Recommendations for the BiH authorities
High unemployment rates, especially among young people; low rates of investment and growth; corruption and a complicated and non-transparent business climate; and a low level of social support for less-well-off citizens are key issues that must be addressed by a coherent and comprehensive reform programme. This was concluded by participants at the Forum for Prosperity and Jobs in Bosnia and Herzegovina, held on 26 and 27 May in Sarajevo.
After discussions in five separate workshops, Forum participants agreed that a fresh start is vital and that the whole process of economic transformation has to be revived. With this in mind, the BiH authorities are urged to address the following issues:
• Bosnia and Herzegovina must generate new jobs and improve competitiveness by reducing the labour cost to a far lower percentage (aiming at the European average of around 30%) of labour costs. The authorities are urged to consider proposals to lower the tax burden on labour, with the assistance of the IMF, while ensuring fiscal sustainability.
• Bosnia and Herzegovina must enact a set of labour market reforms to increase job creation, by revitalising the process of collective bargaining, reducing disincentives to hiring and, in particular, promoting the inclusion of young people in the workforce.
• Bosnia and Herzegovina is ranked 131st on the World Bank’s Ease of Doing Business Indicators list: this must improve. The authorities must agree on a results-based plan designed to improve the country’s ranking in the Ease of Doing Business list and other lists so that it rises at least to the regional average.
• Bosnia and Herzegovina has a weak private sector and is experiencing serious difficulty in attracting investment. Legislation that protects investors must be improved and improvements must also be made in maintaining standards of corporate governance, in providing access to funding (particularly for new enterprises) and in establishing a more efficient insolvency framework. The authorities are urged to speed up reforms that will strengthen the insolvency framework, facilitate privatization and encourage the creation of new businesses.
• Corruption is killing off initiative and investment in the BiH economy. Fighting corruption requires strict adherence to the rule of law (police, prosecutors and judges) and substantial reforms in public administration. The current review of Bosnia and Herzegovina’s Anti-Corruption Strategy should involve all institutions, civil society and academia.
• The BiH authorities must target social assistance more effectively by taking steps that will make the delivery of social protection fairer and more efficient. The World Bank is ready to work with the authorities in moving forward with these reforms.