July
2000
Bosnia
Update Memo
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Bosnia Update Memo |
The following report outlines new developments in the past three months and the state of on-going developments.
1. The interaction between business and regulatory constraints
1.1 The regulatory background
Bosnia and Herzegovina is administratively divided into two entities with very high level of autonomy. While there exist federal ministries, the real authorities are their counterpart ministries in the Federation of Bosnia-Herzegovina (FBiH) and Republic of Srpska (RS). Most of the regulations and legal acts were inherited from the former Yugoslavia. Because of the war that started immediately after the declaration of the independence from the former Yugoslavia, there have not been any favorable conditions to build a new regulatory system. Building such a system still remains one of the most important tasks for both entities, their governments and the federal administration.
1.2 Business constraints and entry barriers
With respect to communications and industry, Bosnia and Herzegovina is tightly connected to its neighboring countries, and via them to the rest of the world. RS is under very strong influence of FR of Yugoslavia and its business community. Similarly, in parts of FBiH with a Croat population, there is great influence from Croatia and its business community. Despite the strong liberalisation and privatisation efforts, many of the bigger companies are still state-owned. This ownership sturcture remains the biggest business constraint. Nonetheless, a substantial number of small- and medium-sized privately owned enterprises have emerged.
1.3 Attitude of the incumbent operator towards alternative network providers
All existing operators are still state-owned and monopolistic. Nevertheless, the new "LAW ON FOREIGN INVESTMENT AND CONCESSIONS" provides possibility for change and opportunities for foreign investors.
The transportation system of the Republic of Srpska and Bosnia and Herzegovina as a whole does not function properly. War damage, lack of maintenance of facilities, the falling behind in development and applied technologies, and the lack of new investments in the past period describe the present situation. This ineffective transportation system affects the economic activities and a possible improvement in the economic situation. Participation of the transportation costs in the economy is estimated to be over 25 per cent, which is extremely high comparing to the standards of Western developed countries, which amount to less than 10 per cent.
In a large privatisation project, the Government of the Republic of Srpska planned a quick privatisation of the tertiary sector of services, which includes communications in all sectors. Large infrastructure systems will be privatised later as parts of several separate projects.
1.4 On-going regulatory developments concerning alternative networks
The privatisation project is intended to play an integral part in the economic recovery of the country. In this context, one of the most important steps was the approval of the "LAW ON FOREIGN INVESTMENT AND CONCESSIONS" in the RS. Under this law it is possible for foreign companies to invest their funds in the region. Nevertheless, the law contains several limitations on foreign investment in fields such as the telecommunications sector. Under Articles 6 and 7 of the law, a foreign investor cannot run his own enterprise and cannot be a dominant partner if the enterprise is a joint venture between the foreign investor and a domestic partner.
Complete legislation for a privatisation is established. It contains the following laws:
The legislation contains also the following regulations:
The proces of the privatization is currently underway.
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