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Bosnia and Hercegovina COUNTRY REPORT Bosnia and Hercegovina November 2000 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising conferences and roundtables. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.20) 7499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: http://www.eiu.com Electronic delivery This publication can be viewed by subscribing online at http://store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office London: Jan Frost Tel: (44.20) 7830 1183 Fax: (44.20) 7830 1023 New York: Dante Cantu Tel: (1.212) 554 0643 Fax: (1.212) 586 1181 Hong Kong: Amy Ha Tel: (852) 2802 7288/2585 3888 Fax: (852) 2802 7720/7638 Copyright © 2000 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1462-673X Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Bosnia and Hercegovina 1 Contents 3 Summary 4 Political structure 6 Economic structure 6 Annual indicators 7 Outlook for 2001-02 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 23 Economic policy 25 The domestic economy 25 Output and demand 26 Employment, wages and prices 28 Foreign trade and payments List of tables 10 BiH: international assumptions summary 11 BiH: forecast summary 13 BiH: Nov 2000 elections, BiH House of Representatives 13 RS: Nov 2000 elections, president & vice-president slate 14 RS: Nov 2000 elections, National Assembly 14 Federation: Nov 2000 elections, House of Representatives 15 Federation: Nov 2000 elections, cantons 26 BiH: industrial production 27 BiH: labour statistics, 2000 28 BiH: retail prices 29 Federation: trading partners, Jan-Aug 30 BiH: current account, Jan-Jun 2000 List of figures 12 BiH: gross domestic product 12 BiH: current-account balance 28 BiH: retail prices EIU Country Report November 2000 © The Economist Intelligence Unit Limited 2000 Bosnia and Hercegovina 3 Summary November 2000 Outlook for 2001-02 The third post-war general election in Bosnia and Hercegovina (BiH) on November 11th 2000 marks the return to power in the Republika Srpska (RS) of the nationalist Serbian Democratic Party (SDS), which has captured the presidency. Nationalist parties have secured a presence in BiH’s parliaments for the next four years, and will probably take part in the RS government, although in the Federation and the BiH parliament the non-nationalist Social Democratic Party (SDP) may share power with other parties. The elections may lead to a rethink of the West’s strategy. The EIU has revised its forecast slightly downwards, to 7.5% real GDP growth in 2001 and 7% in 2002, mainly owing to a likely slowdown in both gross fixed investment and in public con- sumption. The current-account deficit should narrow in 2001 after widening in 2000, as the trade deficit falls with broadly favourable external factors over the forecast period. The political scene The November 2000 elections showed that many Bosnians were still prepared to vote for nationalist parties, although the moderate SDP made gains in the BiH and Federation parliaments. The outgoing RS prime minister, Milorad Dodik, was defeated for the RS presidency by the candidate for the SDS, which also performed well in the RS parliamentary election, and the party looks set to return to power after several years in opposition. For Western officials, Bosnian Croat “defiance” has been a particular concern: the Croatian Democratic Union of BiH (HDZ BiH) held a parallel referendum on changing the Dayton dispensation. There has been increasing evidence of international impatience with BiH politics. Economic policy Strengthening the central BiH state has had budget implications. The high representative, Wolfgang Petritsch, has imposed a solution on pension reform. BiH now has a State Court. The IMF has delayed disbursing the next tranche of its stand-by credit. Privatisation in the Federation has resumed. The domestic economy Federation industrial output growth has slowed down, and construction growth has levelled off. Household demand in the Federation is still strong. Inter-entity trade has slackened. Unemployment has increased throughout BiH as employment has stagnated. Wages have continued to increase, and retail prices have edged higher. Foreign trade and The trade deficit is still large. Switzerland is taking most Federation exports, payments and Croatia supplies most Federation imports. A trade agreement has been reached with Croatia. The current-account deficit should increase in 2000 before falling again. Foreign investment is set to rise. Editors: Michael Taylor (editor); Gavin Gray (consulting editor) Editorial closing date: November 20th 2000 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule EIU Country Report November 2000 © The Economist Intelligence Unit Limited 2000 4 Bosnia and Hercegovina Political structure Official names Bosnia and Hercegovina (BiH) has legal existence within the boundaries of the former Yugoslav republic of the same name. It comprises two entities: the Federation of Bosnia and Hercegovina (which is often referred to simply as the Federation), set up by the Washington Treaty of March 18th 1994, and the Republika Srpska (RS) Form of state BiH has the following limited responsibilities under the Basic Principles agreed in Geneva and New York in September 1995, and confirmed at Dayton, US, on November 21st: the establishment of a Constitutional Court, a Commission for Displaced Persons, a Human Rights Commission, a central bank, public corporations to manage and operate transport and telecommunications, a Commission to Preserve National Monuments, and a system of arbitration between the two entities. Foreign trade is also supposed to be managed by the government of BiH Legislatures BiH has a bicameral parliament comprising the House of Representatives and the House of Peoples, two-thirds of whose members are elected from the Federation and one-third from the RS. A valid majority requires the support of at least one-third of the members representing each entity. The Federation and the RS have their own parliaments National elections November 11th 2000. Next elections: parliamentary, November 2004; presidential, by September 2002 Head of state BiH has a rotating collective presidency of three, elected on September 12th-13th 1998: Zivko Radisic (current chairman), Ante Jelavic and Halid Genjac (acting pending the election of a successor to Alija Izetbegovic, who resigned on October 14th 2000) National government The Council of Ministers as reorganised in April 2000 comprises six ministers, one of whom is appointed chairman (prime minister) on a rotating basis for eight months at a time. The current government was approved on June 22nd 2000, with a rotation of chairman on October 18th. The entities have their own governments Main political parties Croatian Democratic Union of BiH (HDZ BiH); New Croatian Initiative (NHI); Party of Democratic Action (SDA); Party for BiH (SzBiH); Social Democratic Party (SDP); Democratic Socialist Party (DSP); Party of Democratic Progress (PDP); Party of Independent Social Democrats (SNSD); Serbian Democratic Party (SDS); Serbian People’s Alliance (SNS); Serbian Radical Party of Republika Srpska (SRSRS); Socialist Party of Republika Srpska (SPRS) International involvement The Dayton agreement called for the appointment of a high representative, a senior foreign diplomat charged with monitoring the implementation of the agreement and co-ordinating the activities of international organisations operating in BiH. The high representative is advised by the Peace Implementation Council (PIC), which includes all the signatories to the Dayton agreement. Since December 1997 the high representative has been able to impose decisions in cases of
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