Banja Luka, 20 March 2015

Excellences, Ladies and Gentlemen,

Thank you all for coming. I am very grateful to the Ambassador of Norway Vibeke Lilloe for sponsoring this event and I am grateful to the Mayor of Banja Luka, Mr. Slobodan Gavranovic, for the hospitality his beautiful city is offering us today.

As the Ambassador of Norway mentioned, the Compact for Growth we have an agenda of reforms that are needed in Bosnia and Herzegovina. It is a reform agenda that puts focus on opportunities and on economic prospects for you and your families, which is what today’s event is all about. 

With the conclusions of the European Council on Bosnia and Herzegovina from last December, the Compact for Growth now constitutes a driving force for the immediate engagement of the EU with BiH. And since February this year, we also have a firm commitment from Bosnia and Herzegovina to begin implementing the agenda as soon as all the relevant governments have been formed.

As you probably know, the unemployment rate in Bosnia and Herzegovina stands at 27.5 percent of the workforce—one of the highest rates in Europe. Seven out of ten of these people have been unemployed for two years or more. Two out of three young people are unemployed.

This is an appalling waste of talent.

But even worse, 44 percent of the working-age population have given up on finding work altogether and they are not even included in these unemployment figures. This percentage is the lowest in Europe. In other countries in Europe, the average number of people who are active in the labour market is about 70 percent. In BiH, it the reverse—almost 60 percent are inactive.

This is an appalling expression of lost hope.

So this event is organised in an attempt to reach out to some of these people; to re-connect with them—with you, perhaps; and to encourage engagement and participation in the economy.

We also want to encourage you to engage in the political process and to push for the socio-economic reforms that are so necessary. A Forum for Prosperity and Growth was organised in Sarajevo in May and here in Banja Luka in July. Representatives of the business community, banks, labour unions, academics and politicians all agreed that something urgent has to be done. They identified six priorities that would reinvigorate the economy and spur the creation of jobs, especially for the youth of the country. These priorities are set out in the Compact for Growth and Jobs:

1. Taxes on wages have to be cut so that more people will be offered jobs at a reasonable wage;

2. Laws that regulate employment must be freed up so that employers—and many of them are here today—will be willing to hire more people;

3. The complicated rules and regulations that make it almost impossible to do business in this country must be radically simplified so that there will be more investment;

4. And the simplification of these rules will also reduce opportunities for corruption and make it easier for the rule of law to be exercised;

5. Old enterprises need to be restructured so that assets are free to be put to their most productive use; and

6. Social benefits and pensions need to be given to those people who really need them instead of to those who could and should be making a contribution to society.

That’s it! – Just 6 items on a comprehensive agenda for reform. Your governments really need to do this and we in the international community—including the EU, the IMF, the World Bank Group and USA—are ready to assist. We all believe that these reforms can work and can get investment and employment going again.

Some people will claim that these economic reforms do not promote social justice. But they are wrong. This reform agenda is all about social justice—justice in the real circumstances of Bosnia and Herzegovina that offers an opportunity to those who are stuck on the outside:

• Lower taxes on wages will bring more people into the formal sector where their taxes will contribute to society and where they will have protection from abuse;

• The reform of labour-market regulations will open up opportunities for those who have given up on finding work and ensure that we do not have another lost generation in BiH;

• As the situation now stands, BiH does not adequately provide for the needy in society. You spend more on social welfare than any other country in the region but less than 20 percent of this money goes to the poorest in the population. This is not real social justice.

• Meanwhile, many pensions are based on entitlement rather than need and every three registered workers currently support two pensioners. As the population grows older, and the formal economy shrinks, this ratio will increase even further. The pension system is simply not sustainable and it is, in effect, an empty promise. Reform is the cure for empty promises.

Clearly, reform implies that some people will have to give up some of their privileges. Naturally, they will resist change. But people who benefit from the current situation will have to make some compromise if the whole of society is, ultimately, to benefit.

In the end, the main question is whether BiH wants to have an economy and a welfare system that is based on privilege—and where privilege is awarded through corruption and nepotism—or one that is based on equality of opportunity? This is the fundamental question that is addressed in the Compact.

Bosnia and Herzegovina is a European country and belongs in the European Union family. As has been repeated over and over by the European Council, the European Union is strongly committed to helping Bosnia and Herzegovina join the Union.

The Compact should set the socio-economic agenda of Bosnia and Herzegovina for the years to come. Your governments must implement these reforms for the sake of a better future of this country and its citizens. The EU and other international organisations are ready to assist in the process.

While we collectively appeal to the governments of Bosnia and Herzegovina to do their job, and implement the necessary reforms, today’s event is about getting as much out of the current situation as possible.

So, the agenda is clear and you must play your part. Pick up a copy of the Compact brochure and see what you think. I also hope that you will benefit from this event today.

Please ask questions; get involved; and—most of all—hold to account those that can make socio-economic reforms happen: those are the people that you elected—your political leaders.