An Agenda For Reform Agreed Between the Government of Bosnia
and Herzegovina and the International Community
ECONOMY
| BiH has drawn up a number of macroeconomic and other
framework agreements with the international community, especially the IMF,
World Bank and the EU. Along with the General Framework Agreement
for Peace (Dayton), these remain the legal agreements which govern
economic policy in BiH. The reform agenda set out here derives from,
and is consistent with, those agreements, which are legally binding and to
which this country is completely committed. |
A Message To The People Of Bosnia And Herzegovina
THE ECONOMY
The economy of Bosnia and Herzegovina is in a very poor state. The absence of
a fully fledged market economy, of the rule of law, of an efficient public
administration, of a clear and light regulatory environment for business and of
a modern infrastructure all combine to drive away investors and exasperate
entrepreneurs, who take their money elsewhere – increasingly to our competitors
in the region. The result is very high unemployment and widespread poverty.
Things cannot go on like this. We need to transform the economy, so it
becomes capable of creating jobs and generating wealth. This does not mean
endless government intervention, but instead, allowing the free market to
flourish. But key to a flourishing market is a stable economic
environment. That is why the reforms listed in this document must take
place against the backdrop of continued monetary stability based on the
principles of the currency board, of responsibility and prudence in the
management of the public finances, and on continued co-operation with the
International Financial Institutions.. Only within this context will we be
able to implement the reforms needed to make this country competitive and to
make the most of its considerable assets, not least our people.
None of the problems we face are insoluble. The example of our neighbours, of
Hungary and Slovenia, shows what can be achieved and how, in the end, the
pain of reform is worth the gain.
What, after all, is the alternative? We cannot depend on foreign
hand-outs for ever. There is no choice but to make the changes necessary to
allow this country to stand on its own two feet. We must accept that we cannot
do everything at once; that reform will take time to feed through. We must
tailor our aspirations to our circumstances. We cannot spend more than we
earn. We cannot pay for things until we have a tax system to underpin our
spending – although the burden of tax must be reasonable. We cannot expect, for
example, to have decent public services, or the level of protection for our
vulnerable people that we would want, until we can pay for them. We will only be
able to pay for them if businesses are earning enough profits for government to
tax. But we cannot tax non existent businesses and non existent profits.
Because the economy is so central to all our lives, reforming it inevitably
touches on reform in every area – in the law, in the public administration, in
education, and as well as in the economic arena.
What follows are our targets for economic reform. In due course, we
will agree similar targets in other key areas such as Rule of Law, Education,
Refugee Returns etc. This agenda for reform is not exhaustive. It is not
everything we need to do. But it represents a serious start. If we do all of
what follows, we will be a long way down the road towards integration with the
EU, and towards becoming a prosperous modern European state. So let us start
right away…
REFORMING THE ECONOMY TO CREATE JOBS AND TACKLE
POVERTY
We have one over-riding objective for the economy: to create more jobs.
Today, far too many of our people are without employment. That’s what keeps
families poor and prevents refugees from returning home. They and their
families struggle to get by. If there is one thing that unites the people
of this country, it is their wish to see more jobs. This is the people’s top
priority. It is also ours.
· For the individual, a job
offers self-respect and motivation, a secure income and a chance to provide for
one’s family and fulfil one’s potential.
· For the community,
employment is the key to a decent standard of living, and a strong economy is
needed for good quality services, a modern infrastructure and a dependable
social safety net.
· And for the country,
employment means stability, growth and progress as a modern European nation.
Governments cannot create jobs. But they can create the conditions in which
private enterprise can thrive and generate growth and with increased employment.
Economies which attract investors create jobs. But money only flows where it is
made welcome.
We aim to transform our economy, to make it one of the most business friendly
in Europe. We will seek to intensify economic co-operation with the other
countries in the region, and aim to integrate our country with the European
Union, progressively adopting and implementing European standards and
legislation. We will also seek to benefit from markets beyond our
continent by becoming a member of the World Trade Organisation (WTO) at the
earliest opportunity.
This is the path of reform. It is the only path out of poverty and
towards prosperity. Implementation of the development strategy known as
the Poverty Reduction Strategy Paper will be key to this.
But most fundamental of all is job creation. Our target is to create
60,000 new jobs in the private sector by the end of 2004, to shift enterprise
from the grey to the formal economy, to encourage small businesses and to reduce
poverty.
We make these pledges to the people on
THE ECONOMY
We will support private enterprise, accelerate privatization, remove
barriers to business and make this country attractive to investors by:
- cutting businesses registration to 15 days
· enacting laws that allow small
businesses to borrow and expand
- reforming land ownership registry and laws in order to restore confidence
in ownership and investment
- driving forward strategic privatization
We will make government more efficient, secure government revenues
and cut government waste by:
· fighting tax and customs fraud
and evasion
· cutting unnecessary bureaucracy
and putting in place a lean, modern public administration the country can
afford
· simplifying taxes by replacing
the current inefficient and ineffective sales tax regime with VAT, and providing
taxpayers with much clearer picture of how the money the government takes from
them in tax is spent
We will guarantee the free movement of goods, people, services and
capital and promote trade with the EU and our trading partners through the
creation of a single economic space and, in particular, by:
· eliminating double taxation
within BiH borders
· setting up agencies in BiH that
command international confidence and can certify products for export to the
EU
· working with the EU to implement
the fundamental economic reforms which are indispensable if we to move towards
EU membership
We will work to deliver high quality, affordable utilities and
essential public services by:
· modernising road and rail
infrastructure and ensuring safe and fully functional air transport
· increasing the quality and
efficiency of essential services, including by restructuring the public
utilities and reforming their regulatory environment
· providing the citizen with
information about – and easy and equal access to – government services and
benefits
We will work to provide the elderly and the vulnerable with a secure
safety net, over time, and as the country can afford, by:
· securing the viability of the
health insurance funding structure and work steadily to improve access to
healthcare
· unemployment benefits for those
without jobs and revitalize the labor market to liberate the potential of BiH’s
work force
· a dependable and regular income
for pensioners by improving the efficiency and sustainability of the pension
system
OUR REFORM AGENDA: A LEGISLATIVE GUIDE
We will support private enterprise, accelerate privatisation, remove
barriers to business and make this country attractive to investors
Vigorously pursue the policy and strategies articulated in our Business
Environment Action Plan, the Poverty Reduction Strategy Paper and the
Privatization Technical Assistance Credit. This comprehensive action plan,
encompassing the legal environment, administrative procedures, the judicial
system and anti-corruption efforts provides a baseline strategy for improving
the business environment in BiH. Specific required actions also
include:
- cutting business registration to 15 days
- put in place a single
business registry system and adopt harmonized enabling legislation
· enacting laws that allow small
businesses to borrow and expand
- clarify the rights and
duties of contractual relationships by putting into place harmonized Laws on
Obligations (1st year)
- streamline and clarify the bankruptcy process
by enacting harmonized Laws on Bankruptcies and Liquidations (1st
year)
- facilitate a reliable
credit reporting capacity by establishing authorized credit bureaus
(1st year)
- clarify ownership and
collateral issues by enacting effective Laws on Registered Pledges
(1st year)
- create a climate of strong
confidence in the banking system by updating and reforming banking legislation
and endorsing rigorous enforcement (1st year)
- explore potential vehicles
for risk-guarantee schemes for SMEs
- reforming land ownership registry and laws in order to restore
confidence in ownership and investment
- enact harmonized land
registry laws and secure technical assistance in training and staffing land
registry offices (1st year)
- initiate close coordination
of concessions grants by means of a state/entities information-sharing body to
improve transparency and consistency (1st year)
We will make government more efficient, secure government revenues and cut
government waste by:
· Improving revenue
collection
- implement and rigorously
enforce the tax laws and take determined action against evasion. (1st
year)
- Implement the Tax
Administration Laws, using effectively the technical assistance for capacity
building (1st year)
- implement the Taxpayers
Identification Number system and ensure universal compliance (1st
year)
- secure broad consensus on
allocation mechanisms for excise and value- added (VAT) taxes (1st
year)
- step up the fight against
fictitious companies through legal regulations, the Taxpayer Identification
Number system and improved court procedures (1st year)
· cutting unnecessary
bureaucracy and putting in place a lean, modern public administration the
country can afford
- identify and adhere to hard
budgetary constraints – the key to low inflation and macroeconomic stability –
at all levels of government, including municipalities (1st year)
- introduce modern treasuries
at all levels, and make expenditure details publicly available (1st
year)
- put in place a
well-designed procurement framework by using the recommendations of the World
Bank’s recent procurement study and passing enabling legislation at all levels
of government (1st year)
- adopt the Statistics Law,
allowing the existing structures to work and provide reliable countrywide
statistical data for forecasting purposes (1st year)
- simplify and shorten
inspection procedures
· simplify taxes by replacing
the current inefficient and ineffective sales tax regime with VAT, and providing
taxpayers with much clearer picture of how the money the government takes from
them in tax is spent
- set up an inter entity /
State VAT Working Group (1st year)
- agree on the functional
level of VAT and the revenue allocation system (1st year)
We will create a single economic space in order to guarantee the free
movement of goods, people, services and capital, and promote trade with the EU
and our trading partners by:
· eliminating double taxation
within BiH borders
- implement recently enacted
tax legislation (all taxes, not just sales and excise taxes) so that all
differential tax rates and the scope of taxes are harmonized in the entities /
Brcko. (Immediate)
- eliminate all existing
barriers to the placement of products into the single economic space
· setting up agencies in BiH
that command international confidence and can certify products for export to the
EU
- pass the State Veterinary
Law (1st year) to enable the existing State Veterinary Office to
become operational and capable of meeting EC certification requirements for the
export of meat and animal products, so as to take advantage of autonomous trade
measures granted to BiH by the EU
- establish a competent
authority to represent BiH in international phytosanitary issues and pass a
national phytosanitary legislation to improve the quality of plants and seeds
for domestic and export markets (1st year)
- develop creative approaches
to promote export financing options
· working with the EU to
implement the fundamental economic reforms which are indispensable if we move
towards EU membership
- address specific economic
issues identified in the Road Map and the annual reviews of the Stabilization
and Association Process
- take all necessary steps to
enable BiH to negotiate a Stabilization and Association Agreement
We will deliver high quality, affordable utilities and essential public
services by:
· providing the citizen with
information about – and easy and non-discriminatory access to – government
services and benefits
- take steps to make
government services more transparent, user-friendly and more available
online
- triple the Internet
penetration over the next 4 years by ensuring that pupils become computer
literate and have access to the Internet in all schools and universities, and by
putting into place pro-competition telecom policy
- promote Public Internet
Access Points (PIAP) in facilities accessed by the public (1st
year)
· modernizing road and rail
infrastructure and ensuring safe and fully functional air transport
- pass the amendments to the
Civil Aviation Law, and taking all necessary steps to guarantee uninterrupted
aviation services (1st year)
- establish a re-structuring
plan for railways through the Working Group on Rail Transport (1st
year)
- develop regulations for
rail transport and take all necessary steps required for implementation
(1st year)
- develop a framework for
management of roads under the Working Group on Roads (1st
year)
· increasing the quality and
efficiency of essential services, including by restructuring the public
utilities and reforming their regulatory environment
- pass and implement the
Communications Law as a key component toward full liberalisation and market
competition of the telecom industry (1st year)
- privatize the public
telecommunications operators through sale to strategic partner(s)
- complete the process of
issuing the third GSM licence to create a competitive mobile telephony market
(1st year)
- adopt an action plan to
restructure and privatize the electricity sector in both entities
(1st year)
We will work to provide the elderly and the vulnerable with a secure
safety net, over time, and as the country can afford, by:
· securing the viability of the
health insurance funding structure and work steadily to improve access to
healthcare
- establish an operational
Health Insurance Fund in Canton 7 and Canton 8 in accordance with the FBiH Law
on Health Insurance (1st year)
- solve the current problem
of non-payment of health contributions for pensioners (1st year)
- strengthen state-level
bodies in the field of healthcare to enable them to represent BiH in
International Organisations, improve disease control and prevention, and collect
countrywide statistics
- solve the current problem
of non-payment of health contributions for pensioners (1st year)
· implementing legislation
providing fair and affordable unemployment insurance benefits and passing new
legislation to create an efficient labor market
- accredit a body to represent BiH in
international labor fora
- implement the FBiH Law on
Job Placement and Social Security of the Unemployed by completing the division
of assets between BiH Employment Bureau and FBiH Employment Bureau, establishing
a functional system of Cantonal Employment Services, and making all due
unemployment insurance payments prior to engaging in other funding projects
- adopt new Laws on Labor
Inspection in line with the standards of modern free market economies
· striving to pay pensions
regularly at sustainable levels and improving the efficiency of the pension
system
- adhere to the existing
rationing mechanism for pensions, in accordance with the High Representative’s
Decision of December 2000 and vigorous collection of contributions by employers
(1st year)
- adopt the Statute of the
Federation Pension Fund (1st year)
- streamline the operations
of the Pension Funds in both entities by cutting all unnecessary operating costs
(1st year)
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