Interview with Ambassador Peter Sorensen for Infokom magazine of the BiH Foreign Trade Chamber

Infokom magazine: Progress Report for Bosnia and Herzegovina in 2011, which is published by the European Commission is not satisfactory. On several occasions, you have warned that the BiH authorities should, in future, be focused on removing deficiencies so that the process is unblocked and the state of BiH moves forward in terms of EU membership. Do you think the time has come for BiH to authorities shift their attention to economy, rather than daily political issues within which lead to pointless discussions?

“Sound economic management is very important for the country to be able to compete in a global market, to produce and trade high value added goods and services, but also to assist those members of society who need social help. Boosting the economy and helping to create the conditions for jobs and growth here is a central interest of the EU. Indeed our fortunes are tied – our high bilateral trade is a symbol of this. The political actors should bring their contribution to this goal and put their political differences aside when it is about better education or better and more jobs. It is important that, in the short term, Bosnia and Herzegovina’s authorities focus on facilitating the efforts to get the country’s Stabilisation and Association Agreement (SAA) – its contract with the EU – to enter fully into force. By bringing the Stabilisation and Association Agreement fully in to force, BiH will be taking a further step towards a functioning market economy able to cope with competition and market forces in the EU. “

Infokom magazine: Even when assuming the office of the Special Representative and Head of EU Delegation in BiH, you have clearly indicated that you are not here to impose solutions, but to help find solutions in partnership with BiH authorities. It seems that Brussels is more committed to the progress of BiH than the local politicians. What is it, in your opinion, that we could call the priority of all priorities for BiH authorities to implement in order to achieve progress and prosperity for all citizens of Bosnia and Herzegovina?
“You are right to indicate that the difficult and substantive work will have to be done by the leaders and people of this country. You will have many EU Ambassadors into the future, but all of them will be here to assist Bosnia and Herzegovina on the way to the European Union, not to do the job for you.
“In my opinion, the top priority is the economy and economic growth. How can this be addressed? Through creating new jobs, reducing red tape for local and foreign investors, becoming more competitive in the region and finding your niche in the huge EU market, investing in your people’s education and in key infrastructure projects like Corridor Vc. I cannot see this happening without ever-closer partnership between BiH and the EU, culminating in eventual BiH membership in the EU family. The country’s perspective for membership is real, but its progress towards the EU is currently too slow and BiH is falling behind the rest of the region. In this effort there is a leading role for citizens, authorities, media and civil society in achieving EU membership for Bosnia and Herzegovina. That’s why I defined ‘partnership’ as one of the key elements of my approach back in September last year.

“As for the steps towards EU membership, the main one is getting the SAA into force. Specifically, there have to be credible efforts to follow up the ruling on the Sejdic-Finci case, which deemed Bosnia and Herzegovina to be not compliant with the European Convention on Human Rights. There needs to be an EU-compatible State Aid Law. And there needs to be an approved Census Law.”

“All of that will unlock some further EU funding programmes, open up new avenues of co-operation between governments and parliaments, speed up harmonization of laws and rules that regulate business and markets and bring the country closer to becoming a full member of the European Union. We are particularly keen for Bosnia and Herzegovina to be seen as a more attractive business environment in this way.”

Infokom magazine: Law on State Aid System in Bosnia and Herzegovina is a document which is among one of the three main conditions for BiH to be able to submit a credible application for EU membership and the status of the candidate. Years have passed in reaching the agreement on this legal decision and now all disputes are reduced to the method of financing of future Council for State aid. Is it acceptable that citizens are suffering because of this?
“The European Commission fully supports the draft State Aid Law as transmitted from the Council of Ministers to the Parliament.  This draft law is fully compatible with the EU ‘acquis’ and has been prepared with substantial support from the European Commission. The various modalities and solutions have in the past been widely discussed between the different authorities and the European Commission. We now urge the authorities and the political parties to concentrate on an urgent adoption of this law.”

Infokom magazine: In addition to these disputes over the methods of funding future Council for state aid and that from 1 July 2010, when it was deadline for adoption of this legislation, BiH is in breach of the Interim agreement on trade and trade issues, and little is known about the importance of the Law on State Aid System.Why is it actually important for BiH to have this law? What does it imply?

” The EU has established clear rules and conditions under which state aid may be granted. The European Commission supervises the Member States in this regard and thus ensures fair market conditions within the EU. State aid is a tool often used by governments to influence economic policy. Direct financial support or indirect help granted to economic operators, companies, factories and businesses risk however to distort the market economy by favouring certain undertakings to the detriment of others, above all those operating in the same sector. This might even lead to a dominant market position for one particular company or producer with the ultimate consequence that prices of goods and services are increasing, which the customers have to pay for in the end.

“Sometimes state aid is also used to keep inefficient companies on the market. This does not help a country to have economic growth and to be competitive in the global environment in which we live and work nowadays.

“By signing the Stabilisation and Association Agreement (SAA) with the European Union in 2008, Bosnia and Herzegovina took on the obligation to implement the European Union legislation for state aid including the set-up of a special authority to supervise it. Bosnia and Herzegovina accepted this international obligation in exchange for the European Union opening its market “asymmetrically”, that is to say liberalising its trade faster than Bosnia and Herzegovina, for almost all products of Bosnia and Herzegovina origin, in particular industrial goods.”

Infokom magazine: When we talk about the Law on State Aid System, we must mention the issue of the Stabilisation and Association Agreement. Specifically, in addition to [the Law] being important for credible application for EU membership, its adoption is one of the key elements so that SAA may enter into force. What are the benefits of this Agreement for BiH and its citizens?
“I have referred to the SAA once or twice already. Let me set it in context. The Stabilisation and Association Process (SAP) is a progressive partnership, in which the EU offers a mixture of trade concessions (Autonomous Trade Measures), economic and financial assistance to BiH through Instrument for Pre-accession Assistance (Euros 660 mln. for BiH alone in the years 2007-2013)  and contractual relationships (the Stabilization and Association Agreements) to a country.

“The progress achieved in the SAP then culminates in  the establishment of the contractual relationship between a country and the EU known as the Stabilization and Association Agreement (SAA). The SAA is a tool which provides the formal mechanisms and agreed benchmarks that allow the EU to work with Bosnia and Herzegovina to bring it closer to European Union standards.

“BiH has signed its SAA and has therefore entered into a contractual relationship with the EU. The country has recognised the importance of the approximation of the existing domestic legislation to that of the European Union and of its effective implementation. Unfortunately, though signed and ratified by all 28 parties, our joint ‘contract’ has not yet entered into force as BiH would be in serious breach of it, first and foremost for discriminating against its national minorities, as laid out in the well known Sejdic – Finci ruling. Therefore, BiH at the moment cannot enjoy all benefits of SAA, only of the Interim Agreement that is currently in place.

“The benefits that the SAA brings for BiH citizens are immense and can be traced in the areas of the economy, justice, security and peace.  These include promoting the free movement of goods, creating efficient institutions, developing a market economy with consumer protection, reducing crime and corruption, promoting higher education reform, developing democracy, human rights, and promoting an independent media and improving transport infrastructure. Overall it reinforces the concrete perspective of membership.” 

Infokom magazine: The European Commission, i.e. Brussels, on several occasions transmitted a clear message that it is important that all the legal arrangements adopted in BiH must be harmonized with European legislation, but they do not necessarily have to be at the State level. Do you think it is possible to resolve the issues of establishing a single economic space, obligations, banking supervision, the adoption of strategies in the field of energy this way? I am asking you this, because all these are currently the duties that are before the authorities of Bosnia and Herzegovina?

“Well, let me ask you a question – do you believe that BiH can join one single European market without having established a single economic space in the country itself? It will not be acceptable for EU Members States and EU business, it will not be in line with EU laws and most of all it is not in the interest of the people of BiH to have fragmented or conflicting rules in small local market.

“With a commitment to good co-ordination and positive political will, this can be overcome. The EU will remain a supportive partner, and has a very clear position that Bosnia and Herzegovina will only enter the Union as a united and sovereign country. All political parties and leaders have backed the EU accession process, all have said that they intend to fight corruption, strengthen the rule of law and get the economy back on its feet. This provides ample ground for agreement, including on how internal co-ordination should work. The EU stands ready to assist in every way possible, but the essential decisions to move forward must come from within Bosnia and Herzegovina.”

Infokom magazine:  When we have already touched upon the necessity of harmonization of BiH regulations and its harmonization with the EU aquis communautaire, it is clearly stated that we still have problems in this area in entities.So the Federation BiH has not made changes to the Law on Public Enterprises, and the provisions of the Law on Internal Trade of the Federation BiH is the one that violates the SAA, and contrary to the provisions of the WTO. What is your evaluation of the current state of inconsistent regulations? What are the priorities?

“We would like to encourage the responsible authorities in BiH to adjust the legislation to make sure that the relevant EU law is adequately transposed into the respective legislation in BiH. In terms of the FBiH law on Internal Trade, amendments have been prepared and are currently under review by the European Commission. Regarding legislation to apply the EU competition principles to Public Undertakings, such as to railways or electricity companies, as this issue is going to be discussed at the upcoming Internal Market sub-committee meeting on 24 – 25 January in Brussels, we hope that BiH can inform the EU of some tangible results by then. This requirement is an essential part of the market opening requested from BiH in the EU integration process.
These two examples illustrate the need for BiH to improve internal coordination and adopt a nationwide programme of EU-integration as a matter of urgency. It is true that many aspects of the EU legislation are the competence of the entities and the Brcko District. Nevertheless, law harmonisation and EU related reforms have to take place evenly and in a co-ordinated manner throughout the whole country. If the commitments are not fulfilled in a smallest part of its territory – BiH (and its citizens) is going to bear the consequences. Coordination is necessary particularly in the areas that are the competence of the entities, to ensure even results on the whole territory. If there was a programme which clearly indicates necessary measures, responsible institutions and deadlines, everyone would know what to do by when. Such a programme would clearly indicate areas of responsibilities of the state and of entities (and cantons) and therefore would be useful for all stakeholders in the country.”

Infokom magazine: How would you rate the degree of implementation of the Action Plan for implementation of priorities under the European Partnership? Its implementation for the first six months of 2011 was only 13.9 percent and is the worst so far. We need the Economic and Social Council of BiH, amendments to the Law on Public Procurement and a series of other important documents. Do you agree that their failure is to the detriment of the citizens?

“The European Partnership is one of the instruments of the Stabilisation and Association process for Western Balkans countries, intended to help in identifying priorities for reforms in each country. The last EP was adopted in February 2008 before the SAA was signed. It logically includes obligations which are now part of the SAA. EP medium-term priorities should have been fulfilled within three to four years which is not the case. Activities under EP and SAA should have been integrated into a single programme of EU integration mentioned above. BiH is the only country in the pre-accession phase which does not have such a document. It is difficult to pursue reforms if there is no clear agenda. That is why BiH is lagging behind other countries and its citizens suffer the consequences.”
Infokom magazine: Recently, in Sarajevo, there was a meeting of high officials of the European Commission and the BiH authorities to agree on EU program of assistance (IPA) for 2012 and 2013. Information is that for EC assistance worth 200 million euros is planned for this timeframe. How happy you are with the meeting and do you think that we will not repeat the 2011 when we had problems with the consultation on IPA projects?

“IPA funds are an important part of EU support to help candidate countries and potential candidates prepare for the demands of EU membership across different sectors. I believe that IPA funding – over EUR 91 million in the 2011 programme alone – will have a deeply positive impact on the lives of Bosnia and Herzegovina’s citizens.

“However as you imply, the European Commission has to be sure that the funds can be absorbed and will be implemented properly. We need to be able to rely on Bosnia and Herzegovina for this. Therefore smooth and efficient internal co-ordination is necessary and the authorities at the different levels need to set up effective mechanisms. We have already provided our advice and expertise on this matter to those responsible at State and Entity levels. As I said earlier, I believe this can and should be done.”
Infokom magazine: I had the opportunity to talk through InfoKom with more than 30 ambassadors accredited in BiH, EU high officials, ministers of finance and trade of many countries and they all indicated the two big problems in BiH – a complicated administration that along with the political conditions is the main obstacle to more active foreign investment, and thus progress and also a high level of corruption. What is your view of the situation on these issues? What are the solutions?

“First of all, I think I should underline that the EU recognises that Bosnia and Herzegovina has a specific constitutional order. We support this, and please remember that there are also different types of internal structure within many of the existing Member States.

“That said, reform of public administration and governance is crucial for the European integration and economic development processes of any country. The objective of better governance is central to not only achieving  EU accession, but supporting economic growth, new jobs for unemployed youth and building a competitive country, which no one would like to leave. 

“It is clear that the country’s administrative structures need to be substantially strengthened if Bosnia and Herzegovina wants to be able to respond effectively to the requirements of the EU accession process, as outlined in the 2011 Progress Report of the European Commission. There need to be continued efforts to fight corruption and promote investment – it is the responsibility of the authorities to put the policies in place to achieve this.

“We are providing our support. For example, a strategy for reforming the public administration in BiH has been in place since 2006 and the level of attainment of its priorities has exceeded 50% as reported in mid-2011. The Project ‘Capacity Building of the Public Administration Reform Coordinator’s Office’ (EUPAR) was funded by the European Union from the Instrument for Pre–Accession Assistance (IPA) in the amount of 1,845,400.00 EUR.”