Sarajevo, Friday 201 September 2013

Ladies and Gentlemen,

Let me begin by thanking the organizers for inviting the EU to speak at this conference on an issue that deserves and indeed requires a lot of attention from us all.

Bosnia and Herzegovina has over the past years persistently scored low results on many economic cross-country indicators. It continues to lag behind its neighbours in the annual World Bank Report on “Doing Business”. This year Bosnia and Herzegovina ranked 126th for how easy it is to do business (rivalled by Ethiopia, Honduras and Bangladesh) For comparison, let me mention that the regional average for Eastern Europe and Central Asia is 73.  

Let me also mention that in the calculation of this rank, it was issues under the responsibility of local government that pulled BiH’s ranking down. Just to mention a few:
1.    the time it takes to register a business (avg. 37 days),
2.    the time it takes to get building permits (avg. 180 days), and
3.    the time it takes to get connected to the local electricity grid (avg. 125 days).
Not surprisingly this translates directly into the relative amount of new businesses established in a year, where BiH also has a regional low score with less than one new company registered per 1,000 people .

Of course the business environment in Bosnia and Herzegovina – as is the case anywhere else – is not only defined by the local administrative side of establishing a new business, it also a function of a few other factors:
1.    a general political and economic situation that is marred by the absence of a common vision for the country, a factor which in itself may deter foreign investments;
2.    a transport infrastructure in much need of improvements and modernisation, which makes it more difficult for businesses to reap the benefits of their relatively close proximity to EU markets;
3.    a high level of complexity and a lack of transparency in government practices;  The perception of the BiH business community is that administrative burdens, corruption and an over-sized public sector are posing the major constraints for entrepreneurship development.
4.    and finally, limited access of entrepreneurs to financial support and credits, that will allow them to get their business prospects “off the ground”. Some 45 per cent of firms in Bosnia and Herzegovina see access to financing as a major obstacle to the development of their business .
99 % of businesses in BiH are Small and Medium Sized Companies and the vast majority of these SMEs operate in local markets. Therefore, Municipalities have a crucial role to play in helping to improve the business climate and to encourage investment for the business sector.

Municipalities need to take on the mission of being the champions of business. This means providing efficient administration, speedy granting of permissions and efficient provision of utilities and services. Basically, making it easy to do business.

While we are talking about local competitiveness – what we have seen many places in the EU is that when municipalities cooperate with higher administrative institutions to improve conditions in general, there is a real chance of lifting the general economic outlook of regions. This generates investments, creates jobs, and improves the living conditions of the populations of entire regions.

When higher levels of government cooperate with municipalities to get the legal frameworks in place – and when municipalities focus on the quality of the services they need to provide, there is a real economic perspective in these partnerships.

It is important that responsible politicians act with ambition and that they act with urgency!

The European Union stands by your side in this effort. The EU is the single largest source of financial assistance to Bosnia and Herzegovina. Over the past twenty years, the EU has contributed more than 3 billion EUR worth of assistance to BiH. The foremost vehicle for the assistance the European Union provides is the multi-annual Instrument for Pre-Accession for “Enlargement Countries”, abbreviated “IPA”. For 2013 alone we have allocated some 108 MEUR.

•    This money covers the Rule of law and Public administration reforms. Both are critical for a corruption-free and business friendly environment.
•    We are also planning to provide considerable funds for Infrastructure development, mainly transport and energy networks and projects that provide direct benefits to small businesses. Our support to SMEs will focus on transfer of knowledge and new technologies, quality standards, infrastructure and more.

•    Over the past few years, the EU support to local economic development has been in the amount of approximately 20 million EURO. Much of this support has been focused on provision of services to the local entrepreneurs for better access to markets, skills training, innovation and introduction of standards.

•    We have recently launched a call for proposals worth 3 MEUR with the aim of supporting local economic development in BiH through improvements to the business infrastructure, introduction of quality standards and new technologies etc.

•    And looking ahead, there is much more potential for local integrated development in Bosnia and Herzegovina;
•    In the draft Country Stategy Papers for the IPA II (2014-2020), the EU has developed the concept of “integrated local development” for possible support to BiH;
•    Integrated Local Development has as a main objective to boost competitiveness and job creation at local level, reflecting the EU economic priorities for local development, as well as the EU 2020 Strategy and the SEE 2020 Strategy (currently under preparation)

Clearly there is a very close relationship between economic development and political stability and vice-versa. Therefore practically all of the priorities and efforts of the European Union vis-à-vis Bosnia and Herzegovina have an economic angle.

This country has a real prospect of eventually becoming an equal member of the European Union. But in order to get there, a sincere and persistent commitment by the political leaders of this country is of paramount importance. Political leaders need to focus on – and to find common stances on – policies that will help the country as a whole to finally begin catching up with its neighbours. This is what the people of Bosnia and Herzegovina want and what they deserve.

Thank you.