Over the past decades, Bosnia and Herzegovina has made important progress to strengthen domestic competencies. Many education authorities, at entity, canton and district levels, have started to integrate a competency-based approach into their respective curricula. To improve the quality of teaching, Bosnia and Herzegovina established a body to accredit education institutions and programmes for initial teacher education. This chapter puts forward policy priorities to sustain such progress, and to provide the citizens of Bosnia and Herzegovina with the modern labour market and transversal skills needed for economic transformation and civic participation. Much can be achieved through investments in early childhood education and care (ECEC) as a means to strengthen the foundational skills of children. Considering the decentralised governance structure of Bosnia and Herzegovina, more systematic engagement in the policy-making process by all relevant stakeholders would better support alignment of key objectives and activities across different government levels. Collaboration with the private sector should play a key role in this respect.
Multi-dimensional Review of the Western Balkans
4. Boosting education and competencies in Bosnia and Herzegovina
Abstract
The Initial Assessment of this Multi-dimensional Review of the Western Balkans identified education and competencies for economic transformation as the top priorities for Bosnia and Herzegovina and for all economies across the region (OECD, 2021[1]). While economic structures vary significantly from one economy to another, finding new sources of productivity growth and engines for future transformation is an urgent task for all the regional economies. Good jobs are scarce and young people continue to leave. Boosting youth and workforce competencies can unlock new opportunities to overcome these trends. The more unfavourable an economy’s current wage-to-productivity ratio, the more urgent it becomes to find new and more productive activities to build a strong economy.
High quality education also tops the list of aspirations for the future in Bosnia and Herzegovina and in the region. Quality education is an essential element of quality of life for all; young people in school; families; those who want opportunities for their own children; those who want to have children in the future; and those who depend on younger generations to shape the future of their societies. Education also matters for civic engagement and respect for diversity and for the rule of law.
This report builds on an extensive peer-learning process with practitioners in the region and expert assessment to provide suggestions for strengthening education and competencies in Bosnia and Herzegovina and in the region. Building on the Governmental Learning Spiral methodology (Blindenbacher and Nashat, 2010[2]), two peer-learning workshops brought together experts and practitioners from across the region and beyond to prioritise among challenges and solutions, develop ideas for action, and learn from each other (Box 2.1 of Chapter 2). The peer-learning workshops on education and competencies served three complementary aims: to identify outcome-level challenges hampering the build-up of competencies; to identify key policy challenges; and to put forward key policy priorities for Bosnia and Herzegovina and for the region (Figure 4.1).
Over the past decade, Bosnia and Herzegovina has taken important steps to boost the quality and relevance of education across all levels. Significant progress was made in ensuring full participation in basic compulsory nine-year education and in making learning more competency-oriented through the introduction of competency-based curricula. Bosnia and Herzegovina’s participation (in 2018, for the first time) in the OECD Programme for International Student Assessment (PISA) was also an important step in providing valuable data and benchmarking that can help authorities identify and close existing learning gaps. Nascent efforts have also been made in some entities and cantons to introduce teaching standards and Bosnia and Herzegovina also established a body to accredit higher education institutions and programmes for initial teacher education (ITE). Efforts have also been made to strengthen co‑ordination and harmonisation of education policy across the economy by establishing co‑ordinating mechanisms and bodies.
To sustain the progress in building key competencies of students and adults, Bosnia and Herzegovina must now tackle a set of outcome-level challenges that remain (Figure 4.1). Student performance on the PISA 2018 assessment was among the lowest in Europe. Employer surveys continuously report significant difficulties in hiring due to skills gaps, ranging from technical to meta-cognitive skills. High unemployment and limited prospects in the labour market, especially among youth, limit incentives to invest in education and skills, and are a “critical push” factor for emigration and brain drain. In fact, Bosnia and Herzegovina has one of the highest emigration rates among the Western Balkan economies. Strengthening the education and competencies of youth and the existing workforce is, therefore, critical for creating sustainable economic prospects and unlocking a virtuous cycle that will boost employment opportunities for all – and thus nurture and retain the talent at home.
Figure 4.1. Strengthening education and competencies in Bosnia and Herzegovina and in the Western Balkans
Note: Purple = policy actions developed by peer-learning participants. Orange = policy actions suggested by the OECD.
Source: OECD peer-learning workshops.
Eleven policy actions have great potential to strengthen education and competencies in Bosnia and Herzegovina, with strengthening practical learning through more collaboration with firms being the key peer-learning priority (Figure 4.1).
Strengthen practical learning through more collaboration with firms (peer-learning priority)
Increase access to early childhood education and care (ECEC)
Foster equitable education at all levels
Systematically engage with stakeholders in the participatory policy-making process for better policies and stronger governance of education
Make efficient use of education financing
Update and modernise curricula
Improve teaching quality
Employ digital technologies in the classroom
Increase access to and quality of adult education
Leverage foreign direct investment to boost skills
Foster closer linages with diaspora
This chapter is divided into three sections. Sections 4.1 and 4.2 provide policy implications for Bosnia and Herzegovina across the eleven policy actions through a prism of challenges specific to Bosnia and Herzegovina. Section 4.3 provides indicators against which policy progress can be measured in implementing all the policy priorities for Bosnia and Herzegovina. This chapter is complemented by the regional chapter (Chapter 2) by providing more specific policy options for the eleven policy actions based on international practices that may be applied, albeit to different degrees, also to Bosnia and Herzegovina.
4.1. Improving the quality and relevance of formal education in Bosnia and Herzegovina
4.1.1. Strengthen practical learning through more collaboration with firms
Strengthening practical learning through increased collaboration with firms to provide expert mentorship and collaborate in work-based learning was identified as a key priority for Bosnia and Herzegovina during the peer-learning workshops. Forming strong partnerships, particularly with the private sector, has already been an important strategic priority for Bosnia and Herzegovina, as evidenced by key strategic documents across a range of policy areas including education (Bosnia and Herzegovina, 2021[3]). In practice, systematic and effective engagement between vocational education and training (VET) and the private sector is yet to be achieved. Box 4.1 highlights specific actions and requirements that peer-learning participants see as necessary to strengthen practical learning through more collaboration with firms.
As the most popular education track in Bosnia and Herzegovina, VET needs to be better aligned with labour market needs. With about three-quarters of secondary school students choosing to pursue this path, VET plays a significant role in the overall education system (Agency for Statistics of Bosnia and Herzegovina, 2020[4]). Many VET profiles are outdated, however, and employers complain about serious skill gaps in growing and dynamic sectors of the economy. In 2018, a tracer study of VET graduates found that only 51% of employed VET graduates held jobs related to their education (GIZ, 2018[5]).
The lack of sufficient practical training to prepare VET graduates for the workplace is an obstacle for employers. The VET system in Bosnia and Herzegovina has a small component of practical training through work-based learning (in most cases) organised in school workshops. Co-operation with firms for work-based learning remains limited, making up only 20% of all practical lessons (WBA4WBL, 2021[6]). Consequently, positive cases (such as reported in the Goražde Canton) in which practical knowledge acquired during an in-company internship results in the intention to hire interns after graduation remain very rare (USAID, 2017[7]).
Box 4.1. Strengthening practical learning through more collaboration with firms (peer-learning priority)
Peer-learning participants selected strengthening practical learning within VET through more collaboration with firms as a key priority in building competencies and improving educational outcomes in Bosnia and Herzegovina. Following regional discussions at the peer-learning workshops (Box 2.1 of Chapter 2), participants from Bosnia and Herzegovina – representing the Ministry of Civil Affairs, the Directorate for Economic Planning, the Centre for Education and Research, the Foreign Investors Council, and the Center for Educational Initiatives Step by Step – gathered to identify key policy priorities for Bosnia and Herzegovina.
Great potential exists in Bosnia and Herzegovina to leverage work-based learning; with 44% of businesses interested in offering work-based learning, it has the highest engagement in the region (ETF, 2020[8]). Documentation from VET and company co-operation shows that in-company training requires stronger harmonisation of content (WBA4WBL, 2021[6]). It also notes that the government should improve the capacity of in-company trainers and provide incentives for companies to accommodate students, including establishing a structure for cost-sharing for practical training and remuneration of trainees (ETF, 2020[8]). Another best practice would include accreditation of companies that can offer apprenticeships (ETF, 2020[8]). To boost practical learning through collaboration with the private sector, peer-learning participants from Bosnia and Herzegovina proposed six actions:
Support implementation of the current regulatory framework
Implement work-based learning
Establish professional orientation in secondary education (already existing in strategic directives for career orientation since 2015)
Apply best local practices across Bosnia and Herzegovina
Implement requirements of the EU process
Support implementation of Riga conclusions across Bosnia and Herzegovina
Creating momentum for implementation of the above actions – sustaining it over the longer term – requires the following conditions:
First, Bosnia and Herzegovina should harmonise regulatory framework. Bosnia and Herzegovina has a complex vertical and horizontal structure of mandates and responsibilities (see Section 4.1.4). With exception of framework laws, this means that a law adopted at level of one administrative unit may not be valid at another administrative unit, which in the case of awarded qualifications means qualification awarded in one entity may not be accepted in another (UNESCO, 2016[9]).
Second, government institutions should consider introducing various financial and non-financial incentives to encourage private sector participation in the process. Very often, a flexible VET system willing to listen to the needs of the private sector and demonstrating an ability to provide a competent workforce is an important step in attracting the private sector. Other incentives, such as tax breaks, may also help.
Third, it would be important to set up mechanisms for collaboration with the private sector and work-based learning. This includes: establishing a framework of formal agreements between schools and companies willing to be involved in work-based learning; ensuring continuous training of educational staff to provide teaching consistent with labour market needs; putting in place financial compensation and insurance for mentors and students who participate in work-based learning; and fostering ongoing co-operation between teachers and mentors to provide feedback to students involved and to ensure continuous build-up of teacher competencies.
Ensuring the impact of the envisaged actions requires strong involvement of diverse stakeholders. The need for a participatory process was also underscored by Riga Conclusions in 2015,1 which call for stronger collaboration in VET to boost employability and competitiveness (European Commission, 2015[10]). Collaboration with the private sector is integral to ensuring the education system, especially VET, is able to better equip students with competencies needed in the private sector. This can be achieved by implementing relevant curricula and providing practical learning within firms across Bosnia and Herzegovina. To facilitate collaboration with the private sector and create a foundation for implementing the envisaged actions, it requires also involvement of other stakeholders, including: relevant ministries (e.g. of education and entrepreneurship); schools, educational institutions and pedagogical institutes; chambers of commerce and of crafts and trade; businesses; and associations of employers.
1. Ministers from the EU Member States, Candidate Countries, European Economic Area Countries, as well as the European social partners and the European Commission met in Riga on 22 June 2015 to discuss further deepening of European co-operation in Vocational Education and Training (VET).
Source: OECD peer-learning workshops.
Beyond the actions identified above, enhancing funding for VET would be important to improve access to equipment and teaching materials. Spending per student on secondary education in Bosnia and Herzegovina is by far the highest in the region and compares with OECD and EU averages (World Bank, 2021[11]). As most of the financing goes to staff salaries, little funding is available for technology, equipment and other resources. This disproportionally impacts VET institutions, which generally have higher costs in these areas than do general education institutions. In fact, lack of equipment and materials, along with the lack of practical training, is considered the most significant constraint to VET education in Bosnia and Herzegovina (GIZ, 2018[5]). As a result, the VET system still strongly relies on financial support from international donors such as the European Union or the GIZ. International donors have also been instrumental in driving curricula upgrades and modernisation, as well as supporting apprenticeships and work-based learning, which are still relatively limited (GIZ/SDC, 2020[12]).
4.1.2. Increasing access to early childhood education and care is critical for building foundational skills for work and for life
Boosting access to early childhood education and care (ECEC) is a critical challenge in Bosnia and Herzegovina that should be addressed. Only 27.3% of children aged 3-6 years old attend a pre-school facility (in 2020), which is lower than most regional peers and well below the OECD and EU averages of 81.7% and 99.9% (Figure 2.15 of Chapter 2). Younger children are also more strongly impacted by the limited access, while the enrolment rate of 5 year-olds has been steadily increasing from 31% in 2011 to 54% in 2016, and is still increasing. Children from poor and disadvantaged backgrounds are also less likely to participate in ECEC. For example, only 1.5% of Roma children and 2% of the poorest children attend pre-school (UNICEF, 2021[13]).
Bosnia and Herzegovina should consider increasing funding for ECEC, and setting criteria for the most efficient and effective allocation of this financing. The low supply of publicly funded ECEC facilities and services reflects underlying challenges of financing for ECEC: in 2018, ECEC accounted for just 3.1% of total spending on formal education in Bosnia and Herzegovina (Agency for Statistics of Bosnia and Herzegovina, 2020[4]). In the absence of publicly-funded options, the high cost of private preschool education limits the participation, particularly for children from low-income families (Camovic and Hodic, 2017[14]). With primary education budget taking up a lion’s share of the total education budget in Bosnia and Herzegovina, scope exists for efficiency gains in primary education spending and reallocation of financing to ECEC. Yet, any potential reallocation needs to be carefully assessed so that the potential reallocation of funding does not affect the primary education, which also requires quality improvements.
Improve the infrastructure for ECEC by targeting in particular rural areas and municipalities with no ECEC facilities. Investments in hard infrastructure can be complemented with additional services focused on the poorest communities. In the main urban areas, high demand results in long waiting lists, while many rural areas do not even have access to any ECEC services (in 30 out of the 143 municipalities there are no preschool programmes) (Branković et al., 2016[15]). Moreover, ECEC enrolment rates in rural areas represent about one-third of the enrolment rates in urban areas, further undermined by higher unemployment, less disposable income and cultural norms regarding childcare (UNDP, 2013[16]; World Bank, 2019[17]).
4.1.3. Fostering equitable education at all levels is essential for boosting the size and quality of the workforce of Bosnia and Herzegovina
Scale up initiatives that target inclusion of economically disadvantaged minorities (such as Roma), rural populations at all levels of education, and persons with special needs. Participation and attainment in education among the Roma population are systematically lower than the rest of the population. The Roma primary school enrolment rate is roughly two-thirds that of the rest of the population; Roma secondary school attendance is less than 50% (UNICEF, 2020[18]; UNDP, 2012[19]). Roma students also have higher dropout rates compared with non-Roma students, especially among girls. Children from poor and rural backgrounds are less likely to attend secondary school. The largest share of children attending ECEC is those of formally employed parents who live in urban areas (75% of all children going to preschools) (World Bank, 2019[17]). Finally, provision of infrastructure and services needed to support special needs education varies across Bosnia and Herzegovina, depending on the resources and capacities of municipalities and schools, according to peer-learning participants.
4.1.4. Systematically engage with stakeholders in the participatory policy-making process for better policies and stronger governance of education
Systematically engaging all relevant stakeholders in the policy-making process, as a means to strengthen participatory policy development, was also one of the most important priority measures identified by peer-learning participants from Bosnia and Herzegovina. Participatory policy development aims to facilitate inclusion of diverse groups and individuals in the design of policies. Participatory policy development should create an environment in which various stakeholders can define their goals, express their opinions, consider options and come up with a set of recommendations that the government can implement (FAO, 2005[20]).
To ensure the greatest impact from engaging various stakeholders on education policies, it is important to align key objectives and activities across different government levels. First, defining strategic objectives for the education system in line with the expectations of all relevant stakeholders and by co-ordinating the alignment of the Republika Srpska (RS), cantonal in the Federation of Bosnia and Herzegovina (FbiH) and Brčko District BIH level strategic documents under the Conference of Bosnia and Herzegovina Education Ministers. It is also important to strengthen the co-ordination mechanisms for implementing these objectives, to monitor – in a consistent way across all jurisdictions – progress vis-à-vis targets, and to evaluate the impacts of education policies and adjust them accordingly. If done correctly, participatory policy development can increase competencies in Bosnia and Herzegovina through: better informed and more equitable policies; strengthened transparency and accountability; strengthened ownership; enhanced capacity to include marginalised groups; and enhanced government capacity (Rietbergen-Mccracken, n.d.[21]).
To ensure the widest possible impact of participatory policy making, it is important to identify and involve diverse stakeholders and to establish effective co-ordination mechanisms. Identification of key stakeholders that should be involved, including the Ministry of Civil Affairs at the state-level, Ministries of Education of RS, cantons in the FbiH, and Brcko district BiH, municipalities in the case of RS, private sector, teachers, parents, NGOs and other actors. In addition, Agency for pre-primary, primary and secondary education should also be involved and given a clear mandate for setting high level, common goals and scaling initiatives. To ensure effective co-ordination, a working group could be established with representatives of the above stakeholders. Ministry of Civil Affairs at the state-level could be the key co-ordinating body.
Streamlining and simplifying complex policy-making processes that characterise the complex education system of Bosnia and Herzegovina can improve participatory policy making. Three different systems come into play across the current education system: in RS, education is governed at the entity level; in the FbiH it is governed at the cantonal level; and in the Brčko District, at the district level. Each of the administrations is responsible for enacting its own education legislation and financing education. FBiH further comprises ten cantons, each with an education ministry. Overall co-ordination of education across Bosnia and Herzegovina, including liaison at international level, is undertaken by the Ministry of Civil Affairs at state level. Three state-wide agencies support the implementation of education policies: a) Agency for the Development of Higher Education and Quality Assurance; b) Agency for pre-primary, primary and secondary education; and c) Centre for Information and Recognition of Qualifications in Higher Education. Further, a Conference of Ministers of Education provides a dialogue framework on state-wide education affairs with decisions taken by a state-wide Council of Ministers. At present, more than 70 policy documents – including framework laws, strategies, legislation and guidelines – govern education in Bosnia and Herzegovina (ETF, 2020[8]).
Better and more harmonised data collection is also needed to strengthen governance of the education system and participatory policy development. Weak education outcomes also reflect a lack of systematic monitoring and evaluation (M&E) of education policies; in turn, M&E is undermined by the lack of systematic collection and sharing of education-related data at the state level. As a result, education-related statistics are incomplete, inconsistent and spread across jurisdictions without any aggregation – all of which limit the evidence base for policy making. Limited comparable data on learning outcomes, and the absence of a state-wide student assessment system to measure outcomes, hinder regular performance monitoring.
4.1.5. More efficient use of education financing is needed to improve learning outcomes at all levels
Bosnia and Herzegovina should reassess high staffing costs and consider reallocation to improve availability of funds. At 3.9% of GDP, Bosnia and Herzegovina’s spending on education is in line with regional peers, albeit lower than advanced economies (Figure 2.13 – Panel A of Chapter 2). Personnel expenditures account for most of these costs: about 90% of all spending is on staff salaries, including large numbers of teachers and non-teaching staff. In fact, Bosnia and Herzegovina has one of the lowest student-to-teacher ratios in the region and beyond (Figure 2.13 – Panel B of Chapter 2). Non-teaching staff costs are also relatively high compared to peers; in primary schools, they account for about one-third of total spending (Agency for Statistics of Bosnia and Herzegovina, 2020[4]). These high personnel costs also limit spending for other important (and deficient) resources such as quality facilities, teaching materials, teacher training and continuous professional development (CPD) (World Bank, 2020[22]). Some of this financing gap is covered by donors, which have played a critical role in financing curricula upgrades, teacher training, provision of adult education and other areas.
Finally, considerable differences in per student spending on education across different administrative units leave a significant scope for increasing the equity of financing – the introduction of per-capita funding formula could be an alternative. Primary education spending per student is about 24% higher in FBiH than in RS, and further differences are also present between cantons within the FBiH. This reflects in large part the decentralised funding of education. As a result, the resources invested in education and the quality of education can vary notably across the economy (World Bank, 2019[17]). Decentralised financing also leaves considerable room for inefficient allocation of resources at the economy level, with negative consequences on educational equity and quality overall.
4.1.6. Updating and modernising curricula to impart relevant knowledge and skills
Given the lack of competencies that are in demand in the labour market, it is important to develop modern curricula that focus on current and future labour market needs. In a recent survey, about 30% of respondents said that skills acquired during their education did not meet the needs of their jobs. In turn, some 58% of firms say the education system does not impart the skills needed in the current labour market (World Bank, 2017[23]).
Bosnia and Herzegovina needs to make more progress in implementing the developed competency-based curricula for primary and secondary education and to develop the institutional mechanisms and processes for systematic upgrading and adaptation of curricula. Over the past two decades, education quality and relevance in Bosnia and Herzegovina has suffered due to the reliance on outdated curricula across all education levels, but the process of development and implementation of competency-based curricula in Bosnia and Herzegovina has been long (World Bank, 2019[17]). Until today, competencies education authorities have aligned their existing curriculum to competency-based curricula until various degrees (Guthrie et al., 2022[24]).
4.1.7. Improving teaching quality is key for better learning outcomes
ITE needs to be more comprehensive in Bosnia and Herzegovina, with a stronger focus on pedagogical and other teaching skills. Curricula for teachers are designed by the faculties in which the teachers are educated (pedagogical faculties; philosophy, science, and mathematics faculties; art academies), which results in considerable diversity in the curricular content and significant focus on subject knowledge at the expense of teaching competencies such as psychology, pedagogy, didactics, and methodology (PPDM). There are also no programme-specific accreditation criteria to ensure that ITE providers can demonstrate that they are equipping candidates with the skills they need for teaching (Guthrie et al., 2022[24]).
Bosnia and Herzegovina also needs to put a stronger spotlight on teacher in-service training and CPD. Bosnia and Herzegovina has the lowest share of vocational teachers participating in any kind of training, except for CPD in businesses, in which Bosnia and Herzegovina only trails behind Turkey (Table 2.5 of Chapter 2). In-service teacher training is quite limited and largely dependent on the initiative of individual teachers or principals. Donor financing is the main source of funding for such activities. Disaggregated financing, lack of continuity and long-term sustainability remain important concerns with the reliance on this source of financing (World Bank, 2019[17]). VET teachers have limited exposure to the world of work; coupled with the lack of effective CPD, this results in limited updating and/or upgrading of teaching competencies. In 2018, Agency for pre-primary, primary and secondary education developed Guidelines for Development of Standards for the Accreditation of Training Programs for VET Teachers in Bosnia and Herzegovina. These guidelines have yet to be incorporated into legislation in different parts of Bosnia and Herzegovina.
Teacher compensation and career progression ought to be linked to performance. Teacher compensation is based mainly on years of experience, however, rather than performance. This limits incentives for teachers to innovate, to strive to improve practice or to invest in CPD. The limited and inconsistent appraisal of teachers further compounds this challenge. Teacher performance is evaluated mainly by administrators, such as school principals, advisors and/or inspectors from the local pedagogical institute (if such an institution exists and has sufficient evaluation capacity). Moreover, evaluations are not based on common quality standards and, in the instance of a disappointing evaluation, teachers are not provided with sufficient guidance, feedback or support.
4.1.8. Systematically employing digital technologies in the classroom can significantly boost education outcomes
Bosnia and Herzegovina should increase student access to digital technologies in the classroom. Reportedly, among students leaving school, about 32% of them believe that the skills they lack the most are digital skills (Regional Cooperation Council, 2019[25]). According to data from PISA, there are just over 0.3 computers per pupil in Bosnian schools, compared with an average of over 0.8 in OECD countries (OECD, 2020[26]). Internet access is also an issue: while nearly all school computers in OECD countries are connected, in schools in Bosnia and Herzegovina, the share drops to just over 70%. Access to computers in school has been shown to have a statistically significant impact on student performance in Bosnia and Herzegovina (World Bank, 2019[17]).
Addressing digital skills among teachers would be an important step forward. Even in EU countries, only one-quarter or less of students are taught by teachers who feel confident using digital technologies (World Bank, 2020[27]). While no comparable data are available for Bosnia and Herzegovina, this issue may also be a significant challenge. On a positive note, despite considerable aforementioned challenges in policy co-ordination among the numerous education authorities, co-operation on entrepreneurship and digital competencies is relatively well developed. Stakeholders agreed upon a working document to promote these competencies (GIZ, 2021[28]).
4.2. Boosting competencies in Bosnia and Herzegovina beyond formal education
4.2.1. Increasing access to and the quality of adult education will be essential for creating a nimble workforce that can adapt to changes in the labour market
Flexible training provisions, statuary education and training leave, financial incentives and recognition of previous learning (including informal) are key levers to improve participation in adult learning. In 2017, only 8.7% of adults (aged 25-64 years) participated in some type of formal and/or non-formal education. Of these, only 2.2% participated in formal education or training, while 6.9% received non-formal education (Agency for Statistics of Bosnia and Herzegovina, 2018[29]). The strong focus of the labour market on diplomas and formally obtained qualifications – rather than acquisition of skills – has led to limited recognition of informal training, which represents an important constraint to adult learning. Donor-financed initiatives have been made to boost recognition of informally obtained qualifications in the labour market.
4.2.2. Leveraging foreign direct investment can help to boost the competencies of the workforce
Increased co-ordination efforts among various investment promotion agencies (IPAs) – including data sharing, streamlining of administrative procedures and clarity on investment incentives – can create conditions necessary to attract investors. As a result of institutional and overall challenges related to the fragmented internal market and the business environment, net FDI inflows over the past five years have comprised just 2.3% of GDP, well below most regional and global peers (World Bank, 2021[11]). Investment promotion activities are conducted at both state and entity levels, which creates a complex web of contact points, adds to administrative costs, and limits the resources and capacities of the state-level Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA). While the FIPA is responsible for promoting the overall economy as an attractive investment destination, it is the entity-level IPAs that conduct investor targeting activities, including focusing on specific strategic sectors for investment attraction. Incentives for FDI attraction are predominantly defined at the entity level, though efforts have been made to avoid overlaps and inconsistencies at the economy-wide level. This leads to a complex and confusing system for investors. It also results in limited state oversight regarding how incentives are applied at the entity level. Lack of transparency about the amount of state aid provided to companies further adds to the uncertainty facing investors (OECD, 2021[30]). Uncertainty for investors also prevailed within the four special economic zones (SEZs) in Bosnia and Herzegovina. While investors are granted customs and value-added tax (VAT) exemptions by law, firms were required to claim VAT recovery in front of courts, which caused additional legal costs. As SEZs were created in former heavy industry hubs around existing companies, they were unable to attract large amounts of new investments. Consequently, employment impact was limited; the number of 1 700 jobs created is lower than for SEZs in Serbia and North Macedonia (OECD, 2017[31]).
Co-operation on training between companies and education institutions remains limited but could be further expanded, given the high demand for well-trained, skilled workers. When interviewed in a recent study, German firms located in Bosnia and Herzegovina reported that they were training workers – often in their own training facilities abroad – because they often do not find the skills they are looking for locally (Jovanović, 2021[32]). Foreign firms are also part of the increased effort to provide work-based learning within the VET system, funded with the help of donors (see Section 4.1.1). The training components they provide are adapted to special knowledge needed in their plants, which gives them opportunity to influence the curriculum of the educational system. Almost all foreign employers voice the complaint, however, that they invest in the training and education of their workers who afterwards decide to leave Bosnia and Herzegovina (Jovanović, 2021[32]).
4.2.1. Fostering closer linkages with the diaspora can also be a source of new competencies
To tap into the diaspora as a potential source of knowledge and investment, it would be important to map the existing diaspora and to foster a proactive approach in creating linkages. According to some estimates, Bosnia and Herzegovina’s diaspora could be as large as 2 million people – as much as 53% of the resident population (USAID, 2020[33]). Based on the OECD DIOC database (OECD, 2016[34]), of about 505 000 persons born in Bosnia and Herzegovina now living and working in OECD countries, 61.7% are employed in medium and highly qualified professions such as: plant and machine operators and assemblers; technicians and associate professionals; professionals; services and sales workers; and craft and related trades workers (Figure 2.18 of Chapter 2). They also tend to maintain familial connections to their economies of origin, as evidenced through the large volumes of remittances that flow to Bosnia and Herzegovina every year (11.2% of GDP in 2019) (World Bank, 2021[11]). To date, the diaspora have not played an important role as a source of knowledge and competencies (FAO, 2005[20]).
Better leveraging on knowledge and competencies accumulated abroad requires a comprehensive diaspora policy with strong involvement of Ministry of Human Rights and Refugees at the state-level and other relevant institutions. Implementation and co-ordination of diaspora policy in Bosnia and Herzegovina remain weak at the state level. Responsibility for such policy falls under two different entities. At the state level, the Strategy on Migration and Asylum of Bosnia and Herzegovina and its Action Plan 2016–2020 describe the institutional and policy frameworks that need to be strengthened for stronger ties with the diaspora, including the offering of centralised services and support programmes. Several other programmes were launched to engage in skills transfer and investment. One example is the TOKTEN (Transfer of Knowledge through Expatriate Nationals) scheme, through which experts from the diaspora engage in subsidised, short-term consultancy work in their economies of origin. However, these programmes often failed to establish long-lasting ties with the diaspora and thus led to limited knowledge transfer. Institutional capacity and co-ordination among different ministries should be increased to offer the diaspora opportunity for active engagement in decision making. This would allow the ministries to shape the policy agenda around the diaspora, which could boost their mobilisation (Williams, 2018[35]).
4.3. Indicators to monitor the overall policy progress in Bosnia and Herzegovina
To monitor progress in implementing participatory policy development and other policy priorities in Bosnia and Herzegovina, the OECD suggests a set of key indicators, including values for Bosnia and Herzegovina and benchmark countries (either OECD or EU averages, based on data availability). Table 4.1 provides differences between the benchmark value and value for Bosnia and Herzegovina. As the overall education data in Bosnia and Herzegovina is rather limited, more collaboration and co-ordination among the key stakeholders in the education systems would facilitate international benchmarking (Guthrie et al., 2022[24]).
Table 4.1. Indicators to monitor progress in implementing policy in Bosnia and Herzegovina
2018, unless otherwise specified
Note: *2019, **2017, ***2016, ****2020. The benchmark values are based on the current OECD averages, except for Individuals who have basic or above basic digital skills and for Adult participation in education and training, where the benchmark is the EU average.
Source: OECD (2021[36]), PISA 2018 Database, https://www.oecd.org/pisa/data/; World Bank (2021[11]), World Development Indicators (database), https://databank.worldbank.org/source/world-development-indicators; ILO (2021[37]), ILOStat (database), https://ilostat.ilo.org/data/; Eurostat (2020[38]), Database - Skills-related statistics, https://ec.europa.eu/eurostat/web/skills/data/database.
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