Bosnia and Herzegovina

In document The Phare programme annual report 1998. COM (2000) 183 final, 31 March 2000 (Page 76-80)

The year in review

Despite a difficult post-war situation in Bosnia and Herzegovina there has been considerable progress with regard to economic revival in 1998. External assistance fuelled a strong economic recovery in 1995-1998, during which GDP growth averaged around 35 per cent per year. Inflation has fallen to moderate levels in both entities (post-war Bosnia is made up of two entities: the Muslim-Croat Federation and the Serb Republic (RS)), mainly thanks to the tight fiscal discipline maintained by the entity authorities. Although progress has been made, GDP stands at about half of its pre-war level, and the GDP per capita at less than half of its pre-war level. Overall unemployment stands at 30-40 per cent, and in the RS it is reported to be as high as 50-60 per cent.

In the context of the current IMF-supported countrywide macroeconomic and structural reform programme, which was adopted by the Bosnian authorities in May 1998, important progress has been achieved with regard to promulgating an appropriate legislative framework which encompasses common institutions suited to a market economy. Key achievements so far include: the introduction of a new common currency, the Convertible Marka, the adoption of a common State Budget in the spring of 1998 and the promulgation from 1 January 1999 of a new uniform Customs Code, drafted with the assistance of the EC-funded CAFAO programme.

In 1998 Bosnia and Herzegovina continued to experience political difficulties in the sense of resistance to integration, especially in the eastern part of the Serb Republic and in some parts of the Federation. Furthermore, the work of Bosnia and Herzegovina’s common institutions seemed still hampered by the lack of political will to take decisions. The judicial system reform is still awaited. And serious obstacles remain on refugee return.

With regard to EU-Bosnia and Herzegovina relations, the EU Declaration on BiH of June 1998 represents an important step in bilateral relations. It emphasises that the future of BiH is in Europe and provides the framework for closer cooperation. The Member States have also created the ‘EU/BiH Consultative Task Force’ (CTF). The CTF provides a joint EU/BiH vehicle for technical and expert advice in the fields of administration, regulatory framework and policies.


The Commission applies the conditionality principles to the programmes it manages in Bosnia and Herzegovina. This is notably based on the Regional Approach adopted in April 1997 which outlines the political and economic conditions to be fulfilled in order to permit the development of bilateral relations.

Phare and Obnova in 1998

The two main EC instruments for reconstruction in Bosnia and Herzegovina are the Phare and Obnova programmes which are complementary, as Bosnia is not eligible for full Phare assistance. In line with the conditions and steps laid down in the Regional Approach, “Phare assistance will be limited to projects in direct support to the peace agreements, in particular the building of cross-entity links and refugee return”. Obnova funding will be used to further “underpin the reconstruction process, to encourage return of refugees, reconciliation and regional economic cooperation, and to create the economic and social conditions that will lay the foundations for the development” of Bosnia and Herzegovina by supporting CAFAO, economic development activities, integrated assistance activities, social development and media projects.

As Bosnia entered its third year of reconstruction, the return and reintegration of refugees and displaced persons became the focus of a major new international effort. Creating sustainable reconstruction by moving away from emergency interventions and toward targeted programmes in support of economic development and institution building was the other guiding theme for the Commission’s strategy. The Commission directed approximately half of the 1998 programme to refugee return initiatives. In addition, the Commission undertook several large institution-building projects, promoting the development of customs and taxation systems, a modern central bank, and democratic media. Bosnia-Herzegovina also received a budget of EUR 1.5 million for Tempus, allowing for the funding of 7 Joint European Projects.

The total allocation in 1998 was more than EUR 186 million (Phare and Obnova).

Other EC-funded programmes in BiH

ECHO (European Community Humanitarian Office), the humanitarian arm of the European Commission. Since the beginning of the conflict, ECHO has granted EUR 1,623 billion to the victims of the conflict in the former Yugoslavia.

The Customs and Fiscal Assistance Office (CAFAO) programme funded under B7- 544 (managed by European Commission Directorate General XXI)

Specific aid to the reception and voluntary repatriation of refugees in the European Union, managed by the Task Force on Justice and Home Affairs of the Secretariat General of the European Commission.


In 1998, integrated refugee assistance was the number one priority. The Commission designed an ambitious refugee return programme mainly implemented through European NGOs (see box below).

In 1998, the Commission funded institution-building projects in a wide range of economic and social sectors, including banking, the constitutional court, the central bank, the police, economic reforms, education, health care, civil aviation, customs and taxation, statistics and environmental legislation.

A wide range of economic regeneration projects were funded in 1998. Through an industrial development programme started in 1998, the Commission is working with immediately viable economic sectors and attempting to engage European firms in them. With a contribution to the EBRD’s micro-entreprise bank, the Commission is attempting to stimulate investment in small and large Bosnian enterprises. Through support to Village employment projects, the aim is to help create jobs. Finally, though direct intervention in the agriculture and forestry sectors, the EC is securing a firm base for two important economic sectors.

In 1998 the Commission continued to fund large and small infrastructure projects like roads, bridges, telecommunications and energy supply projects.

In the field of democracy and human rights, the EC funded independent media in BiH, and offered support to the Commission for Human Rights.

In 1998, significant steps have been taken to improve the level of implementation: amendments brought to the Obnova Regulation have simplified the decision-making process for project approval and implementation; the management of the programmes has been deconcentrated to the Commission Representation in Sarajevo.

Case study

Making return possible:The 1998 Refugee Return Programme

Getting Bosnia and Herzegovina’s many refugees and displaced persons to go back to their places of origin is an absolute priority for the European Commission. It hopes that at least 30,000 people will return home thanks to its 1998 integrated return programme. Most of the projects are still under way and it is difficult to give a precise assessment of the results, as the return programme will have a sizeable impact during the second half of 1999. Even at this early stage, however, it is clear from reports from NGOs and field visits that the European Commission’s integrated return programme has led to a breakthrough at local level in minority returns: by the time the projects are finished, 7,500 houses will have been rebuilt and 30,000 refugees or displaced persons should have gone home.

Rebuilding houses, however, is not enough, if that goal is to be met. The 1998 return programme is also helping to rehabilitate essential infrastructure, like electricity and water networks, schools and health centres. It also helps create jobs. The Commission may be counting on helping 30,000 people return home. But the figure will probably be double that, because many families that returns to a house rebuilt by the EC vacate other homes, meaning that yet other families can return. And the domino effect does not end there. Developments over the past year demonstrate that when a small group of people returns to a municipality thanks to an assisted programme, other people follow. Thus European Commission-sponsored projects act as a catalyst, sparking off the process and encouraging people to go back to their places of origin.

Refugees and displaced persons: the figures

In 1998 140,000 refugees and displaced persons returned home. 100,000 of them were refugees from abroad, mainly Germany. Of those, 35,000 were people returning home to places where they are in a minority – a slightly higher number than in 1997. That leaves 375,000 refugees still abroad along with 860,000 internally displaced people who would be in a minority if they returned to their pre-war homes. Of those internally displaced people, 120,000 would be prepared to return if the conditions were such that they could feel safe and build a future for themselves and their families. However, three years after the Dayton accord was signed, real barriers to return persist. The biggest barrier is an appalling lack of political will on the part of the authorities (source: RRTRF, OHR).

In document The Phare programme annual report 1998. COM (2000) 183 final, 31 March 2000 (Page 76-80)