Such are a few examples of the many administrative barriers that need to be knocked down in order to unlock local investment.

Led by various international agencies, large-scale reforms have started to overhaul the business environment and stimulate private sector activity. Framework reforms include creating conditions to enable a wider variety of exports, better and faster privatization, implementation of bankruptcy, a more flexible labor market, strengthened domestic credit markets and enhanced corporate governance. BiH is far behind in the establishment of an institutional and regulatory framework to certify the standard of its goods for export. And, while progress has been made, the Single Economic Space<sup>2</sup> has not yet been fully achieved, a critical factor for developing the economy and a must for BiH to become an accession country into the European Union.

Such programs, despite their evident long-term benefits for the country, are mostly moving forward to the extent that the international agencies are supporting them through conditionality, since the political arena is still divided along ethnic lines, and the nationalistic or personal vested interest of politicians often block progress. Nevertheless, some progress is being made on the following framework reforms as outlined in the BiH Development Strategy, approved by all three prime ministers in early December 2003:

- Implementation of indirect tax reforms -- merging the Customs Agencies and introducing VAT – two developments that will make it easier and fairer to do business in BiH.

- Creation of a single business registration system: The BiH framework law on business registration, which is under consideration by the Council of Ministers will eventually make it easier and quicker for foreign and BiH investors to set up companies and create new jobs, resolving the current expensive, bureaucratic and time-consuming system that discourages economic recovery.

- Implementation of a coherent, comprehensive trade policy: In addition to indirect tax reform, the authorities are pushed to move ahead with judicial reforms, and also with liberalizing the telecom and power sectors.  EC certification procedures have to be established to help companies get the required approvals that lets them sell their goods in the EU.

- Improvement of institutions and services to support business and promote exports: The aim is to establish an efficient and responsible, single statistics service to give potential investors an overview of the BiH economy. The Foreign Investor Promotion Agency, the State Veterinary Office, and the Institute for Standardization are finally coming under budgetary financing so that they can help BiH companies compete in the global export market. Establishment of a BiH Investment Guarantee Agency is under consideration.

- Implementation of a domestic debt package is planned, to verify all claims and make arrangements for repayments, also tackling the issue of bonds.

- Restarting of the privatization process, to make it easier to tender and privatize strategic enterprises, through  stronger, more efficient and more transparent Entity privatization agencies.

- Enactment of a Civil Procedure Code setting in place the kinds of commercial legislation and dispute-solving mechanisms that will give confidence to businesspeople and investors; and the enactment of basic contract laws.

- Implementation of a Law on Accounting and Auditing that will modernize this core function of business life.

But these are not quick fixes, nor a very gratifying agenda for a young population of high-energy entrepreneurs who need quick results. To the contrary, the population is extremely skeptical of the government’s commitment to those reform efforts. They see reform as the responsibility of the International Community, and especially the High Representative who has the power, among other things, to enact or repeal legislation. Further, with the employed population earning an average wage of $250 a month, the general public is unresponsive to abstract issues such as business environment. The result has been an absence of motivation for strategic reforms.

> 2 The EC Community Assistance for Reconstruction, Development and Stabilization (CARDS) program for BiH includes a sub-program, currently in its second phase, which aims to establish a Single Economic Space in BiH in line with the EU Aquis Communitaire and in order to facilitate the EU integration adoption through the necessary legislative, regulatory and institutional reforms.

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