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Politics and Economy

The breakup of Yugoslavia resulted in changes in Bosnia and Herzegovina. Following a referendum, the Bosnian parliament proclaimed independence on 7 April 1992, immediately recognized by the international community. Bosnian Serbs oppose this vote and form the Republika Srpska, which will lead the country into a fratricidal war for 4 years, until the signing of the Dayton Agreement in December 1995.


Bosnia-Herzegovina live under the Dayton Accords (December 1995) which ended the civil war triggered by the collapse of the former Yugoslavia (1991-1992). The country is divided between the Serb (Orthodox), gathered overwhelmingly in Republika Srpska (49% of the territory and 25% of the population) and the Federation of Bosnia and Herzegovina, which includes Bosniaks (Muslims) and Croats ( Catholics). Central institutions have limited powers, with each of the two entities in addition to its own political institutions, the police, the judicial system, educational system, etc.. The complexity of the politico-administrative system, the superposition of four different levels of government (municipal, cantonal, entity and state) and the highly decentralized explain a large part of the problems of Bosnia and Herzegovina.
The international community, including the EU, are in favor of strengthening central institutions for the implementation of the necessary reforms to the country’s EU prospects. But this building is an object of contention between entities that do not wish to renounce their skills backed by Dayton. A High Representative, an offshoot of the Peace Implementation Council (55 countries and agencies) has the power to dismiss ministers and to repeal laws ("Bonn authority"). The Steering Board is composed of the G8, the EU (Presidency and Commission) and Turkey (Representative of the OIC).

Bosnia and Herzegovina is a potential candidate country for accession has signed various agreements with the EU, the Stabilisation and Association Agreement (SAA) on 16 June 2008. Once ratified by all Member States, it shall be ratified at the European Union and will enter into force. In the meantime, an Interim Agreement on trade and accompanying measures to the ASA is in place and a European Partnership. The Agreement on visa liberalization for citizens of BH for entry into the EU, which entered into force on 15 December 2010, allowing citizens of Bosnia and Herzegovina, holding a biometric passport to travel without a visa the Schengen area for a period not exceeding 90 days. Financially Bosnia and Herzegovina supported through EU pre-accession assistance since 2007 (two IPA components "transition assistance and institution building plants" and "cross-border").


The greatest riches of Bosnia and Herzegovina are its abundant woods and crystal clear mountain rivers. Therefore BIH’s main focus before the war was on the production of goods out of wood and iron and semi-manufactured products for automobiles, furniture, etc. Agriculture was mainly monopolized by private landowners, the properties mostly small and non profitable and most of the food was imported.
The most damage to Bosnia and Herzegovina’s economy was made by the conflict in BIH and the region. The destroyed economy and infrastructure resulted in a +n 80% drop in production. After 1995 there was an increase in production and the economy as well as the land itself started to recover.

The currency becomes stable which contributes to the favourable business atmosphere in the country. The Bosnia and Herzegovina convertible mark (KM) is bound to the Euro at a fixed rate: 1 KM = 0.51 €. The inflation rate is low; the country is not insolvent with most of its infrastructure rebuilt.
BIH started the negotiation for the admission into the European Union in November of 2005. Since then a large number of political, social and economical reforms have been enforced, the speeding up of the economical reforms bettering the business climate. The country is focused on the reduction of the bureaucratic apparatus, the privatisation of the public sector and on attracting foreign investors.

The strategy of the economic advance leans on the development of the wood-processing industry as it did before because of its abundance in goods, as well as agriculture, tourism, mining, the iron-processing industry and the textile industry.

Since 2000, BIH has achieved an economic growth of 5% per year, which is also expected in the future. This continual annual growth of GDP, combined with the rapid growth of production and export, is a clear indicator that the BIH economy is in full expansion.

BIH is realizing the process of privatization of enterprises which is of strategic importance in order to increase economic growth and increase the inflow of foreign investment. In addition, Bosnia has new modern bankruptcy laws that provide flexible options for reactivating companies in financial difficulties, thus creating potentially valuable opportunities for foreign investors. It has signed the CEFTA agreement (FTA in Central Europe) with neighboring countries and is currently negotiating accession to the World Trade Organization (WTO). Besides the EU, BIH has a preferential export regime with countries like Canada, Japan, Russia, Turkey and the United States.

Bosnia has a great energy potential and its highlights are numerous hydroelectric power plants on the rivers Neretva and Vrbas. There are many findings of rock salt, gypsum, iron, bauxite, etc. And the mountain, religious, summer, farm and health tourism have been developed. Thermal springs are located in Tešanj, Ilidža, Kiseljak, Lakataši, Višegrad and other towns.

Bosnia and Herzegovina is a country which, in this day and age, offers a wealth of resources and natural beauty, attractive locations, a long tradition of industrial production, a large number of available production facilities, transparent legislation, low taxes, educated workforce and many more, and is an ideal place for foreign investors who, in BIH, have the same status as the domestic ones in terms of rights and obligations.

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