Identifier
Created
Classification
Origin
08SARAJEVO1721
2008-11-07 15:58:00
UNCLASSIFIED
Embassy Sarajevo
Cable title:  

BOSNIA:EU PROGRESS REPORT REPORTS LITTLE PROGRESS

Tags:  ECIN PREL PGOV EU BK 
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R 071558Z NOV 08
FM AMEMBASSY SARAJEVO
TO SECSTATE WASHDC 9238
INFO EUROPEAN POLITICAL COLLECTIVE
NSC WASHDC
CIA WASHINGTON DC
DIA WASHINGTON DC
JCS WASHINGTON DC
SECDEF WASHINGTON DC
DEPT OF TREASURY WASHDC
UNCLAS SARAJEVO 001721 


DEPT FOR EUR/SCE, EUR/ERA; TREASURY FOR LINDQUIST

E.O. 12958: N/A
TAGS: ECIN PREL PGOV EU BK
SUBJECT: BOSNIA:EU PROGRESS REPORT REPORTS LITTLE PROGRESS

REF: 07 SARAJEVO 2414

UNCLAS SARAJEVO 001721


DEPT FOR EUR/SCE, EUR/ERA; TREASURY FOR LINDQUIST

E.O. 12958: N/A
TAGS: ECIN PREL PGOV EU BK
SUBJECT: BOSNIA:EU PROGRESS REPORT REPORTS LITTLE PROGRESS

REF: 07 SARAJEVO 2414


1. Summary. The European Commission (EC) on November 5
published its 2008 progress report on BiH's accession
efforts. It acknowledges that progress since November 2007
in the four key areas led to the signing of a Stabilization
and Accession Agreement (SAA) in June 2008, but that since
then Bosnia has made litle progress implementing EU-required
reforms. The report cites the lack of political consensus,
inflammatory rhetoric, the insufficient functioning of BiH
institutions, lack of movement on constitutional reform, and
the failure of BiH to speak with one voice as the primary
causes of the gridlock. EC Ambassador to BiH Kourkoulas
judged that BiH scored a 2.5 on a scale of 1-5, although, he
said, it could have scored a 5 had it made more of an effort.
This decidedly optimistic view is not reflected in the
report. End summary.


2. Based on progress in the four key areas set out by the EU
in 2005 (implementation of police reform; full cooperation
with ICTY; adoption and implementation of public broadcasting
legislation; and public administration reform),the European
Union signed an SAA with BiH in June, together with an
Interim Agreement, which entered into force on July 1.

//Political Criteria//


3. Bosnia does not fare well in the EC's discussion of its
fulfillment of political criteria for EU accession. The
report notes that nationalist rhetoric has prevailed of late,
preventing the development of more functional and efficient
state structures through constitutional reform. Some changes
have been made to improve the efficiency of the state
Parliament, but its work is still hampered by the "unstable
political climate, systematic voting along ethnic lines and
insufficient administrative resources," according to the
report. The Council of Ministers has become marginally more
functional and efficient, but "lack of resources, lack of
coordination, ethnic tensions, and internal conflicts
continue to delay reform." The report also cites
discrepancies between the entities in adopting legislation -
with the Republika Srpska (RS) performing more efficiently
that the Federation, mainly due to competing party/ethnic
interests in the Federation's governing coalition. It also
concludes that Bosnia made only "limited progress" on making

state-level istitutions more functional and efficient, which
is necessary to ensure that Bosnia can meet its EU
commitments.


4. Public administration reform has shown some progress,
although since it is still in its early phases, the country's
complex institutional structure continues to undermine
efficiency. Progress on defense reform was also apparent, as
evidenced by BiH's invitation to start NATO's "Intensified
Dialogue." BiH also made advances in developing a more
effective judicial system, particularly in the area of war
crimes. But the country suffers from a lack of a Supreme
Court, and no provision has been made for establishing one.
BiH also lacks a single judicial budget and a single criminal
law. This fragmentation and inconsistencies among the
judicial frameworks at different levels of government
continue to impair the system's efficiency. BiH made very
little progress on improving its tools to fight corruption,
according to the report. The report noted that the temporary
suspension of Transparency International's operation was a
serious concern.


5. The report notes that implementation of international
human rights conventions needs to improve. Although limited
progress was seen in the area of civil and political rights,
no progress was made on fostering freedom of expression or
assembly. While BiH established a Council of National
Minorities at the state level, other progress, such as
enforcement of minority rights has been weak.


6. Nationalist and inflammatory rhetoric from political
leaders belonging to all constituent peoples continues to
challenge the Dayton Peace Agreement and has grown more
frequent, although the report still claims that Dayton
implementation has continued. It also claims that BiH
cooperation with the ICTY has reached a satisfactory level.
It chides BiH for failure to abrogate the bilateral immunity
agreement with the U.S. regarding the International Criminal
Court. The RS is also singled out several times for its
opposition to attempts to strengthen state institutions or
comply with treaty obligations, such as the RS failure to
meet its obligations under the Athens Energy Community
Treaty.

//Economic Criteria//


7. The economy has continued to expand rapidly, with real
GDP growth for 2007 at 6.8%. While BiH maintained political
consensus on market-based economic policy, the report notes
that concrete policy measures failed to back the government's
Economic and Fiscal Program for 2008-2010. A number of
successes were nevertheless achieved, such as the
establishment of a National Fiscal Council, agreement on a
methodology for allocation of indirect tax revenues, the
reduction of direct taxes, and the elimination of double
taxation through certain legislative measures. However,
fiscal risks mounted, in particular in the Federation, where
large social spending commitments were made despite
decelerating budget revenues. Wage increases at all levels
of government have weakened fiscal sustainability and
external competitiveness. Overall, the report concludes that
the macroeconomic policy mix worsened because of BiH's
expansionary fiscal policy, which has fueled inflationary
pressures and widened the current account deficit.


8. Unemployment remains high, although according to a Labor
Force Survey conducted using ILO (International Labor
Organization) standards, it has fallen from 29% to 23.4%.
The report notes that the public sector continues to have
excessive influence over the economy. While the share of the
private sector as a percentage of GDP rose to approximately
60% in 2007, privatization has all but halted in the
Federation. It is somewhat better in the RS, which sold off
13 companies between January and September 2008. Yet neither
entity has any concrete plans regarding privatization of the
utilities sector. Overall, the commitment to structural
reforms remains uneven across the country, and considerable
effort must be made to enable BiH to deal with competitive
pressures and market forces within the EU.

//EC Ambassador Positive//


9. Comment. EC Ambassador to BiH Kourkoulas remarked
yesterday that overall, he'd rate BiH's progress toward
accession at 2.5 on a scale of 1-5. To us, this would
indicate that BiH had fulfilled 50% of its obligations, which
is far from the truth. Kourkoulas further stated that with a
little effort, BiH could have rated a 5. Again, given the
shortcomings pointed out in the report, Kourkoulas comes
across as overly optimistic. He may hope that by painting an
optimistic picture, BiH politicians will realize that real
progress is in fact possible. But overall, the picture
painted in this report is grim by European standards. Even
though the report does not fully present the threat to
Bosnian political stability represented by RS Prime Minister
Dodik's efforts to undermine state-level institutions, it
shows that under the prevailing political conditions in BiH,
little progress toward the EU is possible. Unless we see a
marked downscaling of nationalist rhetoric and an increased
willingness to work together to strengthen the state (both of
which are unlikely in the near term),progress toward meeting
EU standards will continue to stall. End comment.

ENGLISH