Bosnia: Stagnation – And Turbulence – On The Horizon – Analysis

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With no sign of any end to political infighting, major moves on corruption, economic reform or accelerating the EU integration process appear unlikely.

By Elvira M. Jukic

Solving export problems before Croatia joins the EU, getting closer to submitting an EU membership application, addressing a chronic lack of money, resolving the reconstruction of the Federation entity government and fight against the corruption are the major issues facing Bosnia in 2013.

Much work is needed also in preparation for the historic population and household census, which has not been conducted since 1991, as well as in figuring out how to improve the everyday life of citizens hit by worsening unemployment and higher prices of food.

Bosnia and Herzegovina

Bosnia and Herzegovina

World Bank projections for next year say all countries in the region need more intensive reforms to reduce public debt and accelerate reforms in the public sector, investment climate and labour markets.

Since Bosnia’s state government was restructured in the last quarter of 2012, it has to demonstrate its functionality in 2013 after the turbulence over changing ministers consumed much of the energy that could have been used in focusing on more important issues.

All in all, experts are not optimistic about 2013, and either expect the pattern of the previous year to be repeated – meaning nothing major will happen – or some expect only slow progress in some fields.

Loans to finance debts:

A World Bank report in December said it expected sluggish growth in the 2013 in the region, with the lowest growth in Bosnia, of 0.5 per cent, and fastest is expected in Kosovo, 3.3 per cent.

“Unemployment has become a massive social crisis, which is unlikely to abate until the return of more robust, labor-absorbing growth,” the report said referring to Bosnia among other countries.

The rapid increase in food prices during the summer of 2012 drew attention around the world as well as in Bosnia.

“Food is a significant share of household spending,” the same report said, “particularly for some of the most vulnerable groups, so that even small increases could make life difficult for large numbers of households.”

“Other possible price rises, such as for energy, might compound the strains on their budgets,” the Bank said.

In the region, Albania and Bosnia are potentially most vulnerable because of the higher share of food in household budgets there, and their greater reliance on grain imports. Serbia, as a grain exporter, may be less vulnerable.

One fact holding Bosnia back from returning to growth are its debts, and the fact that the country relies heavily on external demand for recovery.

“The two entities in BiH should continue efforts to improve the targeting of their safety nets and make benefit administration efficient and transparent,” the report said on Bosnia.

Budgets for 2013 in both entities, the Serb-led Republika Srpska and Bosniak-Croat Federation, were set higher than the previous year’s, reflecting a need to pay off loans taken to fill budgets in previous years.

The Republika Srpska budget for 2013 was set at 994 million euro, a little higher than the 2012 budget of 925 million euro. The Federation budget was set at 1.13 billion euro, almost 11 per cent more than in the previous year.

The expansions of both budgets are to be covered by a fresh IMF loan to Bosnia of 405 million euro, spread over two years.

The loan was presented as a success by both entity governments, which said that as a result both entities will function over the next year. But long-term solutions are still not in sight.

Political deals:

The political scene will be marked by continuing uncertainty. While the state government changed a few ministers at the end of 2012 following a change in the ruling coalition, attempts to change the Federation entity government along the same lines will continue in 2013.

“The most negative situation that we can expect in the next year in terms of politics is that nothing happens,” journalist Ozren Kebo told Balkan Insight.

“No one here has a solution to the problem as a goal,” he added. “We are hostages of this situation, which is controlled by political elites.”

Although he is not optimistic about 2013, some things might move ahead in the country, like the reconstruction of the Federation, announced for the start of 2013, he said.

“We all want a solution simplifying this monstrous system in the Federation,” Kebo said. “But it can only be started as a process next year, not finished.”

Apart from the announced reconstruction of the Federation entity, which currently comprises ten cantons, whose huge administrations cost a lot of money, getting closer to the European Union also will be on the agenda.

But since the EU “Road Map” given to Bosnia in June in Brussels, work on it has barely started.

The Road Map contains an obligation on Bosnia to implement the 2009 Sejdic-Finci ruling by the European Court of Human Rights. This told Bosnia to change its constitution to allow ethnic minorities to run for top posts currently reserved for the three largest ethnic groups, Serbs, Bosniaks and Croats.

Other EU conditions are the creation of a functional coordination mechanism that would define and distribute all the obligations and authorities of all institutions in the country during the EU process.

Tija Memisevic, of the Sarajevo-based European Research Center, told Balkan Insight that Bosnia may formally get a little closer to the EU in 2013.

“The trend is that EU criteria are not being respected and there are even compromises over European standards and regulations which is something to be worried about,” Memisevic said.

She added that EU messages, such as “whatever local politicians agree to is acceptable”, have ended up with the agreement of the Social Democratic Party, SDP, and the Alliance of Independent Social Democrats, SNSD, which, according to Memisevic, focus only on keeping the two parties in power.

“The SDP-SNSD agreement is the answer of the ruling structures to the problematic situation of public finances,” Memisevic said. “Their agreement is just focused on deepening debt and does not offer any development.”

Memisevic also warned about the long-term consequences of budgets filled with foreign money and used to pay off old debts.

In terms of EU integration, Memisevic said the EU should become more serious in its approach to Bosnia and more decisive in its relationship with the authorities.

“The EU should renew its mechanism of conditioning, instead of agreeing to the destructive compromises of ruling structures, which don’t have the process of EU integration at heart,” Memisevic said.

Corruption still endemic:

Another long-term problem is corruption. Ivana Korajlic, of Transparency International Bosnia, told Balkan Insight that she did not expect any serious steps in fighting this problem over the next year owing to laws being changed and agreed on only by political elites and not primarily in parliaments.

She referred to the meetings of leaders of ruling parties who have developed a practice of agreeing on laws outside institutional gatherings and then implementing the results through their parties in governments and parliaments.

“It is clear that…the institutions which implement laws absolutely don’t make sense anymore,” Korajlic said. “That is why I don’t have illusions that we will see any progress next year.”

Korajlic added that she did not expect any major corruption prosecutions, either, since most such cases had remained untouched for years.

“The list of corruption cases is long and I am afraid that processing them is an empty hope until such time as Bosnia, like Serbia, gets a list of cases that it has to solve,” she said. “Only then will something move forward.”

As the countries of the region slowly but surely head towards EU membership, with Croatia joining the union in July, Bosnia is struggling to factor in this change.

Once it joins, Croatia will close its borders to all Bosnian products that are not certified according to EU rules, which will hit dairy producers who export a significant part of their product to Croatia.

Bosnia does not yet have certified laboratories to help Bosnian producers continue exporting to Croatia. It has assured only two Border Inspection Posts where products can be checked which is not enough for all products from Bosnia.

Although Croatia planned to start closing the border to non-certified products from January 1, it has recently extended the date to July 1 – the day of joining the EU, so that Bosnian institutions must focus on solving the issue by then if it does not want hundreds of producers to lose their jobs.

Census delay?

The 2013 is also planned as the year of census, the first head count in 22 years owing to the outbreak of the 1992-5 war in the meantime.

In December, the International Monitoring Commission, which oversaw the conduct of the October 2012 test census, recommended that the census be postponed for six months, stating Bosnia was not technically ready, but Bosnian authorities still did not decide whether to do so.

Tija Memisevic said it was most important that citizens were well informed enough about it and that it is conducted professionally.

Balkan Insight

The Balkan Insight (forner the Balkan Investigative Reporting Network, BIRN) is a close group of editors and trainers that enables journalists in the region to produce in-depth analytical and investigative journalism on complex political, economic and social themes.

BIRN emerged from the Balkan programme of the Institute for War & Peace Reporting, IWPR, in 2005. The original IWPR Balkans team was mandated to localise that programme and make it sustainable, in light of changing realities in the region and the maturity of the IWPR intervention.

Since then, its work in publishing, media training and public debate activities has become synonymous with quality, reliability and impartiality. A fully-independent and local network, it is now developing as an efficient and self-sustainable regional institution to enhance the capacity for journalism that pushes for public debate on European-oriented political and economic reform.

One thought on “Bosnia: Stagnation – And Turbulence – On The Horizon – Analysis”

  1. You are right that there are economic serious problems facing the country: corruption, debt, and a large and inefficient public sector which is the root of all of it. It is fairly easy to get this information from IMF, the EU institutions (and actually a little common sense). However, on the issue of forming a new government you are not very well informed. Although a new majority has been formed they cannot oust some of the ministers (!), because this needs to be confirmed by a single (!!) person – the president of the federation (!!!). He is currently blocking it. Why? Well, the political system is too complicated and corruption is widespread, remember? Both SDP and SBB are pro-European, and pro-reform. The change of the government in the FBiH is an important step, since the SDA is unwilling to carry out the necessary reforms. Together with the two major Croat parties HDZ and HDZ 1990 they are trying to change this. The process is being blocked so far, but there is still hope that they will succeed.

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