Necessary economic reform outlined in new Compact

Is it possible to agree on a simple set of priority measures that would re-ignite the process of modernising the economy in Bosnia and Herzegovina?

Together with all those with an interest in the economy – institutions, civil society, international organisations, social partners, citizens and officials – we set out to answer this question at the Forum for Prosperity and Jobs for Bosnia and Herzegovina held in May 2014. It was followed by an expert seminar in Banja Luka earlier this month.

These efforts have led to the creation of a Compact for Growth and Jobs in Bosnia and Herzegovina. The Compact is a reform package which answers the question above with concrete proposals – which, if endorsed by stakeholders, can make a positive and substantial difference to life of all the citizens of Bosnia and Herzegovina.

The Compact was presented today by the European Union Special Representative in Bosnia and Herzegovina/Head of Delegation, Ambassador Peter Sorensen. Ambassador Sorensen’s message was:

“Bosnia and Herzegovina needs to reform. Otherwise the country risks falling further behind her neighbours in terms of the business environment and actions needed to spur investment and create jobs. Reform is possible – even if there are difficult tasks ahead – and the process has to start, in earnest, to improve the lives and prospects of the people of Bosnia and Herzegovina.”  

The Compact outlines that to get its economy moving and create jobs, BiH should:

1.    Reduce taxation on work to make it less of a burden to employ new workers.

2.    Increase openness and competition in the labour market to make it easier for young people and unemployed people to find work – and to ensure hard work pays off.

3.    Slash the requirements for and time taken to start a business.

4.    Pass an improved insolvency framework so businesses can be restructured faster.

5.    Produce clear, public e-registers of procedures for licences and permits.

6.    Reduce the amount of privileged pensions, and raise social assistance for those who really need it.

Ambassador Sorensen said:

“A broad spectrum of support is needed for reform to succeed. The governments of Bosnia and Herzegovina must implement these reforms, and I encourage citizens, civil society and social partners to support them and get involved. The international community will of course offer its assistance. This is a matter for everyone, because Bosnia and Herzegovina faces very serious challenges in its economy. Dealing with these must be a top priority.”  

The six priority reform measures should be implemented by the governments that emerge from the October 2014 general elections. They have been endorsed by the International Financial Institutions and the European Union, which are fully comitted to help with their implementation and to provide financial assistance to alleviate their short-term effects.

The Compact outlines that a determined effort can make a real difference in people’s lives, but equally there needs to be a renewal of public confidence that short-term sacrifices will deliver growth and jobs in the medium term. This level of trust can only be established on the basis of a firm commitment by political leaders that they intend to agree on and implement meaningful reforms—reforms that will deliver real opportunity for all of society.

Note to Editors

The Compact for Growth and Jobs specific proposals are:
1.    Taxes on jobs need to be reduced towards the average for new member states of the European Union at 35 percent of total working costs.

2.    Barriers to jobs need to be broken down through labour market reforms that will link wages to skills and performance (instead of seniority) and actively promote inclusion of young people in the workforce.

3.    A Plan to lift the Doing Business ranking toward the regional average would include measures to:

  • Make it simpler to start a business (especially in the FBiH);
  • Expedite procedures for getting construction permits and access to public services (like electricity);
  • Simplify tax procedures to make adherence to the system less onerous and costly (in terms of time and money).
4.    An Enterprise Recovery Programme would concentrate on improving investor protection through: better insolvency practices; streamlining risk management assessment; & credible sanctions for bad management.

5.    An Anti-Corruption Agenda would have a medium-term focus on public administration reform and stronger adherence to the rule of law. And a short-term focus on increased transparency in regulations, fees and licensing procedures to cut opportunities for corruption.

6.    Social Welfare Reform would put the system on a firmer financial footing and make policies more effective, efficient and equitable. Measures would include:
  • Penalties (bonuses) for early (late) retirement
  • Raising assistance for those that are most in need of help

For more information see:

Compact for Growth and Jobs in BiH presentation by Ambassador Peter Sorensen

Brochure for Compact for Growth and Jobs in BiH

Opening remarks by Ambassador Peter Sorensen at the Compact presentation

Special feature page on the Forum for Prosperity and Jobs in BiH