Bosnia and Herzegovina - Meeting Copenhagen economic criteria for accession to the EU

Delegation of the European Commission based in Sarajevo, Bosnia and Herzegovina (BH) granted the consortium represented by ECORYS a contract for EU support to the Economic Policy Research Unit, a subdivision of the Economic Policy Planning Unit of the Council of Ministers of Bosnia and Herzegovina. As part of this project activities a subproject was designed trying to assess the position of BH against the benchmarks of the Copenhagen economic criteria and to identify policy measures for meeting the criteria. The issues of particular relevance to the project included: presentation of the Copenhagen economic criteria, analysis of the existing situation in the country, strategic and policy documents addressing the subject, identification of gaps to be filled in order to achieve the benchmark, and policy recommendations. In July, 2006 ECORYS appointed the Center for Social and Economic Research (CASE), an international, non-profit research and advisory institution, to research on the subject. The research project team comprised experts: Messrs. Rafa³ Antczak (team leader), Wojciech Paczyñski, and Ranko Markuš, Mmes. Ma³gorzata Antczak and Karina Kostrzewa, assisted by Mr. Erol Mujanovic. The report was based on available national account and microeconomic data, strategic and policy documents of the BH governmental bodies, relevant reports by international organisations, EU institutions, academic and research centres and opinions of key stakeholders. The analytical research on the economic developments in BH by international financial institutions, especially the IMF and World Bank, as well as domestic bodies, especially the Economic Policy Research Unit, was extensively exploited in the research. However, the primary focus of the research was on structural and institutional aspects facilitating or impeding functioning of a market economy in the BH and country's capacity to cope with competitive pressure and market forces within the EU. Therefore, the report focuses on background analysis of economic factors influencing the functioning of market economy and the capacity to withstand the competition in the EU market. The research consists of four main parts. In Part 1, the Copenhagen economic criteria are presented in a comparative perspective of the recent experiences of the new member states and acceding countries to allow diagnosing of the most important gaps to be filled by BH. Part 2 analyses macroeconomic developments in BH, presenting them in a comparative perspective relative to EU candidate countries. The special focus is on two fields where BH faces particularly difficult challenges: labour market and foreign trade. Also, the three scenarios of BH catching-up with the EU are presented. Privatisation process which is one of the most important institutional and structural features of every transition economy and especially relevant from the perspective of meeting the Copenhagen criteria is analysed in Part 3. Part 4 comprises analysis of microeconomic developments in BH with the elements of the financial analysis of enterprises, both state and private. The financial analysis of enterprises concentrates on current situation and identification of trends in microeconomic developments to identify comparative advantages, assess productivity, and to position the BH enterprise sector towards the potential competition on the EU markets. Finally, Part 5 includes policy recommendations for decision makers both from the BH government and the EC. The research is supplemented by the Annexes providing background pieces of information on the analysed topics. The project team established contacts with representatives of international organizations, the BH governmental bodies, and research community in BH to collect pieces of information and consult on research topics. However, the authors of the researchers bear the sole responsibility for the pieces of information and opinions presented in the report.