Western Balkans Competitiveness Outlook 2024: Bosnia and Herzegovina

Annex A.  Western Balkans Competitiveness Outlook (CO) 2024 assessment model for Bosnia and Herzegovina

Constitutional set-up of Bosnia and Herzegovina

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.

CO 2024 assessment of Bosnia and Herzegovina

As policy making in Bosnia Herzegovina is much more decentralised than that of the other Western Balkan economies covered by the Western Balkans Competitiveness Outlook 2024 assessment, information from the FBiH and the RS as well as from the state level has been taken into account in assessing and scoring of policy dimensions. In other words, Bosnia and Herzegovina completed three sets of assessment materials, involving questionnaires and statistical sheets; information from all three sources has thus been considered in the analysis. While the Brčko District was not directly included in the assessment, its policies have been covered in various sections of the report, as appropriate. Policy recommendations have in many cases been formulated to emphasise the importance of policy co-ordination in Bosnia and Herzegovina in order to strengthen the single domestic market and the competitiveness of both entities.

Detailed scoring criteria tables for all 146 qualitative indicators, a novelty of this assessment cycle, have been developed and adapted to accurately reflect the distribution of competencies in BiH. This was done in order to provide a comprehensive and precise portrayal of the design and implementation of policies across various levels of government. Figure A.1 illustrates an example of this design, focusing on the climate change mitigation indicator within the environment policy dimension.

Figure A.1. Example of scoring criteria differentiation between state and entity levels

Table A.1 shows which scoring model has been applied in the 15 policy dimensions covered under CO 2024 as well as the rationale for its selection. For most of the 15, a score has been derived by giving one-third of the weight to each of the two entities and the state (“State and entities”), with the scoring criteria tables reflecting the competencies in greater detail.1 For five of the dimensions (Access to finance, Tax policy, State-owned enterprises, Employment policy and Environment policy), a score has been derived by calculating a simple average of the two entities’ scores. This approach (“Entity only”) reflects that major policies, mechanisms and institutions in these policy areas exist mainly at the level of the entities.

Table A.1. Application of the scoring models to the Competitiveness Outlook 2024 policy dimensions

Policy dimension	CO 2024 assessment	Rationale
1. Investment policy and promotion	State and entities	Investment policy and promotion is managed at both the entity and state levels. The Ministry of Foreign Trade and Economic Relations (MoFTER) regulates the economy’s overall investment policy while the entities follow supplemental legislation on topics such as expropriation, contract enforcement, and alternative dispute mechanisms. Although the economy’s investment promotion agency exists at the state level, promotion activities, incentive regimes and investor targeting also occur at the entity levels.
2. Trade policy	State and entities	Trade policy is guided by the jurisdiction, framework laws and priorities put in place at the state level by the MoFTER. However, the entities have an important role to play as they adopt their own sectoral laws and regulations governing and affecting various aspects of trade. While digital trade policy is guided by legal frameworks at both state and entity levels, digital trade facilitation measures lie within the jurisdiction of the state level.
3. Access to finance	Entity only	Responsibilities under Access to finance are primarily at the entity level. Legal and regulatory frameworks are mostly established at the entity level (and by cantons in FBiH in the specific case of public-private partnerships).
4. Tax policy	Entity only	While the Indirect Tax Authority collects indirect taxes and is managed at the state level, the entities define their own taxation framework for direct taxes and are in charge of tax collection. Scoring was not provided at the state level; as the majority of tax policies remain at the entity level, scores for the tax policy dimension’s indicators and averages are based solely on FBiH and RS scores.
5. State-owned enterprises	Entity only	Bosnia and Herzegovina’s performance in the State-owned enterprises dimension is based on activities of the FBiH and RS. The assessment focuses mostly on state-owned enterprises (SOEs) held and managed by the governments of FBiH and RS rather than cantons and municipalities.
6.Anti-corruption policy	State and entities	The state-level Agency for Prevention of Corruption and Co-ordination of the Fight Against Corruption focuses primarily on developing an anti-corruption policy framework and on co-ordinating the anti-corruption efforts of the entities. Anti-corruption prevention and prosecution are dealt with at the state and the entities level. Regulation relating to business integrity exists only at the entity level.
7. Education policy	State and entities	Education policy is primarily under the responsibility of the entities (and cantons in FBiH). However, the state level does play a role by adopting important framework laws and through the Agency for Pre-school, Primary and Secondary Education; the agency is a state-level institution responsible for developing learning standards and common core curricula, as well as evaluating learning achievements for pre-primary, primary and secondary education.
8. Employment policy	Entity only	Employment, labour and social policy is within the competencies of the entities. The state level does not have competencies for those policies or social protection, but it does play a role in adopting policies and programmes related to migration and diaspora engagement. The Ministry of Civil Affairs of Bosnia and Herzegovina is assigned only a co-ordinating role when representing the economy’s interests abroad.
9. Science, technology and innovation	State and entities	The strategic and institutional frameworks for science, technology and innovation (STI) are highly decentralised, with dedicated ministries in the two entities as well as at the canton level in FBiH. However, the state level plays a role, as the Ministry of Civil Affairs co-ordinates STI policy across Bosnia and Herzegovina and ensures international representation.
10. Digital society	State and entities	Digital society encompasses a number of different policy areas, such as data accessibility, digital skills development and privacy protection, in which policy frameworks are developed at the state or entity levels. Policies in different areas are guided by the state- and/or entity-level institutional and regulatory frameworks.
11. Transport policy	State and entities	Transport policy is guided by state-level framework laws and investment priorities. However, these are often implemented at entity level and the entities have a significant role to play in that they adopt their own laws and regulations governing different transport modes, make their own investments, and operate key publicly-owned enterprises.
12. Energy policy	State and entities	Energy policy is guided by legal and regulatory frameworks at both the state and entity levels. The state-level MoFTER plays an important role in co-ordinating energy policy between the entities as well as ensuring international co-operation and energy trade.
13. Environment policy	Entity only	Environment and climate policy are overseen by the two entities. Entity-level institutions manage strategic frameworks, policy setting, implementation, and reporting. The state-level authority (MoFTER) focuses on fulfilling BiH’s international obligations and co-ordinating entity activities in environment-related sectors, such as energy and agriculture, subject to entity approval. The Focal Point at the Ministry of Physical Planning, Civil Engineering, and Ecology of the RS co-ordinates all United Nations Framework Convention on Climate Change (UNFCCC) activities and National Communications development.
14. Agriculture policy	State and entities	Agricultural policy is guided by framework laws and priorities established at the state level by the MoFTER. The ministry is responsible for defining and co-ordinating the state agricultural policy framework in co-operation with the relevant institutions of the entities. The entity institutions, on the other hand, are responsible for the management and implementation of policies, programmes and measures in their respective territories.
15. Tourism policy	State and entities	Tourism falls primarily under the jurisdiction of the two entities, which are responsible for the adoption of their own tourism strategies and the establishment of the governance structure and institutional setup, which differ in each entity. At the state level, the Tourism Working Group was established by the MoFTER to co‑ordinate tourism activities between the entities. The state also retains its authority as the governing body for visa and border frameworks.

Note

← 1.  For some indicators, where the distribution of competencies was more concentrated at the state level or entity level, discretionary adjustments have been made to the scores to reflect the performance of BiH as a whole more accurately.