Centri civilnih inicijativa: Reform Agenda in BiH has not met its goals

SARAJEVO, (Patria) - Centers for Civic Initiatives (CCI) held a round table in Sarajevo today titled "Did the Reform Agenda meet expectations?" which discussed the scope and goals of the Reform Agenda over the past three years. The event presented criticisms of reforms in BiH over the last three years, since the adoption of the Reform Agenda, and agreed upon recommendations in its areas: public finance, business environment, labor market, social and pension policy, public administration and rule of law, and the impact of all the above on citizens' living standards.

The implementation of the Reform Agenda measures has not been sufficiently effective at all levels of government, so by May 2018, 64% had been realized at the state level, only 47% in the Federation of BiH, while the situation is better in Republika Srpska where 70% of the agenda has been adopted. With just over three months left until the end of the mandate, all parties are already in election campaign mode, making it unrealistic to expect the items from the Action Plans to be adopted, which indicates a general lack of political will at all political levels in BiH.

Some of the positive indicators that can be noted are GDP growth, a decrease in debt which currently stands at 36% of GDP, a 5% drop in unemployment since the agenda was adopted, a 3% increase in export coverage, and continued growth in industrial production. However, there is no correlation between the Action Plans and the aforementioned positive developments, as the items in the Action Plans themselves are often administrative rather than reformist, many are not measurable and lack clear goals, and the adoption of items from the Action Plans has too often been carried out under urgent procedures and without public debate, contrary to the provisions of parliamentary rules of procedure and public interest.

In the area of public finance, the situation regarding public debt has shown a downward trend since the agenda was adopted, standing at 36%. Public debt in RS is almost twice as high as debt in FBiH, and still close to the EU limit of 60% of GDP, undermining the fiscal sustainability of the entities and the entire country.

Debt to commercial banks, incurred by entity governments, amounted to two billion and 225 million KM at the end of 2017, an increase in debt of 70 million KM over one year. Total debt per capita is 3,214 KM, with per capita debt in Republika Srpska being about 50% higher than in the other entity.

In the next mandate, new borrowing must not be used for public sector salaries, but must be directed towards economic growth, infrastructure, and projects of public importance aimed at economic recovery and growth. In addition, it should be emphasized that public debt statistics are insufficiently up-to-date.

"According to the global rankings of the World Economic Forum (Competitiveness Index) and the World Bank (Ease of Doing Business), there have been no significant changes in the business environment in BiH since the adoption of the Reform Agenda. The country ranks 103rd (World Economic Forum) and 86th (World Bank) out of 150 ranked countries worldwide, making it the worst position for a European country. Although one of the main promises of the entity prime ministers was precisely to improve these rankings, it is clear that the past mandate had the wrong approach, and the Action Plans themselves did not have enough measures to accelerate business start-ups or strengthen property rights. This is supported by data on foreign direct investment, which has fluctuated between 537 and 780 million KM over the past three years, a very modest result compared to countries in the region," stated Ismar Hota, project manager.

The grey economy continues to be a huge problem in BiH, estimated at around 25% of GDP or 7.5 billion KM according to the latest relevant estimates, meaning that, in addition to other social losses, tax losses alone due to the grey economy exceed 3 billion KM.

Since the adoption of the agenda, the negative trend in the labor market has been halted, and the unemployment rate has decreased by 5%. In absolute terms, since the adoption of the Agenda, there are about 82,152 more registered employees in the whole of BiH. However, public labor market statistics are unreliable because multiple methodologies are used to define employment or unemployment status. Furthermore, it is extremely unclear why the number of employees according to the BiH Agency for Statistics increased by 41,203 persons in January 2018 compared to December 2017.

The burdens on labor and business have not decreased, despite this being one of the main intentions of the Reform Agenda. Over three years, net salaries have increased by 4.35%, and pensions by 1.69% (both entities). Close to two average salaries or four average pensions are needed for one consumer basket.

The living standard of pensioners has not improved by even a fraction in the last three years. Two out of three pensioners, i.e., 66% of pensioners, receive a pension below 330 KM, and over three-quarters of pensioners have a pension of 500 KM or less. As many as 98% of pensioners receive a pension of 800 KM or less, which clearly illustrates the social picture of society. The pension system in both entities is permanently destabilized and unsustainable without budget subsidies or borrowing. Over the last 5 years, the ratio of pensioners to employed persons has not changed by even a fraction, meaning that alongside the growth in employment, the number of pensioners is also growing.

Contrary to the declarative positions of the governments in BiH, the percentage of employees in public administration in FBiH has decreased by 1.18%, and in RS by 1.03%, which in both cases is insignificant, as it does not indicate the success of government measures such as the moratorium on new employment in civil service or broader public administration. More than a quarter of employees are on the budget, and more than a quarter of all budgets are spent on salaries. Public administration reform must move towards meritocracy, meaning new hirings must not be based on cronyism or party affiliations. While public administration largely remains a hotbed of nepotism, corruption, and inefficiency!

The fight against corruption is almost non-existent, and it continues to flourish. BiH's ranking in Transparency International's Corruption Perception Index has only declined since the Reform Agenda, and we are currently in 91st place, making BiH by far the worst-ranked country in the region.

"Due to all of the above, reforms must be approached much more responsibly, transparently, comprehensively, and targeted at the living standards of citizens, rather than selective fulfillment of conditions. The focus of reforms must be directed towards combating the grey economy, improving business conditions, reducing enormous public spending and borrowing, establishing an independent and efficient judiciary, and final public administration reform," added Hota.