Report to the European Parliament by the OHR and EU Special Representative for BiH, January – June 2001




 Mid-Year Report to the European Parliament

January – June 2001


 The Work of the Office of the High Representative for Bosnia and Herzegovina, January-June 2001

 Mid-year report for the European Parliament



The 1995 Peace Agreement designated the High Representative (HR) to oversee the implementation of the civilian aspects of the Peace Agreement on behalf of the international community. He is also tasked with co-ordinating the activities of the civilian organisations operating in the Bosnia and Herzegovina (BiH). The Office of the High Representative (OHR) is the chief civilian peace implementation agency in Bosnia and Herzegovina

This Report covers highlights of the activities of the Office of the High Representative and key’ developments in BiH during the period from January through June, 2001. During this period, the HR’s priority was the acceleration of peace implementation in the three key strategic areas identified by the Peace Implementation Council (PIC) held in Brussels in May 2000. These were: consolidation of the State institutions, economic reform, and refugee return. Special attention was also directed at tackling the Croat nationalist challenge to the constitutional order and to the unsettled problems in Republika Srpska (RS). Another important issue was constitutional reform: on 11 January the HR issued a Decision creating Constitutional Commissions in the Federation and RS parliaments, which are now in charge of drafting constitutional changes to implement the BiH Constitutional Court Decision by which all peoples are equal and constitutive in both Entities.

European support, both bilaterally and through the EU, was essential to OHR’s work, especially in areas such as implementation of the EU Road Map (RM), media reform, the election law, and the setting up of the Court of BiH.

Political Issues

During the reporting period, the new non-nationalistic authorities at the State and Federation level (the SDP-Ied “Alliance for Changes”), as well as the international community (IC), faced serious challenges from the forces that had dominated BiH life for the previous 10 years.

State Level: Following its formation on 22 February, the new Alliance-led Council of Ministers (CoM), under the chairmanship of Mr. Bozidar Matic, adopted its work programme and made some progress in its implementation. However, legislative activities and the implementation process were regularly challenged and obstructed by RS authorities and parliamentarians, on the grounds that the CoM’s legislative agenda invades the RS competencies. The HR has asked the RS authorities to clarify their objections constructively and cooperate with CoM, for the benefit of RS’s viability and BiH’s normalization, especially in view of its participation in the European integration processes.

Progress in the BiH Parliamentary Assembly was less satisfactory during the reporting period. The Alliance and its Serb allies, a fragile coalition with a very tight majority of 22 out of 42 delegates in the HoR, has proven increasingly difficult to hold together. As of June 2001, the BiH Parliamentary Assembly had not passed any new legislation of major importance.

In view of the fact that the November 2000 elections were intended to be the last for which the OSCE was responsible, the adoption of an Election Law became particularly pressing during the reporting period. The adoption of such a Law was one of the main obligations stemming from the Declaration of the Peace Implementation Council (PIC) held in May 2000. It was also one of the primary conditions for the accession of BiH to the Council of Europe and for the fulfillment of the EU Roadmap. On 12 April the CoM adopted the Draft Election Law, prepared by a group of experts under the joint auspices of OSCE and OHR. (It was ultimately passed by the BiH Parliamentary Assembly -PA- in September 2001.)

Federation: On 3 March, the HDZ -which had been ousted from power at State and Federation levels by the “Alliance for Changes” after the November elections- proclaimed “Croat Self-Rule”. Four days later the HR removed Mr. Jelavic, the Croat member of the BiH Presidency and HDZ President- from his positions for personally leading this serious violation of the constitutional order. A month later, HR appointed a Provisional Administrator for the Hercegovacka Banka, the financial backbone of the HDZ-Ied illegal parallel structures. On 13 March, HDZ officials ordered the disbanding of the Croat component of the Federation Army followed on 28 March by a walkout of Croat officers and soldiers from their barracks.

The new Federation authorities successfully thwarted the HDZ efforts to disrupt the Federation Government, especially on financial and military matters. The HR has made it clear to the HDZ that they will always be welcome to return to those institutions they had left, but that neither the IC nor the BiH authorities will ever compromise on BiH’s constitutional principles. One positive development is that the HDZ delegates in the BiH House of Representatives of the PA, after a boycott of State institutions that lasted several months, are pursuing their goals from their elected seats once again. They were especially active during the debate over BiH’s Election Law.

RS: The most public manifestation of problems in the RS occurred in May, when ceremonies to lay foundation stones for reconstruction of mosques in Banja Luka and Trebinje were disrupted by serious Serb nationalistic violence. However, after the HR intervened with the RS authorities and demanded they take swift measures toward reconciliation and reform within the RS society, they publicly apologized for the violence. In addition, the RS Interior Ministry’s leadership was replaced, a multi-ethnic Reform and Reconciliation Committee was established under the auspices of the RS President and a new -and successful- foundation stone ceremony was held in Banja Luka on 18 May. The subsequent actions of these authorities were closely monitored by OHR.

Although Prime Minister Ivanic has somewhat managed to stabilize the social­ economic situation, by increasing the efficiency of tax collection and, to some degree, improving fiscal discipline, the overall economic and social situation in RS is still difficult, with a decrease of industrial production and high unemployment.

On 5 March RS and the Federal Republic of Yugoslavia (FRY) signed an agreement on Special Parallel Relations (SPR), as provided for in the General Framework Agreement for Peace (GFAP). OHR worked to ensure that the agreement’s text and spirit fully respect the constitution as well as BiH’s sovereignty and territorial integrity. The OHR will be consulted in the drafting of any annexes and has a supervisory role in the agreement’s implementation. However, the HR attaches crucial importance to more intensive state-to-state relations.

Brcko: One year after the establishment of the Brcko District (BD), progress has been made in many key areas. For example, both Entities and the BD Government began a 6 million KM joint programme for displaced person’s housing, which should result in 500 housing resolutions by the end of the year. A modern judicial system, consisting of a basic court, an appellate court, a legal aid center and a judicial commission was established on 1 April. Both Entities Governments have shown, in general, a positive and supportive attitude toward the District.

Economic Issues

The payment bureaus ceased to operate on 5 January, marking the decisive step in replacing this monopolistic institution with a modern countrywide banking system

In order to ensure the effective functioning of the State institutions, the new State authorities and OHR began to investigate various other means of financing the State Budget, as it is currently almost entirely dependent on contributions from the Entities. OHR is working closely with local authorities and the IFls to find independent sources of income for the State in the nearby future.

Net salaries increased in both Entities in 2000, contributing positively to consumer demand during the reporting period. The inflation rate (retail price index) continued at a very low level in the Federation and remained at a higher level in the RS. The employment situation did not change substantially in the first half of 2001- a level of 646,000 official jobs was maintained. In addition to the serious situation in the social sector (high unemployment and low pension level payments), the problems in the trade balance and the balance of payments are causes for concern.

Clearly, economic reforms – particularly in privatization of public utilities and restructuring – must be accelerated in 2001. While an increased inflow of foreign direct investment would facilitate the restructuring of the economy, the creation of a favorable investment climate remains a challenge for the BiH authorities. These are major priorities, to which OHR has devoted a great deal of attention and resources, following the recommendations of the PIC Steering Board.

In the RS, the voucher offer that began in November 2000 ended on 15 March. Citizens and 13 Privatization Investment Funds (PIFs) were offered 55% of state equity in 830 enterprises. Of a total of 49 million vouchers issued, over 84% were utilized. In the Federation, the first wave of Public Offering of Shares was completed on 28 March. A total of 542 enterprises were offered to certificate holders, with the amount of certificates subscribed at 4.25 billion KM.

In the fields of public utilities, public services, infrastructure development and natural resource exploitation, public sector participation is usually arranged by way of concessions. An Inter-Governmental Working Group, which had the full participation from the BiH CoM, both Entities and international experts, completed its work in May 2001 and submitted fully-harmonized, draft concession laws to the BiH and Entity governments for adoption.

On 2 March, the HR established the Communications Regulatory Agency (CRA), which combines the competencies of the Independent Media Commission (IMC) and the Telecommunications Regulatory Agency (TRA). It serves as a State­-level regulator for the media and telecommunications sectors. The World Bank has offered technical assistance for sector restructuring, privatization and other transition measures, which will involve re-organizing the separated postal services, offering a concession for the radio transmission infrastructure system and exploring e-commerce opportunities. On 30 April the CRA granted BiH-wide GSM licenses to the two publicly owned mobile telephone operators, PTT-BiH and Mobilna Srpska and launched the international competitive tendering process for a third BiH-wide GSM license.

Many of these economic/commercial developments have important State­ building implications. For example, on May 7, Radio PBS (Public Broadcasting Service) started broadcasts for the whole of BiH. For the first time since the disintegration of the former Yugoslavia, BiH has a statewide broadcasting capability. Furthermore, the adoption of new Electricity Laws by Entity parliaments contained the endorsement of, among other things, a new State level regulatory authority and the creation of a single power transmission corporation for BiH. (These are key conditions for obtaining World Bank (IDA) and EBRD approval for a Power III Loan Project worth USD 230 million.)


During the first five months of 2001, 30,123 “minority” returns were registered with UNHCR. This points to a dramatic increase compared to last year’s total figure of 67, 000, when Human Rights Watch was speaking of a breakthrough. However, obstacles stemming from the failure of many local authorities to take full ownership of the process are still slowing down returns. Although a State­level Ministry for Human Rights and Refugees has been created, a stronger role in the coordination of return-related issues between the Entities is necessary. 

While the Federation budget now includes a substantial budget to support returns, the HR also urged the RS PM to increase the RS Ministry for Refugees’ budget and to re-focus it towards Bosniac and Croat returns to RS -and Serb to the Federation- instead of only supporting Serb DP’s who wish to stay in RS. On several occasions he warned mayors who obstruct returns and on 1 June, he removed the Mayor and the Head of the Housing Office of Bratunac (Eastern RS) for their continued obstruction of the return process in this municipality.

The RRTF (Reconstruction and Return Task Force), with its Economic and Human Rights counterparts, has increased its focus on sustainability, in particular equal access to economic opportunities. Still, returnees’ efforts to acquire documentation, employment, education and pensions remained problematic during the reporting period. OHR is working to address these problems and to ensure that returnees can access basic utilities under fair and equal conditions.

Refugee return remains negatively affected by the situation in Croatia and the FRY, although there was some legislative progress in Croatia during the reporting period. The obstacles continue to include the lack of a transparent legal framework for the repossession of property. Therefore, some 25,000 Croatian Serbs in the western RS are still awaiting resolution of their status, creating a serious obstacle to Croat and Bosniac return to RS. OHR is working to improve the overall environment for property repossession in BiH, to increase cooperation and dialogue between FRY, BiH and Croatia on these matters.

BiH and Europe

The Stability Pact provided a useful forum for regional collaboration. OHR noted with satisfaction that the BiH Ministry of European Integration has become a full and active partner in the Pact’s economic activities held under the auspices of Working Table lion Economic Reconstruction and Development. Further, BiH assumed the co-chairmanship of Working Table /I for the second half of 2001.

Due to the inability of the BiH PA to get important legislation passed, the pace of the European integration process was disappointing during the period under review. The end of this reporting period coincided with the deadline set in Zagreb last year, for the fulfillment of the EU RM, which is the first step towards the conclusion of the Stabilisation and Association Agreement. This deadline passed with a significant number of RM conditions still unaccomplished, among them the adoption of the Civil Service Law. However, the September adoption of the Election Law fulfilled the most important of the pre-accession criteria for BiH’s accession to the Council of Europe. The CARDS assistance programme for BiH is crucial in supporting the participation of BiH in the Stabilisation and Association process.