BOSNIA AND HERZEGOVINA (BIH): STAGNATION AND TURBULENCE ON THE HORIZON

HISTORIC POPULATION CENSUS SCHEDULED FOR 2013, UNLIKELY TO BE CONDUCTED IN TIME 

See related article: http://geopoliticsrst.blogspot.com.ar/2013/01/bosnia-and-herzegovinas-internal-twist.html

 

With no sign of any end to political infighting, major moves on corruption, economic reform or accelerating the EU integration process appear unlikely.

Solving export problems before CROATIA joins the EU, getting closer to submitting an EU membership application, addressing a chronic lack of money, resolving the reconstruction of the Federation entity government and fight against the corruption are the major issues facing BOSNIA in 2013.
Much work is needed also in preparation for the historic population and household census, which has not been conducted since 1991, as well as in figuring out how to improve the everyday life of citizens hit by worsening unemployment and higher prices of food.

World Bank projections for next year say all countries in the region need more intensive reforms to reduce public debt and accelerate reforms in the public sector, investment climate and labour markets.

EXPECT GROWTH IN 2013 IN THE REGION: LOWEST BOSNIA 0.5 PER CENT AND HIGHEST, KOSOVO 3.3 PER CENT

Since BIH state government was restructured in the last quarter of 2012, it has to demonstrate its functionality in 2013 after the turbulence over changing ministers consumed much of the energy that could have been used in focusing on more important issues.
All in all, experts are not optimistic about 2013, and either expects the pattern of the previous year to be repeated – meaning nothing major will happen – or some expect only slow progress in some fields. A World Bank report in December said it expected sluggish growth in the 2013 in the region, with the lowest growth in BIH, of 0.5 per cent, and fastest is expected in KOSOVO, 3.3 per cent.

“Unemployment has become a massive social crisis, which is unlikely to abate until the return of more robust, labor-absorbing growth,” the report said referring to BIH among other countries.
The rapid increase in food prices during the summer of 2012 drew attention around the world as well as in BIH.
“Food is a significant share of household spending,” the same report said, “particularly for some of the most vulnerable groups, so that even small increases could make life difficult for large numbers of households.”
“Other possible price rises, such as for energy, might compound the strains on their budgets,” the Bank said.

ALBANIA AND BOSNIA MOST VULNERABLE

In the region, ALBANIA and BIH are potentially most vulnerable because of the higher share of food in household budgets there, and their greater reliance on grain imports. SERBIA, as a grain exporter, may be less vulnerable. 

See also: "GREATER ALBANIA" http://geopoliticsrst.blogspot.com.ar/2013/01/greater-albania-united-states-project.html

One fact holding BIH back from returning to growth are its debts, and the fact that the country relies heavily on external demand for recovery.

“The two entities in BIH should continue efforts to improve the targeting of their safety nets and
 make benefit administration efficient and transparent,” the report said on BIH.

Budgets for 2013 in both entities, the SERB-LED REPUBLIKA SRPSKA and BOSNIAK-CROAT FEDERATION, were set higher than the previous year's, reflecting a need to pay off loans taken to fill budgets in previous years.
The REPUBLIKA SRPSKA (RS) budget for 2013 was set at 994 million euro, a little higher than the 2012 budget of 925 million euro. The FBIH budget was set at 1.13 billion euro, almost 11 per cent more than in the previous year.

The expansions of both budgets are to be covered by a fresh IMF loan to BIH of 405 million euro, spread over two years.
The loan was presented as a success by both entity governments, which said that as a result both entities will function over the next year. But long-term solutions are still not in sight.

Sarajevo

POLITICAL DEALS:

The political scene will be marked by continuing uncertainty. While the state government changed a few ministers at the end of 2012 following a change in the ruling coalition, attempts to change the Federation entity government along the same lines will continue in 2013.
The most negative situation that BIH could face next year in terms of politics is political stagnations due to lack of solutions to pending problems. Thus BIH is a hostage of this situation, instigated by political elites. Nevertheless certain issues might move ahead in the country, like the reconstruction of the Federation, announced for the start of 2013.
Apart from the announced reconstruction of the Federation entity, which currently comprises ten CANTONS, whose huge administrations cost a lot of money, getting closer to the EUROPEAN UNION also will be on the agenda.

But since the EU “Road Map” given to BIH in June in Brussels, work on it has barely started.
The Road Map contains an obligation on BIH to implement the 2009 Sejdic-Finci ruling by the EUROPEAN Court of Human Rights. This told BIH to change its constitution to allow ethnic minorities to run for top posts currently reserved for the three largest ethnic groups, SERBS, BOSNIAKS (MUSLIMS) AND CROATS.
Other EU conditions are the creation of a functional coordination mechanism that would define and distribute all the obligations and authorities of all institutions in the country during the EU process.

BOSNIA MAY FORMALLY GET CLOSER TO THE EU IN 2013.

There seems a trend that EU criteria are not being respected and there are even compromises over EUROPEAN standards and regulations, a tendency which could delay EU membership process even further.
EUROPEAN UNIONS messages, “whatever local politicians agree to is acceptable” have ended up with the agreement of the Social Democratic Party, SDP, and the Alliance of Independent Social Democrats, SNSD, which focus only on keeping the two parties in power. 

See: BIH INTERNAL TWIST http://geopoliticsrst.blogspot.com.ar/2013/01/bosnia-and-herzegovinas-internal-twist.html

The SDP-SNSD agreement appears to be the answer of the ruling structures to the problematic situation of public finances. According many experts their agreement is only focused on deepening debt without development.
Current dept ridden politics will have devastating long-term consequences for budgets filled with foreign money used to pay off old debts. 

See: UNDER THE CLAWS OF THE IMF http://geopoliticsrst.blogspot.com.ar/2013/01/cyprus-under-claws-of-imf.html

In terms of EU integration the EU should become more serious in its approach to BIH and more decisive in its relationship with the authorities. The EU should renew its mechanism of conditioning, instead of agreeing to the destructive compromises of ruling structures, which don't have the process of EU integration at heart.

See: BOSNIA "CURSED" BY EU?  http://geopoliticsrst.blogspot.com.ar/2011/08/bosnia-cursed-by-european-union-eu.html

http://geopoliticsrst.blogspot.com.ar/2011/07/bosnia-european-unions-stepchild.html

http://geopoliticsrst.blogspot.com.ar/2012/07/bosnia-suffers-from-unresolved-issues.html

CORRUPTION STILL ENDEMIC:

Another long-term problem is corruption. Transparency International Bosnia stated that no serious steps in fighting corruption is imminent over the next year, because of laws being changed and agreed on only by political elites and not in parliaments.

See also: CRIME AND CORRUPTION AND THE POLITICAL SYSTEM  
http://geopoliticsrst.blogspot.com.ar/2012/09/crime-corruption-and-political-system.html (Part 1)

http://geopoliticsrst.blogspot.com.ar/2012/09/crime-corruption-and-political-system_7.html (Part 2)

Leaders of ruling parties in BIH have developed a practice of agreeing on laws outside institutional gatherings and then implementing the results through their parties in governments and parliaments. Subsequently the institutions which implement laws do not correspond to reality, thus delaying political progress in a country which is already considered to be in a “political coma”.

Is seems highly unlikely to see any major corruption prosecutions in the near future, since most such cases have remained untouched for years. The list of corruption cases is long and processing them is unlikely until such time BIH, like SERBIA, receives a list of cases by the EU, which it needs to solve and prosecute in order to curb in corruption.

As the countries of the region slowly but surely head towards EU membership, with CROATIA joining the union mid 2013, BIH is struggling to factor in this change.
Once CROATIA joins the EU it will close its borders to all BIH products that are not certified according to EU rules, which will hit dairy producers who export a significant part of their product to CROATIA.

BIH does not yet have certified laboratories to help BIH producers continue exporting to CROATIA. It has assured only two Border Inspection Posts where products can be checked which is not enough for all products from BIH.
Although CROATIA planned to start closing the border to non-certified products from January 1, it has recently extended the date to July 1 – the day of joining the EU, so that BIH institutions have time to focus on solving the issue in order not to encounter large numbers of layoffs in BIH dairy industry.

CENSUS DELAY?

The 2013 is also planned as the year of census, the first head count in 22 years.
In December, the International Monitoring Commission, which oversaw the conduct of the October 2012 test census, recommended that the census be postponed for six months, stating BIH was not technically ready, but BIH authorities still did not decide whether to do so. 

Article adapted by Geopolitical Analysis and Monitoring from Elvira M. Jukic

BIH ECONOMICS - FACTS AND FIGURES

BOSNIA STILL HAS NOT SECURED NECESSARY CONDITIONS FOR SAFE AND LONG-TERM FOREIGN INVESTMENT

MANUFACTURING MOST INTERESTING TO FOREIGN INVESTORS

Foreign investors in 2011 invested EURO 313 million in BOSNIA (BIH), in CROATIA more than EURO 1 billion, and in SERBIA around EURO 1.5 billion

If judged according to total funds invested 2011 in BIH, it can be concluded that the country still has not secured necessary conditions and atmosphere for safe and long-term investment by potential investors in the country and abroad.

According to research by the BiH Statistical Agency, the total amount paid for investments in 2011 in BiH approaches 4.5 billion KM (Convertible Mark http://coinmill.com/BAM_calculator.html ), which in relation to 2010 represents an increase of 0.1 percent.

According to the same source, 2011, the greatest numbers of investments were recorded in the Federation of BiH, which could encourage citizens of that entity, but not those of the entire country. Of the total investments made in BiH in 2011, 66.94 percent were in FBiH, 31.8 percent in RS, and 1.26 percent in Brcko district.

BRCKO DISTRICT

( http://en.wikipedia.org/wiki/Br%C4%8Dko_District )

According to the BiH Statistical Agency, in 2011 actual investment in fixed assets of legal persons or business entities fell.

The value of total investment in fixed assets of legal entities in BiH in 2011 amounts to a little more than 4 billion KM, which compared to 2010, represents a reduction by 0.41 percent.

Total investment in new fixed assets in 2011 amounted to nearly 3.9 billion KM - compared to 2010 an increase of 0.2 percent.

As in previous years, the greatest investment in BiH was noted in the manufacturing sector.

The biggest investment in total, considered according to investors in 2011, was noted in the manufacturing sector at 17.12 percent, followed by wholesale and retail at 16.53 percent, and transport, storage, and linkage at 15.58 percent.

By investors, the greatest share in gross fixed capital in 2011 was in the manufacturing industry at 16.93 percent, transport, storage, and linkage at 16.03 percent, and wholesale and retail at 15.48 percent.

On the other hand, according to the Central Bank, in BiH from May 1994 to December 2010, total direct foreign investment was EURO 4.5 billion.

WHEN IT COMES TO FOREIGN INVESTMENT, AS OF 2010 AUSTRIA WAS THE LARGEST INVESTOR.

According to previously published data covering the period between May 1994 and December 2010, AUSTRIA was the largest investor in BiH, with a total amount of EURO 960 million, followed by SERBIA at EURO 878 million.

TURKEY IN CLOSE PURSUIT 

According to economic analysts, there is also increased interest from TURKEY in recent years, which is now among the five largest investors in BiH. In past years, TURKISH companies have invested in a limestone mine "crown" in Lukavac for close to 6 million KM, the company Sisecam Soda in Lukavac at about 8 million KM, and a somewhat smaller amount recorded for the oil company Turkoil. It is assumed that TURKEY in the future will invest much more in the economy of BiH.

See Historic background on AUSTRIA’S and TURKISH interests in BOSNIA AND HERZEGOVINA: http://www.historylearningsite.co.uk/bosnian_crisis.htm

 

LARGEST INVESTOR IN BIH: SERBIA

The countries with the largest number of investors in BIH in 2012 were SERBIA (50.21 percent), LUXEMBOURG (28.87 percent), HOLLAND (25.11 percent), SAUDI ARABIA (10.65 percent), (See: 6 part document on Saudis Wahabbism in BIH at  http://geopoliticsrst.blogspot.com.ar/2012/07/wahhabism-in-bosnia-herzegovina.html ) and TURKEY (9.91 percent).

The amount of investment largely depends on the ease of doing business in a country, and it is reflected in the World Bank's annual "Doing Business" report, according to which BIH in 2012 is ranked 125th of 183 countries.

That the position of BIH has not changed shows in the previous years when BIH in 2009 was in 119th place, and the year before in 116th.

In 2011, foreign investors invested EURO 313 million. CROATIA last year received more than EURO 1 billion in foreign investment, while SERBIA in only eight months in 2011 received around EURO 1.2 billion.

Related articles on BIH: 

http://geopoliticsrst.blogspot.com.ar/2011/08/bosnia-cursed-by-european-union-eu.html

http://geopoliticsrst.blogspot.com.ar/2011/07/bosnia-european-unions-stepchild.html

http://geopoliticsrst.blogspot.com.ar/2012/07/bosnia-suffers-from-unresolved-issues.html

http://geopoliticsrst.blogspot.com.ar/2012/07/ethnic-rift-key-hindrance-to-bosnias.html

http://geopoliticsrst.blogspot.com.ar/2012/07/bosnia-2012.html