Last Sunday, voters in Bosnia and Herzegovina went to the polls to select not a president and members of parliament but, depending ethnicity and location, up to two presidents, two vice presidents, and national, regional, and cantonal parliaments, each of which will in turn elect a prime minister. This labyrinthine system owes its existence to the 1995 Dayton Accords, hammered out by rival ethnic factions in an attempt to put an end to the violence that had raged through the Balkans since the breakup of communist Yugoslavia four years earlier. While the accords succeeded in ending war, 15 years later this political mishmash continues to obscure the democratic process and encourage allegiance to ethnicity rather than country.
Two basic institutional issues continue to inhibit progress in reforming the country’s ineffective political system. The first is the division of the country into two highly autonomous entities – the Federation of Bosnia and Herzegovina (in which Bosniaks and Croats form a majority) and the Republika Srpska (dominated by Serbs). The second is the institutionalization of ethnicity in the political process, most notable in the country’s tripartite presidency, which by law consists of one Bosniak, one Croat, and one Serb. Many of the country’s political parties are also ethnically-based, encouraging voters to cast their ballot based on ethnic identity rather than issues.
The result of this institutional muddle is that policy makers have incentives to craft legislation that strengthens the power and autonomy of their own regional entity, even when this has negative consequences on the country’s economic vitality. It is thus no surprise that Bosnia is one of the most frustrating places in Europe to do business: no EU member or associated country received a lower ranking in the World Bank’s 2010 Doing Business report. It is especially frustrating for international investors, who must navigate a labyrinth of state, entity, and municipal bureaucracies, each with its own tax code and regulatory system.
Bosnian entrepreneurs face similar obstacles, as business licensing procedures vary between entities, and, in the Federation, within each canton. This torturous process discourages business owners from operating throughout the entire country, or even from entering the formal economy at all. The sheer number of administrative layers involved also creates numerous opportunities for corruption. Bosnia received a score of 3.0 in Transparency International’s most recent Corruption Perceptions Index – abysmally low for a country with serious EU membership aspirations.
As many members of Bosnia’s political elite have a stake in preserving the divisiveness of the status quo, the best hope for change in Bosnia is that grassroots groups who are aware of the failures of the current system will seek to change public perceptions about the types of policies that will lead to meaningful improvements in Bosnian society. At a recent hearing before the US House of Representative’s Foreign Affairs Committee, witnesses including the National Endowment for Democracy’s Ivana Howard presented their ideas for how the international community – including the US – can alter its engagement with Bosnia to encourage meaningful reform efforts. All witnesses agreed that strengthening civil society and education will be key elements of a successful strategy.
As entrepreneurs have much to gain by refocusing policymakers on pursuing unity rather than division, the business community should be encouraged to play a leading role in grassroots reform efforts. Also, teaching entrepreneurship and business skills to Bosnian youth has the potential to instill values in young Bosnians that will encourage cooperation across ethnic and regional lines. As the business community has much to gain by achieving a sustainable democratic state in Bosnia, both local international actors would do well to heed the voice of small business owners and entrepreneurs when crafting their strategies for encouraging political reform.
Published Date: October 08, 2010