided  with 
adequate  funds  but  political  pressure  and  attempts  to  undermine  the  MPI’s  work  have 
continued.  The  existence  of  unidentified  grave  sites  continues  to  pose  a  challenge  for  the 
identification  of  missing  persons  in  the  country.  Renewed  political  support  for  the  issue  of 
missing persons is needed. 

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 has 
continued  its  active  involvement  in  regional  initiatives,  including  the  South  East  European 
Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council  (RCC),  the  Central 
European Free Trade Agreement (CEFTA), the Energy Community Treaty and the European 
Common Aviation Area Agreement. Bosnia and Herzegovina took over the Presidency of the 
Migration,  Asylum  and  Refugees  Regional  Initiative  (MARRI)  in  April  2012.  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.  In  February,  the 
second  trilateral  meeting  between  the  Presidents  of  Bosnia  and  Herzegovina,  Croatia  and 
Serbia took place in Jahorina and focused on cooperation in the fight against organised crime 
and cross-border cooperation projects in infrastructure, the environment and sport events.  

Relations with Albania remained good. Bosnia and Herzegovina ratified the Memorandum on 
settling Albania’s debt related to goods exchange with the former Yugoslavia.  

Relations  with  Croatia  have  intensified.  Bosnia  and  Herzegovina  has  ratified  a  dual 
citizenship  agreement  with  Croatia  in  October.  A  number  of  meetings  have  taken  place  to 
address  the  implications  for  bilateral  relations  of  Croatia’s  accession  to  the  EU.  In  this 
context,  discussions  have  continued  with  regard  to  the  outstanding  issues  on  border 
management, with limited progress. The agreement on free transit through the port of Ploce, 
in  Croatia,  and  the  Neum  corridor,  in  Bosnia  and  Herzegovina,  as  well  as  the  local  border 
traffic  agreement  should  be  aligned  with  the  EU  acquis.  Limited  progress  was  achieved  in 
resolving outstanding issues, including property issues and border demarcation.  

Relations  with  the  former  Yugoslav  Republic  of  Macedonia  continued  to  be  good.  Several 
agreements on judicial cooperation and on cooperation in the areas of health and of education 
were signed.  

Relations with Montenegro remained good. Agreements were signed and/or ratified in various 
fields  of  cooperation,  including  international  transport  mutual  protection  of  classified 
information, legal aid and enforcement of court decisions. A dual citizenship agreement was 
concluded in June. Border demarcation remains pending.  

Relations  with  Serbia  remained  good.  Agreements  on  veterinary  cooperation,  police 
cooperation, tourism, employment, security and communications were ratified. The Minister 
of Foreign Affairs of Bosnia and Herzegovina visited Belgrade in March 2012. The Speaker 

∗ 

This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the 
ICJ Opinion on the Kosovo declaration of independence. 

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of the Serbian Parliament paid a visit to Bosnia and Herzegovina in December and President 
Tadic  visited  Republika  Srpska  on  several  occasions.  In  September,  Prime  Minister  Dacic 
paid an official visit to Bosnia and Herzegovina. Border demarcation remains an open issue.  

There  are  no  official  relations  with  Kosovo,  as  Bosnia  and  Herzegovina  has  not  recognised 
Kosovo as an independent state. Steps have been taken by the Council of Ministers to set up 
procedures for citizens of Kosovo to obtain visas comparable to those issued by EU Member 
States  which  do  not  recognise  Kosovo.  The  Ministry  of  Foreign  Affairs  of  Bosnia  and 
Herzegovina  is  now  authorised  to  issue  visas  to  the  citizens  from  Kosovo  and  assess 
individual visa requests. 

Relations with Turkey intensified. A readmission agreement was signed. The Protocol on the 
origin  of  goods  of  the  bilateral  Free  Trade  Agreement  entered  into  force.  A  number  of 
Presidential  and  ministerial-level  visits  have  taken  place.  The  Collegium  of  Bosnia  and 
Herzegovina’s House of Representatives has met with the President of the Turkish parliament 
and agreed to intensify economic cooperation and ratify agreements on the removal of double 
taxation for Turkish investment in the country.  

Overall,  Bosnia  and  Herzegovina’s  cooperation  with  the  ICTY  has  continued  to  be  largely 
satisfactory  and  a  number  of  important  steps  have  been  taken  to  process  war  crimes. 
Significant progress was made with regard to the Sarajevo Process on refugees and internally 
displaced persons. Efforts to find the missing persons from the 1992-1995 conflict continued. 
The country has continued to participate actively in regional cooperation and to maintain good 
neighbourly  relations.  The  remaining  border  and  property  issues  need  to  be  addressed  and 
legal obstacles to extradition with neighbouring countries removed. 

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 

The  long-lasting  political  stalemate  following  the  October  2010  general  election  had  a 
negative  impact  on  the  country’s  economic  and  fiscal  policy.  The  delays  in  adoption  of  the 
2011 and 2012 State-level budgets and of the Global Frameworks for Fiscal Policies for the 
periods 2012-2014 and 2013-2015 increased the uncertainty over the short- and medium-term 
fiscal path. Despite the steps taken by the new central government as of February 2012, the 
consensus  between  the  authorities  at  different  government  levels  on  the  economic  policy 
essentials has weakened. The Stand-By Arrangement (SBA) negotiated with the International 
Monetary Fund (IMF) in 2009 has, de facto, been non-functional since October 2010, when 
the last programme review was completed. The country was able to withdraw only about 1/3 
of the funds before the SBA expiration. In September 2012, the IMF Board approved a new 
two-year  SBA  aimed  at  supporting  the  country’s  efforts  to  counter  the  effects  of  the 
worsening  external  environment  and  tackle  external  and  domestic  vulnerabilities.  The 
budgetary  support  planned  by  the  World  Bank  has  been  delayed  mainly  due  to  the  lack  of 
tangible  outcomes  of  legislative  reforms  in  the  area  of  cash  transfers.  In  March  2012  the 
authorities submitted – after a significant delay – their sixth Economic and Fiscal Programme, 
covering the period 2012-2014. In the absence of a medium-term fiscal framework at country 

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level,  the  programme  remains  fragmented  and  does  not  present  a  coherent  formulation  of 
economic and fiscal policies. Overall, the consensus on economic and fiscal policy essentials 
has weakened and hampered progress in reforms at country level.  

Macroeconomic stability 

In  2011,  the  economic  recovery  continued  with  real  GDP  growth  accelerating  slightly  to 
1.3%,  as  compared  to  0.7%  a  year  earlier.  Domestic  demand  revived,  supported  by  a 
relatively  stable  inflow  of  remittances  and  slightly  accelerating  credit  growth.  Both  private 
consumption and private-sector investment registered positive growth rates after the decline in 
2009-2010.  After  being  the  main  contributor  to  the  expansion  of  the  economy  in  2010, 
external  demand  weakened  in  the  second  half  of  2011  and  export  growth  moderated 
significantly.  At  the  same  time,  import  growth  accelerated  –  spurred  by  the  recovering 
domestic  demand  –,  thus  resulting  in  a  negative  contribution  of  net  exports  to  growth. 
Industrial  production  rose  by  5.6%  in  2011,  up  from  1.6%  in  the  previous  year,  driven  by 
export-oriented  industries.  However,  the  indicators  available  for  2012  suggest  that  the 
economic  recovery  stalled,  negatively  affected  by  the  worsened  external  environment. 
Industrial  production  fell  by  6.5%  year  on  year  in  the  first  seven  months  of  the  year,  while 
exports  of  goods  dropped  by  4.3%.  Per  capita  income,  measured  in  purchasing  power 
standards  (PPS),  decreased  to  29%  of  the  EU  average  in  2011  from  30%  in  2010.  Overall, 
economic  recovery  gained  some  momentum  in  2011  but  this  positive  trend  was  reversed  in 
early 2012.  

After  a  crisis-led  adjustment  in  2009-2010,  the  current  account  deficit  soared  from  5.7%  of 
GDP in 2010 to 8.8% in 2011. This deterioration was mainly driven by the expansion of the 
trade deficit, surging by 12.3% year on year to 27.9% of GDP. Export growth almost halved 
to 15.6%, while the recovery of domestic demand triggered an acceleration of the growth of 
imports to 14%. Surpluses in the services and income accounts decreased by 4.1% and 22%, 
respectively, thus also contributing to the higher current account deficit. At the same time, the 
net current transfers – covering almost half of the trade deficit – grew only slightly by 2.5%, 
thus  only  partially  offsetting  the  negative  developments  in  the  goods,  services  and  income 
balances.  In  the  first  quarter  of  2012,  the  current  account  deficit  widened  further  by  64.6% 
year  on  year  due  to  faster  expansion  of  the  trade  gap.  Exports  fell  by  9.6%  year  on  year, 
negatively affected by the economic downturn in the EU, while the imports still grew, even 
though  at  a  significantly  reduced  rate.  The  current  account  deficit  was  financed  mainly  by 
external  borrowing  and,  to  a  lesser  extent,  by  foreign  direct  investment  (FDI).  The  stock  of 
official foreign exchange reserves decreased by 0.5% in 2011 and fell further by 4.1% year on 
year in the first seven months of 2012, though still covering around five months of imports. 
Bosnia and Herzegovinaʼs external public debt increased by 5.9% to 26.1% of GDP in 2011, 
while  external  private  debt  reached  33.1%  of  GDP.  In  the  first  half  of  2012,  the  external 
public debt rose further by 5.1% year on year. Public international creditors account for 90% 
of the countryʼs external public debt. The largest creditor remains the World Bank group. A 
large part of the debt is contracted on concessional terms with the average interest rate of all 
debt  being  at  only  1.6%.  Overall,  external  imbalances  have  widened  again  after  the  sharp 
crisis-led  contraction  in  2009-2010,  thus  indicating  that  the  adjustment  was  just  temporary 
and not structural.  

Labour market conditions remained weak. The average unemployment rate reached 27.6% in 
2011, as compared with 27.2% a year ago. Employment fell by 1.6% in 2011 and went further 
down  in  the  first  six  months  of  2012.  The  highest  decline  in  employment  was  registered  in 
construction,  agriculture  and  manufacturing,  whereas  some  employment  growth  was 
witnessed  in  real  estate,  mining  and  quarrying  and  financial  intermediation.  The  number  of 
employees in the public administration continued to rise throughout 2011 and the first half of 

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2012,  thus  further  increasing  the  size  of  the  already  large  public  sector.  The  Labour  Force 
Survey  (LFS),  conducted  annually  in  April/May  following  the  International  Labour 
Organisation  (ILO)  methodology,  showed  an  increase  in  the  unemployment  rate  to  28%  in 
2012  from  27.6%  a  year  earlier.  Unemployment  was  particularly  high  among  the  young 
population (63.1% for people aged between 15 and 24, according to the LFS). The officially 
registered  unemployment  rate  climbed  up  to  43.8%  in  June  2012,  compared  with  43.1%  a 
year  before.  The  very  high  unemployment  rate  and  the  sizeable  difference  between  the 
registered  and  survey-based  labour  figures  point  to  the  existence  of  a  fairly  large  informal 
labour  market  and  significant  structural  rigidities,  such  as  the  high  rates  of  social  security 
contributions  and  poorly  targeted  social  transfers.  Average  monthly  nominal  gross  wages 
increased  by  4.4%  in  2011,  but  wage  growth  has  been  moderating  since  the  beginning  of 
2012. Adjusted for inflation, the average gross wage rose marginally, by 0.7%, in 2011 before 
the  trend  turned  negative,  at  -1.6%,  in  June  2012.  Overall,  labour  market  conditions  have 
remained weak. Unemployment is very high and structural rigidities continue to hamper job 
creation.  

Average  annual  inflation  reached  3.7%  in  2011,  compared  to  2.1%  in  2010.  The  highest 
increases  were  registered  in  transport  and  food  prices,  reflecting  international  price 
developments. The rising overall price level in 2011 was also driven by an increase in excise 
duties  on  tobacco  and  alcohol.  Inflation  moderated  in  the  first  seven  months  of  2012, 
dropping to 1.4% in July, pushing the 12-month moving average inflation rate down to 2.8%. 
The growth of food and transport prices slowed down, which were the main factors behind the 
lower inflation. 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 have remained unchanged since February 
2011, when the minimum reserve requirement for short-term deposits was lowered from 14% 
to  10%.  The  growth  of  money  supply  moderated  in  the  course  of  2012  and  monetary 
aggregate M2 increased by 4.3% year on year in July, as compared with a 5.8% rise in 2011. 
Overall,  the  currency  board  has  continued  to  function  well  and  monetary  and  financial 
stability have been preserved while inflation has moderated. 

The consolidated budget deficit reached 1.3% of GDP in 2011, compared with 2.5% in 2010. 
Fiscal consolidation was achieved partly as a result of rising revenue, fuelled by the economic 
recovery and increases in tax, contribution and excise rates. The share of general government 
in  GDP  remained  high,  with  government  expenditure  at  approximately  45.8%  of  GDP  and 
revenue  at  about  44.6%  in  2011.  Tax  revenue  increased  by  7%  due  to  higher  economic 
activity, an increase in the personal income tax as of February 2011 in Republika Srpska and a 
rise  in  excise  duties  on  tobacco  which  counteracted  the  continuous  reduction  of  duties  and 
tariffs  as  set  out  in  the  Interim  Agreement  on  trade  with  the  EU.  Collected  contributions  – 
accounting for over 1/3 of the overall revenues – rose by 5.9%, partly because of the increase 
in contribution rates in Republika Srpska as of 2011. On  the expenditure  side,  purchases of 
goods  and  services  plummeted  by  19.5%,  thus  creating  some  fiscal  space.  However, 
expenditures  on  social  benefits  and  wages  increased  by  14.9%  and  5.3%,  respectively,  thus 
further increasing their already high shares in overall expenditure. The higher wage bill was 
partly  caused  by  the  income  tax  changes  in  Republika  Srpska.  Capital  expenses  surged  by 
21.6%, although from a very low base following the contractions in recent years. In the first 
half of 2012, the repercussions of the worsened external environment were increasingly felt in 
public finances. Tax revenue fell by 0.8% year on year reflecting the downturn in economic 
activity,  while  most  expenditure  categories  increased  in  year  on  year  comparison.  Overall, 
some fiscal consolidation has taken place, but the quality of public finances remains low. 

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The transparency, sustainability and reliability of public finances in Bosnia and Herzegovina 
were seriously undermined by the long delay in adoption of the State-level budget and of the 
Global Frameworks for Fiscal Policies for 2012-2014 and 2013-2015. The State-level budget 
for 2011 was not adopted until February 2012, while the one for 2012 was approved in May. 
Temporary financing arrangements were in place throughout 2011 and the first two quarters 
of 2012. The Parliament of Republika Srpska endorsed the Entity’s 2012 budget in December 
2011, planning a 4% rise in total spending (compared with the revised 2011 budget), while the 
2012  budget  of  the  Federation  –  projecting  11%  growth  in  nominal  expenditure  –  was 
approved  in  January  2012.  Both  Entity  budgets  were  adopted  in  the  absence  of  a  medium-
term  fiscal  framework,  in  violation  of  the  country’s  legal  framework16  for  the  second 
consecutive year. In March 2012, the Fiscal Council agreed an expenditure ceiling and a fixed 
revenue  allocation  from  the  Single  Account  for  the  State-level  institutions  for  the  period 
2012-2014, thus creating the necessary preconditions for drafting a comprehensive medium-
term  fiscal  strategy.  In  June  2012,  the  authorities  agreed  on  the  fiscal  framework  for  the 
period 2013-2015, thus allowing for the timely launch of the 2013 budget preparation process. 
In  September  2012,  both  Entity  budgets  have  been  revised  slightly  in  accordance  with  the 
newly reached agreement with the IMF. Total planned spending of Republika Srpska has been 
corrected  downwards  by  0.8%,  while  the  Federation  has  reduced  its  budget  expenditure 
envelope  by  about  2%,  when  adjusted  for  financing  items  and  reclassification  effects.  The 
authorities  have  reached  an  agreement  on  the  settlement  of  disputed  indirect  tax  revenue 
amounts through end-2011. However, an agreement on a permanent formula for allocation of 
indirect  tax  revenue  to  the  State,  the  Entities  and  the  Brčko  District  is  still  pending.  In 
Republika  Srpska,  the  new  Pension  Law,  adopted  in  December  2011,  should  improve  the 
long-term  sustainability  of  the  Entityʼs  public  finances,  while  in  the  Federation  a  special 
working group has been established to tackle this issue and to define a reform strategy by the 
end  of  2012.  Overall,  the  sustainability  and  credibility  of  fiscal  policy  in  Bosnia  and 
Herzegovina suffered from the delayed adoption of the State-level budget and of a medium-
term fiscal strategy. 

General government debt, both domestic and foreign, increased by 6% and stood at 39.5% of 
GDP  at  the  end  of  2011.  External  debt  accounted  for  26.1%  of  GDP  and  domestic  debt  for 
13.3%. Domestic public debt is managed and served by the Entities. Both Republika Srpska 
and the Federation started issuing short-term treasury bills and long-term government bonds 
in  2011  to  finance  their  cash-based  budget  deficits.  For  the  time  being,  the  offers  have  met 
relatively high demand and secured relatively favourable conditions. Overall, even though the 
debt-to-GDP  ratio  is  still  relatively  moderate,  its  upward  trend  needs  to  be  monitored 
carefully. 

The quality  of the  policy mix  has  worsened, thus challenging macroeconomic  stability. The 
currency board arrangement continues to enjoy a high level of confidence and credibility, but 
the  weakened  budget  planning  and  lack  of  fiscal  coordination  severely  threaten  the 
transparency, reliability and sustainability of public finances and are a serious impediment to 
short-  and  medium-term  economic  planning.  Overall,  financial  and  monetary  stability  have 
been preserved, but the worsening quality of budgetary processes is hampering the conduct of 
macroeconomic policies. 

16 

According  to  the  Law  on  Fiscal  Council  in  Bosnia  and  Herzegovina,  the  Entities  should  implement 
provisional budgets until a Global Framework on Fiscal Policies is finally agreed and adopted by the 
Fiscal Council. 

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Interplay of market forces 

The private sector’s share in GDP is estimated to have remained stable at around 60% of GDP 
in  2011.  There  has  been  no  further  progress  with  the  privatisation  agenda.  In  Republika 
Srpska,  some  69%  of  the  initial  stock  of  State-owned  capital  intended  for  privatisation  had 
been sold by September 2012, unchanged from a year earlier. In the Federation, none of the 
ten companies included in the 2012 privatisation plan has been sold. About 58% of the initial 
stock of State-owned capital intended for privatisation remains State-owned. Most prices are 
liberalised, even though a number of regulated prices remain (e.g. for utilities). Overall, the 
planned privatisation process has not advanced for the fourth consecutive year. 

Market entry and exit 

In 2011, the time needed to start a business was reduced from 55 to 40 days, on average. The 
time  required  to  obtain  a  construction  permit  was  shortened  significantly  from  255  to  181 
days.  However,  companies  are  still  required  to  register  in  both  Entities  before  they  can  do 
business  in  the  whole  country.  In  Republika  Srpska,  the  new  Law  on  Crafts  and 
Entrepreneurship  simplified  business  registration  procedures  for  entrepreneurs.  The  Law  on 
Courts  was  also  amended  in  order  explicitly  to  give  jurisdiction  over  company  registration, 
bankruptcy  proceedings  and  commercial  disputes  to  five  regional  commercial  courts.  In  the 
Federation, the second stage of the ʻlegislative guillotineʼ project to reduce the administrative 
burden  has  been  completed.  A  total  of  27  legal  acts  were  adopted  in  various  ministries  to 
streamline 352 business-related administrative procedures by December 2011. In the first half 
of 2012, alongside the worsened external environment and decreased economic activity, the 
number of newly registered companies dropped by around 12% year on year. Overall, some 
limited  improvements  have  been  made  to  the  business  environment  but  significant 
administrative barriers remain for private-sector development. 

The legal system 

No  substantial  improvements  can  be  reported  in  the  complex  legal  system  in  Bosnia  and 
Herzegovina.  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  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. Enforcement of commercial contracts remains a lengthy process, which 
involves  37  procedures  and  takes  an  average  of  595  days.  Overall,  weak  rule  of  law, 
corruption and unreliable contract enforcement continue to impair the business environment.  

Financial sector development  

The  banking  sector  continued  to  dominate  the  financial  system  of  Bosnia  and  Herzegovina, 
with  an  83%  share  in  the  total  assets  in  2011.  The  share  of  claims  on  the  private  sector  in 
relation to GDP decreased marginally year on year to around 55% in July 2012. Twenty-nine 
banks are operating in the country, out of which twenty-eight are privately owned and one is 
majority State-owned. Two banks are under provisional administration. Twenty-one banks are 
under  foreign  ownership,  accounting  for  slightly  below  90%  of  the  total  banking  system 
assets in 2011. The five largest banks accounted for 56.3% of the total assets of the banking 
sector.  Banking  sector  assets  rose  marginally,  by  0.1%,  in  2012  (July  compared  with 
December 2011), accounting for approximately 86% of GDP. 

The financial position of domestic banks has improved. After an aggregate net loss of some 
€ 63.6 million in 2010, the banking sector finished 2011 with an aggregate net profit of € 72.6 
million. After the slight improvement at the end of 2011, the quality of the loan portfolio has 
been deteriorating again since the beginning of 2012. The share of non-performing loans fell 

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slightly  to  11.9%  in  the  fourth  quarter  of  2011,  but  rose  to  12.6%  in  the  second  quarter  of 
2012. The capital adequacy ratio increased from 15.3% in the third quarter of 2011 to 16.8% 
in  the  second  quarter  of  2012,  comfortably  above  the  legal  minimum  of  12%.  Banking 
profitability improved slightly in the first half of 2012. The return on average equity increased 
from 3.4% in the third quarter of 2011 to 4.2%, while the return on average assets grew from 
0.4%  to  0.5%.  However,  liquidity  indicators  deteriorated  during  the  same  period  with  the 
ratios of liquid to total assets falling from 27.2% to 24.8% and of liquid assets to short-term 
financial  liabilities  from  47.5%  to  43%.  Twenty-six  banks  are  participating  in  the  deposit 
guarantee  scheme.  Its  coverage  level  remained  unchanged  at  around  € 18,000.  Overall, 
despite the relatively high non-performing loan ratio, financial stability was safeguarded. 

Annual  credit  growth  accelerated  from  3.1%  in  2010  to  5.3%  at  the  end  of  2011  and 
moderated slightly to 4.3% in July 2012, with total loans accounting for about 60% of GDP. 
However, loans to private enterprises have been stagnating since the beginning of 2012, while 
those  to  the  government  surged  rapidly  by  over  40%  year  on  year.  Loans  to  households 
increased  by  5%  year  on  year  up  to  the  end  of  July.  The  recovery  of  deposits  continued 
though  at  lower  rates.  Total  banking  deposits  reached  49.8%  of  GDP  in  July.  Households 
remained the main contributors to this development, increasing their savings by 9.5%, while 
the  corporate  sector  raised  its  deposits  only  slightly  by  2.7%.  As  a  consequence  of  these 
developments, the loans-to-deposits ratio climbed from 118.2% in October 2011 to 121.3% in 
July  2012.  The  spread  between  the  average  loan  and  deposit  interest  rates  of  commercial 
banks decreased further by 17 base points from 7.43 percentage points in September 2011 to 
7.26 percentage points in early 2012, mainly due to lower lending rates. This level points to 
still  high  intermediation  costs.  Overall,  the  efficiency  of  financial  intermediation  has 
continued  to  increase  slightly  and  credit  activities  have  been  gaining  strength  but  there  are 
signs that the government is crowding out private investments. 

After a slight recovery in early 2011, stock market indices have been on a downward trend. 
The main index of the Sarajevo Stock Exchange lost 7.9% in the first eight months of 2012, 
while that of the Banja Luka Stock Exchange fell by 6.3%. The cumulative turnover shrank 
by  23.5%  year  on  year  in  the  period  from  January  to  August  2012.  The  combined  market 
capitalisation declined to about 30% of GDP from around 44% in 2011. The insurance sector 
remained small, accounting for approximately 1.9% of GDP in 2011. The annual growth of 
premiums  accelerated  slightly  to  3.4%,  from  a  2.9%  annual  rise  in  2010.  The  market  was 
dominated  by  the  non-life  insurance  segment,  which  accounted  for  83.6%  of  the  total. 
Twenty-five companies were operating on the market in 2011, unchanged from the previous 
year. Overall, financial intermediation by the non-banking sector remained shallow. 

3.2. 

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

Existence of a functioning market economy 

External  imbalances  have  increased  and  the  quality  of  public  finances  remains  low,  even 
though some fiscal consolidation has taken place. The slow pace of economic restructuring, 
especially  in  the  Federation,  combined  with  the  prevailing  obstacles  to  private-sector 
development and the structure 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 any strengthening of domestic sources of growth. 
Unemployment remains very high. Progress towards creating a single economic space within 
the  country  –  which  is  a  key  European  Partnership  priority  –  has  been  limited.  Overall,  the 
functioning  of  market  mechanisms  remains  hampered  by  the  large  government  sector, 
characterised by low spending efficiency and sizeable interference in the economy.  

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Human and physical capital  

Education  and  training  policy  falls  within  the  responsibilities  of  the  Entities  and  Cantons. 
Information and statistics on human capital is scattered and scarce, thus preventing effective 
policy-making. Progress in the field of education has been limited. A new coordination format 
for  education  reform  has  been  agreed.  However,  the  mismatch  between  the  qualifications 
needed  on  the  labour  market  and  the  profile  of  graduates  coming  out  of  the  education  and 
vocational training systems adds to other structural weaknesses, such as high social security 
contributions  and  poorly  targeted  social  transfers,  and  remains  a  concern.  Cooperation 
between  the  education  system  and  employers  is  still  weak.  Enrolment  rates  in  higher 
education  decreased  slightly  in  the  2011-2012  academic  year.  Participation  in  the  labour 
market is still very low, with an activity rate of 44% in 2012, remaining unchanged in year on 
year  comparison.  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. 

The investment-to-GDP ratio remained at a relatively low level of about 20% in 2011, broadly 
unchanged from a year ago. Net FDI flows more than doubled in 2011 – albeit from a very 
low level –, reaching 2.3% of GDP. The banking sector accounted for a significant part of the 
net  FDI  inflows,  while  some  increase  was  also  evident  in  retail  trade  and  real  estate.  A 
number of projects are underway to upgrade road and railway infrastructure. Maintenance and 
upgrading of roads continued, but progress was slow. The Federation Parliament adopted the 
spatial  plan  for  the  route  of  transport  corridor  Vc  in  the  Entity  in  December  2011.  Overall, 
infrastructure improved slightly, but still requires repairs and modernisation. 

Sector and enterprise structure 

Market liberalisation remains insufficient in many sectors as most utility providers still do not 
apply  market  prices.  Although  the  utility  market  was  opened  for  non-household  consumers, 
they have little incentive to change suppliers, as regulated tariffs are still below market prices. 
No  progress  has  been  made  on  unbundling  electricity  networks.  Progress  towards  a 
competitive  telecommunications  market  has  been  limited.  The  three  incumbent  operators 
continue to act as de facto monopolies in their geographical areas. Their combined share of 
the  fixed  telephony  market  added  up  to  85%  for  international  calls  and  98%  for  national 
callsin 2011. New licences were granted for internet services and network operators. The level 
of broadband internet access has increased further but still remains at relatively low level of 
slightly over 11%. The Railways Regulatory Body introduced a set of regulations, aiming at 
reaching  compliance  with  the  EU  directives.  Overall,  limited  progress  was  achieved  on 
liberalisation of network industries. 

There  were  no  major  shifts  in  the  sectoral  structure  of  the  economy  in  2011.  Services 
accounted for 68.4% of gross value added (up from 68% in 2010), industry and construction 
for  26.7%  (26.8%)  and  agriculture  for  8.4%  (8.6%).  The  traditionally  high  share  of  public 
administration,  education  and  health  increased  further  to  23.1%.  The  large  informal  sector 
which  is  fuelled  by  weaknesses  in  tax  and  expenditure  policies  and  in  law  enforcement, 
including  the  fight  against  corruption,  remains  an  important  challenge.  Overall,  there  have 
been no major changes in the structure of the economy. The informal sector is an important 
challenge. 

State influence on competitiveness 

No progress has been made towards reducing the state’s influence in the economy. In 2011, 
direct budget  subsidies to industry and agriculture decreased to 1.6%  of GDP from 1.9% in 
2010.  However,  in  the  first  half  of  2012,  they  increased  by  28.4%  year  on  year.  State-level 

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legislation on  State aid has  been adopted, but a State aid authority has not been established 
and  a  State  aid  inventory  has  not  been  compiled.  Overall,  State  aid  remained  high  and  the 
state continued to influence the economy through state-owned monopolies.  

Economic integration with the EU 

Bosnia  and  Herzegovina  remains  an  open  economy.  Total  trade  (the  sum  of  the  volume  of 
exports  and  imports  of  goods  and  services)  increased  further  to  93.2%  of  GDP  in  2011,  as 
compared with 84.2% in 2010. The EU continues to be the countryʼs largest trading partner, 
with  shares  of  58%  of  total  exports  and  46.6%  of  total  imports  in  the  first  eight  months  of 
2012 (goods only). While the share of exports to the EU has increased somewhat, the share of 
imports from the EU has decreased slightly. The other main trading partners were, once again, 
the countries of the CEFTA region, which account for 32.2% of exports and 25% of imports. 
In  2011,  the  real  effective  exchange  rate  based  on  the  country’s  20  largest  trading  partners 
appreciated marginally by 0.1%. 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  Stabilisation  and  Association  Agreement 
(SAA)  and  the  European  Partnership  priorities.  It  also  analyses  Bosnia  and  Herzegovina’s 
administrative  capacity.  In  each  sector,  the  Commission’s  assessment  covers  progress 
achieved  during  the  reporting  period,  and  summarises  the  country’s  overall  level  of 
preparations.  

4.1. 

Internal market 

4.1.1.  Free movement of goods  

There was some progress on free movement of goods.  

A development strategy for the quality infrastructure as a whole and a horizontal coordination 
mechanism are not yet in place. A public-private dialogue on the industrial market remains to 
be established. 

Good progress was made in the area of standardisation. The Institute for Standardisation of 
Bosnia  and  Herzegovina  (BAS)  adopted  3,395  European  standards  (ENs)  as  national 
standards, bringing the total to 14,005 ENs. The BAS performed the second annual check on 
its  quality  management  system  and  worked  actively  on  public  awareness-raising  on 
standardisation. An action plan was prepared with a view to becoming a full member of the 
European  Committee  for  Standardization  (CEN)  and  of  the  European  Committee  for 
Electrotechnical Standardization (CENELEC). 

No progress was made on conformity assessment. It is not being performed on either locally 
manufactured  or  imported  products  before  they  are  released  onto  the  market.  Appropriate 
procedures for designating conformity assessment bodies remain to be established. 

Some progress was made as regards accreditation. The Institute for Accreditation of Bosnia 
and Herzegovina (BATA) accredited a total of 51 conformity assessment bodies. The BATA 
became  an  associate  member  of  European  co-operation  for  Accreditation  (EA).  The  EA 
carried  out  a  full  evaluation  of  the  BATA  covering  testing  and  calibration  laboratories  and 
inspection  bodies.  The  conditions  for  future  international  recognition  of  tests,  calibration 
results  and  certification  remain  to  be  fulfilled  and  the  Law  on  Accreditation  remains  to  be 

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amended  to  bring  it  fully  into  line  with  the  acquis.  A  clear  policy  is  needed  on  the  role  of 
accreditation in authorising conformity assessment bodies at both State and Entity levels.  

Some progress  was made  in the case of metrology. Several by-laws, including a by-law on 
legal  units  of  measurements  were  adopted.  The  Institute  of  Metrology  of  Bosnia  and 
Herzegovina (IMBiH) signed Memoranda of Understanding with the metrology institutes of 
the Netherlands, Slovenia and Serbia. Representatives of the IMBiH participated in the work 
of  European  technical  committees  on  metrology  (EURAMET  and  WELMEC).  The  IMBiH 
participated  in  three  inter-comparisons  and  one  capability  test  and  met  the  international 
requirements  by  achieving  positive  results.  The  IMBiH  laboratory  for  mass  proved  its 
competences internationally by publishing data on calibration and measurement capabilities in 
the  International  Bureau  of  Weights  and  Measures  (BIPM)  key  comparison  database.  A 
development  strategy  for  the  metrology  system,  a  new  Law  on  Metrology  merging  the 
existing legislative framework and laying the foundation for the implementation of the acquis 
and various by-laws remain to be adopted. Cooperation and coordination between the IMBiH 
and the metrology institutes of the Entities need to be improved. 

There was some progress on market surveillance. The Market Surveillance Agency initiated, 
implemented  and  coordinated  proactive  and  reactive  market  surveillance  activities  and 
projects.  The  agency  is  implementing  the  2012  Annual  Surveillance  Plan  with  good 
cooperation from the Entity inspectorates and the Brcko District. The agency is continuing to 
raise awareness on product safety and consumer protection. 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. 

No  progress  was  made  as  regards  the  ‘New  and  Global  approach’  acquis.  To  raise  public 
awareness  on  new  technical  regulations,  the  Ministry  of  Foreign  Trade  and  Economic 
Relations (MOFTER) carried out seminars and published brochures in several key areas. Line 
ministries and institutions in charge of aligning legislation and implementing directives do not 
have  sufficient  capacity  to  perform  the  alignment  tasks.  A  formal  procedure  is  needed  for 
internal consultation and notification of new technical regulations before adopting measures 
that would have an impact on trade. 

There was no progress regarding the ‘Old Approach’ acquis. The division of responsibilities 
for alignment of legislation with it remains to be clarified. 

There was some progress in the area of consumer protection. The technical capacity of the 
relevant  State-level  and  Entity  institutions  and  their  public  information  activities  increased. 
The  MOFTER  included  consumer  counselling  in  its  activities  and  introduced  Consumer 
Protection  information  on  its  webpage.  A  new  Draft  State-level  Consumer  Protection  Law 
aligned with the acquis was not adopted. Republika Srpska adopted its Consumer Protection 
Law.  The  report  on  implementation  of  the  2011  consumer  protection  programme  was 
adopted. The 2012 annual consumer protection programme remains to be approved.  

The Office of the Ombudsman for Consumer Protection needs to be strengthened to deal with 
the increased number of cases. The efficiency and output of the Office remain unchanged. In 
2011 the Ombudsman handled 242 cases, of which 218 were resolved. The Ombudsman gave 
25  expert  opinions,  provided  680  pieces  of  legal  advice  and  answered  1,515  requests  for 
information.  The  Ombudsman  completed  an  extensive  analysis  of  the  current  State-level 
Consumer  Protection  Law  and  gave  his  opinion  on  its  implementation  and  the  degree  of 
harmonisation  with  the  acquis.  The  Ombudsman  provided  opinions  on  the  draft  Law  on 
protection of Users of Financial Services and the draft Law on Protection of Guarantors in the 
Federation. 

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There  was  good,  but  uneven,  progress  in  the  fields  of  standardisation,  accreditation, 
conformity  assessment,  metrology,  market  surveillance  and  consumer  protection.  The 
legislative framework remains to be harmonised with the horizontal acquis and aligned with 
the product-specific acquis. Strengthening the institutional capacity and creating channels for 
coordination  between  the  relevant  institutions  remain  essential.  Prioritisation  of  legal 
alignment  and  capacity-building  in  accordance  with  market  remain  to  be  done.  Major  steps 
need  to  be  taken  to  achieve  a  fully  functioning  single  economic  area.  The  State-level 
Consumer Protection Law has yet to be fully aligned with the acquis. Overall, preparations in 
these areas of the acquis are moderately advanced. 

4.1.2.  Movement of persons, services and right of establishment  

No progress can be reported on movement of persons. Bosnia and Herzegovina concluded an 
agreement with Serbia on temporary employment of citizens. Differences in labour legislation 
and social security systems between the Entities and also between Cantons in the Federation 
continue to be an obstacle for the movement of workers within the country. Alignment with 
European standards remains at a very early stage. 

No progress was made towards coordination of social security systems between the Entities 
and between the Cantons in the Federation.  

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

Little progress can be reported in the area of financial services. The Federation amended its 
own  Law  on  the  Banking  Agency  to  expand  its  regulatory/supervisory  functions.  The 
Federation  introduced  an  Ombudsman  for  Financial  Services.  The  Entities  harmonized 
legislation  on  the  Ombudsman  amongst  each  other.  Republika  Srpska  adopted  rules  of 
procedure  for  the  Ombudsman  for  financial  services  established  in  2011.  Republika  Srpska 
adopted  the  Law  on  Internal  Payment  System  and  by-laws,  as  well  as  a  set  of  decisions 
pertaining to minimum standards for financial institutions for prevention of money laundering 
and financing of terrorist activities. Both Entities are implementing regulations pertaining to 
credit and operational risk in line with Basel I. The regulation on operational risk applies the 
basic indicator approach of Basel II. Both Entities are implementing new charts of accounts 
for financial institutions. Reporting between the Entities is harmonized. The coordination of 
banking  supervision  between  the  Entities  remained  satisfactory.  Simulations  for  home-host 
cooperation between supervisors in Bosnia and Herzegovina and the EU were performed to 
strengthen  micro-  and  macro-prudential  supervision.  The  Entities’  banking  supervisory 
agencies extended temporary measures on loan repayments until the end of 2012.  

Basel  II  recommendations  on  banking  laws  and  Basel  Banking  Supervision  Committee 
standards  remain  to  be  fully  implemented  in  both  Entities,  and  legislative  processes  to  be 
synchronised.  Market  risk  regulations  were  not  adopted.  The  amendments  to  the  Federation 
Law  on  the  Banking  Agency  that  hampered  its  independence  were  revoked.  These  had 
provided  for  dismissal  of  the  Agency’s  management  and  board  if  the  Federation  parliament 
would  not  adopt  the  Agency’s  annual  report.  The  Federation  Laws  on  Banks,  Leasing 
Companies and Micro-credit Organisations were not aligned with the Law on Prevention of 
Money-Laundering. Provisions on protection of users of financial services were not included 
in  the  revised  Federation  draft  Law  on  Banks,  Leasing  Companies  and  Micro-credit 
Organisations, and remain to be adopted as separate legislation. Memoranda of Understanding 
with  supervisors  of  foreign  banks  present  in  the  country  remain  to  be  signed  due  to  the 
country’s inadequate regulations on security and confidentiality of business and banking data. 
Coordination and cooperation between the Entity Ministries of Finance and Banking Agencies 

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remain to be improved, in particular on drafting primary legislation. Further alignment with 
the acquis is required. 

Little  progress  was  made  towards  creating  a  single  economic  space  for  insurance  services. 
Both Entities adopted amendments to the implementing legislation relating to the content of 
the  audit  reports  of  insurance  undertakings.  Republika  Srpska  adopted  amendments  to  the 
implementing  legislation  relating  to  the  reserves  of  insurance  undertakings,  the  guarantee 
fund and the conditions for insurance brokerage and non-life insurance activities. Brokerage 
firms from the Federation opened two branch offices in the Republika Srpska. A protocol on 
cooperation  and  exchange  of  information  between  the  Green  Card  Bureau  in  Bosnia  and 
Herzegovina and the Bosnia and Herzegovina Insurance Agency was signed. The Republika 
Srpska Insurance Agency is running public-awareness campaigns about the obligatory third-
party motor vehicle insurance. 

The  legislation  remains  partially  harmonised  with  the  acquis.  The  Law  on  the  Insurance 
Agency  of Bosnia  and Herzegovina and the Entities’ legislation on insurance and insurance 
supervision have yet to be fully aligned with the Solvency II Directive. Entity legislation on 
obligatory third-party liability motor insurance remains to be harmonised with the acquis and 
between  Entities.  Significant  differences  between  Entities’  legislation  persist,  in  particular 
regarding  penalties  imposed  in  case  of  serious  offences.  The  regulatory  powers  of  the 
Insurance  Agency  of  Bosnia  and  Herzegovina  remain  to  be  enforced  and  its  enforcement 
powers clarified. Development of by-laws and guidelines for statistical and other reporting by 
insurance  undertakings  to  the  Entity  agencies  and  on  data  exchange  between  the  Entity 
agencies  and  the  Insurance  Agency  of  Bosnia  and  Herzegovina  is  at  an  early  stage.  The 
Federation’s  Insurance  Ombudsman’s  Office  and  State-level  capacity  to  arbitrate  in  case  of 
litigation between the Entities’ Insurance Agencies have yet to be established. Memoranda of 
Understanding  with  foreign  supervisory  authorities  remain  to  be  signed.  There  were  no 
changes  in  the  requirement  to  establish  a  branch  office  and  in  the  method  of  supervising 
insurance companies registered in one Entity which wish to operate in the other.  

The Entity Agencies for insurance supervision initiated cooperation towards harmonising the 
rules  for  establishment  and  operation  of  branch  offices.  Limitations  in  provision  of  the 
insurance services between the Entities remain. The administrative capacity of the insurance 
regulatory and supervisory institutions remains underdeveloped despite some initial efforts to 
introduce risk based assessment of insolvency and bankruptcy of insurance companies.  

There was little progress in the area of capital markets. Republika Srpska adopted the Law on 
amendments  to  the  Law  on  the  Securities  Market.  Both  Entities  adopted  implementing 
legislation to streamline activities on the securities markets and reduce administrative barriers 
and  costs.  All  three  regulators  signed  a  regional  cooperation  declaration.  Legislative 
alignment in the area of securities is still slow. The Entities’ legislative frameworks remain to 
be fully aligned with the acquis and harmonised between each other. Amendments to relevant 
legislation remain to be adopted in both Entities. The Brcko District has not yet adopted laws 
on  the  securities  market  and  takeovers  of  joint  stock  companies.  The  Federation  Law  on 
Takeovers  of  Joint  Stock  Companies  was  not  adopted.  Regulatory  authority  and  oversight 
remain fragmented. Participants in the securities market with their head office in one Entity 
can operate in the other only after obtaining a licence there. There is no adequate institutional 
capacity for coordinating capital market policies and legislation.  

No  progress  can  be  reported  in  the  field  of  postal  services.  The  Agency  for  Postal  Traffic 
issued  two  more  licences  for  private  courier  services,  increasing  the  total  to  12.  A  postal 
strategy at State and Federation level does not exist. The State-level Law on Postal Services 
remains  to  be  further  harmonised  with  the  acquis.  The  Republika  Srpska  law  is  partially 

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aligned  both  with  the  State-level  law  and  the  acquis.  The  universal  service  obligation  is  set 
above the minimum requirement laid down in the postal acquis. The situation is the same with 
the scope of the reserved area, which is broad in comparison with the postal acquis. The lack 
of  harmonisation  between  the  Entities  and  the  State-level  regarding  the  scope  of  universal 
services and reserved services raises serious transparency issues. The administrative capacity 
at  the  State-level  Ministry  of  Transport  and  Communications  regarding  postal  services 
remains  weak.  The  deadline  for  harmonising  the  tariff  policies  of  public  postal  operators 
expired, but their tariffs had still not been harmonised.  

Little  progress  was  made  on  the  right  of  establishment.  The  registration  costs  for  foreign 
nationals were mostly harmonised throughout the country, and the procedure was simplified. 
Internal  harmonisation  of  legislation  is  pending.  A  single  economic  space  allowing 
registration of foreigners to do business throughout the country has not been established and 
this continues to impede business activity. The time taken to handle requests for registration 
remains lengthy, in particular in the Federation. The reciprocity principle is not fully applied 
to natural persons acquiring ownership. The country made no progress towards aligning with 
the acquis on the recognition of EU professional qualifications. Republika Srpska introduced 
differentiation 
legislation  between  recognition  of  professional  and  academic 
qualifications. Recognition procedures are inconsistent across the country in terms of forms, 
costs and duration.  

its 

in 

Some, but uneven, progress was made in the area of company law. The Federation adopted 
by-laws  to  shorten  the  business  registration  procedure.  Republika  Srpska  amended  its 
Company Law to extend the deadlines for businesses to harmonise their economic activity in 
line with the law on classification of business activities. Republika Srpska amended its Law 
on  Courts  to  give  jurisdiction  over  company  registration,  bankruptcy  proceedings  and 
commercial disputes to five regional commercial courts. It adopted the Law on Craftsmen and 
Entrepreneurial Activities to simplify business registration procedures for entrepreneurs. The 
Entities’ Laws on Business Companies remain partially harmonised with the acquis and with 
each other.  

The legislation on corporate accounting and auditing is broadly aligned with the acquis and 
almost  fully  harmonised  between  the  Entities.  The  Federation  adopted  the  Law  on  the 
Financial  Information  Agency  to  establish  and  maintain  registers  of  company  financial 
statements and of bank accounts, along with implementing legislation on the consolidation of 
financial  statements  in  line  with  the  Seventh  Company  Law  Directive.  The  Entities  apply 
International Financial Reporting Standards (IFRS) to all companies, irrespective of their size. 
In  Republika  Srpska  IFRS  for  Small  and  Medium  Enterprises  may  be  used  by  small  and 
medium-sized companies if they provide justification in their accounting policies. Companies 
with public responsibility and those listed at the Stock Exchange, are obliged to apply the full 
IFRS. The statute of the Federation Chamber of Auditors that will undertake quality assurance 
reviews of audits was adopted and the Chamber came into operation. The rulebook on quality 
assurance was not adopted. The Assembly of the Chamber did not adopt the work plan and 
financing  plan  for  2012  and  did  not  appoint  members  to  the  quality  assurance  review 
committee.  A  full-time  quality  assurance  supervisor  remains  to  be  recruited.  In  Republika 
Srpska, the Association of Certified Auditors and Accountants continued to implement quality 
assurance reviews. The Ministry of Finance performs the independent oversight of audits.  

Further  alignment  with  the  acquis  is  needed  on  cross-border  mergers  for  Republika  Srpska 
and on take-over bids for both Entities. There is no system for sharing data between different 
company registers. The systems for quality control and independent oversight of auditors have 
yet to become fully operational. The Federation did not appoint members to the independent 
Public Oversight Board that remains to be set up in the Federation.  

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The country made little progress on movement of persons, services and right of establishment. 
Some progress was made on company law, corporate accounting and auditing. Alignment of 
financial services legislation is not completed. Enforcement and supervision mechanisms need 
substantial  strengthening.  A  legal  framework  for  providing  universal  postal  services  across 
the country remains to be established. Overall, preparations are still at a very early stage.  

4.1.3.  Free movement of capital  

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

Bosnia  and  Herzegovina  continues  to  apply  relatively  liberal  rules  on  inward  capital  flows. 
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 transfer without bureaucratic burdens.  

Regarding  foreign  investment,  coordination  throughout  the  country  for  designing  and 
implementing  legal  reforms  in  this  area  is  lacking.  Capital  markets  are  not  fully  functional. 
Creation of a single economic space would be the key to attracting more foreign investment. 
Foreign  banks  own  89.4%  of  the  banking  sector  assets.  Overall,  foreign  direct  investment 
inflows increased in 2011 and reached 2.4% of the country’s GDP albeit still much lower than 
before  the  global  crisis.  Restrictions  on  foreign  direct  investment  continue  to  apply  in  the 
media,  where  a  49%  limit  has  been  imposed  on  foreign  capital.  Privatisation  of  State 
enterprises  remains  at  a  standstill.  Work  on  improving  the  overall  business  climate  was 
inconsistent,  and  no  meaningful  progress  was  made  on  structural  reforms  to  ensure  private 
sector-led growth and job creation. 

Within  the  Central  Bank,  Bosnia  and  Herzegovina  has  a  modern  payment  system  for  giro 
clearing and real-time gross settlement operations. In 2011 the value of transactions in these 
two  categories  increased  by  13%.  Within  the  commercial  banking  system,  intra-bank 
transactions made up 65% of the total number and 55% of the value of transactions. 

There was no progress regarding free movement of capital. Further alignment with the acquis, 
ensuring  country-wide  harmonisation  and  creating  a  single  economic  space,  is  needed. 
Overall, preparations in the area of free movement of capital remain moderately advanced. 

4.1.4.  Customs and taxation  

Limited  progress  was  made  in  the  field  of  customs.  The  customs  tariff  was  updated  in  line 
with the 2012 version of the EU Combined Nomenclature. The International Convention on the 
Harmonized System for Names and Codes for Goods was ratified. Rules of origin continue to be 
used in accordance with the Interim Agreement. The fee for processing customs declarations 
was  abolished.  Electronic  prior  declaration  of  data  from  the  TIR  carnet  was  introduced. 
Implementing legislation for customs enforcement of intellectual property rights was adopted. 
The  customs  law  and  legislation  on  free  zones  remain  to  be  aligned  with  the  EU  Customs 
Code.  The  lack  of  a  fully  developed  risk  analysis  results  in  frequent  and  poorly  targeted 
customs controls. Progress on the use of simplified procedures and trade facilitation remains 
limited.  Further  efforts  are  required  in  this  area,  including  development  of  the  concept  of 
‘authorised economic operator’.  

Little  progress  can  be  reported  on  taxation.  Republika  Srpska  amended  the  Law  on  Profit 
Tax.  Some  changes  concerning  the  excise  on  tobacco  products  were  adopted.  Further 
alignment with the VAT acquis and the EU excise legislation is necessary. 

Amendments to the Law on Income Tax, the Federation rulebook on application and the Law 
on  Taxation  Procedures  enhanced  control  and  collection.  The  exchange  of  information 
between  Entities  improved.  The  personal  income  tax  systems  are  not  fully  harmonised 

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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  the  Brcko  District  remains  to  be  agreed.  Regarding 
business taxation, some measures continue to be incompatible with the EU Code of Conduct 
(e.g.  legislation  on  free  zones).  The  Entities  introduced  fiscal  cash  registers,  but  the  Brcko 
District did not. 

As  regards  administrative  cooperation  and  mutual  assistance  the  country  ratified  new 
agreements  on  avoidance  of  double  taxation  with  Albania,  Algeria,  the  Czech  Republic, 
Ireland, Jordan, Kuwait, Malaysia, Qatar and Spain.  

Some progress was made regarding administrative and operational capacity. The Director-
General  of  the  Indirect  Tax  Authority  (ITA)  was  appointed  with  a  four-year  mandate.  The 
overall  business  strategy  of  the  ITA  for  2012  to  2016  was  adopted.  Customs,  IT  and  law 
enforcement strategies in line with the overall business strategy were agreed. The ITA has to 
prepare  the  implementation  plan  for  the  strategies  and  to  provide  the  resources  needed  for 
implementation. ITA established a unit for IPR enforcement in customs as well as a unit for 
analysis and strategic planning. 

The  IT  system  was  upgraded  to  support  the  taxation  work.  No  legal  amendments  were 
initiated  to  enable  the  ITA  to  share  data  with  the  Agency  for  Statistics  of  Bosnia  and 
Herzegovina. This hampers production of reliable statistics. Further efforts are required in the 
areas  of  tax  refunds,  tax  investigation,  exchange  of  information  and  training.  Data  and 
information sharing, including a website with businesses and taxpayers, should be improved. 
The  functions  performed  by  customs  laboratories  remain  limited.  Bosnia  and  Herzegovina 
should invest further in IT interconnectivity and interoperability with EU IT systems. It is not 
yet  sufficiently  prepared  for  accession  to  the  Common  Transit  Convention  (CTC)  or  the 
Convention on Simplification in Trade in Goods. By expressing its intention to join the CTC 
and  by  planning  the  IT  application  concerned  (NCTS),  Bosnia  and  Herzegovina  would 
achieve a milestone in IT interconnectivity with EU IT systems. 

There was little progress in the areas of customs and taxation. Positive developments include 
the appointment of permanent management and the adoption of the overall business strategy 
of the ITA. Proper implementation of the business strategy and organisational changes remain 
to  be  ensured.  Substantial  efforts  are  required  to  align  legislation  fully  with  the  acquis,  to 
ensure effective implementation of the Interim Agreement, to upgrade the administrative and 
operational capacity, to improve IT and to provide better services to businesses and taxpayers. 
Overall, preparations are at an early stage. 

4.1.5.  Competition  

Some  progress  was  made  on  anti-trust.  The  Competition  Law  remains  to  be  fully  aligned 
with the acquis. The Competition Council’s (CC) activities focused on mergers and abuses of 
dominant  market  positions.  The  CC  adopted  7  anti-trust  decisions  and  8  merger  decisions. 
The CC imposed fines totalling about 201,500 KM on companies that infringed competition 
rules. No mergers were prohibited, no authorised mergers subject to remedies and no mergers 
authorised unconditionally. The CC’s staff require further training to increase the authority’s 
investigative capacity.  

Bosnia and Herzegovina did not fulfil its commitment, under the Interim Agreement, to apply 
the  EU’s  competition  principles  by  1  July  2011  to  public  undertakings  and  undertakings  to 
which special and exclusive rights were granted. 

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Some  progress  was  made  in  the  field  of  State  aid.  The  State  Aid  Law  was  adopted. 
Implementing  legislation  remains  to  be  adopted.  Despite  some  initial  steps  taken,  an 
operationally independent State Aid authority, the State Aid Council and its Secretariat has to 
be  established.  Transparency  of  all  State  aid  granted  in  Bosnia  and  Herzegovina  is  not  yet 
ensured. Bosnia and Herzegovina did not fulfil its commitment, under the Interim Agreement, 
to establish a comprehensive inventory of aid schemes instituted before establishment of the 
State aid authority and to align such aid schemes with EU competition rules by 1 July 2012.  

Some  progress  was  made  in  the  area  of  competition.  Further  efforts  have  to  be  made  to 
improve  the  current  anti-trust  legislation  and  to  increase  the  administrative  capacity  of  the 
Competition  Council.  To  comply  with  the  Interim  Agreement,  the  country  must  fully 
implement State aid legislation and set up the institutional framework necessary for effective 
control of all State aid granted in Bosnia and Herzegovina. The country’s commitment, under 
the  Interim  Agreement,  with  regard  to  public  undertakings  remains  to  be  fulfilled.  Overall, 
preparations in that area remain at an early stage. 

4.1.6.  Public procurement  

There was no progress in the area of public procurement.  

The legislation remains to be aligned with the acquis. The Federation law on concessions has 
yet to be adopted. Implementation of the strategy for development of the public procurement 
system for 2010-2015 is delayed. Public procurement notices are published electronically and 
the  reporting  system  created  by  the  Public  Procurement  Agency  (PPA)  is  in  use.  Paper 
publication  in  the  Official  Journal  is  continuing,  but  the  costs  for  contracting  authorities 
decreased.  Bosnia  and  Herzegovina  did  not  take  measures  to  ensure  competitive  and 
transparent  procedures  or  the  independent  reviews  required  by  the  acquis  in  the  area  of 
public-private  partnerships  and  services  and  works  concessions.  Some  lower  levels  of  the 
administration  introduced  their  own  regulations,  resulting  in  further  fragmentation  of  the 
system  and  legal  uncertainty  for  the  bidders.  The  existence  of  several  legal  concession 
systems across the territory of Bosnia and Herzegovina places a severe obstacle in the way of 
concession  projects  covering  more  than  one  territory  within  the  country.  The  administrative 
set-up  for  managing  concessions  lacks  clarity  and  formal  channels  for  cooperation.  This 
results in high administrative costs and low efficiency of the system as a whole.  

The PPA and the Public Procurement Review Body (PRB) maintained their staffing. The PRB 
has  so  far  been  able  to  handle  the  high  number  of  complaints  with  its  staff  of  17.  Some 
provisions  of  the  rulebook  on  internal  organisation  of  the  PRB  are  not  being  implemented 
(e.g.  rotation  of  the  Chairmanship).  The  composition  of  the  PRB  was  not  renewed.  The 
internet publication of PRB decisions required by law did not resume. Monitoring of public 
procurement procedures, the capacity of contracting authorities to conduct the procedures and 
provision  of  assistance  and  training  to  contracting  authorities  and  economic  operators  all 
require close attention.  

There was no progress in this area. It will require further political will to align the country’s 
legislation, including the concessions system, with the acquis. The work of the PRB needs to 
be  more  transparent,  internal  operations  to  be  improved  and  the  capacity  of  contracting 
authorities across the country strengthened. Overall, preparations in this area are at the initial 
stages. 

4.1.7. 

Intellectual property law  

Progress  was  made  on  intellectual  property  rights.  To  follow  up  the  laws  adopted  in  the 
field of intellectual property rights, implementing regulations  were  enacted. The Intellectual 
Property Rights Councils continued to implement their work programmes, mainly related to 

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dissemination  of  information  and  training.  The  functioning  of  the  Institute  for  Intellectual 
Property  improved  further.  It  continued  to  raise  awareness  of  the  importance  of  intellectual 
property rights.  

Some progress was made in the area of industrial property rights. The Vienna Agreement 
establishing an International Classification of the Figurative Elements of Marks and the Patent 
Law  Treaty  entered  into  force.  The  International  Convention  for  the  Protection  of  New 
Varieties  of  Plants  (UPOV  Convention)  remains  to  be  implemented.  During  the  reporting 
period the Institute received 40 patent applications and processed 125, including some from 
previous  years.  The  Institute  received  414  trademark  applications  and  processed  2,061, 
including many from previous years. The Institute received 11 industrial design applications 
and  issued  16  decisions  granting  industrial  designs.  No  application  for  protection  of 
geographical indications was received. The Board of Appeal of the Institute received 17 new 
appeals and completed 11 proceedings.  

Some  progress  can  be  reported  on  enforcement.  Decisions  were  adopted  on  the 
implementation of customs measures to protect the rights of holders of trademarks, industrial 
designs,  copyright  and  related  rights,  patents  and  names  of  geographical  origin.  The  ITA 
seized counterfeit goods valued at € 20,000. In 12 out of 18 cases the goods were destroyed, 
while  six  lawsuits  were  filed.  The  State  Investigation  and  Protection  Agency  and  Entity 
Inspectorates  intensified  their  work  on  intellectual  property  rights.  High  levels  of 
counterfeiting  and  piracy  persist  across  the  country.  A  reliable  system  for  collecting, 
analysing  and  exchanging  data  between  the  various  institutions  involved  is  lacking.  An 
enforcement  strategy  involving  all  stakeholders  is  not  in  place.  Coordination  between 
enforcement bodies at various levels needs to be improved.  

Some  progress  was  made  on  intellectual,  industrial  and  commercial  property  rights. 
Enforcement  and  coordination  between  all  stakeholders  remain  to  be  improved.  Overall, 
preparations are well advanced. 

4.1.8.  Employment and social policies, public health policy  

There was little progress regarding employment policy. Republika Srpska adopted the 2012 
Action  Plan  for  Employment.  The  Federation  adopted  the  Employment  Service  2012  Work 
Programme. The Brcko District has not adopted an employment strategy. Neither the Entities 
nor  Brcko  District  fulfilled  the  obligation  to  adopt  the  operational  plans  to  implement  the 
State-level Employment Strategy 2010-2014. 

The labour market situation did not improve. According to data from the labour force survey, 
the activity rate decreased slightly in 2011, as did the employment rate. Female participation 
in  the  labour  market  (at  41.2%)  and  the  employment  rate  (28.7%)  remain  low.  Hardly  any 
jobs were created. The already very high unemployment continued to increase. According to 
administrative  data,  in  June  2012  the  unemployment  rate  was  43.8%,  an  increase  of  0.7 
percentage points compared with a year earlier. Both Entities are implementing programmes 
to  help  young  graduates  enter  the  labour  market,  but  without  much  success  as  the 
unemployment rate for young people remained at nearly 58% in 2011. The youth employment 
gap poses a considerable challenge to development of the country. Long-term unemployment 
remains  alarmingly  high,  covering  80.8%  of  all  registered  unemployed  in  2011.  Informal 
employment remains a big challenge.  

Labour market challenges remain considerable. 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  still  lack  the  capacity  to 
implement  appropriate  active  labour  market  measures.  The  large  number  of  labour  and 

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employment  institutions  at  State,  Entity  and  Canton  levels  and  the  lack  of  coordination 
between them remain a cause for concern. Considerable efforts remain to be made to develop 
reliable labour market data, a prerequisite for developing labour market policy (See Chapter 
3.1 – Macroeconomic stability). 

Little progress can be reported on building the capacity of public employment services for job 
counselling  and  employment  mediation.  The  current  legal  framework  and  lack  of  training 
prevent  them  from  becoming  more  efficient  in  providing  job  counselling  to  job-seekers. 
Health  insurance  for  a  large  number  of  unemployed  is  managed  by  the  public  employment 
services, thus preventing them from devoting more time to job counselling.  

There  was  no  progress  on  social  policies.  Existing  labour  laws  in  the  Entities  remain  to  be 
aligned with the acquis. A State-level labour law does not exist.  

No progress can be reported regarding health and safety at work. Labour inspectorates remain 
understaffed  and  unable  to  monitor  compliance  with  health  and  safety  at  work  legislation. 
Reliable  data  on  accidents  at  work  are  not  available.  This  is  a  particular  problem  in  the 
Federation,  where  records  are  held  at  Canton  level.  The  Federation  still  operates  under  the 
Law on Health and Safety at Work inherited from ex-Yugoslavia. 

Little  progress  can  be  reported  in  the  social  dialogue.  The  Brcko  District  established  an 
Economic  and  Social  Council.  The  State-level  Law  on  Social  Partners’  Representativeness 
has yet to be adopted. No agreement was reached on the membership criteria for a State-level 
Economic and Social Council. The social dialogue remains hampered by the complex system 
of government and the fragmentation of legislation.  

No progress can be reported in the area of social inclusion, including anti-discrimination. 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  range  of  exceptions. 
Implementation of disability policies and strategies remains weak. The UN Convention on the 
rights of persons with disabilities is not being implemented (See Chapter 2.2 - Human rights 
and  the  protection  of  minorities).  The  social  inclusion  strategy  remains  to  be  adopted  in 
Republika  Srpska  and  at  State-level.  Vulnerable  groups  (children,  Roma  and  returnees)  are 
not adequately protected neither at Entity nor at State-level nor in Brcko District.  

No progress was made in the area of social protection. The pension systems in both Entities 
are  overburdened  with  ‘privileged  pensions’  and  pension  funds  are  facing  financial 
difficulties.  Republika  Srpska  lowered  other  pension  allowances  to  make  the  system 
financially viable. The Federation initiated pension system reforms, but full implementation is 
pending.  Neither  pension  nor  health  systems  are  coordinated  between  Entities  and  Cantons, 
which creates an obstacle to the free movement of persons.  

Some  progress  can  be  reported  in  public  health  policy.  Measures  were  taken  to  improve 
capacity  for  planning  and  decision-making,  to  establish  a  uniform  system  for  reporting  on 
public health in order to fulfil international obligations, and to develop an electronic database 
providing  indicators  of  public  health  used  for  ECHI,  EUROSTAT  and  WHO  reporting.  A 
system  for  collecting  health  data  at  Entity  and  State-level  was  introduced.  A  reporting 
mechanism on communicable diseases was agreed between all relevant stakeholders. A first 
national health report for Bosnia and Herzegovina was published.  

The Entities made no progress on implementing their healthcare strategies. The EU roadmap 
is  not  being  implemented.  There  was  no  progress  on  harmonising  reforms  between  Entities 
and the system remains fragmented. No steps were taken to address the problems caused by 
the non-transferability of health funds. 

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In the field of tobacco control, the Federation and Republika Srpska adopted a rulebook on 
labelling  of  packaging  of  tobacco  products  aiming  at  aligning  with  the  acquis.  Republika 
Srpska adopted  the Law on  Tobacco regulating conditions for production and processing of 
tobacco  and  its  products,  conditions  for  manufacturing  of  tobacco  products  and  their 
classification,  labelling  of  maximal  quantity  of  tar,  nicotine  and  carbon-monoxide  in 
cigarettes, and all aspects of registration and record of tobacco products.  

In the field of substances of human origin, the Federation adopted three rulebooks on quality 
assurance  and  safety  of  blood  and  blood  components.  In  the  field  of  organs  and  tissues  the 
Federation also adopted two rulebooks.  

In the field of communicable diseases, a strategy on the response to HIV/AIDS in Bosnia and 
Herzegovina  for  2011–2016  was  adopted,  complete  with  an  implementation  plan.  The 
financial plan for its implementation remains outstanding. Administrative capacity to respond 
effectively to public health threats is being built up. Preparations for an early warning system 
are  ongoing  at  all  administrative  levels.  A  national  coordinator  to  cooperate  with  the 
European  Centre  for  Disease  Prevention  and  Control  was  appointed.  Republika  Srpska 
adopted a rulebook on infectious diseases. Coverage of children with immunization remained 
low especially among Roma children. 

In the field of cancer, the Federation adopted a strategy for prevention, treatment and control 
of  malignant  neoplasm  for  2012  to  2020.  The  Federation  adopted  the  Law  on  Registers  in 
Healthcare to improve data collection, analysis and use.  

Republika Srpska adopted a policy to improve nutrition of children under the age of five. The 
Federation  adopted  a  decision  on  free  basic  health  insurance  for  children  under  18  and  is 
drafting a policy on nutrition of young children. Funding was provided to patients suffering 
from rare diseases. 

There  was  little  progress  in  the  area  of  mental  health.  A  regional  activity  to  build  up  the 
capacity of health professionals and users of mental health services is ongoing. No progress 
was  made  towards  de-institutionalising  mental  health  services  and  establishing  high-quality 
community-based mental health services focusing on recovery. Further action remains to be 
taken  to  promote  inclusion  and  empowerment  of  people  with  mental  health  problems.  The 
Federation adopted a policy and strategic document for mental health protection. 

There was little progress on employment and social policies. On labour law, health and safety 
at  work  and  anti-discrimination,  legislative  alignment  remains  insufficient.  Strategies  for 
employment,  social  inclusion  and  social  protection  are  insufficiently  developed  and 
implementation  deficient.  Legislative  approximation  remains  to  be  intensified  and  policies 
enhanced. There was some progress on public health policy. Overall, preparations remain at a 
very early stage. 

4.1.9.  Education and research  

Little progress can be reported in the field of education.  

The  Conference  of  Bosnia  and  Herzegovina  Education  Ministers  started  their  bi-monthly 
meetings and confirmed a new format for coordinating education reforms, albeit along ethnic 
lines.  The  State-level  strategy  for  entrepreneurial  learning  in  education  for  2012-2015  was 
adopted,  along  with  the  implementation  plan.  Implementation  of  the  baseline  qualifications 
framework  has  not  started.  The  Federation  made  some  progress  on  harmonising  Cantonal 
laws on vocational education and higher education with the framework laws17.  

17 

Four of the ten Cantons adopted legislation on vocational education and nine on higher education. 

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There was a slight increase in the number of children attending pre-school education.  

Republika Srpska adopted amendments to the Law on Pre-school Upbringing and Education, 
requiring  at  least  a  secondary  school  diploma  for  staff  working  with  children  with  special 
needs.  No  progress  was  made  on  harmonising  Cantonal  Pre-school  education  laws  with  the 
framework legislation. Republika Srpska adopted the Draft Law on Amendments to the Law 
on  Higher  Education.  There  is  no  State–level  law  on  recognition  of  higher  education 
qualifications. The Conference of Ministers of Education adopted guidelines on recognition of 
higher  education  qualifications,  that  address  the  problem  of  different  practices  in  different 
parts of the country, but the Guidelines are not legally binding. Due to the lack of harmonised 
legislation, different practices continue to be used  throughout the country  for  recognition of 
diplomas  and  qualifications  in  higher  education.  The  process  of  accreditation  of  higher 
education institutions has begun. There was no progress on statistical reporting in education.  

Despite its previous expression of interest, Bosnia and Herzegovina decided not to participate 
in the Lifelong learning programme.  

There  was  some  progress  in  the  area  of  culture.  An  action  plan  to  implement  Bosnia  and 
Herzegovina’s cultural policy strategy for 2011-2014 was adopted and endorsed by Entity and 
Cantonal ministries. The ‘Methodology for statistical monitoring of indicators in the area of 
culture’  was  published  by  the  Agency  for  Statistics.  Bosnia  and  Herzegovina  continued  to 
participate  in  the  EU’s  Culture  programme.  An expression of interest in participating in the 
EU’s  Media  programme  was  submitted.  The  legal  and  financial  situation  of  seven  cultural 
institutions  of  the  country  was  not  solved.  Some  operated  without  appropriate  budgetary 
allocations for several years and were forced to close some activities to the public.  

Some progress was made on research and innovation policy. The country actively promoted 
cooperation  on  research  and  innovation  with  the  EU,  resulting  in  a  slight  increase  in  the 
number  of  submissions  under  the  Seventh  EU  research  Framework  Programme  (FP7).  The 
overall success rate is nevertheless low. Further steps were taken to facilitate integration into 
the  European  Research  Area  (ERA)  and  to  contribute  to  the  Innovation  Union,  but  the 
research  and  innovation  capacity  building  at  national  level  needs  to  be  strengthened  and 
coordination remains to be improved.  

With  respect  to  FP7,  the  administrative  capacity  improved  by  increasing  the  number  of 
National  Contact  Points,  organising  training  sessions  and  promoting  events  on  FP7. 
Cooperation with COST and EUREKA was strengthened.  

Regarding the integration into the ERA, the overall level of investment in research remained 
low.  Due  to  the  lack  of  reliable  statistics,  it  is  not  possible  to  monitor  progress  made  or  to 
establish investments made by public or private sector. Some progress was made on human 
capital  building  and  a  register  was  set  up  to  monitor  the  number  of  researchers.  Republika 
Srpska adopted the Law on Scientific Research Activities and Technology Development for 
2012-2016, and relevant by-laws. The Republika Srpska strategy on science and technological 
development for 2012-2016 was adopted. Republika Srpska established an electronic database 
on  researchers  and  research  organisations  and  agreed  to  build  a  unified  science  library 
information and bibliographic system based on COBISS, the cooperative online bibliographic 
system and services. The Federation supported projects of technology modernisation, research 
and  education  institutions.  The  Federation  Law  on  the  Science  and  Research  and 
Development System and Policy was not adopted18.The EURAXESS network was established 
and functions well. Communication and coordination between the different science ministries 
and Entities is insufficient.  

18 

Only three out of the ten Cantons have a legal framework that regulates science and research. 

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There was little progress in the areas of education and culture. Strategies and framework laws 
and the baseline qualifications framework need to be fully implemented. Sub-national higher 
education  and  vocational  training  legislation  remains  to  be  harmonised  with  the  relevant 
framework  legislation.  The  country  is  participating  in  the  Culture  programme.  Preparations 
for future integration into the ERA and the Innovation Union continued, but national research 
and  innovation  capacity  remain  to  be  strengthened  and  investment  in  R&D  to  be  increased. 
Adoption  of  the  legislative  framework  for  science  and  research  has  yet  to  be  completed. 
Overall, preparations are moderately advanced. 

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 ninth time. Bosnia and Herzegovina proceeded with its 
bilateral  negotiations  on  market  access  for  goods  and  services.  Bilateral  negotiations  were 
concluded  with  China,  Japan,  Switzerland,  Norway,  Canada,  Honduras  and  El  Salvador. 
Negotiations with Korea, Ecuador, Brazil, India and the Dominican Republic are in the final 
stage. There are outstanding issues in the negotiations with the United States and Ukraine. 

4.2. 

Sectoral policies 

4.2.1. 

Industry and SMEs  

There  was  little  progress  on  industrial  policy.  The  Entities  continued  implementing  their 
industrial policy action plans without State-level coordination. A country-wide development 
strategy  including  industrial  policy  elements  remains  to  be  adopted.  The  absence  of 
harmonised  statistics  prevents  creation  of  an  effective  strategic  framework  for  industrial 
policy planning.  

Little progress can be reported on SME policies. Republika Srpska adopted an SME strategy 
for  2012-2015.  The  SME  Council  for  Development  and  Promotion  of  Entrepreneurship  did 
not  meet  since  three  initial  meetings  in  2011.  The  new  State-level  SME  strategy  was  not 
adopted. The revised Federation Law on SME Promotion and Entrepreneurship, providing for 
establishment  of  the  SME  Agency,  remains  to  be  adopted.  The  Draft  State-level  Law  on 
Entrepreneurship  and  SME  Promotion  was  withdrawn  from  the  parliamentary  procedure,  as 
were the draft amendments to the Law on the Foreign Investment Promotion Agency (FIPA). 
Bosnia and Herzegovina continued to participate in the implementation of the Small Business 
Act (SBA). Insufficient coordination at State-level delayed the completion of the 2011 SBA 
self-assessment  according  to  which  the  country  made  incremental  progress  on  company 
registration  and  access  to  finance.  A  Regulatory  Impact  Analysis  (RIA)  has  not  yet  been 
introduced in Bosnia and Herzegovina. The Republika Srpska Strategy on Regulatory Reform 
and Introduction of RIA 2011-2015 was adopted. No progress was made towards introducing 
harmonised  financial  support  measures.Pilot  structural  business  statistics  were  published  for 
the  first  time  for  the  country  as  a  whole,  revealing  a  high  proportion  of  inactive  SMEs  in 
business  registers.  To  ensure  higher  quality  records  and  simplify  access  to  data,  Republika 
Srpska  adopted  legislation  on  a  single  register  of  business  entities’  accounts.  Bosnia  and 
Herzegovina did not establish a single SME registration system to simplify doing business in 
both Entities.  

The  network  of  business  incubators  is  well  developed,  comprising  five  incubators  in 
Republika Srpska and eight in the Federation. Other forms of start-up support are weak.  

Some  progress  was  made  in  the  case  of  tourism.  Republika  Srpska  adopted  the  Law  on 
Amendments to the Law on Catering Services and several by-laws in the field of tourism and 
catering industry. Similar legislation has yet to be adopted in the Federation. The Federation 
did not adopt the strategy on tourism development for 2008-2018. 

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There  was  little  progress  in  the  area  of  industrial  and  SME  policies.  The  country  lacks  a 
comprehensive  industrial  policy  and  an  updated  framework  for  SME  policy.  Coordination 
between  the  Entities  remains  the  key  issue  for  promoting  enterprise  development.  Overall, 
preparations in the fields of industrial policy and SMEs remain at an early stage. 

4.2.2.  Agriculture and fisheries  

There  was  little  progress  on  alignment  with  European  standards  in  the  area  of  agriculture 
and rural development policy. 

Bosnia and Herzegovina has not yet adopted a country-wide rural development strategy and 
the State-level Law on Wine. The State-level strategic plan and the harmonisation programme 
for  agriculture,  food  and  rural  development are  not  being  implemented.  Republika  Srpska’s 
rural development strategy and action plan and the Federation’s harmonisation programme for 
agriculture,  food  and  rural  development  remain  to  be  harmonised  with  the  State-level 
framework. Administrative capacity and channels for coordination at State and Entity levels 
remain  weak.  The  coordination  of  rural  development  policy  and  actions,  including  support 
measures, are insufficient.  

Little  progress  was  made  with  the  preparations  for  the  Instrument  for  Pre-Accession 
Assistance  for  Rural  Development  (IPARD).  A  sectoral  analysis  was  prepared  for  five 
sectors.  No  agreement  was  reached  on  the  institutional  structures  for  decentralised 
management. The Office for Payment Harmonisation was established but the number of staff 
is insufficient to carry out its tasks. Inter-sectoral coordination and participation by the non-
governmental sector remain weak. 

The Entities’ budgets for agriculture and rural development remain low. Subsidies to farmers 
are  mainly  product-based  and  not  aligned  with  the  acquis.  The  lack  of  an  efficient 
administration  and  effective  rural  credit  schemes  hampers  the  efforts  to  increase  the 
productivity and competitiveness of the sector. 

Bosnia and Herzegovina did not adopt the agricultural information strategy or the Law on the 
Agricultural Census. Agricultural statistics and the agricultural information system have yet to 
be improved, including harmonisation of the existing systems. Land registration systems are 
not harmonised and land management requires strengthening. 

Little  progress  was  made  regarding  food  safety.  Bosnia  and  Herzegovina  adopted 
implementing legislation on residues of pesticides and radioactive contamination and product-
specific  standards.  Responsibilities  for  food  safety  remain  fragmented  at  State  and  Entity 
level. Preparations started regarding the assessment and upgrading of food establishments. A 
laboratory capacity strategy to cover analysis of samples in line with the official controls on 
food and feed chains still needs to be drawn up. The capacity to implement official controls is 
weak.  

There  was  very  little  progress  in  the  veterinary  sector.  Some  legislation  on  animal  diseases 
and  import  conditions  was  adopted.  Legislation  remains  to  be  aligned  with  the  acquis  on 
hygiene and food supervision. Closer coordination between the State and Entities in aligning 
with  the  acquis  in  these  fields  remains  essential.  The  powers  of  the  State  Veterinary  Office 
are not sufficient for it to act as the central competent authority. Legislation at State-level is 
neither  adopted  nor  implemented  at  Entity  level.  The  overlaps  between  the  veterinary  and 
food  safety  legislation  remained.  The  financing  of  sampling  for  official  controls  is  not 
adequate.  National  laboratories  have  not  yet  been  further  improved  so  as  to  obtain 
accreditation  and  establish  effective  quality  control  systems.  Inspectors  and  food  business 
operators  require  further  training  about  specific  EU  requirements  on  hygiene.  This  lack  of 
progress has a negative impact on trade in agricultural products, in particular with the EU. 

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Progress  was  made  in  the  phytosanitary  sector.  Phytosanitary  checks  at  all  border  crossings 
improved thanks to the introduction of uniform lists of plants, plant products and other objects 
which  must  be  subject  to  a  plant  health  inspection.  The  Federation  appointed  phytosanitary 
inspectors  and  training  of  inspectors  commenced.  The  programme  for  monitoring  potato 
diseases is being implemented. The legislation remains to be harmonised with the acquis and 
the  capacity  to  implement  the  acquis  to  be  strengthened.  Reference  laboratories  for 
monitoring residues remain to be designated.  

There  was  progress  in  the  area  of genetically  modified  organisms (GMOs). Implementing 
legislation  was  adopted  on  registers,  risk  assessment  and  conditions  for  placing  GMO 
products  on  the  market.  Training  of  laboratory  and  inspection  staff  on  control  methods 
commenced. Entity legislation remains to be harmonised with the State-level legislation.  

Little  progress  was  made  on  fisheries.  There  is  no  State-level  legislation  which  is  aligned 
with  the  acquis.  Responsibilities  for  the  fisheries  sector  remain  fragmented  despite  the 
potential for a considerable increase in exports of fish and fishery products to the EU.  

There  was  little  progress  in  the  fields  of  agriculture  and  rural  development,  food  safety, 
veterinary  and  phytosanitary  policy  and  fisheries.  A  comprehensive  State-level  agricultural 
and rural development strategy remains to be implemented throughout the whole country, the 
State-level  capacity  for  coordination  and  harmonisation  strengthened,  the  implementation 
mechanisms reinforced and legislation further aligned with the acquis. Implementation of the 
food safety acquis and the official control capacity needs to be stepped up and the upgrading 
of establishments accelerated. Overall, preparations in these areas of the acquis remain at an 
early stage. 

4.2.3.  Environment and climate change  

There was little progress in the field of the environment. 

There was little progress on horizontal legislation. Republika Srpska advanced the alignment 
with the Strategic Environmental Assessment (SEA) Directive by adopting the new Law on 
Environmental Protection. A Framework Law on the Environment remains to be adopted and 
efforts are required to implement the Environmental Impact Assessment (EIA) Directive in a 
harmonised  manner  at  State  and  Entity  levels.  Implementation  of  the  Espoo  Convention  on 
EIA  in  a  Transboundary  Context  has  not  started.  Public  participation  in  environmental 
decision-making and public access to environmental information remain weak.  

Some progress can be reported on air quality. Republika Srpska adopted the new Law on Air 
Protection.  The  Federation  adopted  several  rulebooks  on  air  quality  monitoring  methods, 
definition  of  types  of  pollutants,  air  quality  standards,  etc.  Air  quality  planning  and 
monitoring systems remains inadequate. A country-wide air monitoring network has not yet 
been established.  

There was little progress on waste management. The Federation adopted a waste management 
plan  to  implement  its  Environmental  Protection  Strategy  for  2008-2018.  Coordination 
between the Entities and the Brcko District on implementing a packaging waste management 
system remains a concern. Investment in waste management remains insufficient. Progress in 
construction and operation of regional sanitary landfills was limited. 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. 

There  was  little  progress  on  water  quality.  The  Federation  adopted  a  water  management 
strategy and a rulebook on the conditions for wastewater discharges into natural recipients and 
public sewer systems, thus advancing the alignment with the Urban Waste Water Treatment 
Directive. Bosnia and Herzegovina aligned its legislation with the Drinking Water Directive, 

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but  implementation  is  slow.  No  efforts  were  made  to  ensure  a  consistent  and  harmonised 
approach to water management at State-level and between the Entities and the Brcko District, 
including implementation of the water laws, monitoring and river-basin planning. Inadequate 
administrative  capacity  and  lack  of  ready-made  projects  are  causing  considerable  delays  in 
sectoral investments. Access to drinking water, untreated discharges of wastewater and flood 
management remain key challenges. 

There  was  little  progress  on  nature  protection.  The  Federation  adopted  implementing 
legislation  on  Natura  2000,  thus  advancing  the  alignment  with  the  Birds  and  Habitats 
Directives. Implementation of the Convention on International Trade in Endangered Species 
of  Wild  Fauna  and  Flora  (CITES)  did  not  start.  Implementation  of  the  nature  protection 
acquis remained at an early stage.  

There  was  little  progress  on  industrial  pollution  control  and  risk  management.  Bosnia  and 
Herzegovina  prepared  an  initial  list  of  installations  in  accordance  with  the  Industrial 
Emissions  Directive.  An  emissions  register  of  these  installations  was  published  on  the  web. 
The permit process remains fragmented due to complex administrative procedures with weak 
public  participation  in  the  decision-making  process.  Environmental  investments  by  industry 
remain insufficient. The administrative capacity for inspection activities remains weak. 

There  was  little  progress  in  the  field  of  chemicals.  Republika  Srpska  adopted  a  strategy  on 
chemical safety and implementing legislation on chemicals and biocides. The Federation did 
not  start  aligning  its  legislation  with  the  acquis.  Bosnia  and  Herzegovina  acceded  to  the 
Rotterdam  Convention  on  the  Prior  Informed  Consent  Procedure  for  Certain  Hazardous 
Chemicals and Pesticides. There was little progress on noise. The Federation adopted a Law 
on Protection against Noise.  

Regarding  climate  change,  no  progress  was  made  on  general  policy  development.  The 
country  has  no  national  climate  strategy.  Climate  considerations  are  increasingly  integrated 
into the energy policy. Substantial efforts are required to fully integrate climate change into 
sectoral  policies  and  strategies.  The  country  associated  itself  with  the  EU  positions  in  the 
international context. While having previously associated itself with the Copenhagen Accord, 
the  country  did  not  yet  put  forward  a  mitigation  commitment  by  2020.  The  country  should 
consider  taking  mitigation  commitments  consistent  with  those  of  the  EU  and  its  Member 
States for the purpose of the post-2020 climate agreement to be reached by 2015. 

Little progress was made on aligning with EU climate policies and legislation. The country is 
at a very early stage in adopting the climate acquis. The country took initial steps to identify 
stationary  installations  for  the  future  implementation  of  an  emissions  trading  system. 
Significant  efforts  are  required  to  strengthen  the  country’s  monitoring,  reporting  and 
verification capacities. Cooperation and coordination remain weak. The lack of administrative 
and financial capacity is delaying preparation, legislative alignment and implementation of a 
climate policy in line with the acquis. The country participated regularly in the climate work 
under the Regional Environmental Network for Accession (RENA). There is still a significant 
need  for  awareness-raising  at  all  levels  and  for  the  promotion  of  cooperation  of  all 
stakeholders. 

Administrative  capacity  in  the  environment  sector  remains  weak.  An  Environmental 
Protection Agency with country-wide functions for monitoring and reporting on the state of 
environment  remains  to  be  established.  The  administrative  capacity  within  the  relevant 
environmental institutions is limited due to the fragmentation of competencies both vertically 
and horizontally. Integration of environmental concerns in other sectors remains weak. There 
was  some  progress  regarding  the  administrative  capacity  to  address  climate  change.  The 
Executive  Board  of  the  Designated  National  Authority  (DNA)  to  implement  the  Kyoto 

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Protocol’s  Clean  Development  Mechanism  had its  first  constitutional  assembly  and  adopted 
its rules of procedure. The necessary structures for the DNA’s work were established at Entity 
and  District  Brčko  level.  The  administrative  structure  on  climate  change  should  be 
considerably  strengthened.  Capacity  building  is  required  to  address  the  significant  capacity, 
cooperation and coordination needs. There was little progress in the environment and climate 
areas.  The  establishment  of  a  harmonised  legal  framework  for  environmental  protection, 
adequate institutional capacity and a functioning environmental monitoring system remain the 
priorities.  Improvements  remain  to  be  made  to  horizontal  and  vertical  communication  and 
information exchange on environmental and climate change issues between all authorities and 
the general public. Regarding climate change, substantial efforts are required for awareness-
raising, setting a more strategic approach for the country, aligning with and implementing the 
acquis  and  continuing  to  build  up  administrative  capacity  including  inter-institutional 
cooperation and coordination. Preparations in the field of the environment and climate change 
remain at an early stage. 

4.2.4.  Transport policy  

is  actively 

implementing 

In the case of the trans-European transport networks, some progress was made. Bosnia and 
Herzegovina 
the 
Development  of  the  South-East  Europe  Comprehensive  Regional  Transport  Network  by  the 
South-East  Europe  Transport  Observatory  (SEETO).  Attention  has  to  be  paid  to  the 
implementation  of  the  priorities  agreed  for  the  SEETO  comprehensive  network.  Work 
continued  on  the  signalling  overhaul  on  the  SEETO  railway  network,  specifically  on  the 
Ploce-Bradina section of corridor Vc and the Banja Luka-Kostajnica rail section. 

the  Memorandum  of  Understanding  on 

Little progress can be reported regarding road transport. The legislative framework for road 
safety  and  the  transport  of  dangerous  goods  remains  unclear.  By-laws  were  adopted  on  the 
procedures for issuing memory cards and for drivers’ qualifications to perform international 
road transport. 

Little progress can be reported in rail transport. The Instruction on safety and interoperability 
of the railway system was adopted. The Federation adopted the Law on Amendments to the 
Law on Federation Railways. Both railway companies remain in a critical financial situation 
and  need  restructuring.  Full  separation  of  the  infrastructure  manager  from  the  railway 
undertaking remains to be addressed, as does legislative alignment with the acquis on public 
service obligations. An independent accident investigation body does not exist. The railways 
of Republika Srpska have not yet published their network statement.  

No progress was made on maritime transport. Although Bosnia and Herzegovina is a member 
of  the  International  Maritime  Organisation  (IMO),  it  is  not  a  signatory  to  any  of  the  most 
important  IMO  conventions  like  the  International  Convention  for  the  Safety  of  Life  at  Sea 
(SOLAS), including the International Ship and Port Facility Security Code, the International 
Convention  for  the  Prevention  of  Pollution  from  Ships  (MARPOL)  or  the  International 
Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). 

Little progress can be reported in the case of inland waterways. Demining and rehabilitation 
of  the  River  Sava  waterway  has  yet  to  start.  The  river  information  system  remains  to  be 
introduced. No progress was made on combined transport. 

Little progress was made on air transport. The Aviation Law was amended to align it with 
the acquis. Several rules and by-laws in the area of civil aviation were adopted. Efforts remain 
to  be  made  to  speed  up  the  implementation  of  the  first  phase  of  the  European  Common 
Aviation Area (ECAA) Agreement.  

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Little progress was made in the area of transport. Legislation remains to be aligned with the 
acquis  on  all  modes  of  transport,  especially  rail,  road  and  maritime  transport.  A  Transport 
Strategy and Action Plan have yet to be prepared. The upgrading of transport  infrastructure 
needs to be intensified. Overall, preparations are at an early stage. 

4.2.5.  Energy  

There was uneven progress with oil stocks and security of supply. The Energy Community 
obligations  on  the  security  of  gas  and  electricity  supplies  remain  to  be  implemented.  The 
Federation Law on Oil has yet to be adopted. No official figures are available on the country’s 
level  of  oil  stocks.  A  country-wide  energy  strategy  addressing  the  security  of  supply  of  oil, 
gas  and  electricity  remains  to  be  adopted.  The  Entities  have  their  own  strategic  planning 
without harmonised criteria or a common approach to investment priorities. 

Little  progress  was  made  with  the  internal  energy  market.  The  Federation  drafted  a  new 
Electricity Law, which remains to be adopted. Existing laws at all levels neither fully comply 
with  the  acquis  nor  allow  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/Elektroprijenos) improved 
marginally.  Although  no  business  or  investment  plans  were  approved  and  the  company’s 
management continues to operate in an acting capacity, the Entity Prime Ministers agreed to 
replace the management and the board, to apply capital share rules in staffing and investment 
and  to  establish  a  working  party  with  a  view  to  devolution  of  110 kV  assets  to  utilities  at 
Entity  level  and  to  improve  the  relationship  with  the  ISO.  The  Entity  Prime  Ministers’ 
agreement  remains  to  be  implemented.  The  viability  of  TRANSCO  as  a  country-wide 
enterprise  and  the  fragmentation  of  the  electricity  market  are  causes  for  concern  and  would 
pose an obstacle to full implementation of the Energy Community Treaty. A comprehensive 
review  of  the  electricity  legislation  applicable  at  the  various  levels  of  government  was 
launched  to  make  Bosnia  and  Herzegovina  compliant  with  the  acquis  and  to  enable  the 
country  to  fulfil  the  requirements  of  the  Energy  Community  Treaty.  The  de  facto 
independence  of  the  regulatory  commissions  is  not  ensured.  The  regulators  in  both  Entities 
and  in  the  district  of  Brcko  have  adopted  secondary  legislation  addressing  some  of  the 
legislative  gaps.  Both  Republika  Srpska  and  the  Federation  revised  tariffs,  but  they  remain 
below market prices.  

No progress can be reported in the gas sector. There is still no legislative alignment. Entities 
have  established  different  rules  on  market  participants,  unbundling,  third-party  access  or 
market opening, which are not in line with the acquis.  

The country has not begun to make preparations for alignment with the EU’s ‘third internal 
energy market package’. 

There  was  little  progress  on  renewable  energy.  The  Entities  introduced  incentives  (feed-in 
tariffs)  for  renewable  energy  sources  which  differ  and  thus  potentially  create  internal 
inefficiencies.  There  is  no  State-level  strategy  for  promoting  renewable  energy.  Bosnia  and 
Herzegovina has not yet prepared a National Renewable Energy Action Plan (NREAP), which 
will provide a roadmap for achieving the binding target set for the share of renewable energy 
in  the  country’s  final  energy  consumption  in  2020  within  the  framework  of  the  Energy 
Community, and to take measures to promote the use of biofuels in transport. The complexity 
of  the  organisational  structure  and  decision-making  system  hinders  effective  promotion  of 
renewable  energy.  Significant  efforts  are  required  to  create  a  regulatory  environment  that 
would foster greater use of renewable energy sources in all sectors, including by streamlining 
administrative procedures for authorisation and licensing. 

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There was little progress on energy efficiency. Although legislation is being drafted, a State-
level  energy  efficiency  action  plan  and  a  credible  roadmap  for  transposition  of  the  relevant 
EU legislation on energy efficiency to meet obligations under the Energy Community Treaty 
are missing. 

Little progress can be reported in the area of nuclear safety and radiation protection. The 
new  Director  of  the  State  Regulatory  Agency  for  Radiation  and  Nuclear  Safety  was 
appointed,  but  a  national  emergency  plan  and  a  strategy  for  radioactive  waste  management 
have not been developed. 

Little  progress  was  made  in  the  field  of  energy.  The  country  needs  to  meet  its  legal 
obligations  under  the  Energy  Community  Treaty,  improve  its  security  of  supply,  ensure 
effective  functioning  of  the  electricity  transmission  company  and  establish  an  integrated 
energy  market.  The  lack  of  cooperation  and  coordination  between  the  Entities  and  with  the 
State-level is hampering development of a fully functioning energy market and compromises 
improvements in the energy sector as a whole. Bosnia and Herzegovina is at the early stage of 
implementing  the  acquis  on  the  internal  gas  and  electricity  markets  and  of  aligning  its 
legislation  with  the  acquis  on  nuclear  safety  and  radiation  protection.  Development  of  a 
comprehensive  energy  strategy,  including  promotion  of  energy  efficiency  and  renewable 
energy  sources,  remains  essential.  Overall,  preparations  in  the  field  of  energy  remain  at  an 
early stage. 

4.2.6. 

Information society and media  

No  progress  can  be  reported  towards  legislative  alignment  with  the  acquis  on  electronic 
communications  and  information  technologies.  The  Electronic  Communications  Law  is 
largely based on the 1998 EU regulatory framework. No decision was taken to introduce the 
general  authorisation  system.  No  progress  was  made  on  introducing  the  single  European 
emergency number 112.  

Legislative  alignment  is  delayed  due  to  the  continuing  discussions  between  the  Entities  and 
the  State  on  their  respective  powers,  thus  weakening  the  position  of  the  Communications 
Regulatory Agency (CRA). The institutional and financial independence of the CRA and its 
lack of adequate human resources remain serious concerns. The Council of Ministers has not 
appointed the head and new Council members of the CRA. (See Political criteria) 

The  CRA  continued  to  make  progress  with  implementing  the  competitive  safeguards  to 
prevent misuse of market power by operators. Fixed number portability was introduced, while 
mobile  number  portability  is  pending.  The  CRA  is  implementing  the  last  phase  of  the 
rebalancing of tariffs for voice telephony services. The rulebook on tariff rebalance for 2013-
2015 is pending. 

The three incumbent operators are all subject to significant market power (SMP) obligations, 
while the CRA allowed them to provide services outside their original concession areas. They 
continue  to  operate  in  their  geographical  areas  as  de  facto  monopolies  over  fixed  voice 
telephony.  Their  market  share  was  around  85%  for  international  calls  and  98%  for  national 
calls in early 2012. The incumbents’ share of the fixed broadband market fell to 64%, in the 
face of competition from cable and wireless network operators. The overall fixed broadband 
penetration rate increased modestly, to 11.2% at the end of 2011. The three mobile network 
operators,  each  affiliated  with  one  incumbent,  provide  near-national  coverage.  Technology-
neutral spectrum assignments allow them to deploy 3G mobile services. Legislative measures 
would enable mobile virtual network operators to emerge.  

No  progress  can  be  reported  towards  alignment  with  the  acquis  in  the  field  of  information 
society services. The State-level Law on the Agency for the Development of the Information 

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Society  is  yet  to  be  adopted.  There  is  no  State-level  legislation  on  electronic  documents,  e-
government  and  cyber  crime.  Legislation  remains  to  be  aligned  with  the  e-commerce 
Directive  and  implementing  legislation  on  conditional  access  services.  The  State-level  e-
commerce law did not enter into force yet. The implementation of the State-level e-signature 
law of 2006 is pending. The administrative capacity in the State-level Ministry of Transport 
and Communications remained weak.  

Some  progress  can  be  reported  on  audiovisual  policy  and  the  media.  The  new  set  of  rules 
adopted by the CRA largely harmonized the regulation with the Audiovisual Media Services 
Directive  (AVMSD).  The  draft  codes  on  audiovisual  and  radio  programmes  and  on 
commercial audiovisual communications partially implement the Audiovisual Media Services 
Directive (AVMSD). The remaining provisions of two Articles of the AVMSD remain to be 
incorporated. Entity laws on public broadcasting services are not in line with the State-level 
law.  The  CRA  issued  a  decision  on  use  of  multiplex  A  (MUX  A)  for  digital  terrestrial 
broadcasting.  The  CRA  began  developing  entry  criteria  for  existing  TV  stations  to  the 
commercial MUX and documents for licensing MUX operators. A working group supervising 
this procedure ceased to exist.  

There  was  no  further  progress  towards  the  switch  from  analogue  to  digital  terrestrial 
broadcasting. The digital switchover, initially planned for the end of 2011, was postponed to 
the  end  of  2014.  This  raises  potential  concerns  about  timely  implementation  of  the  process. 
No decision was taken on how to use the valuable spectrum freed up by the switchover. 

Members of the expert secretariat of the forum on digital television were appointed, but the 
secretariat  is  not  operational.  The  statute  of  the  public  broadcaster  BHRT  remained 
unchanged (See Chapter 2.2 - Human rights and the protection of minorities). The statutes of 
the  public  broadcasting  corporation  (PBS)  remain  to  be  adopted.  Two  new  members  of  the 
supervisory  board  of  the  BHRT  have  not  yet  been  appointed.  The  reform  of  the  public 
broadcasting sector was further delayed.  

Little  progress  was  made  on  the  information  society  and  media.  Harmonisation  of  the  legal 
framework  for  public  broadcasting  remains  incomplete.  The  lack  of  coordination  and  of 
adequate human resources, and in particular the continued challenges to the CRA’s functional 
and financial independence, remain a serious concern. Legislative alignment in the fields of 
electronic  communications,  the  information  society  and  media  did  not  advance.  Overall, 
preparations are at an early stage. 

4.2.7.  Financial control 

There  was  some  progress  in  the  area  of  public  internal  financial  control  (PIFC).  Policy 
papers and action plans of the State and Entities are being implemented, albeit with delays. 
Amendments  to  the  Law  on  Internal  Audit  and  the  Law  on  Financing  were  adopted.  The 
Central  Harmonisation  Units’  (CHUs)  coordination  board,  providing  a  single  platform  for 
coordination  of  legislation  and  methodology,  ceased  to  perform  its  role.  Consequently, 
legislation  took  different  directions.  The  Federation  is  in  overall  terms  lagging  behind  the 
State  and  Republika  Srpska.  Internal  audit  units  are  not  fully  operational,  although  the 
capacity of internal auditors throughout the country increased somewhat. 

There was little progress on external audit. The functional capacity of the four supreme audit 
institutions  (SAIs)  improved  with  performance  audits  conducted  by  all  levels.  Yet,  their 
financial independence remains in danger. No efforts were made to secure the independence 
of the State-level SAI from the executive or to embed it in the Constitution.  

With  regard  to  the  protection  of  the  EU’s  financial  interests  and  protection  of  the  euro 
against counterfeiting, Bosnia and Herzegovina is at an early stage of preparation. 

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There  was  little  progress  in  the  area  of  financial  control.  Substantial  efforts  are  required  to 
adopt  and  implement  PIFC  legislation,  resume  coordination  between  CHUs  and  build 
capacity on FMC and internal audit. The independence of the SAIs remains to be addressed. 
Overall, preparations are at an early stage. 

4.2.8. 

Statistics  

Some progress can be reported in the area of statistics. Amendments to the Law on Statistics 
taking into account some recommendations of the adapted global assessment of 2011 were not 
adopted.  

Little progress was made on statistical infrastructure. The cooperation between the Agency 
of Statistics of Bosnia and Herzegovina (BHAS) and the Entity institutes for statistics slightly 
improved.  Their  cooperation  and  the  coordination  of  activities  remain  to  be  considerably 
enhanced. There was continuous incorrect implementation of the State-level Law on Statistics 
and of the agreement on cooperation and coordination. The Indirect Taxation Authority does 
not  provide  the  BHAS  with  the  data  required  from  administrative  sources,  leading  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.  

There  was  little  progress  regarding  classifications  and  registers.  The  Statistical  Business 
Register is operational but incomplete due to lack of the administrative data required for it to 
function  fully.  An  inter-agency  working  group  was  established  to  draft  a  classification  of 
territorial units for statistics in the country. The discussion is continuing, also in the light of 
the  country’s  obligation,  under  the  Interim  Agreement,  to  submit  per  capita  GDP  figures  to 
the EU at NUTS 2 level by 1 July 2013. 

Progress was made on sectoral statistics. The Law on the Census of Households and Housing 
in Bosnia and Herzegovina for 2013 was adopted. The census fieldwork is scheduled from 1 
to  15  April  2013.  The  Central  Census  Bureau  came  into  operation.  Numerous  planning, 
communication and coordination activities for the census remain to be carried out. The budget 
for  the  census  in  2013  was  adopted.  The  agriculture  census  is  planned  after  the  population 
census. In general, agricultural statistics require substantial upgrading. 

Little  progress  can  be  reported  on  macroeconomic  statistics.  The  annual  GDP  estimates  for 
2011  were  published.  Quarterly  national  accounts  cannot  be  developed  until  the  relevant 
short-term  indicators  are  produced  and  the  requisite  cooperation  between  all  involved  is  in 
place. Fieldwork for the household budget survey was completed and results are expected to 
be available at the end of October 2012. The labour force survey was implemented in 2012 
and preliminary data were published. 

There was some progress in the field of statistics. Sectoral statistics such as national accounts, 
business  and  agricultural  statistics  remain  to  be  improved.  The  population  and  household 
census  is  expected  to  be  conducted  during  2013.  Cooperation  between  the  BHAS  and  the 
Entity statistical institutes and also between the BHAS and the relevant State-level agencies 
slightly  improved.  The  communication  between  the  Entities,  the  coordination  and  the 
decision-making process in the national statistical system, need to be improved considerably. 
A  great  deal  remains  to  be  done  to  develop  fully  reliable  statistics  at  the  various  levels  of 
government. Overall, preparations are moderately advanced.  

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4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration  

Progress  was  made  in  the  field  of  visa  policy.  Positive  and  negative  lists  remain  fully 
harmonised with the EU visa list. In 2011, 248 visas were issued at the border, a decrease of 
24% compared with the same period last year, when 327 were issued.  

Following  the  lifting  of  visa  requirements  in  December  2010  for  citizens  of  Bosnia  and 
Herzegovina  holding  biometric  passports,  a  post-visa  liberalisation  monitoring  mechanism 
was  established.  Most  visa-free  travellers  are  bona  fide  travellers,  but  a  number  abused  the 
visa-free arrangement by  submitting  manifestly unfounded asylum applications to Schengen 
countries. Experts from EU Member States visited the country to assess the sustainability of 
progress  on  the  reforms  called  for  in  the  visa  liberalisation  roadmap.  An  electronic  data 
exchange  system  for  police  and  prosecutors  was  set  up.  All  law  enforcement  agencies  are 
establishing electronic registers. The rulebook on the internal organisation of the Agency for 
Prevention of Corruption and Coordination of the Fight against Corruption was adopted. The 
European Commission presented its third monitoring report to the European Parliament and 
the Council.  

Progress  was  made  on  border  management.  Most  legislation  related  to  integrated  border 
management (IBM), including the Law on Border Control, is mainly based on the acquis. The 
revised IBM strategy and action plan are being implemented. The IBM Commission adopted 
a set of protocols to enhance implementation of the agreement on interagency cooperation and 
a  manual  for  the  work  at  border  crossings.  The  rulebook  on  the  internal  procedures  of  the 
Joint Risk Analysis Centre (JRAC) was revised. Risk domains were developed as a basis for 
the annual joint risk analysis report adopted by the IBM Commission. A link was established 
between the JRAC and the databases of the agencies involved. An amended draft rulebook on 
the  internal  organisation  of  the  border  police,  legally  introducing  the  JRAC,  is  not  yet 
adopted.  

Infrastructure  at  border  crossing  points  further  improved,  in  particular  surveillance  and 
equipment.  Out  of  55  international  border  crossing  points,  29  are  covered  by  video 
surveillance. All international border crossings are equipped with biometric passport readers 
and  connected  to  the  integrated  system  of  control  of  state  border  crossings  (CSBC)  and 
organisational  units  of  the  border  police.  The  CSBC  was  upgraded  with  a  new  application 
enabling  access  from  border  crossings  to  relevant  databases.  Progress  was  made  in  the 
management of border crossing points (BCPs). A new Rulebook on Internal Organization and 
Systematization  was  adopted  by  the  Indirect  Taxation  Authority  (ITA)  Steering  Board  to 
enable  efficient  management  and  maintenance  of  BCPs.  In  addition,  budgetary  allocations 
were approved by the Council of Ministers to upgrade IBM infrastructures for a three years 
period.  

Establishment  of  two  inspection  posts  at  the  border  with  Croatia  (Bijaca  and  Gradiska)  is 
underway. An upgrade of the Neum I and Neum II BCPs to a joint location on the Croatian 
side is underway. A joint border crossing between Gradina and Jasenovac was established on 
the  Bosnia  and  Herzegovina  side.  Frequent  joint  border  patrols  with  neighbouring  countries 
resulted  in  increased  detection  of  illegal  migrants  and  smuggled  goods.  Identified  spots  for 
possible  illegal  crossings  of  the  border  with  Montenegro  and  Serbia  remain  to  be  closed. 
Conclusion  of  revised  bilateral  agreements  on  border  crossings  in  the  light  of  Croatia’s 
accession to the EU is pending. 

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

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There was some progress in the area of asylum. Bosnia and Herzegovina is implementing the 
Law on the Movement and Stay of Aliens and Asylum, as well as an asylum and migration 
action  plan.  The  asylum  section  in  the  Ministry  of  Security  is  almost  fully  staffed  and 
adequately trained. The  asylum  module  of  the  migration information system (MIS) is being 
fully  utilised.  The  Ministry  for  Human  Rights  and  Refugees  is  connected  to  the  MIS  and 
application of the system is being expanded. Work on a permanent asylum centre in Trnovo is 
progressing. A new migration and asylum strategy and the related action plan were adopted. 

The number of asylum applications increased to 41 (46 persons) in 2011 in comparison with 
38  applications  (64  persons)  in  2010.  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. 173 irregular migrants were enrolled for the 
assisted voluntary return (AVR) programme during 2011 and none during the first six months 
of 2012. 

Good  progress  was  achieved  on  migration.  The  centre  for  temporary  detention  of  irregular 
immigrants  is  in  operation.  In  2011,  a  total  of  218  foreign  nationals  were  accommodated 
there.  254  foreign  nationals  were  relocated  outside  Bosnia  and  Herzegovina.  47  of  them 
returned voluntarily to their home countries, 87 returned under the AVR programme, 81 under 
readmission  agreements  and  the  other  five  were  forcefully  repatriated.  During  the  first  six 
months of 2012, 192 third-country nationals were accommodated, of whom 87 returned under 
readmission agreements (with Serbia and Montenegro) and four were forcefully repatriated. 

Implementation of the readmission  agreement  between the European Union and Bosnia and 
Herzegovina  continued  smoothly.  In  2011,  329  persons  were  readmitted,  an  increase  of 
11.53%  from  the  previous  year.  In  the  first  half  of  2012,  139  citizens  were  readmitted,  a 
decrease/increase of 70% compared with the same period in 2011. 

Bosnia and Herzegovina continued its efforts to conclude readmission agreements with non-
EU  countries.  The  readmission  agreements  with  Turkey  and  Moldova  were  signed.  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 
Chapter 2.2 - Human rights and the protection of minorities).  

Interceptions  of  people  attempting  unlawfully  to  cross  the  border  in  2011  remained  at  the 
level  of  the  previous  year.  324  people  were  intercepted  trying  to  enter  or  leave  the  country 
illegally. In the first half of 2012, 112 people were intercepted, a decrease of 29.5% compared 
with the same period in 2011. 

The Service for Foreigners’ Affairs (SFA) has adequate administrative capacity and continued 
to enhance cooperation with other law enforcement agencies. The SFA makes full use of the 
MIS and granted access to its databases to relevant agencies at all levels. In 2011, the SFA 
issued 7,661 permits for temporary stays, a decrease of 6% in comparison with 2010. In 2011, 
308 permits for permanent stays were issued, a decrease of 2% compared with 2010. The SFA 
issued  309  expulsion  decisions  in  2011,  a  decrease  of  25%  from  2010.  In  the  first  half  of 
2012,  the  SFA  issued  4199  permits  for  temporary  stays  and  205  for  permanent  stays.  In 
addition, 149 expulsion decisions were taken. 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 2011 annual report. The fourth country 
migration  profile  was  published.  It  includes  statistics  from  the  improved  MIS.  A  working 
group with representatives from State and Entity levels is working on aligning collection of 

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migration  data  with  Eurostat  regulations.  Bosnia  and  Herzegovina’s  legislation  on  legal 
migration encompasses  the  right  to  family reunification, long-term residence and conditions 
for admission of third-country nationals for study purposes.  

Bosnia  and  Herzegovina  made  progress  in  the  areas  of  visa  policy,  border  management, 
asylum  and  migration.  The  country  continued  to  address  its  priorities  in  the  field  of  visa 
policy  and  to  advance  on  border  management.  Efforts  to  improve  border  crossing 
infrastructure,  management  and  maintenance  are  needed.  The  country’s  asylum  and 
international  protection  system  is  adequate  for  the  current  inflows.  Additional  human  and 
financial resources need to be allocated to increase the efficiency of the system. Bosnia and 
Herzegovina’s  capacity  in  the  area  of  migration  is  adequate.  Monitoring  of  migration  flows 
and  inter-agency  cooperation  continued  to  improve.  Overall,  preparations  in  this  area  are 
moderately advanced. 

4.3.2.  Money-laundering 

Some progress was made in the fight against money-laundering.  

Bosnia  and  Herzegovina  is  implementing  the  strategy  and  action  plan  for  the  prevention  of 
money-laundering  and  financing  of  terrorist  activities.  In  2011,  the  Financial  Intelligence 
Department  (FID)  within  the  State  Protection  and  Investigation  Agency  received  220,000 
reports  of  suspicious  and  cash  transactions.  153  suspicious  transactions  required  further 
investigations.  In  2011,  13  criminal  offences  involved  money-laundering.  The  electronic 
reporting  system  is  functioning.  Transaction  reports  come  mostly  from  the  banking  sector. 
Notaries, lawyers, audit offices and accountants filed no reports to the FID.  

The FID has access to the Central Bank database of bank accounts of companies and to the 
IDDEEA (Agency for identification documents, registers and data exchange) database. It does 
not  have  access  to  crime  report  databases  to  cross-check  data.  The  Law  on  Prevention  of 
two-way 
Money-Laundering  and  Financing  of  Terrorist  Activities  provides 
communication between persons covered by the relevant obligations and the FID. Feedback to 
persons  covered  by  the  obligations  is  provided  in  a  non-systematic  manner.  The  FID  has 
Memoranda of Understanding with 12 foreign FIDs and exchanges information with all other 
members of the EGMONT Group. 

for 

Training sessions including the FID, the Criminal Investigation Department, prosecutors and 
financial  regulatory  agencies  were  organised  on  reporting  obligations  and  financial 
investigations. Additional operational capabilities and budgetary independence are necessary 
in  the  FID,  as  recommended  in  the  MONEYVAL  report.  Attempts  to  relocate  it  as  an 
independent body failed. The FID requires additional human resources. Technical capabilities 
to conduct both analyses and investigations are limited.  

The criminal law provisions on confiscation of assets are largely harmonised with the Council 
of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from 
Crime  and  on  the  Financing  of  Terrorism.  While  the value of assets confiscated in criminal 
proceedings is increasing, the number of cases is decreasing. 

Steps were taken to set up a structure for management of confiscated properties. The relevant 
Republika  Srpska  agency  came  into  operation.  The  Federation  government  adopted  a  draft 
Law on the Confiscation of Illegally Obtained Property, providing for the establishment of an 
agency.  The  draft  Law  is  still  pending  adoption  in  the  Parliament.  The  Republika  Srpska 
Agency for Banking Supervision and the Federation Agency adopted decisions on minimum 
reporting  standards.  The  Federation  draft  Laws  on  Banks,  Leasing  companies  and  Micro-
credit  organisations,  harmonised  with  the  Law  on  Prevention  of  Money-laundering  and 
Financing  of  Terrorist  Activities  are  in  the  parliamentary  procedure.  The  Republika  Srpska 

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Law on the Agency for Banking Supervision is already harmonised. Cooperation between the 
Central  Bank  and  the  two  Entity  Agencies  for  Banking  Supervision  was  improved  under  a 
Memorandum of Understanding. 

Bosnia  and  Herzegovina  made  some  progress  in  the  fight  against  money-laundering. 
Additional institutional and legislative measures are required to prepare the country to fight 
money-laundering  effectively.  Mechanisms  for  confiscation  of  assets  did  not  yet  come  into 
operation throughout the country. Overall, preparations in this area are moderately advanced. 

4.3.3.  Drugs  

Little  progress  was  made  in  the  fight  against  drugs.  International  drug  trafficking  routes  to 
Europe pass either through Bosnia and Herzegovina or along its borders. Drug trafficking is a 
major  part  of  organised  crime.  Narcotics  cultivation  is  limited  to  small-scale  marijuana 
production. Drug consumption is on the rise, but remains relatively low compared with other 
European countries. 

Implementation of the national drugs strategy (for 2009-2012) and action plan remains slow. 
A  rulebook  on  safekeeping  and  destruction  of  seized  narcotic  drugs  was  adopted. 
Amendments  to  the  Law  on  Prevention  and  Suppression  of  the  Abuse  of  Narcotic  Drugs, 
providing for the establishment of an Office for Drugs, failed to be adopted. The Federation 
adopted  an  action  plan  on  the  fight  against  drugs  for  2012-2013.  The  Republika  Srpska 
strategy for monitoring drugs and preventing drug abuse and the related action plan are being 
implemented by an interinstitutional commission.  

In cooperation with the European Monitoring Centre for Drugs and Drug Addiction, Bosnia 
and  Herzegovina  prepared  a  national  action  plan  on  the  drug  information  system,  an 
information map on drug-related data sources and the 2010 annual report on the drug situation 
in the country.  

Seizures of heroin, cocaine and skunk at the border increased. The number of related reports 
of  criminal  acts  increased,  whereas  the  number  of  cases  processed  decreased  slightly. 
Coordination  between  the  different  law  enforcement  agencies  is  arranged  case  by  case. 
Effective judicial follow-up and a deterrent criminal policy are missing.  

Bosnia and Herzegovina made little progress in the fight against drug trafficking. Pending the 
establishment  of  an  Office  for  Drugs,  its  institutional  capacity  to  coordinate  the  policy 
framework  and  implement  it  systematically  remains  weak.  Law  enforcement  activities  to 
tackle  drug  trafficking  continued  but  did  not  achieve  a  major  breakthrough.  Overall, 
preparations in this area are moderately advanced. 

4.3.4.  Police  

Some  progress  was  achieved  on  police  matters.  Implementation  of  the  police  reforms  is 
continuing.  

The  capacity  of  the  Directorate  for  Coordination  of  Police  Bodies  increased.  Definitive 
premises for the Directorate remain to be secured. The Directorate acts as the national contact 
point for operational activities under the Police Cooperation Convention. In this capacity, it 
carried  out  joint  exercises  with  the  State  Protection  and  Investigation  Agency  (SIPA),  the 
Border  Police,  the  Republika  Srpska  Ministry  of  the  Interior,  the  Federal  Police 
Administration  and  the  Police  Administration  of  the  Brcko  District  on  cross-border 
surveillance, urgent pursuit and undercover investigations. A Memorandum of Understanding 
on  cooperation  in  VIP  protection  was  agreed  upon  by  all  law  enforcement  agencies.  No 
agreement was reached on a memorandum on reporting. 

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The number of messages exchanged via the Interpol network is rising. A roadmap setting out 
the conditions for the country to conclude an operational agreement with Europol was signed 
and accession to the Europol application ‘Siena’ is planned. 

The  institutional  development  of  the  Agency  for  Forensic  and  Expert  Examination,  the 
Agency  for  Education  and  Advanced  Training  and  the  Agency  for  Police  Support  is 
undermined by general budgetary constraints and lack of political agreement on their future. 

The  public  complaints  board  received  71  complaints,  mostly  related  to  incorrect  and  non-
professional behaviour of police officers. A small number of cases included suspected links to 
corruption  and  organised  crime.  Four  cases  were  proven  to  be  justified.  The  board  for 
complaints by police officers received 127 complaints in 2011, mainly linked to ranking and 
legal status. Few were confirmed and followed by measures.  

The  SIPA  reached  a  staffing  level  of  73%.  The  Law  on  Police  Officials  was  amended  to 
regulate the deployment of officers from other police bodies to the SIPA, the Border Police 
and the Directorate for Coordination of Police Bodies. A document management system was 
installed.  Temporary  financing  in  2011  prevented  the  allocation  of  funds  for  capital 
investments and new recruitments.  

The  Federation  Police  Administration  amended  its  rulebook  on  internal  organisation  to 
strengthen the sectors for combating crime and organised crime. A new draft Federation Law 
on  Internal  Affairs  was  adopted  by  the  Federation  government,  introducing  more  extensive 
political  and  administrative  oversight  over  the  work  of  the  police  and  appointment  and 
dismissal of the Police Director. Several Cantons are drafting new Laws on Internal Affairs 
aligned to the changes expected at the Federation level.  

Republika Srpska adopted a new Law on Internal Affairs. The Law was harmonised with the 
Republika  Srpska  Law  on  Police  Officers  and  with  the  national  legislation  on  protection  of 
personal  data.  The  law  did  not  change  the  overall  structure,  management  principles  or  the 
legal status and budget of the Republika Srpska police. A unit specifically assigned the task of 
fighting organised crime and corruption was established.  

Bosnia and Herzegovina made some progress in the field of police. Institutional development 
of  police  reform  agencies  and  the  Directorate  is  slowly  advancing.  The  capabilities  of 
individual law enforcement agencies are improving, but systematic cooperation remains to be 
improved. Overall, preparations in this area are advanced. 

4.3.5.  Fighting organised crime and terrorism  

There  was  little  progress  in  fighting  organised  crime.  Bosnia  and  Herzegovina  remains  a 
source of arms and ammunition for criminal groups in the EU. Organised crime activities are 
also linked to the transit of drugs on international trafficking routes.  

A working group was established to coordinate and follow up implementation of the strategy 
to fight organised crime (for 2009-2012). A number of successful joint police operations took 
place,  also  at  large  scale.  In  2011  84  reports  against  931  persons  were  handed  over  to  the 
Prosecutor’s  Office.  The  trend  over  the  past  years  shows  that  less  and  less  indictments  are 
confirmed. In 2011, less than 10% of the indictments were confirmed. Although the number 
of  reports  decreased,  the  investigations  involved  a  higher  number  of  suspects.  A  statistical 
map for a unified method for collecting statistics was prepared. A draft Law on the Witness 
Protection  Programme  is  in  the  adoption  procedure.  An  action  plan  for  prevention  and 
suppression of criminal offences relating to motor vehicles for 2012-2015 was adopted.  

Protocols under the Police Convention on Cooperation in South-East Europe were signed with 
Croatia, the former Yugoslav Republic of Macedonia, Montenegro and Serbia.  

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The  SIPA  organised  citizens’  forums  to  enable  civil  society  and  cooperation  partners  to 
contribute to the fight against organised crime. The agency operates a crime hotline. 

Due to the lack of prison capacity, Bosnia and Herzegovina is not a party to the Council of 
Europe Convention on the International Validity of Criminal Judgments or to the additional 
protocol to the Council of Europe Convention on the Transfer of Sentenced Persons.  

Proactive investigations of organised crime groups are carried out throughout the territory of 
Bosnia  and  Herzegovina,  although  unevenly.  Amendments  to  the  instruction  on  police-
prosecutor  cooperation  were  proposed,  particularly  on  cooperation  when  using  special 
investigative  means.  Joint  training  and  information  gathering  on  specific  cases  of  police-
prosecutor  cooperation  are  organised 
remain  with  proper 
implementation of the system of prosecutor-led investigations. 

regularly.  Difficulties 

The whole range of special investigative measures is used. The system for legal interception 
of  telecommunications  is  fully  operational.  Deployment  of  special  investigative  measures  is 
limited by the short maximum duration of interceptions, highly restricted use of interpreters 
for  interceptions,  lack  of  modern  technology  and  limited  powers  to  use  cover  identities  and 
vehicle registrations.  

The amendment to the Law on Protection of Classified Information, to bring the law into line 
with  the  relevant  EU  standards  and  provide  for  implementation  of  the  bilateral  security 
agreement, remains to be adopted. 

Coordination meetings for exchanging intelligence are organised at different levels but with 
uneven attendance, regularity and quality. Lack of data and persisting mistrust between law 
enforcement agencies prevent further systematic exchanges of intelligence. An electronic data 
exchange  system  for  police  and  prosecutors  was  set  up.  All  law  enforcement  agencies 
established electronic registers.  

Limited  progress  was  made  on  combating  trafficking  in  human  beings  (THB).  Relevant 
provisions  in  the  State-level  criminal  code  are  in  line  with  international  standards. 
Implementation  of  the  national  action  plan  for  2008-2012  continued,  financed  mainly  by 
donors. Thus, sustainability remains an issue. A new action plan is being prepared.  

The national coordinator’s office continued an educational campaign targeting social workers, 
secondary  school  teachers,  work  inspectors  and  prosecutors.  The  State-level  government 
secured funds for three ‘safe houses’.  

The  number  of  THB  victims  identified  increased.  The  majority  of  trafficking  was  for  the 
purpose  of  sexual  exploitation  and  begging.  Bosnia  and  Herzegovina  continues  to  be  a 
country of origin, transit and destination for trafficking of women. Provisions on THB in the 
Entity and Brcko District criminal codes are not yet harmonised with the State-level criminal 
code  or  with  ratified  international  instruments.  The  Department  for  Combating  THB  within 
the national coordinator’s office and the database on THB victims are not fully operational.  

Some  progress  was  made  in  the  fight  against  terrorism.  The  Joint  Task  Force  to  fight 
terrorism was re-activated and its technical capacity developed. Security and intelligence data 
available  24/7  are  exchanged  between  the  agencies  represented  in  the  Joint  Task  Force.  As 
part of the civil-army cooperation plan in case of a terrorist attack, training in line with NATO 
and EU standards was organised.  

There  were  some  efforts  to  implement  the  strategy  for  preventing  and  fighting  against 
terrorism for 2010-2014. All law enforcement agencies and the Intelligence Security Agency 
of Bosnia and Herzegovina (OSA) adopted action plans. A Counter Terrorism Task Force and 
an  operation  Group  to  suppress  radicals  and  extremists  potentially  capable  of  conducting 

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terrorist activities were set up. While Republika Srpska and the Brcko District amended their 
criminal  codes  to  introduce  a  criminal  offence  to  suppress  crimes  linked  to  hate  and 
extremism, the Federation needs to amend and harmonise its criminal code.  

Bosnia and Herzegovina continued to implement the restrictive measures established by UN 
Security  Council  Resolutions.  The  Ministry  of  Security  adopted  a  number  of  decisions 
regarding Liberia, Iraq, Somalia, members of Al-Qaida, Osama Bin Laden, Taliban and other 
individuals or groups linked to terrorist activities.  

Bosnia  and  Herzegovina  made  some  progress  in  the  fight  against  organised  crime  and 
terrorism.  The  lack  of  systematic  exchanges  of  proper  intelligence  and  of  effective  and 
sustainable  coordination  and  cooperation  mechanisms  between  law  enforcement  agencies  is 
preventing further progress in the fight against organised crime. Capacity to fight trafficking 
of  human  beings  remains  to  be  strengthened.  Proactive  identification  of  victims  and  an 
effective  national  referral  mechanism  are  crucial.  Further  strengthening  of  criminal 
prosecution  is  needed.  Proactive  and  preventive  action  and  also  intelligence-sharing  remain 
uncoordinated. Overall, preparations are moderately advanced. 

4.3.6.  Protection of personal data  

There was some progress on personal data protection.  

Following  the  latest changes  to  the Law on Protection of Personal Data,  the Director of the 
Personal Data Protection Agency and his deputy are appointed by parliament. All decisions of 
the agency are final and can be challenged only before the court of Bosnia and Herzegovina.  

The  agency  increased  its  staffing.  Given  the  increase  in  its  workload,  the  2012  budget  has 
allocated further resources.  

The agency started to issue orders to ensure efficient implementation of the Law on Protection 
of Personal Data. It carried out 17 monitoring inspections and provided 117 expert opinions, 
three  of  which  were  on  draft  laws  and  others  to  legal  and  private  entities.  It  dealt  with  35 
complaints  and  integrated  19  new  controllers  in  the  main  registry.  The  Agency  has  also 
started  with  execution  of  sanctions,  issued  one  penalty,  and  has  carried  out  35  ex  officio 
procedures.  

Amendments  to  the  Law  on  IDs,  Travel  Documents  and  Personal  Identity  Numbers  were 
adopted to regulate use of copies of such documents. 

The  agency  regularly  receives  requests  to  give  its  opinion  on  draft  regulations,  but  no 
systematic screening takes place in the legislative process to make sure that new regulations 
comply with the Law on Personal Data Protection. 

The  Law  on  Personal  Data  Protection  does  not  apply  to  the  Bosnia  and  Herzegovina 
Intelligence Agency. 

There was some progress on personal data protection. Overall, preparations for personal data 
protection are advancing, although still at an early stage.  

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Statistical Annex 

STATISTICAL DATA 
Bosnia and Herzegovina 

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

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real  GDP  growth  rate  (growth  rate  of  GDP  volume,  national 
currency, % change on previous year) 
Employment  growth  (national  accounts,  %  change  on  previous 
year) 
Labour  productivity  growth:  GDP  growth  per  person  employed  (% 
change on previous year) 
Real  unit  labour  cost  growth  (national  accounts,  %  change  on 
previous year) 
Labour productivity per person employed (GDP in PPS per person 
employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
Industry 
Construction 
Services 

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

Industry 
Industrial production volume index (2005=100) 

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

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million 
euro) 

of which government transfers (million euro) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of  which  FDI  of  the  reporting  economy  in  EU-27  countries 

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

Note

Note
1) 

2) 
2) 
2) 
2) 

Note

Note
3) 

Note

2001 
3 790s 
51 209 

2001 
12 641 
6 463 
1 705s 
: 
: 
2.4 

: 

: 

: 

: 

10.8 
19.8 
6.2 
63.2 
: 
: 
: 
28.2 
75.5 

2001 
72.8e 

2001 
3.1 

2001 
-833 
-3 308 
255 
595 
1 626 

450 
133 
0 
: 

133 

2007 
3 843 
51 209 

2007 
21 836 
11 165 
2 906 
6 360 
29 
6.1 

: 

7.9 

: 

: 

9.8 
20.4 
5.9 
63.9 
113.6 
28.1 
1.5 
37.2 
68.6 

2008 
3 842 
51 209 

2008 
24 759 
12 659 
3 295 
7 318 
32 
5.6 

: 

7.5 

: 

: 

8.9 
21.0 
6.4 
63.7 
114.3 
30.6 
1.6 
36.8 
69.6 

2009 
3 843 
51 209 

2009 
24 051 
12 297 
3 200 
7 259 
31 
-2.9 

: 

8.0 

: 

: 

8.6 
20.2 
6.2 
65.1 
114.3 
24.7 
-0.5 
32.2 
55.2 

2010 
3 843 
51 209 

2010 
24 584 
12 570 
3 271 
7 274 
30 
0.7 

: 

: 

: 

: 

8.3 
20.8 
5.1 
65.8 
113.3 
21.7 
0.3 
37.4 
59.1 

2011 
3 840e 
51 209 

2011 
25 474 
13 024 
3 392e 
: 
: 
1.3 

: 

: 

: 

: 

8.1 
21.0 
4.8 
66.1 
: 
: 
: 
: 
: 

2007 
119.9e 

2008 
128.7e 

2009 
130.6e 

2010 
135.4e 

2011 
144.1e 

2007 
1.5 

2007 
-1 191 
-4 142 
639 
336 
1 976 

193 
1 540 
-20 
: 

1 520 

2008 
7.4 

2008 
-1 771 
-4 823 
664 
457 
1 930 

186 
695 
-11 
: 

684 

321 

2008 
-2.2 
17.1 

2008 
: 
: 

2009 
-0.4 

2009 
-778 
-3 410 
563 
416 
1 653 

166 
185 
-4 
: 

181 

91 

2009 
-4.4 
21.8 

2009 
: 
: 

2010 
2.1 

2010 
-719 
-3 232 
567 
210 
1 736 

168 
205 
-32 
: 

174 

: 

2010 
-2.5 
25.6 

2010 
: 
: 

2011 
3.7 

2011 
-1 142 
-3 629 
544 
164 
1 779 

153 
327 
-14 
: 

313 

: 

2011 
-1.3 
26.1 

2011 
: 
: 

of  which  FDI  of  EU-27  countries  in  the  reporting  economy 

: 

333 

(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) 

Note

Note

4) 

4) 

2001 
: 
35.0 

2001 
: 
: 

2007 
1.2 
18.1 

2007 
: 
: 

1 377b 

2 931 

2 910 

2 836 

3 017 

3 163 

2 387b 

6 112 

6 360 

6 498 

6 968 

7 372 

: 

: 

: 

: 

: 

: 

EN 

58 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
to 

financial 

residents 

institutions 

Total  credit  by  monetary 
(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 (2005=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) 

5) 
6) 

7) 

Note

8) 

Note

Labour market 
Economic activity rate (20-64): share of population aged 20-64 that 
is economically active (%) 
*  Employment  rate  (20-64):  share  of  population  aged  20-64  in 
employment (%) 

Note

Employment rate male (20-64) (%) 
Employment rate female (20-64) (%) 

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

9) 
9) 
9) 
9) 
10) 

Agriculture 
Industry 
Construction 
Services 

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

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

Unemployment  rate  of  persons  <  25  years:  share  of  labour  force 
aged <25 that is unemployed (%) 
Long-term  unemployment  rate:  share  of  labour  force  that  is 
unemployed for 12 months and more (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index  of  real  wages  and  salaries  (index  of  nominal  wages  and 
salaries divided by the CPI/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 (%) 

4) 

1 707 

6 060 

7 419 

7 184 

7 436 

7 828 

: 
: 
: 
1.956 

: 
1 385 

2001 
: 
: 
: 
: 
: 
: 

2001 
1.9 

7.6 

71.3 
76.7 

2001 
: 

: 

: 
: 
: 

: 
: 
: 
: 
40.0 
: 
: 
: 

: 

: 
7.2 
0.4 
1.956 

: 
3 425 

: 
7.0 
0.4 
1.956 

: 
3 219 

2007 
7 106.1 
3 035.3 
-4 070.8 
: 
57.3 
47.8 

2008 
8 330.2 
3 431.6 
-4 898.6 
: 
55.0 
48.0 

: 
7.9 
0.3 
1.956 

: 
3 176b 

2009 
6 317.1 
2 828.1 
-3 489.0 
: 
54.0 
49.1 

: 
7.9 
0.2 
1.956 

: 
3 302 

: 
7.4 
0.1 
1.956 

: 
3 284 

2010 
6 961.9 
3 627.9 
-3 334.0 
: 
54.4 
45.9 

2011 
7 938.4 
4 203.9 
-3 734.5 
99.0p 
55.6 
45.4 

2007 
-0.3 

2008 
0.0 

2009 
-0.1 

2010 
-0.4 

2011 
-1.0p 

6.8 

6.9 

6.5 

6.4 

5.4p 

72.1e 
77.5e 

2007 
: 

: 

: 
: 
31.9 

19.8 
23.0 
9.6 
47.5 
29.0 
26.7 
32.9 
58.4 

25.0 

72.4e 
77.7e 

2008 
: 

72.4e 
77.7e 

2009 
: 

72.4e 
77.7e 

2010 
: 

72.4e 
77.7e 

2011 
: 

: 

: 
: 
34.4 

20.6 
21.7 
10.8 
47.0 
23.4 
21.4 
26.8 
47.5 

20.2 

: 

: 
: 
34.0 

21.2 
21.2 
10.3 
47.3 
24.1 
23.1 
25.6 
48.7 

20.0 

: 

: 
: 
33.3 

19.7 
21.9 
9.1 
49.3 
27.2 
25.6 
29.9 
57.5 

22.3 

: 

: 
: 
33 6 

19.6 
20.9 
8.0 
51.5 
28 0 
26 5 
30 5 
57 9 

: 

Note
11) 

2001 
408.0 
: 

2007 
645.0 
: 

2008 
752.0 
: 

2009 
790.0 
: 

2010 
798.0 
: 

2011 
816.0 
: 

: 

: 

: 

: 

: 

: 

Standard of living 
Number of passenger cars per 1000 population 
Number  of  subscriptions  to  cellular  mobile  telephone  services  per 
1000 population 

Note

2001 
: 
92.6s 

2007 
171.8 
637.6 

2008 
178.8 
769.9 

2009 
180.6 
830.7 

2010 
188.6 
784.3 

2011 
191.4e 
825.8e 

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

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

Note

Note

2001 
: 
: 

2001 
: 

: 
: 

2007 
19.9 
28 

2007 
: 

: 
10.9 

2008 
19.9 
28 

2008 
: 

: 
: 

2009 
19.9 
35 

2009 
: 

: 
: 

2010 
20.1 
35 

2010 
: 

: 
: 

2011 
: 
: 

2011 
: 

: 
: 

EN 

59 

   EN 

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

Note

2001 
: 
: 

2007 
: 
: 

2008 
: 
: 

2009 
: 
: 

2010 
: 
: 

2011 
: 
: 

: 

: 

: 

: 

: 

: 

51.0 

62.0 

60.0 

63.0 

62.0 

64.0 

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

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

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

tonnes,  harvested 

tonnes,  harvested 

(thousand 

(thousand 

tonnes, 

Note

12) 

Note

13) 

2001 
: 
: 
: 
: 
: 
: 
: 

2001 
: 

: 
: 
: 
: 
: 

2007 
: 
: 
: 
: 
: 
: 
13.0 

2007 
: 

1 670 
468 
535 
1 104 
724 

2008 
: 
: 
: 
: 
: 
: 
14.8 

2008 
: 

1 679 
459 
502 
1 101 
737 

2009 
: 
: 
3 629bp 
: 
: 
: 
15.7 

2009 
: 

1 656 
458 
529 
1 125 
734 

2010 
: 
: 
3 476p 
: 
: 
: 
17.1 

2010 
: 

1 649 
462 
590 
1 109 
693 

2011 
: 
: 
: 
: 
: 
: 
: 

2011 
: 

1 684 
455 
577 
1 086 
689 

14) 

1 139 

1 001 

1 329 

1 343 

1 104 

1 119 

: 

: 

: 

: 

: 

: 

15) 

190 

254 

282 

280 

286 

287 

: = not available 
- = not applicable 
p = provisional 
e = estimated value 
b = break in series 
* = Europe 2020 indicator 
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) 
12) 
13) 

In 2011, the calculation method for GDP was improved and figures were revised. 
2001 - 2009, 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).  
Data series for period January 2006 – September 2011 updated based on new methodology.  
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.  
Based on export and import unit value indices for 2011. 
2005 - 2011, data according to Nace Rev. 1.1.  
2001, data from the Bureau for Employment.  
2011, Currency: BAM (Convertible Mark); including data from Brcko District; net salary. 
2009 - 2010, primary production of lignite and brown coal included.  
2007 - 2011, the utilised agricultural area consists of arable land, kitchen garden, permanent crops and permanent grassland as 
cadastral data (not as UAA). 
2009, including triticale and buckwheat.  
Including lettuce and melons after 2009. 

14) 
15) 

EN 

60 

   EN