Bosnia and Herzegovina
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Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Rebalancing BosniaandHerzegovina A SystematicCountryDiagnostic Europe and Central Asia Region Rebalancing Bosnia and Herzegovina A Systematic Country Diagnostic November 2015 Regional Vice President: Cyril Muller IFC Vice President: Dimitris Tsitsiragos Country Directors: Ellen Goldstein IFC Regional Director: Tomasz Telma Senior Directors: Marcelo Giugale / Anabel Gonzalez / Ana Revenga Practice Managers: Paloma Casero / Ivailo Izvorski Task Team Leaders: Lada Busevac / Simon Davies / Wolfgang Fengler / George Konda CURRENCY EQUIVALENTS Exchange Rate Effective: August 5, 2015 Currency Unit: BAM BAM 1.79 = US$ 1 Fiscal Year [2016] [January 1—December 31] World Bank Group Toranj B, 17, sprat, Fra AnđelaZvizdovića 1/B/17, 71000 Sarajevo, Bosnia and Herzegovina Telephone: +387 33 251-500 Email: [email protected] Website: www.worldbank.org/bosnia Standard disclaimer This report is a product of the staff of the The World Bank Group comprising the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations and other information shown on any map in this work do not imply any judgment on the part of The World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright statement: This work by The World Bank Group is licensed under a Creative Commons Attribution 4.0 International License (http://creativecommons. org/licenses/by/4.0/). Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution – Please cite the work as follows: World Bank. 2015. 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TABLE OF CONTENTS Team members and acknowledgements .......................................................................................................................... i Abbreviations .................................................................................................................................................................. ii Executive summary ......................................................................................................................................................... v Bibliography ................................................................................................................................................................ 121 1. The Country Context .........................................................................................................................................1 1.1 History: Yugoslavia and BiH in Yugoslavia .......................................................................................................... 1 1.2 Population challenges: aging and shrinking ........................................................................................................ 3 1.3 Institutions and political economy ..................................................................................................................... 4 2. Poverty and Shared Prosperity .......................................................................................................................15 2.1 Poverty dynamics .............................................................................................................................................. 15 2.2 Drivers of poverty reduction .............................................................................................................................18 2.3 Persistence of characteristics of the poor and B40 ........................................................................................... 20 2.4 Rural livelihoods ................................................................................................................................................ 24 2.5 Social and political exclusion .............................................................................................................................27 2.6 The roadmap for ending poverty and creating shared prosperity .................................................................... 30 3. Restoring growth and creating jobs.................................................................................................................33 3.1 Economic performance ..................................................................................................................................... 34 3.2 Fiscal position ................................................................................................................................................... 39 3.3 Financial sector development and inclusion ..................................................................................................... 48 3.4 Private sector development .............................................................................................................................. 50 3.5 Forests: An under-utilized asset ..................................................................................................................... 60 3.6 Infrastructure services ...................................................................................................................................... 62 3.7 Making labor markets and social welfare work ................................................................................................ 73 3.8 Emerging issues and reform areas: Restoring growth and creating jobs .......................................................... 81 4. Promoting social inclusion ..............................................................................................................................85 4.1 Health service delivery and efficiency .............................................................................................................. 86 4.2 Education service delivery and efficiency ......................................................................................................... 91 4.3 Access to water and sanitation .........................................................................................................................97 4.4 Emerging issues and reform areas: Promoting social inclusion ........................................................................ 99 5. Managing risks for sustainable growth ......................................................................................................... 101 5.1 Environmental and climate risks ..................................................................................................................... 101 5.2 Social risk ........................................................................................................................................................ 106 5.3 Emerging issues and reform areas: Sustainability ........................................................................................... 107 6. Identifying priorities for accelerated, inclusive and sustainable growth ........................................................ 109 6.1 Priority-setting exercise ..................................................................................................................................111 6.2 Trade-offs and complementarities between reforms ..................................................................................... 115 6.3 Areas with significant knowledge gaps ..........................................................................................................