A Compact for Growth and Jobs in Bosnia and Herzegovina

In late May this year, the Forum for Prosperity and Jobs brought together representatives of government, business and workers, along with international and domestic economic experts and BiH citizens who have insights on running businesses and creating jobs. The conference proposed concrete and urgent measures that can tackle unemployment and corruption, restore the flow of investment into BiH jobs and make the social protection system fairer and more efficient.

These proposals have now been developed into a Compact for Growth and Jobs, a practical agenda that will be recommended to BiH legislators and policymakers in the coming months with a view to implementation immediately after the new authorities are formed following the October elections.

The Compact lists six priority reform measures:

1. High taxes  on wages are driving people into the grey economy and undermining the social unity that is necessary to pay for social services. The grey economy does not generate revenue (pay taxes) but  people employed in it enjoy services (i.e., health care) that are paid with taxpayer money. Therefore, taxes on working need to be cut, and this will require savings on government spending

2. Laws that protect workers with jobs are making it impossible to hire people without jobs. Too much  egulation is preventing young people from getting access to employment. Therefore, labour laws and regulations  need to be reformed.

3. BiH has one of the most complicated business environments in the world and it is steadily getting worse. As a result, there is virtually no investment, neither domestic nor foreign. The business environment needs to be simplified and red tape needs to be cut across the board (as other countries have done).

4. Many old enterprises are barely surviving and rely on help from the state (that raises taxes on others to provide them with subsidies). This is not a sensible policy for future growth. Instead, old enterprises need to face competition, and either restructure or face the prospect of closure so that new enterprises can take their place.

5. Corruption acts as a serious barrier to investment and undermines growth and social policies. And corruption thrives on complicated regulations and fees that officials can offer to resolve or get around. There needs to be a drive to reduce regulation and to make the remaining procedures clearer to and open to the scrutiny of the public.

6. Social security needs to go to those people who really need help. Instead, many people who are not poor have privileged access to benefits and this puts an unfair burden on working people as well as on those who need help.

This is an agenda for practical action which is non-partisan and which can be implemented quickly. It could change the economic prospects of hundreds of thousands of families in Bosnia and Herzegovina and at the same time bring the country closer to European Union membership – by preparing BiH companies to compete in the EU single market.  Policymakers, businesspeople, academics, unions, employers and NGOs have all come together to produce an agenda for change. The question now is whether it can be transformed into government policy after the next election.