On 4 July, the EU Special Representative in BiH organised a preliminary discussion in Sarajevo on the need for continuing reforms after this year’s elections. The discussion was attended by representatives of major political parties, employers, unions and civil society; including economic experts. The discussion was informed by contributions from the IMF, World Bank, IFC, EBRD, USA and EU. It identified possible areas for urgent attention by the next set of governments.
Three years ago, in response to a deteriorating socio-economic situation, BiH embarked on an ambitious path of reforms supported by the International Community. The aim was to bring economic growth, jobs and opportunity for the majority of people. Throughout the process, important and sometimes painful measures were taken and, as a result, most economic indicators have improved.
But many challenges still remain: BiH’s society is ageing rapidly, too many citizens are hurt and disheartened by widespread corruption, and young people are leaving the country in search of a better future. The rule of law remains weak and a bloated and inefficient public sector puts a heavy burden on a private sector that still provides too few opportunities—especially for the young. This analysis was shared by most participants during the discussion.
There was a divergence of views on progress achieved under the existing Reform Agenda but, more importantly, there was consensus on the need to press ahead with reforms in the interest of citizens. The process of formation of new governments should be expedited and all participants agreed that continued reforms should be at the centre of the new governments’ programmes. They also agreed that reforms should be undertaken early in the mandates of new governments at both state and Entity level; including those measures not yet completed under the existing Reform Agenda.
Moreover, there was general agreement that a concentration on the following areas would bring tangible results to the citizens of BiH and would also serve to advance BiH on its path towards the European Union:
1. The creation of new jobs, especially for youth, and the need to stem the brain drain from BiH: This effort should be spearheaded by lowering the tax burden on labour, which would also contribute to the fight against the grey economy. Labour-market policies should be actively pursued and the educational system should be better linked to the needs of employers.
2. Rule of Law and good governance are central aspects for economic prosperity and will be essential to achieve further progress on the path of EU integration path: Widespread corruption can only be tackled through greater confidence in the rule of law and incoming governments should be encouraged to pursue recommendations from the peer reviews and sub-committees under the Stabilisation and Association Agreement.
3. Improved efficiency of the public sector including the increased use of digitalization to combat corruption: Public Administration Reform should aim at increased efficiency and professionalism, creating a level playing field for the private sector and tackling corruption; including through greater transparency in public procurement. Cantons and municipalities should be an integral part of this effort.
4. The restructuring and depoliticisation of state-owned enterprises: There is a need to depoliticise the use of public resources and bring an end to political nepotism. The discussion revealed widespread agreement on the need to decouple state-owned enterprises from the control of political parties and vested interests.
5. Improvements in the business and legal environment: Governments at all levels will need to continue to work on establishing one-stop shops for company registration, as well as tackling the cumbersome and disjointed regulatory environment, for instance with regards to obtaining construction and other permits. Entity governments will need to continue to harmonize business legislation and begin reducing para-fiscal fees.
6. Empowering local governments: The recent Local Government Initiative demonstrated support for significant reforms in the operational systems of cantons and municipalities. There is broad agreement on the need for improved coordination and cooperation between different levels of government and across the same level of government. Throughout this process, the financing system of local communities will have to be reconsidered.
7. Health reform and affordability: Despite considerable financial resources devoted to the health care system, an unacceptable number of citizens remain without adequate health care coverage. The sustainability, quality and accessibility of health services needs to be significantly improved. Substantial savings would be possible through the pooled procurement of medicines and the establishment of health network plans.
8. Infrastructure development and competitiveness: New governments need to gradually increase capital spending and take advantage of the financial resources already available from public and private sources. Particular attention should be paid to improving transport and energy infrastructure, as well as regional connectivity.
9. Rural and local economic development: 60 percent of BiH’s population is still living in rural areas, and local resources are ripe for development through investments in agriculture, tourism and improved connectivity. More generally, there is a need to correct the economic imbalance between urban and rural areas.
10. Enhancing socio-economic planning and coordination: Information and planning are central to democratic oversight and there is a need for closer coordination and harmonization of economic policies in the context of preparing an Economic Reform Programme for presentation to the EU. There is a need to improve the reliability and timeliness of statistics, in particular concerning government finance, national accounts and the labour market.
The EUSR will continue working with all concerned stakeholders in BiH and the international community to provide renewed impetus to an agenda of reforms for the benefit of BiH citizens after the elections.