Speech by High Representative and EU Special Representative Valentin Inzko at the Sixth Session of the Parliament for Europe

Farms and Small Companies Hold the Key to Job Creation

Ladies and Gentlemen,

The BiH small and medium-sized enterprise sector and the rural and farming sector are two areas where some progress in implementing the European integration agenda has been made in recent years – but let us acknowledge that this progress has been modest. It does not come anywhere near to fulfilling the needs and the aspirations of BiH citizens – or the promises that have been made to them by their parliamentary representatives.

I believe that this can be changed if the integration agenda is kept before the public – in straightforward and easily understandable terms – and if the benefits of implementing this agenda are made clear.

The potential benefits are far from modest. In agriculture and small and medium-sized business development, the steps that have to be taken could help transform this country. Let me stress why it is crucial that you move the European integration process ahead faster and more effectively in these fields.

Unlocking unrealised agricultural potential

With regard to agriculture and rural development, BiH and the EU together can create important synergies: the EU has a vast agricultural sector whose potential has been harnessed through coherent organisation and the strategic application of funds; while Bosnia and Herzegovina has a vast agricultural sector that desperately needs coherent organisation and the strategic application of funds in order to harness its unused potential.

The Common Agricultural Policy which is the largest beneficiary of EU budget funds, as it is today, was not conceived in a day. It has evolved over a number of years through an intensive reform process. Currently, it is primarily focussed on issues such as food security, food quality, and animal welfare, designed not simply to ensure basic subsistence for the rural community, but also to put in place the necessary framework for a dynamic agro-industrial sector and an environmentally and territorially balanced agricultural development. The Common Agricultural Policy reflects the strategic importance of the sector in the European Union, serving the interest of 500 million consumers by providing them with safe food, employing about 12 million citizens and securing sustainable socio-economic and environmental development of rural areas where about 60 per cent of EU citizens live. To serve these interests, the EU is allocating over 42 per cent of its budget to agriculture and rural development.

I firmly believe that agricultural policy reforms would be beneficial to Bosnia and Herzegovina and to its citizens, too. According to official statistics in Bosnia and Herzegovina over 20 percent of total employment is in the agricultural sector – and if you look at the informal labour market, as much as half the workforce may be engaged in some sort of agriculture-related employment. Despite this fact, agricultural output accounts for only ten percent of GDP, and Bosnia and Herzegovina’s food imports contribute significantly to its trade deficit.

Embracing the European integration process in BiH agriculture can unlock unrealised potential and help to raise living standards across the country.

When you look at it this way, proceeding at a snail’s pace makes no sense at all.

The short-term priorities laid out in the European Partnership include adopting a Law on Agriculture, Food and Rural Development, which was done in the spring of 2008, but this is meaningless without accompanying implementing legislation, which has not yet been enacted. The European Partnership also calls for a comprehensive agricultural strategy at state level, which was adopted in January 2009, and urges the authorities to work towards the establishment of a BiH Ministry of Agriculture, Food and Rural Development, an objective which is no nearer today than when the European Partnership was finalised.

In the meantime, a dynamic approach needs to be taken in order to establish countrywide phyto-sanitary and veterinary inspection processes, as well as related product certification that will allow the export of BiH food products. At the same time, more resources have to be channelled into strategic rural development initiatives.

Here too, the pace of implementation has been anything but rapid and resolute.

The very slow progress in an area that affects the interests of many BiH citizen has not so far been a major election issue.

I believe it ought to be.

More SMEs employ more people

In the small and medium-sized enterprise sector, we have a similar picture – with massive untapped potential and an administrative and legislative response that has been painfully modest.

Bosnia and Herzegovina has just seven SMEs per 1,000 inhabitants – compared to 14 per thousand in Croatia and 18 per thousand in Albania, and that’s before we get to countries such as the Czech Republic or Hungary, which have 85 and 86 per thousand respectively.

The significance of these figures becomes clear when set against the fact that SMEs provide two thirds of all private sector employment in the European Union – that’s around 100 million jobs.

In other words, Bosnia and Herzegovina is lagging far behind its neighbors in developing a sector with massive potential to create new jobs – and this in a country with more than half a million unemployed!

Clearly, the BiH approach to SME development needs a radical shake-up.

At the 2003 Thessaloniki Summit, Bosnia and Herzegovina joined the group of 35 European countries committed to implementing the European Charter for Small Enterprises.

The object of this policy is straightforward – to create new jobs by making it easier for small and medium-sized enterprises to employ more people.

Among the steps required to help SMEs in Bosnia and Herzegovina thrive are:

• enacting the BiH Law on Obligations, so as to deliver significant improvements in the business environment;

• establishing a BiH Social and Economic Council, so as to channel input from entrepreneurs, among others, into policymaking; and

• adopting a BiH SME strategy and establishing a BiH agency for SME development.

We all know that the first two measures have not been enacted, and as a result the jobs that could have been created have not been created.

I believe it is up to Members of Parliament to explain to the electorate why these job-creating initiatives have languished.

The BiH SME strategy was adopted by the Council of Ministers in the spring of 2009, and this is a very positive step, but subsequent implementation has been sparse. If the draft BiH Law on the Promotion of SMEs is enacted in the coming weeks – as we hope it will be – this may serve as an impetus to more satisfactory progress in this sector.

I do not want to present an overly gloomy picture. I do acknowledge that progress has been made – but I also think we all agree that it has been made almost grudgingly, as though tackling mass unemployment were not the first priority of parliamentarians, as though implementing the EU accession agenda that has created millions of jobs across Europe were some sort of irksome task.

The European Union and individual Member States have provided multi-million Euro grants for individual projects aimed at fostering SME growth, including those disbursed through the Regional Development Agencies, which have received varying degrees of cooperation from the different levels of government. The United States has also provided generous funding for projects designed to improve the BiH business environment. At the same time, I should draw your attention to the latest multi-million Euro lending facility, announced just last month, by the EBRD, which will be directed for the most part at extending credit to SMEs in Bosnia and Herzegovina.

Positive support for SMEs is coming from outside the country; it is high time it starts to be coming from inside the country as well.

Political focus and media coverage

Transforming BiH agriculture and realising the job-creating potential of its small companies through European integration is a task that requires political and legislative focus; it also needs intensive and sustained media coverage.

Until now, these things have been largely neglected.

Parliamentarians must confront the fact that European Union membership – and all of the benefits it potentially holds for the people of Bosnia and Herzegovina – will only become a reality if they embrace the reform process rather than simply picking at it.

I hope that today’s discussion will contribute to a new approach.

Thank you.