Key findings of the 2022 European Commission Report on Bosnia and Herzegovina

BRUSSELS – European Commission has published the 2022 country reports for the six Western Balkans states and Turkey. Here we present the key findings in the country report on Bosnia and Herzegovina.

The fundamentals of the accession process

As regards political criteria, parties based in the Republika Srpska entity blocked state-level legislative and executive institutions until spring 2022, leading to an almost complete standstill in reforms during that period. The Federation entity government remained in office for the full 2018-2022 term in a caretaker capacity. During a significant part of the reporting period, the Republika Srpska entity pursued to unilaterally take over state competences (including on taxation, the judiciary, defence and security) and dismantle state institutions, endangering the country’s EU accession perspective as set out in the Commission Opinion. Some legislative steps were taken to withdraw the Republika Srpska entity from key state bodies and set up parallel bodies at entity level; these laws are suspended and under constitutional review.

Parliamentary parties could not agree on a solution for constitutional and electoral reforms to bring the Constitution in line with the European Convention on Human Rights, complying with the Sejdić-Finci and related rulings, despite an intense facilitation of talks by the EU and US. Amendments to improve electoral standards were rejected in Parliament. A number of Constitutional Court decisions have yet to be fully enforced. The Council of Ministers took no steps to develop a national programme for the adoption of the EU acquis. Due to political obstruction, the Ministry of Finance and Treasury hindered the smooth organisation of the October 2022 elections by withholding the required funds. General elections took place on 2 October; according to the preliminary findings of OSCE/ODIHR, they were overall competitive and well organised but marked by mistrust in public institutions and ethnically divisive rhetoric. On the same day, the High Representative imposed significant amendments to the constitution of the Federation entity and to the Bosnia and Herzegovina election law, aimed at addressing a number of functionality issues and the timely formation of authorities. No progress was made in ensuring an enabling environment for civil society. Republika Srpska entity authorities and parties advocated for a neutral stance on Russia’s aggression against Ukraine, contesting the country’s alignment with EU statements and obstructing the full implementation of restrictive measures against Russia. The Presidency ratified several international agreements, including on IPA III, Horizon and Creative Europe, and the Union Civil Protection Mechanism.

Bosnia and Herzegovina is at an early stage of preparation and made limited progress on public administration reform (PAR). Notably, positive steps were taken in the area of public finance management: (i) a comprehensive and countrywide public finance management (PFM) strategy was adopted, which now needs to be implemented; (ii) each level of government started implementing PFM strategies; (iii) state institutions improved some professional trainings; and (iv) and the Federation entity amended its administrative procedures. However, the lack of a political decision-making body to steer PAR and insufficient implementation of the action plan and capacities to promote the PAR agenda undermine the well-functioning of the public administration across all levels of government. Civil service laws are not harmonised with each other and with merit principles, while monitoring on human resource management does not allow to check on any irregularities. In line with Opinion’s key priority 14, the country needs to complete essential steps on public administration reform by ensuring  a professional and depoliticised civil service and a coordinated countrywide approach to policy-making, while establishing a political decision-making body to steer PAR.

Bosnia and Herzegovina is at an early stage of preparation as regards its judiciary. No progress was made in this area over the reporting period. The independence and impartiality of the judiciary did not improve. Executive and legislative authorities failed to adopt additional safeguards. Inconsistency and overly broad discretion persist in applying the rules on appointment, disciplinary responsibility, career advancement and conflict of interest of judges and prosecutors. The Chief Prosecutor of Bosnia and Herzegovina and the chief prosecutor of Republika Srpska were demoted on account of disciplinary offences during the reporting period. The Parliament  rejected the amendments on integrity to the law on the High Judicial and Prosecutorial Council (HJPC) that would create a credible and rigorous system for verifying the financial statements of judicial office holders. The Republika Srpskaentity launched a legislative initiative to set up a separate judicial and prosecutorial council at entity level; if adopted, it would violate the legal and constitutional order. Urgent measures are needed to restore public trust in the judiciary and strengthen its integrity. The lack of political commitment to judicial reform and the poor functioning of the judicial system continued to undermine the citizens’ enjoyment of rights and the fight against corruption and organised crime.

Bosnia and Herzegovina is at an early stage/has some level of preparation in the prevention of and fight against corruption and organised crime. No progress was made in this area over the reporting period. The Parliament rejected a law on conflict of interest. Political leaders and judicial institutions failed to tackle widespread corruption and actively blocked progress, leading to long-term stalling and increasing signs of political capture. The continued lack of progress at all levels increases the risk of backsliding. Political leaders and judicial institutions need to urgently remedy the situation. Although in the reporting period there have been some indictments pertaining to high-level corruption sentences, the overall track record on preventing and repressing corruption (including at high level) remains insignificant, due to operational inefficiency and political interference. There are systemic shortcomings in the operational cooperation between law enforcement agencies fighting organised crime, due to non-harmonised criminal legislation, weak institutional coordination, and a very limited exchange of intelligence. Criminal organisations operating in the country take advantage of legal and administrative loopholes. The police are vulnerable to political interference. Financial investigations and asset seizures are also largely ineffective. A proactive approach remains fundamental to countering criminal infiltration in the political, legal and economic systems. The contact point for cooperation with Europol is still not operational; preparatory steps are underway. There is no systematic cooperation with Eurojust. Bosnia and Herzegovina needs to continue its efforts in the fight against terrorism and drug trafficking and increase its capacity to do so. A new law on anti-money laundering and terrorism financing in line with the EU acquis needs to be urgently adopted.

While the legislative and institutional framework on fundamental rightsis largely in place, there is no comprehensive strategic framework. Adopting action plans for the social inclusion of the Roma in April 2022 and on the rights of LGBTIQ persons in July 2022 are positive steps in this regard. Significant reforms are still needed to ensure that all citizens are able to exercise their political rights and to ensure non-discriminatory, inclusive and quality education for all, including by overcoming the practice of ‘two schools under one roof’. No progress was made to guarantee freedom of expression and of the media by protecting journalists from threats and violence and ensuring the financial sustainability of the public broadcasting system. Challenges persist as regards freedom of assembly, particularly in the Republika Srpska entity.

Bosnia and Herzegovina has taken significant steps to improve migration management. The Ministry of Security continued efforts to improve coordination with local authorities and boosted international cooperation. However, major weaknesses still undermine the provision of necessary assistance. Bosnia and Herzegovina needs to urgently adopt the strategy and action plan on migration, step up efforts to ensure access to asylum, and strengthen border management.

As regards economic criteria, Bosnia and Herzegovina is at an early stage of establishing a functioning market economy. Cooperation and coordination of economic policymaking at state level and among the entities have further deteriorated. As a result, the country’s internal market remains fragmented. The country’s Economic Reform Programme does not contain sufficient credible countrywide measures to address the major structural economic challenges. These relate to the business environment, the informal economy, public enterprises, the green and digital transitions and unemployment. Overall, the country’s economic performance remains below its potential, as policymaking is hindered by political stalemate, an overly short-term orientation, and no focus on policy measures to build growth.

Bosnia and Herzegovina remains at an early stage in terms of capacity to cope with competitive pressure and market forces in the EU and did not make significant progress in this area. The quality of education has remained low, while insufficient action was taken to improve the transport and energy infrastructure. The trade and transport sectors both grew in terms of their relative economic importance (in value-added terms) as a response to strong external demand, while the size of the public sector in the economy was slightly lower by the same measure.

Bosnia and Herzegovina is at an early stage/has some level of preparation in its ability to take on the obligations of EU membership. The country needs to significantly step up alignment with the EU acquisand implement and enforce the necessary legislation. Limited to no progress was made on the different EU acquis chapters during the reporting period.

Bosnia and Herzegovina has some level of preparation and made some progress in the area of public procurement as amendments adopted in August have further aligned the legislation with the EU acquis. This is a first important step on the commitments taken on 12 June and contributes to address key priority 7. There was limited progress was made on statistics; preparations for the next census have hardly progressed and the production of macroeconomic statistics continues to deviate from the EU acquis. Some progress was made on public internal financial control, with both entities adopting strategies.

Major steps are needed to align the legal framework across the country with the EU acquis on the internal market (free movement of goods, workers, services and capital, company law, intellectual property, competition policy, and financial services, consumer and health protection). Bosnia and Herzegovina made limited or no progress in this cluster. Procedures and legislation that differ between the entities create obstacles to competitiveness and growth. Bosnia and Herzegovina should bolster financial stability by improving coordination among the relevant authorities and setting up a financial stability fund as part of the bank resolution framework. This cluster is key for Bosnia and Herzegovina’s preparations to meet the EU single market requirements and is very important for early integration with and the development of the Common Regional Market.

Bosnia and Herzegovina made limited or no progress in most areas of competitiveness and inclusive growth (taxation, digital transformation and media, social policy and employment, enterprise and industrial policy, science and research, education and culture) and some progress in the area of customs union. The country showed backsliding in other areas (economic and monetary policy) where it is at an early stage or has some level of preparation. These areas have significant links to the country’s Economic Reform Programme. Bosnia and Herzegovina needs to introduce socio-economic reforms to address structural weaknesses (including low competitiveness and high unemployment), and the impact of the COVID-19 pandemic.

Bosnia and Herzegovina made some or limited progress in the green agenda and sustainable connectivity cluster, where the country is at an early stage on energy, environment and climate change. The country has some level of preparation in the areas of transport and of trans-European networks. Further steps are needed on connectivity reform measures and in aligning with the Trans-European Transport Network (TEN-T) and Trans-European Networks for Energy (TEN-E) Regulations. The green transition and sustainable connectivity are key to economic integration within the region and with the EU. The implementation of the Economic and Investment Plan and the Green Agenda for the Western Balkans, needs to be accelerated. Bosnia and Herzegovina significantly improved its civil protection system and showed a clear commitment in the area of disaster management; in September 2022 the country joined the Union Civil Protection Mechanism (UCPM) as a full member.

Bosnia and Herzegovina made no progress in the areas of resources, agriculture and cohesion (agriculture and rural development, food safety, veterinary and phytosanitary policy, fisheries, and financial and budgetary provisions), where preparation is mostly at an early stage. The country must step up its efforts to prepare and adopt a post-2021 countrywide strategy for rural development, align its legislation on food safety, veterinary and phytosanitary policy and strengthen its administrative capacities. More efforts are also needed to prepare and adopt a countrywide strategy on fisheries and aquaculture and harmonise data collection. Furthermore, Bosnia and Herzegovina should start preparing a countrywide regional development strategy.

Bosnia and Herzegovina has some level of preparation and made some progress in the cluster on external relations, in particular by improving its alignment with EU foreign policy statements and restrictive measures, which increased to 81% by end August 2022. The country needs to implement the additional protocols to the Central European Free Trade Agreement (CEFTA) on trade facilitation and trade and services, and swiftly adopt the additional protocol on dispute settlement. Bosnia and Herzegovina continued to actively participate in regional cooperation and to maintain good neighbourly relations.

In 2021, Bosnia and Herzegovina benefited from EUR 73 million under the Instrument for Pre-accession Assistance 2021 – 2027 (IPA III), providing support to programmes in migration and border management, the electoral process, energy, transport, employment and social protection, as well as private sector and regional development. This first set of programmes, complemented by a package of multi-country programmes, significant contributes to kick-starting implementation of the Economic and Investment Plan for the Western Balkans and theGreen Agenda. Adopting countrywide sector strategies remains a key requirement for Bosnia and Herzegovina to benefit fully from IPA funding in the future.