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Bosnia and Herzegovina - Assessmentand Analysis of EU Accession Risk FactorsJuly 2009

ASSESSMENT AND ANALYSIS OF EUACCESSION RISK FACTORS FOR

BOSNIA AND HERZEGOVINA

Final Report

July 2009


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ACKNOWLEDGEMENTS

This report was prepared by a consultancy and research team working on contract to the Departmentfor International Development (DFID). The research team comprised Richard Moreton (Project

Manager), Ioannis Armakolas (Lead Research Analyst), Paul Collins, Vedrana Pinjo-Neuschul and

Damir Tokic.

The consultancy and research team would like to thank Damir Hadzic, Satyendra Prasad and Gus

Mackay of DFID for their guidance and comments on successive drafts of the report. Thanks are also

due to the participants of the primary research interviews, the names of whom are listed in Annex 4 of

the report.

The opinions expressed in the report are those of the authors, and do not necessarily represent those

of DFID or the British Government.


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EXECUTIVE SUMMARY

It has been said that Bosnia and Herzegovina (BiH) is undergoing a quadruple transition: from single-party system to multiparty democracy; from social self-management to a market economy; from war to

peace; and from an ethnically divided and segregated country to a more integrated and coherent state.

In addition to this, or as the symbolic end-point of this transitional process, the country is expected to

become a member state of the European Union in the foreseeable future. This has been characterised

as the Dayton to Brussels transition by some observers.

In this context, the progress of the country since the end of the war in 1995 could be seen as being

impressive, with vastly improved security, democratic electoral processes and sustained economic

growth. However, during the last three years the mood in the country and amongst international

observers is becoming more pessimistic. Whilst there remains a broad stated consensus for the goal of

accession to the EU among political and economic stakeholders, the rate of progress in addressing the

requirements of the European Partnership is very slow. Moreover, the tone of political rhetoric has

become more inflammatory in the past three years, at the same time that the country is beginning to be

affected by the global economic crisis.

Within this environment DFID has commissioned this study of the broad trends in governance and to

assess their medium term trajectories. This is intended to help DFID to understand better how these

risks impinge on their own objectives and wider development scenarios. The study is intended to:

inform DFIDs engagement with the international community especially the EC in the period

both up to and beyond its graduation from the country;

guide DFIDs policy dialogue with like minded donors on issues around SAA reporting and IPA

programming; and

provide a basis for DFID to assess whether sufficient development resources are being targeted at

the right recipients and beneficiaries.

The study comprises two parts. During the first phase, a light touch Country Governance Assessment

(CGA) was carried out using DFIDs standard methodology. During the second phase a political

economy analysis approach was used to interrogate the key aspects of the high risk governance trends

which are thought likely to influence the EU accession process and the longer-term social and

economic development of the country. The report ends with conclusions and recommendations directed

at the international community, European Union and British Government in turn.

Governance Analysis

The governance analysis was conducted using current DFID guidelines. The format is used due to

familiarity within DFID of this approach, to enable comparisons to be made with other studies of this

nature, and to provide a logical and proven structure for the analysis. This places the governance

analysis into the three categories of state capability, accountability and responsiveness.

The analysis was conducted almost wholly on the basis of secondary research, due to the abundance

of relatively current published research and analysis on Bosnia and Herzegovina. The main task of the

study was to correlate the findings of this body of research with the CGA format. In this respect, the

researchers placed considerable emphasis of the presentation of the findings in an accessible format.

Brief summaries of findings in each of the three areas follow below.


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State Capability

State capability has improved substantially since the war. However Bosnias unique constitution and

the understandable post-war tension between its constituent entities and nationalities mean thatdecision-making processes within the public administration are notoriously slow and cumbersome.

Whilst the lure of EU accession and the negative consequences of fragmentation have combined to

maintain movement in the direction of reform, this is small in relation to need, and cannot be

guaranteed to be maintained. It is a widely shared view that an amended constitution is necessary to

address the underlying issues of state capability. However, following the suspension of discussions on

this issue in 2006 there seems little likelihood of a short-term resolution to this issue.

Despite the weakness of the state the country does manage to function as a democratic, market

economy. Elections are contested in a largely free and fair manner and the economy has grown

relatively strongly for most of the past decade. Whilst the state seems ill-prepared to assume the

rigorous demands of the EU accession process, it could be said to be relatively successful in relation toother countries which have experienced violent conflict so recently. However, there are concerns that

political developments have deteriorated during the past three years. Increased nationalist rhetoric from

senior political leaders, combined with upcoming parliamentary elections and the delayed impact of the

global economic crisis have combined to cause serious concerns amongst international observers

regarding the sustainability of the reforms implemented to date, if not the very survival of the country in

its current form. In summary:

Political stability has deteriorated in the past three years following a decade of moderate

improvement since the end of the war.

Policy-making capability is severely affected at the state level owing to the complex administrative

structure and national/ethnic tensions.

Despite substantial external support, Governments remain relatively ineffective, frequently delaying

necessary reforms and leaving citizens feeling cynical and frustrated.

Revenue mobilisation has improved since the introduction of VAT and other structural reforms.

However the country still lacks a co-ordinated and integrated system for efficient resource

allocation.

The economy has grown strongly in recent years. However this is likely to be constrained by

structural weaknesses and the impact of the global economic crisis.

Accountability

The relative stability of the political environment, the manner in which elections are conducted and the

growing strength of the justice system could all be considered to be significant achievements in the

context of the nationalist conflict which preceded them. There are, however, signs that the structures

which have been established may not be sufficient to take the country through its next stage of

development as it is required to meet the more exacting rigour as a future member of the European

Union. Signs of disconnect between political leaders, their parliaments, and society could, if allowed to

widen, threaten the fragile stability which has underpinned the reform process to date.

Beyond the basic democratic systems, structures and legal environment, which function relatively well,

there are concerns that society at large is not engaged in public life, as evidenced by low election

turnouts, and a relatively passive civil society. This contrasts with very high levels of dissatisfaction with

the state of the country as recorded by most opinion polls. There are ongoing concerns that the


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concentration of the media in a small number of national-based groups also serves to limit wider debate

on key issues. Whilst there are some recent indications that the public mood and behaviour may be

changing, with the emergence of stronger local politicians and wider public debate on somecontroversial issues, it is too early to draw wider conclusions regarding longer-term trends. In summary:

Political freedoms are constrained by the seemly inextricable link between national identity, religion

and political preferences, which appears to be becoming more engrained with time.

A nominally free media environment is increasingly dominated by media groups closely allied with

nationalist and political groupings.

The political and electoral system functions relatively well, given the context in which it was

established, though remains dominated by nationalist parties.

Good progress has been made in the rule of law over the past ten years, and despite many issues

remaining to be addressed, there is no reason to suppose that the reform process will not continue.

Civil society has developed in quantitative terms, but there are concerns regarding the nationalistic

nature of home-grown NGOs and the sustainability of externally sponsored ones.

Responsiveness

Whilst Bosnia and Herzegovina has made outward signs that it understands its responsibilities in

relation to all of its citizens, there is little evidence to suggest that it has undergone the internal cultural

change required to make this a reality in day-to-day life. At best, discrimination based on nationality,

religion, gender and economic standing show little sign of positive change. At worst, there is evidence

that it is worsening. There is a risk that public discontent with the slow pace of change, particularly in

relation to perceived levels of corruption, could appear as more visible signs of conflict. Alternatively,open civil unrest could be interpreted as the first signs that the silent majority are ready to play a

greater role in the development of a normal, European civil society.

Some of the issues identified as being of concern can find parallels throughout the former socialist

countries of Central, Eastern and South-Eastern Europe, and evidence here suggests that closer

European integration does tend to bring about a convergence of values and practice. However, the

close link between religion and national identity in BiH creates an additional dimension of complexity, in

which religious values beliefs can assume greater prominence than social concerns.

The increasing prevalence of corruption, or at least the strong public perception that this is so, is a

particular issue of concern, which potentially has an effect far beyond its economic consequences in

further undermining confidence in the state from its citizens. In summary:

Progress in the ratification of international human rights treaties is marred by the lack of will in

fulfilling the required obligations, with evidence of recent stagnation.

Poverty levels remain high in BiH with little evidence of positive change. Economic growth is likely

to be affected by the global financial crisis, limiting short-term improvements.

There is little evidence in progress on gender equality or in reducing the incidence of discrimination

based on gender, nationality, religion or disability.

Regulatory quality is not a high profile issue in BiH, which is more concerned with the need to

introduce new regulatory mechanisms in line with EU requirements.


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Corruption is not generally worse than elsewhere in the Western Balkans, but strong public

opinions regarding corruption and a negative trend elevate the importance of this issue.

Drivers for Change

Drivers for change were identified from the governance analysis and categorised according their

perceived degree of influence on current and future developments in the country. Whilst judgements in

this regard are necessarily subjective, the three drivers regarded by the researchers as being strongest

in influence are:

The objective of EU integration (and to a lesser extent NATO membership) and the benefits which

are expected to be derived from this, shared by political elites and the population alike.

The active commitment of the international community to Bosnian sovereignty and ongoing support

for reform and state-building.

Adherence to international conventions, and the obligations which these agreements bring, result in

pressure from their governing organisations for progress in compliance.

Threats and Risk Factors

The governance analysis also enables the identification of threats and risks to the progress which BiH

has made, and need to continue to make if it is fulfil its goal of EU accession. These were also

categorised according to the both the likelihood of their actually happening (high, medium or low

likelihood) and the impact which they would have on the EU accession process (high, medium or low

impact). Those which were considered to be of high impact, and at least medium likelihood of

happening are listed below, over both medium and long-term horizons.

Medium-term risks (next four years)

That inefficiency of the state will mean that BiH falls ever further behind regional neighbours in path

towards EU accession. High likelihood, high impact.

That the renewed nationalist political crisis could cause political deadlock and stall reform,

particularly in the run-up to the 2010 elections. Medium likelihood, high impact

That relinquishment of the Bonn powers may lead to a resurgence of counter-reform activity and

loss of respect for independent state-level institutions. Medium likelihood, high impact

That there is a lack of institutional capacity to conduct reforms. This is not only caused by

institutional fragmentation and lack of clear mandates but also by the lack of adequate data on which

to make evidence-based decisions. Medium likelihood, high impact

Increased control of the media and violence against journalists that would significantly reduce

freedom of speech and flow of information. Medium likelihood, high impact

That economic crisis hinders the ability of the public administration to take on the increased

obligations required by the EU accession process. Medium likelihood, high impact.

Effects of global financial crisis are much more severe than currently forecast, damaging

government revenue and increasing social unrest. Medium likelihood, high impact


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Long-term risks (four to twelve years)

The growing influence of dominant religious groups, resulting in increased discrimination against

members in any community who are not from the majority group. High likelihood, high impact

The establishment of powerful media conglomerates controlling the national media, linked to political

and business elites. High likelihood, high impact

Failure to address the deficiencies of the constitution will permanently prevent the establishment of a

functional state. High likelihood, high impact.

Continued deepening of societal divisions along ethnic lines. Medium likelihood, high impact

The active efforts of the RS Government to unravel state-level reforms and institutions and move

towards a pro-secession orientation Medium likelihood, high impact

That the lack of concerted action against corruption leads to a vicious circle of disengagement of thepublic from civil society, entrenching undesirable practices. Medium likelihood, high impact.

Summary of Progress Trajectory

In summary, the medium-term forecast is not favourable, and whilst there are some signs for optimism

regarding accountability and responsiveness, there are serious concerns that state capability will not

improve at the rates required to maintain the momentum of the EU accession process.

Dimensions of Development

The analysis of the drivers of change and risk factors suggest that developments over the next four

years are highly likely to have a critical influence on the next ten. In particular, the process of

development could either converge towards the development model currently assumed and desired by

the international community, or enter a cycle which inevitably diverges from this.

The approach used in the report is to suggest that the future development of the country can best be

understood by the way it changes across a number of key development dimensions. The analysis

suggested that eight dimensions were of greatest importance, namely EU accession process and

timescale; the functionality of the state; the role of the international community; the role of civil society;

political processes; economic growth; reconciliation; and corruption. These dimensions were used as

the basis for a structured survey of the opinions of some 40 diverse representatives of different facets of

life in todays BiH. Key conclusions which emerged from this analysis, when combined with the earlier

research, are noted below.

Divergence from the CGA findings

It was notable that many responses revealed different perception between the secondary findings of

other research reports and the current perceptions of informed observers. In many cases, the popular

perception of how things are differed markedly from objective reality. However, it could be argued that

perception is at least as important, if not more so, than reality, as it is this which forms opinions and

influences the behaviour of the population at large.

EU accession timescale and process

All of the evidence suggests that formal EU membership of BiH is a considerable length of time away.

Taking all factors together, accession within ten years seems very unlikely, if not unrealistic. It is

concluded that BiH and its international partners should both talk and play a longer game than appears


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to be the case at present. It is further argued that the emphasis of policy effort over the next few years

needs to be on getting the country to the starting blocks of the accession process by establishing a

common political vision for the state and a working public administration which is capable ofimplementing this vision.

Political consensus and constitutional reform

It is concluded from both the secondary and primary research that the issue of constitutional reform

cannot be ignored when discussing governance and the EU accession process. Whilst a new

constitution will not solve all of the problems of the country, failure to make progress on this issue may

seriously affect the efficiency and validity of many elements of the reform process. If a new constitution

is to be effective and sustainable, it needs to be built on a level of political consensus which does not

currently exist. As such, agreement on the shape of a new constitution, and through it the future shape

of the state, would be the visible manifestation of a common vision and understanding of the future of

the country.

Ensuring the sustainability of reform

The past two years have shown that the hard-won reforms of the previous ten years are still extremely

fragile, particularly in the absence of greater inter-entity political consensus. It should be understood

that the forces seeking to undermine reform are more powerful in BiH than in other countries in the

region and it is appropriate, therefore, that a greater effort is required of the supporters of reform, both

internal and external, to counteract these trends.

Entrenchment of political elites

The ruling political elites are often cited as being behind many of the problems facing the country, but

the research shows that there is very little evidence to suggest that there is any likelihood of key partiesand individuals losing their power and influence in the foreseeable future. It would be unrealistic, in the

foreseeable future, to expect the solution to the current problems facing BiH to be found by anyone

other than the current political elites.

Active engagement of the international community

The research findings would appear to broadly support the underlying message of the recent Solana-

Rehn paper, i.e. that the unique situation and history of Bosnia and Herzegovina warrants a unique

approach from the EU, characterised as a tailor-made approach. It seems clear, from both parts of the

research, that it is not sufficient for the EU to simply indicate the conditions of membership and expect

them to be tackled. The report concludes that the main role of the international community in the

immediate future should be to actively engage with the current political elites to address the structuralobstacles to long-term reform. In particular:

While the maintenance of the OHR in its current form is inconsistent with the principle that the EU

should take the lead in dialogue with BiH on the emphasis and direction of the reform process, its

transformation to EUSR has to be managed carefully. Sensible monitoring and evaluation of

implementation of 5+2 conditions for closure of OHR should precede any attempt for an early

transfer of responsibilities to EUSR.

The role of EUSR needs to be precisely defined, and the means of its engagement and objectives

communicated in an open and transparent manner. EUSR needs to become the embodiment of the

tailored-made approach to the BiH accession process.


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In the near future, BiH will need support from the international community which is high level, flexibly

delivered and consistent in its conception and intent. In other words, the current modus operandi of

ad-hoc project support addressing low-level technical issues in an uncoordinated manner may notsuit the countrys needs at this time.

Strengthening the well-being of BiH society

The research revealed a number of issues which could be said to gnaw-away at the basic well-being of

society in the country. These include corruption, deep-rooted mistrust between national groups, the

absence of a well functioning civil society and the dominance of media groups which represent certain

interest groups or present issues through narrow nationalist perspectives. As long as these issues are

not addressed with sufficient vigour, the report argues that their combined influence will continue to

grow and undermine the reform effort. The report concludes that alongside the main effort of political

consensus-building of the next four years, both the BiH Governments and the international community

should strengthen efforts to tackle some of these endemic ills of society.

Economic crisis can be an opportunity as much as a threat

The severity of the global economic crisis has taken all observers by surprise and it is therefore of little

surprise that the BiH governments have been relatively slow to formulate their own response. However,

whilst most observers do not believe that the crisis will significantly undermine the EU accession

process, the manner in which the government does respond will determine whether BiH comes out of

the crisis in a better or worse state than when it entered. It would be inappropriate to make strong

conclusions on the likely effects of this on the EU accession process, other than to conclude that it can

only extend still further the accession timescale.

A society governed by fear

Fear was used as an instrument in BiH to stimulate conflict between national groups and it is used by

politicians today, in a diluted form, to maintain their political positions. Such emotions will not go away

any time soon, but reducing their influence is the key to the long-term stability, and ultimately the

prosperity, of the country. Other countries with no less a violent history than BiH have succeeded in

overcoming fear and mistrust to establish a stable partnership for peace and prosperity, and there is no

reason why this should not be possible here.

BiH and the EU Accession Process

As the report observes, BiH has made little progress in relation to European Partnership commitments

during the past two years, with some indications that it has gone backwards in some areas. Moreover,

the state is currently so dysfunctional that it is not clear that it will be capable, in its current form, ofsystematic negotiation on detailed acquis chapters should candidacy status be granted. The report

introduces a visual framework to understand the EU accession process, dividing the timeframe into

three distinct phases, as follows:

Post-conflict stabilisation and recovery phase (1995 to 2009). The report suggests that the end

of this phase will be the eventual transition from OHR to EUSR, possibly as early as this year. This

would help to change the perception of the international community of Bosnia and Herzegovina from

that of a post-conflict environment to a partner state of the European Union.

Political consensus-building phase (2009 to 2012-4). The report argues that the focus of

attention of the international community over the next four years should be on political consensus

building rather than detailed acquis harmonisation. This is not to say that no wider harmonisation


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efforts should be undertaken. However, the report asserts that there needs to be a greater and more

consistent focus on this political consensus building as a necessary condition of sustainable reform.

Acquis harmonisation phase (2012-14 to 2018-22) The final phase to accession represents thenormal acquis harmonisation, screening and membership negotiation phase which any prospective

EU member state should undergo. The report does not believe that it would be possible to conclude

this process, even by 2020, if the necessary political consensus has not been achieved to do so,

Development Trajectories

The framework illustrates three alternative trajectories depending on the manner in which issues

identified in the research develop. The pessimistic trajectory illustrates a continuation of the political

impasse of the past two years, which is considered to be a probable scenario. The most optimistic

trajectory sees accession in just over ten years time. The most realistic trajectory shows an accession

date of around 2025 or later.

Recommendations

In order to set the context for the possible actions of DFID which could be influenced by the research,

recommendations are made for the international community in general, followed by the EU and finally to

the British Government

Recommendations to the international community

Recommendations are summarised as follows:

It is time to acknowledge this openly and in addition to 5+2, establish a framework for OHR closure

and the transfer of ongoing functions to the EUSR.

The international community should co-ordinate efforts to offer best-in-class global expertise in

political consensus-building to BiH political elites. This effort should be co-ordinated by EUSR.

Members of the international community should guard against the provision of independent support

to areas which are covered by the requirements of the European Partnership, without the approval

of the DEI and Sector for the Co-ordination of International Aid.

Recommendations specific to the European Union

The EUSR should have a focused brief to oversee and support a political consensus building

process which will enable to country to reach the starting blocks of the detailed EU accession

process.

One of the outcomes of this process will be the formulation and agreement on a new constitution

which sets the foundation for the establishment of a functioning state.

The European Union needs to ensure that the purpose of the EUSR is clearly defined and that the

institution is full fit to fulfil its mission prior to the date of the closure of OHR.

The EUSR should retain a diluted form of residual power following the closure of OHR, to form a

counterweight to its mediatory role in political consensus-building.

Additional EU financial mechanisms should be made available to support political consensus-

building and the constitutional reform process and associated state-building activities.


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A review should be undertaken of other EU support instruments, such as the Cross Border

Programme and twinning mechanisms to assess whether current programming criteria are

consistent with the consequences of a tailored approach to accession. An assessment should be made of the format and methodology of the annual Progress Report to

consider whether it is fit-for-purpose in relation to the enhanced, tailor-made approach to BiH

accession.

Recommendations to the British Government

The Government should advocate urgent efforts to define the role and activities of EUSR to enable it

to be in position to assume the ongoing functions of OHR in the future.

The Government should advocate a reassessment of EU and member states financial support to

BiH to ensure that resources are directed to the most important priorities of the next four years.

DFID support to the Centre of Government is in line with the conclusions and recommendations of

this report. However, it is anticipated that the effectiveness of these inputs will diminish unless

parallel efforts are made to build greater consensus amongst the current political elites.

By supporting the completion of the Country Development Strategy, DFID has a valuable opportunity

to play an important role in shaping developments over the critical medium-term period highlighted in

this report.

The British Government has valuable experience in political consensus building, notably in Northern

Ireland, which could be drawn on to contribute to the proposed political consensus building and

constitutional reform process.

DFID may consider the use of some of its remaining resources to support these assessments, inorder to provide informed guidance to the Government, EC and other development partners on the

effectiveness of future programmes in these areas.


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1: INTRODUCTION

It has been said that Bosnia and Herzegovina is undergoing a quadruple transition: from single-partysystem to multiparty democracy; from social self-management to a market economy; from war to peace;

and from an ethnically divided and segregated country to a more integrated and coherent state. In

addition to this, or as the symbolic end-point of this transitional process, the country is expected to

become a member state of the European Union in the foreseeable future. This has been characterised

as the Dayton to Brussels transition by some observers.

In this context, the progress of the country since the end of the war in 1995 could be seen as being

impressive. Personal security in the country is good and violence very rare, despite the brutality of the

war period. Electoral processes are relatively fair and free, even if they are dominated by parties which

essentially represent the three national communities, rather than social ideas and values. The majority

of the economy is now in the hands of the private sector and economic growth has been robust, at or

above 5% per annum for most of this decade.

Despite these successes, the mood in the country and amongst international observers is becoming

more pessimistic. The reversal of the decision to close the OHR in 2007 indicated that the international

community lacked confidence in the political leadership and domestic institutions, coming in the wake of

the failure of constitutional reform in 2006. Since then political rhetoric has become more

confrontational and reforms linked to the EU accession process have slowed. For the first time in a

decade, the possibility of a return to violent conflict has begun to be talked of, even if the likelihood of

this happening still seems remote.

However, there remains a broad consensus for accession to the EU among political and economic

stakeholders. Indeed, the only external leverage which appears capable of overcoming the resistanceof the current political leadership to reform is the carrot and stick of enhanced EU accession status or

the threat of its withdrawal. However, the rate of progress in addressing the requirements of the

European Partnership, combined with growing sentiment within the EU to delay the next wave of

enlargement, mean that accession is most likely at least ten years away, if not much more distant. It is

evident, therefore, that with the current level of instability in the country, much could happen over the

intervening period which could seriously jeopardise this process, if not render it unattainable. This could

be either due to developments in BiH, or in the EU, should the enlargement process be suspended.

Within this context a recent British Government Cabinet Office Countries at Risk of Instability (CRI)

index noted that BiHs underlying structural weaknesses pose risks of instability in the short and

medium term. A British Government scenario assessment concluded that any short term future

characterised by stagnation is likely to enhance the pressures for secession within Republika Srpska.Such pressure could derail the European integration process, both for BiH and the wider region. SIDAs

2005 Political Analyses and DFIDs Regional Drivers of change study make some assessments of the

recent trends and forecast developments over a three to five year time horizon. However with EU

accession much further away than this, much could happen to destabilise the country in a longer

timeframe, both politically and economically.

BiH suffers from a complex and costly structure of governance, born out of the Dayton Peace Accord.

This is commonly recognised as having been an effective mechanism to end the war, but not to govern

the country in a sustainable manner. The co-federal constitutional arrangement means that

competencies are shared between different levels of Government (State; Entity and Cantonal). While


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EU accession has become the driver for state-building and state-effectiveness the central state remains

weak. Its authority and competencies are constantly challenged and often undermined.

During a long process of association and integration, BiH will need to manage risks such as the threatsof secession, economic decline resulting from the global financial crisis, possible citizens fatigue with

the European accession process, periodically heightened inter-ethnic conflict, and weak capacity of the

Government to implement politically divisive reforms. Regional and European factors are also likely to

affect the pace and prospects for accession. These include international disagreements on issues

arising from Kosovos declaration of independence, the pace and progress of Serbias EU accession, to

broader enlargement fatigue within the EU.

Within this environment DFID has decided to carry out this study of the broad trends in governance and

to assess their medium term trajectories. The study is intended to provide an understanding of the key

political economy underpinnings of those trends which are most likely to have significant adverse

consequences on the process of European integration. This is intended to help DFID and BritishGovernment to understand better how these risks impinge on their own objectives and development

scenarios. The study is intended to examine how individuals, groups (formal and less formal),

Governments, and institutions interact in shaping the highest risk outcomes. The assessment should

also inform British Governments engagement and its EU influencing strategy.

The purpose of the study is therefore to conduct an outline Country Governance Assessment (CGA)

combined with a more in-depth analysis of key governance trends and risk factors on the road to Bosnia

and Herzegovinas accession to the European Union. This assessment is intended to:

inform DFID and British Governments engagement with the international community especially

the EC in the period both up to and beyond DFIDs graduation from the country;

guide DFIDs policy dialogue with like minded donors on issues around SAA reporting and IPA

programming; and

provide a basis for DFID to assess whether sufficient development resources are being targeted at

the right recipients and beneficiaries.

The study comprises two parts, the second of which depends on the outcomes of the first. During the

first phase, a light touch Country Governance Assessment was carried out using DFIDs standard

methodology, drawing primarily on published data combined with limited in-country meetings with key

stakeholders and prominent observers. This assessment identifies those governance trends and risk

factors most critical to the EU accession process. The assessment was presented for review and

comment by a reference group of British Government stakeholders and independent experts, followingwhich the conclusions were reviewed and finalised prior to the commencement of the second phase.

During the second phase a political economy analysis approach was used to interrogate the key

aspects of the high risk governance trends which are thought likely to influence the EU accession

process and the longer-term social and economic development of the country. This stage of the

assignment combined the earlier analysis with qualitative primary research. The findings were placed in

a framework which identifies the main political, social, business and external actors, assesses the

extent of this influence and considers how policy decisions are affected by these influences.

The report ends with combined conclusions and recommendations, directed at the international

community, European Union and British Government in turn.


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2: GOVERNANCE ANALYSIS

The governance analysis is prepared according to the guidelines and framework issued by DFID in itsCountry Governance Analysis How to note. The format is used due to familiarity within DFID of this

approach, to enable comparisons to be made with other studies of this nature, and to provide a logical

and proven structure for the analysis.

The analysis is intended to provide the evidence base for the conclusions made in the report, which are

to be used as an aid to policy development. As with any country, there is an abundance of detailed

analytical and research material on Bosnia and Herzegovina, the most relevant of which has been

studied during the compilation of this report. It would be impossible to fully capture the scope and depth

of this material in this analysis. Rather, the intention is to seek to present an illustrative picture of the

current situation in the country which can be understood by people with limited prior knowledge of BiH

to make informed judgements about possible development scenarios.

In order to ease readability and user-accessibility several presentational decisions have been taken.

These have the effect of shaping the nature of the analysis away from one of scientific rigour, to that of

a strategic document for policy-makers. The authors believe that these formatting decisions increase

the likelihood that the document will be used by policy-makers, unlike many more comprehensive

studies which have been reviewed during this assignment. These presentational decisions are as

follows:

DFIDs state capability, accountability and responsiveness model has been used as the basis

framework for the analysis, together with the 15-point sub-division of these categories.

The summary of each of these fifteen points is presented on one single page, with the exception of

political stability, which is afforded two pages. This is intended to ease readability. Sub-titles are not

used, but key phrases are highlighted in bold to enable the reader to identify the context of

specific paragraphs.

A one sentence summary is provided alongside the title of each section, prior to the text. This is

intended to be an aid to assimilation of key messages within the complex picture which is

presented.

At the end of each section, a summary section is presented of drivers for change, risk factors

and assessment of the development trajectory. A simple ranking system is used to assess the

significance of each issue. The choice of issues to highlight and the classification is based on the

preceding analysis, and is necessarily subjective. Readers may disagree with the assessments,

and may change the assessments to match their own views. It is intended that the structure is a

framework to understand issues and make policy judgements.

Some drivers for change and risk factors have had to be omitted in the interests of clarity. The

intention has been to omit those issues of lesser or non strategic importance. Again, readers

may add points which they believe to be important if this helps their own understanding.

The time horizons of four and ten years have been chosen to represent the medium and long-

term, with the latter loosely assumed as a date for EU accession.

A further summary section brings together the most significant drivers for change, threats and

development trajectories into a single framework, and is used as the basis for the construction of

the development scenarios which follow.


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2.1 State Capability

Political Stability and Personal Security

Political stability has deteriorated in the past three years following a decade of moderate

improvement since the end of the war.

There are no specific EU accession criteria related to political stability and personal security, although it

is evident that without political stability it is inconceivable that any country could manage the demands

of the EU accession process. In terms of international ranking, the EUI Democracy Index currently rates

BIH in 87th

position, behind all other countries in the Western Balkans, and the Global Integrity Index for

overall governability classifies BiH as being very weak.

There is little doubt that political stability in Bosnia and Herzegovina has deteriorated within the past

two years, following the relative optimism of the early 2000s. UNDPs 2007 Early Warning System

concluded that BiH is in ...the worst political and institutional situation in ten years. In November 2008the Steering Board of the Peace Implementation Council expressed its deep concern about the political

developments in the previous period, while the High Representative Lajcak spoke of the difficult

political situation and "... the nationalist and ethnic agendas [which] have continued to prevail over the

agenda that actually should matter -- the Euro-Atlantic agenda" (SE Times December 2008).

The problematic nature of the Constitution is a standard observation of any report analysing the

situation in the country. The problem with the constitution can be summarised in two interconnected

faults (see Power and Change Analysis report). Firstly, it enshrines an extremely complex and

decentralised state structure. Secondly, it has created an ethnic state structure, in contravention of

some key international conventions, which is detrimental to stability, democratisation, and development.

In the words of a recent report, The Dayton Agreement and the ensuing constitution were the

instruments to stop the war in Bosnia and Herzegovina, giving them historical importance, but they were

not instruments for [the] building of a sustainable country (Power and Change Analysis). The need for

constitutional reform is recognised by all international stakeholders. All local political actors also largely

concur that the constitution has to be revised. The problem is that local actors view this reform entirely

differently.

The legitimacy of the state has been continuously contested by a significant portion of the population

since before the 1992-1995 war. After the Dayton agreement, and under the strong influence of the

international community, it is not now as contested as in the early post-war period. In recent years the

vast majority of Bosnian citizens have (perhaps reluctantly) come to accept the current status quo (BTI

Bosnia). Serbs appear committed to Bosnian sovereignty as long as their entity is constitutionally

ensured. This signals a key difference from the early post-war period. (DFID 2005 Regional Drivers forChange study).

The relative successful party system and electoral processes are coupled with an apparent

commitment to the democratic system of government, although parties resort to efforts to bend the

rules of the game for achieving political gains (BTI Bosnia report). What is more problematic is the

continuing challenge to the established constitutional order by ethnically-based parties. Central state

institutions do not enjoy the full support of RS Serb political elites, nor in some cases the Croat ones. At

the same time, many Bosniak politicians continue to reject RS institutions and call for the

dismantlement of the entity structure.

By its very nature BiH depends for its survival on inter-ethnic consensus and collaboration. Still,

Bosnia remains a consensus-based democratic system without consensus among the key political


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actors. (BTI Bosnia). However, extremist political forces of the past have transformed or been

marginalised and all Bosnian political elites share the goal of EU integration. Currently, political tensions

and the stalling of reform originate not from extremist and radical forces but by parties which continue toexploit the ethnic agenda to maintain their political position and material interests (BTI Bosnia).

Coalition-building and decision making in BiH is a long and tedious process due to party system

fragmentation, intra-party fractionalisation and ethnic and narrow-minded interest based politics. The

formation and reshuffle of governments takes several months. Especially in the Federation, decision

making is slow and cumbersome with at least two pairs of key parties for each of the two peoples

controlling and stalling the process. In the RS decision making is faster due to the dominance of one

party and the marginalisation of the non-Serb population (Power and Change Analysis report).

In Bosnias nascent but flawed democracy observers point out the dangers of political influence of

individuals and informal and extra-parliamentary factors. Reports often criticise the informal

influence of party leaderships that undermines the independence of the judiciary and the parliament inthe country (BTI Bosnia report). Parliamentary procedures are often neglected and the true power to

move things forward lies with key political figures. The international community has also contributed to

extra-parliamentary processes by negotiating reform with leaders without the involvement of the wider

society. Furthermore, other informal and extra-parliamentary institutions appear to have significant

influence in politics. Religious institutions interfere in politics, especially among Bosniaks and Croats.

Party leaderships maintain strong links to business interests. Finally, all key political parties seem to

have maintained links with business and criminal networks that were created during the war (Power and

Change Analysis report).

Finally, a missing block of Bosnian state building has been the lack of a strategy for reconciliation in

the country, whether by the international community or local elites. Dealing with the past has relied

almost entirely on the ICTY (The Hague Tribunal); although this seeks to bring about justice rather than

reconciliation. Ethnic elites are unwilling to openly deal with the crimes committed by their own side. RS

society still glorifies war criminals. Among Bosniaks the political use of wartime suffering has had the

effect of sharpening divisions with other groups. Recently, civil society initiatives are attempting to

create regional platforms to facilitate reconciliation. It is clear though that without the active involvement

of the political system such efforts are likely to remain marginal.

Developments in the field of security contribute to the general security and stability. Defence reform

was finalised in recent years resulting in a unified military command of the BiH Armed Forces. Progress

has been made in 2008 in the question of defence property while the EUFOR has transferred some

responsibilities to the BiH Armed Forces. The progress was reflected in the invitation that BiH received

from NATO to start the Intensified Dialogue (Progress Report 2008) after joining the Partnership forPeace initiative in 2006. Finally, the presence of EUFOR was recently extended by the UN Security

Council for one more year despite earlier calls by certain European states for withdrawal of the mission.

Against these positive trends, however, there are some reports claiming, probably for the first time in

several years, that the country is at the verge of violent collapse (see esp. Democratisation Policy

Council Report).


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Economic and Social Policy Management Capability

Policy-making capability severely affected at the country level owing to the complex

administrative structure and national/ethnic tensions. Policy is made, but often in a tortuous

manner.

The EU, along with other international observers, regard macro-economic stability and fiscal prudence

as the framework for sound sectoral and cross cutting policies, backed by efficient labour and capital

markets and supported by effective energy and transport provision.

Key issues of economic and social policy management are the privatisation of loss making SOEs;

reducing external deficits; maintaining inflation under control; evidence-based economic forecasting;

public tenders efficiently launched and implemented for major projects; employment standards moving

on par with other Accession countries; employment generating and environmentally sound investments

on increase in sectors of comparative advantage.

The overall policy-making and co-ordination system at all levels of BiH is a system in transition. There is

significant recognition at leadership levels of the need to reform the policy system and especially to

strengthen capacity for strategic advice and policy co-ordination. There is a commitment to

building closer co-operation and consultation among the CoM and the two entity governments in all

areas of policy and legislation. To achieve these objectives, the CoM and entity governments have

endorsed a blueprint for the parallel development of their CoGs (SIGMA: 2008 Policy Management

Assessment). Meanwhile, policy development in economic and social spheres continues on an ad hoc

basis:

Little progress is noted implementing EU standards in education, health, agriculture and transport, and

statistics. Co-operation between the state and entities is improving with some political agreement

regarding the conduct of a census. The currency board has continued to work smoothly. The issue of

the census is highly politicised. There is an initial agreement by key parties to make preparations for a

census in 2011 but there is no agreement about the specifics of its conduct. With the last census

conducted in 1991, failure to conduct a new census will have repercussions on the efforts to design

public policies according to EU standards.

Progress is noted in labour market reform and commercial courts. Proper implementation of

procurement procedures is not yet ensured across the country, limited progress is noted on

employment and social policies. There is limited progress in industry & SMEs, with a strategic vacuum

for both. The State level environment law has not yet been adopted, and BiH is still to implement EU

energy legislation (2008 EU Progress Report).

The Government takes leadership in policy design through an integrated structure that depends not

only on inter-ministerial coordination, but also intra-entity coordination. The locus of initiative for

policy development comes from the BiH Council of Ministers and the two entity Governments. Co-

ordination of the Country Development Strategy is the responsibility of the Directorate for Economic

Planning, which reports to the BiH Council of Ministers.

Existing capacity for policy formulation is hindered by institutional and political obstacles.

Ministries have capacity for planning, but limited capacity for implementation because of high levels of

decentralization. State, entity and canton governments have insufficient capacity for planning and

implementation. Political and ethnic tensions continue to run deep, and the autonomy of the entities

make it difficult to implement a truly national strategy. Duplication of efforts leads to inefficient use of

resources.


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Government Effectiveness and Service Delivery

Despite substantial external support, Government remains relatively ineffective, frequently

delaying necessary reforms and leaving citizens feeling cynical and frustrated.

The effectiveness of the Government and its underlying public administration is one of the underpinning

requirements of the EU accession process. However, it is widely recognised that acute performance

problems of the administration remain. These include inadequate human resources, overlapping

competencies, lack of coordination between and across levels of government, the marked absence of a

consensual, cooperative administrative culture and common-place, political interference in the hiring

and management of civil servants, which exacerbates ethnic cleavages within the public administration

(SIDA/VPI Study on Governance Structures in BiH).

Many of the weaknesses in public administration derive from constitutional issues, described

earlier. Thirteen years since Dayton, and with laborious international efforts to strengthen the central

state, real power in BiH remains at the level of the entities or sometimes within Cantons. This weakness

is epitomised in the small size of the state level legislature and executive. In comparison entity level

parliaments and governments are much larger, commanding authority over large public administrations

and budgets. The weakness of the central state is inextricably linked to the powers of the entities. A

recent report stresses that ...where the state legislates (framework legislation) and the entities retain

the power to legislate and implement, there is little or no entity compliance unless as a result of

aggressive international intervention. (Foreign Policy Initiative report, p. 5). There is evidence to

suggest that government is most effective within RS, where there are no Cantons and policy-making is

dominated by a single party and ethnic group.

Under the guidance of the international community, or more frequently armed-twisted by it, BiH has,

experienced a reform drive over the past decade. Using the prerogatives of the Bonn powers,successive High Representatives have made significant inroads into reform in areas as diverse as

security, defence, justice, media, education, public administration, economic and fiscal policy. Crucially,

this reform drive was usually coupled with centralisation of powers at the state level or, when this was

not possible, full harmonisation of legislation. Thus the effects of the faulty Dayton state organisation

were being incrementally remedied. However, the reform drive has inbuilt flaws. Not a single reform

was locally driven and many were carried forward by international community imposition or soft

imposition (Power and Change Analysis report). The international community risks creating a

dependency culture incompatible with the future development of BiH... (Transparency International

report).

The establishment of the Public Administration Reform Office (PARCO) and the development and

implementation of the PARCO strategy are intended to be key instruments to effect the required

improvements in public administration at both state and entity levels. There is some optimism that

progress is being made, with approximately one third of the measures identified as being required

having been implemented by the end of 2008. The EU Progress Report noted, however, that

administrative capacity is urgently needed for SSA/IA preparation and implementation (EU 2008

Progress Report).

In sum, to quote one report: Despite considerable progress in reforms, the substance of reforms, as

well as their results in practice, are challenged. Much attention has been paid by the international

community to the legal framework at the state and entity level, but it is evident that many of the rules

and regulations are only weak obstacles in practice, and that many actors have found ways to

circumvent the elaborate legislation in place. (Power and Change Analysis)


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Revenue Mobilisation and Public Financial Management

Revenue mobilisation has improved since the introduction of VAT and other structural reforms.

However the country still lacks a co-ordinated and integrated system for efficient resourceallocation.

Key EU accession-related requirement are: the ability to balance budget by way of efficient tax

collection and public expenditure management, customs tariffs in line with the acquis, free tax zone

legislation EU compatible, formulas for indirect tax allocation between states and adequate Internal

financial control and audit in place.

The fiscal system is characterised by many deficiencies, including: the lack of redistributive

competencies preventing a more even development within the country as a whole, the lack of fiscal co-

ordination between different levels of Government, fiscal disparities and overlaps in fiscal

responsibilities between the state and entities, inefficiencies in the direct tax system across the country.

This results in numerous tax law loopholes and weak revenue collection at all levels, and application of

different accounting methods, making analysis of the public sector and its effect on the economy more

difficult. (SIGMA Public Expenditure Management Report, May 2008) The World Bank Country Policy

and Institutional Assessment (CPIA) performance criterion that assesses the quality of budgetary and

financial management places Bosnia and Herzegovina at 3.5 on an increasing scale of 1 to 6.

Nevertheless, recent progress includes implementation of customs related provisions which are said to

have been generally satisfactory, inauguration of the National Fiscal Council, increase in VAT

registrations, harmonisation of budget calendars and establishment of a common Treasury Single

Account (EU 2008 Progress Report).

The guiding framework for resource allocation decision is, theoretically, the Medium-Term Development

Strategy, linked to the Medium-Term Expenditure Framework. However, with the MTDS coming to an

end in 2007, and not yet having been replaced by its successor, the Country Development Strategy,

resource allocation is currently governed entirely by MTEFs and the annual budgeting process at

Canton, Entity and State levels. MTEFs are loosely co-ordinated by the National Fiscal Council (NFC),

although this lacks the power to enforce decisions on overall fiscal policy. There are no plans to

consolidate the separate MTEFs into a single MTEF for the country, although a harmonised budget

calendar has been established, supported by a DFID project.

Capacity for policy formulation is hindered by institutional and political obstacles. Ministries have

capacity for planning, but limited capacity for implementation because of high levels of decentralization.

State, entity and canton governments have insufficient capacity for planning and implementation.

Political and ethnic tensions continue to run deep, and the autonomy of the entities makes it difficult toimplement a truly national strategy.

BiH was the last country in the Balkans to introduce VAT, with the law passed only in 2005. This has

the prospect of strengthening the fiscal independence of the state Government, which is financed

entirely by contributions from the entities, with no taxation right of its own. A BiH Law on Procurement,

in line with international best practice, was adopted in 2003.

BiH is still a significant recipient of external assistance, both in the form of grants and soft loans.

Latest estimates place the annual level of assistance at over 400 million, more than 10% of the public

sector budget. There is currently little integration of these resources into the annual budgeting process,

although a newly established Sector for the Co-ordination of International Aid (SCIA) in the Ministry of

Finance and Treasury intends to improve the co-ordination and allocation of these resources.


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Conditions for Investment, Trade and Private Sector Development

The economy has grown strongly in recent years and should continue to do so. However this is

likely to be constrained by structural weaknesses and the impact of the global financial crisis.

The establishment of a fully functioning market economy is a core requirement of EU accession. The

European Partnership requires progress concerning the free internal movement goods (adoption of EU

standards, market surveillance), elimination of capital restrictions, establishment of effective banking

supervision at the state level and a functioning insurance agency, enactment of competition legislation

and intellectual property law and broader WTO compliance.

Indicators of progress in this area would be full membership of WTO (BiH currently has observer

status), increases in foreign direct investment to the levels of regional neighbours, the speed of

implementation of the privatisation process and the establishment of a single economic space

throughout the country. Progress identified in the 2008 EU Progress Report includes the development

of the Competition Council, progress in improving the business registration process, the

operationalisation of the Council for Consumer Protection, and improved access to financing of the

SME sector.

In general terms, economic performance in BiH has been good in recent years. Real GDP growth

was estimated at 6.8 per cent in 2007 and has continued at a similar pace in the first half of 2008,

driven by strong growth in the construction and financial sectors, and in exports (up 18% year-on-year).

(EBRDs Bosnia and Herzegovina Economic Overview for 2008). There has also been a surge in

foreign direct investment (FDI), driven in part by several larger deals, but also by growing investor

interest in the country. EBRD concludes that the macroeconomic outlook for Bosnia and Herzegovina

remains favourable, provided that internal and regional stability is maintained.

Despite this, Bosnia and Herzegovina lags well behind the region in FDI, at less than half of Serbia

and one fifth that of Croatia (MoFTER data for 2007). There are many reasons for this, but the high

level of red tape and bureaucracy is often cited as a key factor. In terms of FDI, the largest investors are

from Austria, followed by Croatia, Slovenia and Germany. (FIPA Fact Sheet Dec. 2006). Corruption is

also an issue of concern (see later section) with a recent enterprise survey indicating that 69% of firms

expect to have to give gifts to tax officials.

The IMF 2008 Country Report notes that privatization has progressed rapidly in the RS, but has yet

to take off in the Federation. According to this report the creation of a single economic space in Bosnia

and Herzegovina remains largely elusive. Capital markets remain underdeveloped. Both entities

have created their own stock market infrastructure with separate bourses in Sarajevo and Banja Luka.

However, the small size of the market, lack of progress on privatization, and public mistrust of previousvoucher privatization programmes have impeded the development of a healthier market.

In the trade sector, free trade agreements have been concluded with most neighbouring countries and

preferential export regimes with major OECD countries. The Interim Agreement (IA) between the EU

countries and Bosnia and Herzegovina came into force in July 2008, effectively creating a free trade

area. However, the country continues to have a significant negative balance of trade.

Bosnias private sector is therefore on an upswing but still confronts grave structural and performance

constraints. (World Bank Investment Climate Assessment). The impact of the global financial crisis

has yet to be felt strongly in the country. Whilst it is certain to have an impact, this may be softened

due to the relative lack of integration of the country into global financial markets.


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State Capability Drivers, Risks and Development Trajectory

Summary

State capability has undoubtedly improved substantially since the war, not least because almost no

capability existed at all previously, combined with enormous support from the international community.

However Bosnias unique constitution and the understandable post-war tension between its constituent

entities and nationalities mean that decision-making processes within the public administration are

notoriously slow and cumbersome, much more so than in other transitional countries from the former

Yugoslavia. Whilst the lure of EU accession and the negative consequences of fragmentation have

combined to maintain movement in the direction of reform, this is small in relation to need, and cannot

be guaranteed to be maintained. It is a widely shared view that an amended constitution is necessary to

address the underlying issues of state capability. However, following the suspension of discussions on

this issue in 2006 there seems little likelihood of a short-term resolution to this issue.

Despite the weakness of the state the country does manage to function as a democratic, market

economy. Elections are contested in a largely free and fair manner and the economy has grown

relatively strongly for most of the past decade. Whilst the state seems ill-prepared to assume the

rigorous demands of the EU accession process, it could be said to be relatively successful in relation to

other countries which have experienced violent conflict so recently. However, concerns regarding state

capability are concerned with the direction of political developments, which could be said to have

deteriorated during the past two years. Increased nationalist rhetoric from senior political leaders,

combined with upcoming parliamentary elections and the delayed impact of the global financial crisis

have combined to cause serious concerns amongst international observers regarding the sustainability

of the reforms implemented to date, if not the very survival of the country in its current form.

Key Drivers for Change1

The objective of EU integration and the benefits which are expected to be derived from this, shared

by political elites and citizens alike. Strong

The active commitment of the international community to Bosnian sovereignty and ongoing support

for reform and state-building. Strong

External influences from neighbouring countries, notably pro-European and moderate Serbia and

Croatia. Medium

Continuing financial support from donors and international financing instititions to improve the

performance of the public administration, albeit on a reducing level. Medium

Competition between entities and state administrations to demonstrate their competence in the

management of their own responsibilities. Weak

Increasingly well qualified cadre of qualified and experienced civil servants, not linked directly to

political interests. Weak

The objective of NATO membership and the reforms that this requires. Weak

1See Annex 2 for a description of the criteria used to categorise Key Drivers for Change


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Increasing maturity of the business community driving the need for an improved and business-

friendly public administration. Weak

Key Threats and Risk Factors2

Medium-term risks

Inefficiency of the state will mean that BiH falls ever further behind regional neighbours in path

towards EU accession. High likelihood, high impact.

Increasing lack of compliance with enacted legislation undermines respect for the state. Medium

likelihood, medium impact.

Political deadlock, both within the Federation and at the State level, due to strong nationalist

agendas. Medium likelihood, high impact.

Economic crisis hinders the ability of the public administration to take on the increased obligationsrequired by the EU accession process. Medium likelihood, high impact.

Escalation of political tensions in the lead-up to the 2010 elections, stalling reform in the intervening

period. High likelihood, medium impact.

Effects of global financial crisis are much more severe than currently forecast, damaging

government revenue and increasing social unrest. Medium likelihood, high impact

Long-term risks

Failure to address the deficiencies of the constitution will permanently prevent the establishment of a

functional state. High likelihood, high impact.

Continued deepening of societal divisions along ethnic lines. Medium likelihood, high impact

Gradual movement of RS towards a pro-secession orientation. Medium likelihood, high impact.

Renewed nationalistic violence. Low likelihood, high impact.

Further deterioration of parliamentary processes. Low likelihood, medium impact.

Stagnation in economic growth as a result of the global economic crisis and loss of investor

confidence due to political instability. Medium likelihood, medium impact.

Assessment of Progress Trajectory

Progress TrajectoryCategory

To date Next 4 years Next 10 years

Risk

State Capability Slow Slow Slow Medium, rising

2See Annex 2 for a description of the criteria used to categorise Key Threats and Risk Factors


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2.2 Accountability

Political Freedom and Rights

Political freedoms are constrained by the seemly inextricable link between national identity,

religion and political preferences, which appears to be becoming more engrained with time.

The European Partnership requires BiH to amend its electoral legislation to ensure full compliance with

the European Convention on Human Rights (ECHR) and with its post-accession commitments to the

Council of Europe. In particular, the tripartite presidency is in direct contravention of the ECHR. The

2008 EU Progress Report notes some progress in this regard, notably in amendments to parliamentary

procedures to improve functionality and reduce the use of political boycotts. However, the unstable

political climate and systematic voting along national lines have limited faster progress.

In relation to recognised democracy indicators, BiH ranks lower than other countries of the former

Yugoslavia, for example at 87th

out of 167 countries in the EUI Democracy Index. Freedom House ratesthe status of political rights in BiH as being only partly free.

Many of the obstacles to reform centre on the Constitution, which was a product of the Dayton

Agreement. The Constitution tends to treat all citizens as members of one of the three

constituent peoples, in effect creating two tier rights. Whilst this nominally protects minority rights, it

institutionalises a system which is based on the identity of the three main national groups. Failure to

agree on constitutional reform and the subsequent political crisis has the effect of preserving ethnic

quotas in elected positions, thereby limited the access of citizens to power. The most infamous example

of this is the impossibility of a citizen from one national group being elected to the Presidency if they

reside in the entity controlled by another national group. Other national groups have no such possibility

at all.

In practice inter-ethnic relations are burdened by a high level of ethnically based discrimination. Staff

in public institutions and enterprises is practically mono-ethnic, with the exception of the police

and the judiciary (Open Society Democracy and Governance Assessment). The struggle for positions

and resources among the three constituent peoples further marginalises those citizens not belonging to

these groups.

Ironically, BiH has a generally good level of legal protection of freedom, such as freedom of

movement, of association and peaceful assembly, ands of expression. However, several high profile

incidents in recent years show that enforcement of legal provisions is far from satisfactory. There is

widespread recognition that there is a gradual dismantling of the secular state and the official and

informal penetration of the corresponding majority religions in virtually all aspects of public life.

After extensive efforts by the international community, including the restitution of all property and the

creation of conditions of personal security locally, the return of refugees and displaced persons took

place in large numbers during the immediate post-war years (or property was reclaimed and sold). This

peaked at the start of the current decade, followed by a slowdown or even reversal of the trend. Legal

frameworks for the return of refugees are in place and governments, albeit reluctantly, made efforts to

create conditions for their return. However, it is probably the case that, due to economic reasons, social

pressure, non-reconciliation, and political tensions, the return of refugees has largely run its course.


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Transparency and Media

A nominally free media environment is increasingly dominated by media groups closely allied

with nationalist and political groupings.

Public broadcasting is a key short-term priority of the EU. BiH is required to adopt new public

broadcasting legislation at the Federation level and implement public broadcasting reform. BiH is also to

establish an Information Society Agency; maintain the independence of the Communications Regulation

Authority (CRA); implement and enforce regulations on telecoms and e-communications, and liberalise

and make their market competitive. In relation to recognised international benchmarks, BiH scores very

weak in the Global Integrity Index (GII) for Public Access to Information, but strong in the GII for

Media. Freedom House classifies BiHs media as being partly free.

The media sector has been one of the key areas of focus of the international community, not only

because of its role in the development of a democratic society, but also because of the negative role the

media played in the wars of the former Yugoslavia. However, after ten years of effort and more than

$100m of support, international interest is waning, and even donors traditionally focusing on media

reform are now scaling back their support.

According to the 2008 EC Progress Report, some progress has been made in public broadcasting

reform. Several necessary codes have been adopted, although in almost all cases there are delays

with the institutional implementation of these. Among the successes of the international effort was the

establishment and survival of the CRA as a transparent and balanced authority in the field of

broadcasting regulation. (Media Sector Policy Brief for USAID Democracy Assessment, p. A9). The

CRA continues to be subjected to political pressure and attempts for political interference in the

appointment of its Director (Power and Change Analysis report).

With regards to media freedom, BiH has among the most liberal legal environments in the world but

the situation in recent years is deteriorating. Enforcement is largely absent due to problems in the

judiciary. There is a low standard of professionalism and different media groups appeal mostly to their

ethnic constituencies. Journalists often face indirect threats and political pressure. There is also

concern about the influence of organised crime on media (Freedom House report).

As far as the printed media is concerned, the readership of newspapers is low. Among local

newspapers Dnevni Avaz has a commanding position (40.2% in 2005); but newspapers from Serbia

and Croatia retain a large share of the readership (2nd, 4th, and 5th position in 2005) (Democracy

Assessment 2006). A positive trend in post-war BiH has been the plethora of media outlets and the

proliferation of local/regional and small media and their share in viewership; this however is gradually

changing due to consolidation in the media sector. More recently, independent and non-politicallyaligned media seem to be in retreat (Democracy Assessment 2006 & Freedom House report).

Foreign investment in the media sector is not expected before the consolidation phase is over. At the

same time, public broadcasters remain weak and are suffering from ethnic factionalism (USAID BiH

Democracy and Governance Assessment 2007).

There are continuing concerns about the relationship between the media and political elites. Apart

from the problem of ethnic bias, journalists often face political pressure and the media are generally

favourable to the authorities, especially in pre-election periods. In the RS there is a close relationship

between Prime Minister Dodik and the owner of the main media group. In the Bosniak parts of the

Federation there are concerns about the influence of the Avaz, as the only large Bosnian media group,

and at the state level the public broadcaster is under heavy political pressure from the RS leadership


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Political Participation and Checks

The political and electoral system functions relatively well, given the context in which it was

established, though remains dominated by nationalist parties.

Whilst internationally recognised indices show the quality of electoral processes in BiH to be relatively

good (e.g. Global Integrity Index for Election Integrity: very strong), more general indicators concerning

the quality of democracy as a whole show the country to perform less well then all other countries in the

Western Balkans (EUI Democracy Index).

Elections in BiH are organised and conducted by the Central Election Commission (CEC), which has a

reputation as a relatively independent and transparent institution. Election results are generally

accepted by political parties and the electorate, which is a notable achievement in a complex post-

conflict society. However, there is a steady decline in voter turn-out in elections in the country since

1998, with the more dynamic members of society (youth, the urban population, educated people) being

amongst the largest groups of abstainers (Open Society Democracy Assessment in BiH).

As a result of the Vital National Interest (VNI) clause, a series of constitutionally enshrined veto

mechanisms requiring a consensus of the three national groups exist at various levels of public

administration and government (especially the Presidency, Council of Ministers, Parliaments). As a

consequence decision making processes are cumbersome, especially at the state level and in the

Federation, limiting the ability of authorities to govern and allowing interest groups to block policy

making. This deficiency was sharply criticised by the Venice Commission of the Council of Europe,

which recommended reforms in the new Constitution (BTI Bosnia 2008)

The OHR/EUSR, through the Bonn powers, remains a key element of policy making which is not

accountable to the electorate, thereby restricting full democratisation. The Venice Commission of the

Council of Europe has summarised the problem with the OHR as such: the need for the wide powers

exercised by the High Representative certainly existed in the early period following the conclusion of the

Dayton Agreement. However, the longer it stays in place the more questionable it becomes. .

(quoted by Transparency International report) However, the failure of Bosnian politicians to reform the

constitution and to secure a stable political environment has resulted in the extension of the presence of

the international community in the country. There is now a rise in the number of Bosniaks wishing to

see the reduction of the powers of the OHR/EUSR, matching an earlier tendency among Serbs and

Croats.

The party political landscape is today much more stable than in the immediate post-war period.

Political parties are relatively strong and well organised (Sector Policy Brief on Political Parties for

USAID Democracy and Governance Assessment). However, ethnicity remains the primary focus ofidentification for both parties and voters; parties are not based on differences in their approach to public

policy, but on personalities; and parliamentary institutions have insufficient accountability and lack of

ownership over the legislative process (see Sector Policy Brief on Political Parties for USAID

Democracy and Governance Assessment; Power and Change Analysis report).

Local governments have been political losers. In the former regime municipalities enjoyed

extensive powers and policy influence over several aspects of citizens lives as well as a high reputation

among local constituencies. Following the war municipalities lost almost all of their powers to the middle

DFID Istrazivanje Rizici Pristupanja BiH EU

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