Bosnia and Herzegovina
Inclusive and sustainable economic growth in the six Western Balkan (WB6) economies depends on greater economic competitiveness. Although the gap is closing gradually, the standards of living in WB6 are well below those of the OECD and EU. Accelerating the rate of socio-economic convergence will require a holistic and growth oriented approach to policy making.
This is the fourth study of the region (formerly under the title 'Competitiveness in South East Europe') and it comprehensively assesses policy reforms in the WB6 economies across 15 policy areas key to strengthening their competitiveness. It enables WB6 economies to compare economic performance against regional peers, as well as EU-OECD good practices and standards, and to design future policies based on rich evidence and actionable policy recommendations.
The regional profile presents assessment findings across five policy clusters crucial to accelerating socio-economic convergence of the WB6 by fostering regional co-operation: business environment, skills, infrastructure and connectivity, digital transformation and greening. Economy-specific profiles complement the regional assessment, offering each WB6 economy an in-depth analysis of their policies supporting competitiveness. They also track the implementation of the previous 2021 study's recommendations and provide additional ones tailored to the economies’ evolving challenges. These recommendations aim to inform structural economic reforms and facilitate the region’s socio-economic convergence towards the standards of the EU and OECD.
The governance structure of Bosnia and Herzegovina (BiH) is highly decentralised, comprising the state‑level institutions of Bosnia and Herzegovina, the governments of the two entities – the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS) – and the autonomous Brčko District. The FBiH and the RS have significant constitutional autonomy and responsibility for the matters that the Constitution of Bosnia and Herzegovina has not assigned to the state-level government. The entities have jurisdiction over a range of policies, among them healthcare, education, agriculture, culture, labour, police and internal affairs. Both entities have a president, a prime minister and their own governments. The FBiH is furthermore divided into ten federal units (cantons), each with its own government and constitution that defines the institutions and functioning of government authorities.
Prior to the early 1990s, the region presently known as West Herzegovina Canton was one of the poorest areas of Bosnia and Herzegovina (BiH), while today it is one of the richest. It has an important agricultural sector, and it has embarked upon an active investment promotion strategy, focusing on the processing industry, trade and civil engineering (HERAG, 2019[1]). West Herzegovina Canton has the sixth largest population among the cantons composing Federation of Bosnia and Herzegovina (FBiH) (); its primary and secondary school cohort is also the sixth largest. Correspondingly, the canton also comes sixth in terms of the size of its network of primary and secondary schools. The canton’s Ministry of Education, Science, Culture and Sports governs education policy. The ministry has around 25 members of staff, five of which cover education. This profile examines the context and features of West Herzegovina Canton’s evaluation and assessment system for education and highlights policy recommendations that can help strengthen this system to improve teaching and learning.
Through the development of a modern, sustainable, efficient, interoperable and integrated transport network, a sound transport policy can promote closer co-operation with neighbouring economies and be a key driver of competitiveness for Bosnia and Herzegovina and the region. The first sub-dimension, planning and management, measures the extent to which an orderly, coherent, consistent and transparent process is in place for developing transport policy and implementing infrastructure projects. The second sub-dimension, regulation and connectivity, determines how well transport modes and networks are regulated and operated and how they are leveraged to promote regional connectivity. The third sub‑dimension, sustainability, measures progress towards resource efficiency, environmental protection, reducing health impacts and increasing safety and social inclusion.
Effective trade policy is vital for regional integration and alignment with the European Union. This chapter examines how the government authorities in Bosnia and Herzegovina use trade policy to ease market access and harness digitalisation for enhanced trade facilitation. The first sub-dimension, trade policy framework, assesses the government’s ability to formulate, implement and evaluate trade policy, examining the institutional formulation and co-ordination of trade policy, public-private consultations and the network of free trade agreements. The second sub-dimension, digital trade, focuses on the legal framework for digital trade policy and digital trade facilitation and logistics. The third sub-dimension, export promotion, explores the effectiveness of export promotion agencies and programmes, especially in the context of deepening regional integration.
Sound and robust frameworks are essential for the tourism sector to drive positive economic development, enhance competitiveness, and strengthen resilience within economies, particularly those heavily reliant on tourism. This chapter assesses the comprehensiveness of the legislative structure and practices governing tourism across three sub-dimensions. The first sub-dimension, governance and enabling conditions, assesses the effectiveness of efforts aimed at strengthening strategic co-ordination and co-operation in tourism across governance, vertical co-operation, public-private dialogue, and data collection. The second sub-dimension centred on accessibility, tourism offer and human resources, examines progress and challenges in addressing the sector’s connectivity framework and infrastructure, accommodation capacity and quality, and availability of qualified workforce. The third sub-dimension, sustainable and competitive tourism, explores the impact of tourism branding and marketing strategies, natural and cultural heritage valorisation frameworks, and operations promoting sustainable development.
A well-planned tax policy provides the necessary incentives to promote economic growth. This chapter, along with two sub-dimensions, explores the effectiveness of tax policy and tax administration. The first sub‑dimension, tax policy framework, assesses the soundness and efficaciousness of the legal framework, the tax system, and the incentives for investment in promoting steady economic growth. The second sub‑dimension, tax administration, focuses on the efficiency and transparency of the tax administration organisation while also reflecting upon the tax filing and payment procedures and taxpayer services.
Education systems in Bosnia and Herzegovina’s (BiH) have taken steps to introduce new competence-based curricula. However, assessment policies and practices in many of the competent education authorities covered by this review do not yet reflect the types of instructional practices that support student learning. For example, teachers often lack resources and support to implement formative assessments in their classrooms and the use of standardised assessment in the country is very limited. This chapter sets out recommendations for how education authorities can address these challenges and use student assessment as a tool for helping all young people to develop core competences.
Subnational governments play a significant role in ensuring good public governance. The way that they are organised and function has a direct impact on the economic and social well-being of citizens and public trust in government. This report presents the system of multi-level government in the six Western Balkan economies, comparing them both with one another and in the context of broader international trends in multi-level governance. The report covers territorial and institutional organisation, competences of local governments, human resources and accountability, public financial management and vertical and horizontal co-ordination, in each case identifying key characteristics and recent trends.
Several competent education authorities in Bosnia and Herzegovina (BiH) have been moving away from a compliance-oriented approach to school quality assurance towards procedures that emphasise the development of learning and teaching practices. Despite these efforts, most competent education authorities covered by this review do not conduct external evaluations or self-evaluations of schools. Many also lack consistent standards or implementation protocols for evaluating school performance, which makes it difficult to form reliable judgements and determine where and how best to provide schools with support. This chapter puts forward a set of practical recommendations that aim to accelerate the development of improvement-oriented evaluation practices in BiH school systems, while making the most of limited resources and capacity
State-owned enterprises are important economic actors and can enhance economic activity and competitiveness if a level playing field with private companies is ensured. This chapter, along with three sub-dimensions, explores the importance of implementing policy, institutional and legal frameworks that contribute to competitive neutrality between private firms and state-owned enterprises. The first sub-dimension, efficiency and performance through improved governance, assesses clarity of the ownership policy and the board nomination framework, including independent and professional boards and privatisation practices. The second sub-dimension, transparency and accountability, focuses on the financial and non-financial reporting and audit practices, including anti‑corruption integrity measures and protection of minority shareholders. The third sub-dimension, ensuring a level playing field, explores the discrepancies in the legal and regulatory treatment of state-owned enterprises (SOEs) compared to private businesses and the financing conditions of SOEs.
Private investment by Small and Medium-sized Enterprises (SMEs)1 is a key generator of economic growth and social change in OECD member country economies. In most countries, over 90% of all enterprises are SMEs. It is now widely accepted that the contribution of SMEs to new jobs, exports, innovation and regional development is vital to national development. How to benefit from and maximise this contribution is a continuous challenge for all countries. This Enterprise Policy Performance Assessment seeks to help address that question for Bosnia and Herzegovina (BiH) and highlights issues that require attention and priority action.
An effective institutional and policy context for science, technology and innovation (STI) is essential to boost the knowledge economy. This chapter, along with three sub-dimensions, analyses the overall STI trends and performance in the region and the development of sustainable and impactful STI policies and processes. The first sub-dimension, the STI system, assesses the STI regulatory framework and strategies, including smart specialisation strategies and the institutional framework for STI policy. The second sub‑dimension, public research systems, analyses the governance of the public scientific research sector, funding approaches and human resource capacity to foster academic research excellence. The third sub-dimension, knowledge exchange and co-creation, assesses policies that support integration between scientific research and the private sector, which is critical for technology transfer, as well as policies and initiatives to promote European and regional collaboration in STI.
Sarajevo Canton contains the capital of Bosnia and Herzegovina (BiH), Sarajevo City, and has the highest population density and strongest economy of all jurisdictions in the country (). Together, the city and canton of Sarajevo generated nearly 33% of the total GDP of the Federation of Bosnia and Herzegovina (FBiH) in 2017 (Sarajevo Canton, 2019[1]). Sarajevo Canton has important tourism, food processing, manufacturing and information technology sectors, and hosts a number of large international companies. Until recently, Sarajevo Canton had a single ministry with responsibilities for education policy. In spring 2021, however, these responsibilities were split between the new Ministry of Education and Upbringing, which governs pre‑school, school and adult education and a separate Ministry for Higher Education, Science and Youth, which is responsible for higher education, as well as science and youth policy areas (MoES, n.d.[2]; MoE, n.d.[3]). This profile examines the context and features of Sarajevo Canton’s evaluation and assessment system for education and highlights policy recommendations that can help strengthen this system to improve teaching and learning.
Public sector remuneration systems are shaped by an intricate interaction of administrative culture, economic conditions, and political systems. This paper discusses critical considerations to bear in mind when designing, planning and implementing reforms of public service wage systems. It explores key concepts such as job evaluation, pay structures, performance-related pay, market analysis for competitive pay levels and wage bill planning. It provides guidance on the process of reforming public sector salary systems to enhance their competitiveness, equity, transparency and affordability. The paper offers insights drawn from the reform efforts of several EU Member States and SIGMA partners in the Western Balkans, Moldova and Ukraine, presenting real-life examples and updated guidelines for effective, sustainable salary system changes. The primary focus is on reforms of wage systems within central government administrations, acknowledging the complexity arising from diverse classifications of civil service and public employees, and the varying scope and structure of salary systems. This paper serves as a practical guide, presenting options along with their advantages and disadvantages to aid policymakers in aligning reforms with their national public administration context and strategies.
Small and medium-sized enterprises (SMEs) are essential drivers of sustainable economic growth in the Western Balkans and Turkey, where they make up 99% of all firms, generate 65% value added and account for 75% of employment. Nevertheless, SMEs across the region continue to face obstacles such as difficulties accessing financing, low levels of digital uptake, regulatory barriers and relatively low participation in international trade. The situation has been further exacerbated by the COVID-19 pandemic: SMEs found themselves fighting for survival amidst reduced demand, lockdowns and travel restrictions, and supply chain disruptions.
This report provides an overview of the implementation of the Small Business Act for Europe during the period 2019-22. It is designed to help policy makers design, implement and monitor policies to support the recovery of SMEs from the pandemic, boost their competitiveness based on OECD and EU good practices, and further enhance the region’s economic growth and resilience.
Robust SME sectors are critical to the prosperity of the six Western Balkan economies and Turkey, accounting for over 70% of those employed in the business sector and generating 65% of value added in these seven economies. Yet their potential remains untapped, as SMEs across the region grapple with numerous challenges that hamper their growth and productivity. They are still under-represented in international trade, and their contributions to value-added remain comparatively low as they have difficulties in moving or expanding into high value-added activities.
This report provides a comprehensive overview of the implementation of the ten principles of the Small Business Act for Europe (SBA) in the seven EU pre-accession economies over the period 2016-18. It monitors progress against similar assessments performed over the past decade and identifies the outstanding challenges affecting SMEs. It also provides targeted recommendations to remove barriers to SME development and unleashing their potential for driving inclusive economic growth.
The SME Policy Index is a benchmarking tool designed for emerging economies to assess SME policy frameworks and monitor progress in policy implementation over time. The Index has been developed by the OECD in partnership with the European Commission (EC), the European Bank for Reconstruction and Development (EBRD), and the European Training Foundation (ETF) in 2006 for the Western Balkans. The South East European Centre for Entrepreneurial Learning (SEECEL) joined as an additional partner in 2014. The SME Policy Index has since 2006 been applied in four regions and nine assessment rounds overall.
The SME Policy Index: Western Balkans and Turkey 2016 presents the results of the fourth assessment of the Small Business Act for Europe in the Western Balkans and, since 2012, Turkey. The assessment framework is structured around the ten principles of the Small Business Act for Europe (SBA). It provides a wide-range of pro-enterprise measures to guide the design and implementation of SME policies based on good practices promoted by the EU and the OECD.
The Index identifies strengths and weaknesses in policy design, implementation and monitoring. It allows for comparison across countries and measures convergence towards good practices and relevant policy standards. It aims to support governments in setting targets for SME policy development and to identify strategic priorities to further improve the business environment. It also helps to engage governments in policy dialogue and exchange good practices within the region and with OECD and EU members.
Educational work is a key element for both human capital formation and the promotion of peace and democratic values. It has therefore been identified as one of the priorities of the Stability Pact. The OECD was asked to be Co-ordinator for “General Education Policy and System Change” within the Education and Youth Task Force, and to carry out “Thematic Reviews of Education Policy” in the countries of the region. The main outcome of this project is a series of reports which provide both country overviews and a regional overview. These reports offer an analysis of the education system and address issues and barriers to reform and recommendations. The recommendations are designed to be of use for national policy-makers and to assist Stability Pact partner countries and institutions target regional assistance in order to achieve the goal of supporting South Eastern Europe towards European integration. These reports are part of the OECD’s ongoing co-operation with non-member economies around the world.
Republika Srpska (RS) is a centralised self-government entity within Bosnia and Herzegovina that contains 64 local self-government units (i.e. municipalities). With a surface area that makes up nearly half of BiH (), the entity’s socio-economic development is primarily driven by industry, agriculture and services, which respectively employ 28%, 24% and 48.5% of the entity’s population (Republika Srpska Institute of Statistics, 2021[1]). In RS, one out of two employed individuals has completed secondary education, and one out of four has completed higher education (ibid). According to the Bosnia and Herzegovina’s Foreign Investment Promotion Agency, Republika Srpska’s main strengths for attracting investments rely on its natural resources, favourable tax regulations and an increasingly qualified workforce (Emerging Europe, 2020[2]). The entity’s Ministry of Education and Culture is responsible for pre-university education policy and has a staff of around 80 people (BiH, 2021[3]). This profile examines the context and features of the evaluation and assessment system for education in RS and highlights policy recommendations that can help strengthen this system to improve teaching and learning.