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January 2001

Regulatory Developments
Bosnia
Master Report

This is the final Regulatory Developments report on Bosnia as the ESIS project ended in January 2001. This Master Report covers the whole period of the ESIS project surveying the Countries of Central and Eastern Europe, March 1999 - January 2001 inclusive. 

1. Introduction and Summary

Bosnia and Herzegovina issued its declaration of sovereignty in October 1991 – in the middle of the disintegration process of the former Yugoslavia. The declaration was followed by a referendum for independence in February 1992. Armed resistance form one of ethnic groups followed immediately and as it was supported by one of the neighbouring countries, the war started all over the country. Three inside parties were involved in this war, two of them supported from abroad. Terrible and devastating war lasted until the end of 1995. In November 1995, the warring parties signed a peace agreement, bringing to a halt the three years of interethnic civil strife. The signatories were the legitimate president of Bosnia and Herzegovina and presidents of two neighbouring countries that were involved in the war.

The consequences of the war were terrible. The country was completely ruined, many people killed, missing or escaped out of the country. The bitter interethnic warfare caused production to plummet by 80 percent form 1990 to 1995, unemployment to soar, and human misery to multiply. Today, the GDP remains far below the 1990 level. The international community got involved in the process of establishing the country to function as a modern state. This process is still going on. It is obvious that there are many tasks at the moment that have much higher priority then "Information Society" in our sense of meaning. The state as an administrative subject is not involved in this field at all. Luckily, there are some visionary people and/or structures that understand that material rebuilding alone without giving modern contents of new information era will not bring Bosnia and Herzegovina out of troubles and on the way to the new quality of life.

(Just to illustrate what tasks have priorities: In the middle of June 2000 the Central Registry of Passports was established and draft laws on Identification Cards, Unique Citizen Number, and Residency were finalised. All of this has existed in other European countries for decades, if not centuries; here the whole society is starting to build from its very beginnings.)

2. Information Society Policy

2.1 Historical overview and general legislation

Following the war in the former Yugoslavia, the Dayton Agreement in December 1995 created two administrative divisions (or "Entities"): Federacija Bosne i Hercegovine (Federation of Bosnia and Herzegovina, or FBiH) and Republika Srpska (Republic of Srpska, or RS). FBiH is further divided into ten cantons. There are three major ethnic groups in Bosnia and Herzegovina: Bosniaks (used to be called "Muslims" but now it is preferred to use new term), Serbs and Croats. Entities' division within the region more or less reflects this. Both Entities enjoy a high level of autonomy (e.g., in the field of army and police forces, border and custom offices, financial agencies, and educational systems) and have their own governmental structures, including a parliament (assembly), government, and a presidency. In addition, until this year they had two separate telecommunications systems.

On 8 March 2000, "The Brcko District" was declared as a single administrative unit of local self-government existing under the sovereignty of Bosnia and Herzegovina. The Brcko District derives its powers of local self-government from each Entity, which has delegated all of its powers of governance to the District Government. The Constitution of Bosnia and Herzegovina, as well as relevant laws and decisions of the institutions of Bosnia and Herzegovina, are directly applicable throughout the territory of the Brcko District. The laws and decisions of all Brcko District authorities must be in conformity with the relevant laws and decisions of the institutions of Bosnia and Herzegovina.

So there are in fact three administrative divisions in Bosnia and Herzegovina - both Entities and the Brcko district. Some politicians demand the establishment of another similar district - the Sarajevo district, but at the moment these demands are not taken seriously.

Bosnia and Herzegovina’s parliamentary structure is operational in theory, but in practice a number of obstructions to everyday procedures remain. In a significant percentage of cases there are "dead ends," when normal regulatory and legislative subjects deal with a new proposal for laws/bills/decrees etc. Sometimes there are obstructions by one of the ethnic groups, sometimes the parties are unable to reach agreements, and sometimes the Entities' subjects do not come to the requested conclusions and consequently bills, decrees or even laws fail to become statutory. In such cases the High Representative takes over the control and issues the Decisions or even the Laws as an interim measure. The legal basis for such actions are Annex 10 to the General Agreement for Peace in Bosnia and Herzegovina and paragraph XI.2 of the Conclusions of the Peace Implementation Conference in Bonn in December 1997. Normally the High Representative gives some period to the particular subjects during which they must bring their own solutions to ensure compliance. If they fail to do so, the High Representative prolongs the validity of his Decisions.

The Office of the High Representative (OHR), which is appointed by the UN Security Council, acts as the additional legislative body in Bosnia and Herzegovina and has an important impact on the legislative framework (including telecommunications regulations). More and more often, it takes command in its hands and issues so-called "Decisions" that cover everything from nominations of people to governmental appointments to laws.

There were several other Office of the High Representative’s Decisions on Amending several Laws, like Law on the Prosecutors’ Office, Law on Courts and Judicial Service, Law on Funds Management Companies and Investment Funds, Law on Banking Agency in RS etc.

The latest example (November 2000) is the High Representative’s Decision on Establishing the Bosnia and Herzegovina State Court, as the proposed Law was not adopted through regular procedures.

The whole scheme of institutional structure in Bosnia and Herzegovina results from Dayton's Peace agreement. To modernise this whole process and to encourage transparency and accountability, the new Electoral Law was finalised by OSCE, OHR and national experts and submitted to the parliament. However, both OHR and OSCE were disappointed by the passiveness of the BiH Parliamentary Assembly regarding the election law. In the middle of February 2000, the Parliament House of Representatives rejected the Draft Election Law.

State institutions, with the notable exception of the Council of Ministers, continued to meet regularly but failed to take significant decisions or adopt legislation at a satisfactory pace. The efforts since the signing of the Dayton-Paris Accords have largely failed to overcome the ruling political parties' opposing visions of the State. While agreement is generally reached on economic legislation, laws regulating essential issues such as judicial reform, pension and invalid insurance funds are procrastinated. The governments on the state-level, entities and lower lever continue to suffer from parallel lines of authority along ethnic lines. Delayed contributions by the Entities, who finance almost entirely the State budget, also undermine the functioning of the state institutions. During good part of this year, as municipal elections were scheduled to be held in spring and general elections in November, all country's strength was focussed on this activities and literary none of major tasks has been done, except those related to elections.

International patience with Bosnia and Herzegovina is running out. It is estimated that international funds for the country will decrease by at least 25% on an annual basis.

Three main areas are crucial to Bosnia and Herzegovina’s survival as a functioning state:

Economic reform is put at the centre of the strategy of the international community for Bosnia and Herzegovina. The objective of this reform is to deepen economic reform and create the conditions for self-sustaining market-driven economic growth, in order to avoid an economic crisis as Bosnia and Herzegovina makes the transition from a donor dependent economy. This strategy is articulated along three main lines:

After the war, Bosnia and Herzegovina inherited most of its regulations from the former Yugoslavia, but the war had made it difficult for the executive and legislative branches to build a new regulatory system. This is still a primary goal. Tasks for rebuilding the country, e.g., infrastructures, education, health and social care systems, have been given priority. Much work has been done to achieve economic recovery and create a modern market economy. There have been advances in all public utilities - railways, bus lines, roads, navigation, telecommunications, postal services, electricity, and water supplies. Many large companies, for example, all electricity power stations, coal and other mines, refineries, metal and chemical plants, car industry, etc., are still state-owned; but the number of small and medium-sized privately owned enterprises is increasing.

The regulatory sector is rapidly changing. Most regulatory acts are going through a complete renewal process, and the legislative and executive branches are becoming effective in this area. The Office of High Representative continues to focus its efforts in the area of judicial and legal reform.

In the middle of 1999, exercising the powers vested by the Dayton Peace Agreement and Peace Implementation Council, the High Representative issued a series of Decisions. These were taken following the failure of the relevant local authorities and institutions to reach agreement on a number of issues. Among others, these Decisions include:

Related to the last item, for instance, it has been specified that all three telecom operators must reconnect returnees who were subscribers before war at a low cost (maximum cost is determined) and those returnees are not to be charged for any phone bills for the period during which they were not in their homes. Subscribers, who have lost their telephone line because it was cut during the war or re-allocated to somebody else, must be reconnected for free.

Several new law initiative have been started to create a more favourable environment for enterprises in Bosnia and Herzegovina. Clear ownership titles form the base for any market economy. A working group on a new law on land registry and cadastre, attended by both Entities, has discussed the draft and will be preparing the necessary by-laws by the end of the year. Further progress was achieved in preparing a full set of laws in the area of standardization. Metrology and intellectual property – countrywide recognised standards – are the precondition for exports of processes products to the world markets. A new obligation law project was started in August 2000, and the final draft will be ready by mid-2001.

2.2 Umbrella Policies and national IS strategy

The administrative divisions in Bosnia and Herzegovina have created a disturbed picture of regulatory issues:

There is no broader IS activity in the terms we are speaking of and there is certainly no general IS strategy. In the last years there were separate individual attempts to collaborate on some European projects regarding IS but without continuous process, mostly due to the war and after-war situation. For example, during the years 1994 - 1997 there was a widely response to "European Information Society Forum" that was aimed at the Central and Eastern European countries. Several "panels" were opened. Among them was a panel on "Co-operation in Research and Development," which seems to have particularly interested people from Bosnia and Herzegovina, as there were many enthusiastic people willing to attend the panels meetings. Unfortunately Bosnia and Herzegovina never adopted an official approach. The people who expressed readiness and interest and contacted the panel were not always the same. It could be said that the main reason for the failure of collaboration was caused by the political situation in the country, including of course the war.

To summarise - the is no official national IS strategy.

2.3 IS Application Areas (general overview)

Judicial and legal reform in Bosnia and Herzegovina is a crucial element of the peace implementation process. Without an independent and professional judiciary, Bosnia and Herzegovina will be unable to safeguard the human rights of its citizens, nor will it be able to attract investors to build a sustainable economy. A comprehensive strategy on judicial reform is continually being reviewed and updated as reforms are achieved. The primary reforms in this area are related to the establishment of an independent and professional judiciary. This also includes reform of the police, the prosecution function and the correction systems.

So it is quite reasonable to assume that these areas will be among the first to implement at least some basic principles of IS terms. Economy is another area, where IS ideas can be expected soon. In the continuous process of reconstruction and rebuilding of national economy one can expect that investment to IS education will be one of primary targets. The main key to achieve this is of course the readiness of foreign donors and investors not to invest only in basic industry blocks (factories, production, etc.) but also into concrete and suitable perspective projects.

2.4 Government and administration (national, regional, local)

At state level, Bosnia and Herzegovina is headed by the three-member Joint Presidency. The Joint Presidency further appoints the Council of Ministers. Here are the ministries that report to the Council of Ministers:

(The last three ministries are new and are established in the middle of 2000.)

The state-level government, pursuant to the Constitution, has clearly defined but limited responsibilities:

Each Entity has its own Presidency and Council of ministers. In many cases, authority resides with the Entity government, particularly for reconstruction projects and Inter-Entity issues and laws. The governmental structure at the Entity level is more extensive than at the state level, consisting of a larger number of ministries. The FBiH and the RS governments are responsible for conducting all internal affairs within their respective Entity. Pursuant to the Constitution, all governmental functions and powers not expressly assigned to the institutions of Bosnia and Herzegovina (enumerated in the previous paragraph) are those of the Entities.

The Federation of Bosnia and Herzegovina has following ministries:

The Republika Srpska has following ministries:

2.5 Telecommunications and Internet

2.5.1 Telecommunications

The war resulted in the telephone network’s partial destruction. In fact, the telecom network suffered extensive damage to transmission and switching equipment, buildings, microwave towers and overhead cables. Damage to the long-distance transmission network disrupted inter-city and international communications links. Subscriber lines decreased by almost 45 percent, exchange capacity decreased by 25 percent, and 40 percent of the transmission routes were destroyed. Therefore focus in this sector is on reconstruction, modernisation and expansion. In the past two or three years there has been a lot of success in achieving these goals, thanks to international efforts made by the EBRD and the ITU. In urban areas, or areas where damage to the infrastructure was limited, the average waiting time for telephone subscription varies from 30 to 90 days. Installation costs are expensive, but average monthly costs are low compared to other European countries. The operators are working hard to improve their services.

The telecommunications sector has a multi-level regulatory structure. Pursuant to the Dayton Accords, the BiH state government is responsible for "the establishment and operation of common and international communications facilities". The Ministry of Civil Affairs and Communications provides general oversight of the telecom sector. The Ministry of Foreign Trade and Economic Relations is responsible for the spectrum management, including international coordination of the frequency assignment. On the Entity level, the respective ministries of Transport and Communications are responsible for those activities not specifically assigned to the state level government, in terms of regulation operations within the Entities and Inter-Entity developmental projects.

Trying to piece together a harmonious telecom sector in a country politically fragmented and structurally devastating by war (while simultaneously reorienting its economy along market-based lines) was always going to be a tall order for domestic political authorities and the international community alike.

There are three telecom operators in Bosnia and Herzegovina. All of them are state-owned and acting on particular geopolitics areas. In RS there is "Telekom Srpska" from Banja Luka, and in FBiH there are Public Enterprise PTT Bosnia and Herzegovina (covers the Bosniak dominated areas) and HPT Mostar (covers the Croat dominated areas).

JP PTT BiH is the largest of the three companies. HPT Mostar is a joint venture with Croatian Posts and Telekom (HPT), which holds a 10 percent share. Telekom Srpske is the only one that is actually separated from postal service. During the reconstructions, upgrade and expansion of the telecom system, all three companies have engaged in separate (uncoordinated) developmental programs. The European Bank for Reconstruction and Development (EBRD) was the designated sector leader for coordinating assistance to reconstruct and modernise the telecom system. The results of EBRD’s influence the Entities and the State began a sector policy dialogue. A temporary agreement was adopted that:

There are three mobile telephone systems (GSM) in Bosnia and Herzegovina, two from Bosnia and Herzegovina (both state owned) and the third from Croatia. Each of them covers a separated area, primarily on an ethnic basis. One operates under the JP PTT BiH (Public Enterprise PTT Bosnia and Herzegovina) and is aimed towards the Bosniak area of FBiH. In the Croat area of FBiH the GSM service is in fact in the hands of the foreign operator, namely the Croatian CRONET. Just few months ago, it still did not comply with the numbering scheme - the number prefix was not the Bosnia and Herzegovina's 387 but the Croatian 385, and so de-facto worked like expansion of Croatian territory. The third one is in RS and started only last year, but has seen substantial growth. Until summer 1999, GSM services were covered particularly well in larger cities like Sarajevo, Zenica, Tuzla, Mostar, etc. Today they are covered quite well throughout the country. Another two operators announced their mobile phone services, one in RS and another in FBiH.

The three fixed network operators concluded Interconnection Agreements. The Telecommunication Regulatory Agency was expected to issue the international licenses. PTT BiH and Telecom Srpska also agreed to introduce national roaming, beginning in June 2000. These steps represent considerable progress in the telecommunications sector for Bosnia and Herzegovina.

During its meeting in Brussels in May 2000, the Peace Implementation Council called on the High Representative to ensure rapid development of State-level regulatory mechanism for (among others) telecommunication and media.

Deregulation in the telecommunications market as seen in Western European countries has not occurred in Bosnia-Herzegovina. The "Rule Book of Telecommunications", issued on May 1999 (Official Gazette BiH, No. III/7) still does not clearly deal with the question of deregulation. In the telecommunications sector, current legislation situation prevents competition in the sector of telecom operations and services providers. By the new "Law on Telecommunication" all laws and bills inherited from former Yugoslavia continued in effect but the new laws/bills should be announced within 1999-2000. The monopoly versus deregulated situation is expected to continue for another 5 – 8 years.

Status of privatisation process is not fully clear. All three operators chose to wait before looking for strategic investors and are therefore facing a far more competitive and less predictable climate. In July 2000 it has been announced that the privatisation of the country’s three operators would begin with the appointment of advisers in October. Fifty-one percent stake of the JP PTT BiH is to be sold some time in 2001. Possible sale of stakes in Telekom Srpske and HPT Mostar is announced, but no dates are known yet.

A long period was needed to come to the new modern telecommunication law and thus replacing the old one, inherited from former Yugoslavia. In 1997 the "Memorandum of Agreed Principles" was signed and was designed to serve as an interim solution before a new state law could be passed. The Office of the High Representative has been pressing for the development of the new "Law of Telecommunications". The "Law on Telecommunications," elaborated under the aegis of the ITU in close co-operation with the European Bank for Reconstruction and Development (EBRD) and Office of the High Representative (OHR) was finally introduced in November 1998 (Official Gazette BiH, No. II/24) on an interim basis. The representatives from the State Council of Ministers of Bosnia and Herzegovina and the Federation and the Srpska Republic signed the draft Telecommunications Law at the end of 1998. The law was adopted by Parliament on 8/9 June 1999. The aim was to provide a clear and transparent telecommunications environment with a view to enlist the support of business and economic partners in the reconstruction efforts. It should also establish which regular services both domestic and foreign operators provide. Many of the associated boards, committees, agencies and legal acts have not yet been established.

With the new Law on Telecommunications now also de-facto acting, there are opportunities for foreign investments (including from private sources) as well as for some donor help that has been already agreed in the past. For instance, a year ago the European Bank for Reconstruction and Development (EBRD) signed its first reconstruction programme, together with some particular countries. There were also three assistance programmes attached: a technical programme to assist in the planning and procurement process; a programme to help in the creation on the initial legal and regulatory framework; and a programme to assist the operators in implementing international accounting methods. A lot of this was arranged quite some time ago, but the accomplishment was conditioned on the acceptance of the new Law.

2.5.2 Summary of the Law on Telecommunications

The Council of Ministers will appoint a Ministry to act as the supreme body to supervise Bosnia and Herzegovina, especially regarding:

Independent Regulatory Agency for Telecommunications (the "Agency") will be established to maintain regulative functions regarding telecommunications. The Management Board of the Agency will consist of three full-time members, appointed to by the Council of Ministers, two full-time members from FBiH and one part-time member from RS. These members must be experts in the fields of telecommunications, frequency planning, law, economics, business, financing or civil service. Besides these conditions, they must not be related in any way to telecom operators or their partners. If the Management Board cannot come to the conclusion on some aspects, an expert with the internationally recognised reputation, appointed to by the General Secretary of ITU (the "Mediator") will provide his help. If Mediator's contribution will not lead to the final decision of the Agency, then the Council of Ministers has the last word.

Besides the Agency, a special Consultation Group will be established. Its primary goal is to allow various views of the wide area of interests regarding the telecommunications regulations to be heard. The Consultation Group must convene at least four times a year.

The Council of Ministers must issue additional rules that will explain the functioning of the Agency and the Consultation Group in detail. The Agency is responsible for the provision of an effective and economic approach to international telecommunication services. Directives for doing this are yet to be prepared. The applications for providing public telecommunication services must be sent to the regulatory bodies of particular Entity. If there are any items related to the international services, the application must be forwarded to the Agency.
  • The Agency will take care of the development of the "Directory Data Base" as the "common means". Anybody in Bosnia and Herzegovina will be able to access to the information contained in database(s) of individual telecom operators regardless of the part of country that operator covers.
  • One of the Agency's responsibilities is the development and implementation of the numbering scheme to make public telecommunication services easier. The country code for Bosnia and Herzegovina will comply with the respective decisions of ITU.
  • It is illegal to provide public telecommunication services without the proper license. All three telecom operators that were providing telecommunication services prior to this Law continue to provide them. However, in six months the Agency will announce the time limits and additional conditions for providing international telecommunication services. 
  • The current operators will lose their rights to provide services if they do not respond to these time limits and conditions within the next six months.

As the Law on Telecommunications explicitly expressed the obligation to adopt the additional rules, the Council of Ministers on May 20, 1998 issued the "Book of Rules on Telecommunications" (Official Gazette, No. III/7). These rules prescribed the detailed ways of functioning of the Regulatory Agency for Telecommunications and the Consultation Group.

  • The first part of the "Book on Rules" deals with the international telecommunication services. It is said that there will be licenses for international telecommunication services with all obligations and restrictions that the licence holder will have to have. Included in these licenses are directives regarding all conditions for unlimited telecommunication traffic between Entities, cost-related pricing, arrangements for mutual connections between license holder and services in foreign countries etc. All agreements, contracts etc. with international responsibilities of Bosnia and Herzegovina must be turned over to the Agency.
  • The book also states that time limits and conditions for interacting connectivity between public telecommunication services will be established in such a way that they will be open, efficient and non-discriminatory.
  • The Agency will consult the Entities and the Consultation Group and then will issue as the Rule the "Numbering Plan for Telephone Services in Bosnia and Herzegovina". The main principles will take care of the sufficient expanse of the numbering pool so that the numbers can be used with no prolongation; there will be no advantage given to any operator. The country code for Bosnia and Herzegovina and the area codes for Entities cannot be changed without prior permission of the Council of Ministers. All other area code changes must be approved by the Entity on which territory would this change take effect.
  • The second part (in fact one article only) deals with satellite communications. It is said that the use of satellite stations is allowed without a special Agency or Entity's permission if there is permission for a radio frequency and the use of the satellite station is limited to the private (closed) network only.
  • All terminal equipment must be approved according to the rules that have yet to be issued (by Agency or Entity). The Agency and Entities will determine standards for connection of terminal equipment. These standards will take care of the protection of users, the electro-magnetic compatibility, protection of the public telecommunication network etc. Whether the individual attests will be required (as in former Yugoslavia) or the worldwide attests will be accepted is not mentioned.

The last part deals with radio communications, especially with frequencies (including procedures for applying permissions for using radio frequencies).

2.5.3 Process

One of the first results from the new Law was the nomination of an independent Regulatory Agency for Telecommunications. Like in many other similar situations, this nomination was taken for granted just because it has been written in the Law. But in reality the Agency did not exist until September 1999, when the Management Board was nominated. However, as other members were not nominated yet, the Agency itself was still in the process of forming until today.

On September 9, 1999, The Council of Ministers made the final appointments (three full-time members and two of three part-time members) to the telecommunications Regulatory Agency. The Chairman was Mr. Jasenko Lasta. The first appointments to the Management Board of the Telecommunications Regulatory Agency have been made by the Council of Ministers early in 1999. However, of these appointments, one full-time member was unable to take up his position in the near future, and the two appointed part-time members had direct links with the operator, which made them ineligible.

So the Office of the High Representative had to work hard with the relevant authorities to rectify the situation and ensure the proper functioning of the Agency as soon as possible. The first meeting on the Telecommunications Regulatory Agency Management Board finally took place at the end of September. They have not had a chance to deal with any substantive issues yet. The first issue the Agency will focus on is the work on the numbering scheme. The layout has been given by the Roundtable meeting in Switzerland on April 1999, and the numbering system was agreed at the technical level. Although final adoption of the numbering system for Bosnia and Herzegovina is yet to occur, all parties have agreed to an implementation plan. It is the primary responsibility of the Agency to work out details and adopt this numbering plan so that implementation can be completed as soon as possible.

The general agreement was reached on the policy framework for the telecommunications sector of Bosnia and Herzegovina, including state level representation to international organisations in accordance with the new regulatory situation, technical aspects of the numbering plan; and the issue of licences to existing international operators in the immediate months ahead.

The inactivity of the Telecommunications Regulation Agency was particularly disappointing for the international authorities since they had believed the process to create the new regulatory body had been achieved. The ITU, European Bank for Reconstruction and Development, and the Office of the High Representative put a lot of pressure to bring such a body to life.

While the Agency finally officially started to work at the end of September 1999, in fact it has not yet started to work besides holding the Management Board meeting. The agency was expected to begin working in March/April 2000 when other members (beside the Management Board) would be appointed. First meetings of enlarged Management Boards started only in March. Anyway, there was a pressure from relevant internationally community on the Agency to start to work. After all, the ITU donated a Mobile Monitoring Station (with the value of 3,500 Euro) to the Agency in February 2000.

The membership of the Board of the Telecommunication Regulation Agency was changing. The Office of the High Representative removed one member from his position due to his failure to show any commitment to the serious reform of telecommunications within Bosnia and Herzegovina and persistently obstruction to its implementation.

The rebuilding of Bosnia and Herzegovina's telecommunications infrastructure made further progress at a Roundtable meeting in Bern, Switzerland on 29-30 April 1999. This meeting, convened by the ITU, in close co-operation with the Office of the High Representative (OHR) in Sarajevo, agreed on technical principles concerning a new Numbering Plan. The territorial and administrative structures of the country formed the basis for the Numbering Plan. The major benefits of the Plan for telephone users are: easier interconnection between the two entities (the Federation of Bosnia and Herzegovina and the Republika Srpska); the use of one number for the same service throughout the entire country (mobile phone networks, police, ambulance, information etc.); and the use of one country code (387) to reach all regions and districts in the country. Nineteen national Codes to follow the country code 387 were agreed as well as one national access code for GSM Networks (66).

The new Telephone Numbering Scheme for all in Bosnia and Herzegovina (adopted by the Telecommunication Regulatory Agency) has been fully implemented in June 2000. Both the "old" and the "new" numbering systems ran in parallel until autumn. The whole Bosnia and Herzegovina unique country code is 387, and there are 21 area codes.

In addition, the rearrangement of the areas covered by the new area codes means that some subscribers would need to change their number. The time window for fully functionality of the new Numbering Plan was very short - until July 1, 2000. The uniform dialling in the entire territory of Bosnia and Herzegovina finally terminated the irrational situation where some parts of Bosnia and Herzegovina were using not only special area codes from abroad but also country codes of foreign countries. Even worse, some calls from such areas to the neighbouring countries were treated (and charged!) as local long-distance calls instead of international calls.

The Telecommunications Regulatory Agency also signed a normalisation agreement with SFOR, which allows for the return of certain frequencies to civilian authority.

At the same Roundtable meeting it was agreed that the Numbering Plan would be a closed Plan. The Plan was designed in such a way as to assure a smooth conversion from an open Plan to a closed Plan in the future. A Closed Plan in simple terms treats the entire country as one large city with "districts", but still takes into account national tariff zones.

2.5.4 Internet

There have been several attempts to introduce the Internet using assistance and donations from international institutions. Some organisations have prepaid terrestrial or satellite lines for a determined period (up to two years), with the understanding that after this period they could start up their own lines, and later act as Internet Service Providers.

The largest telecom provider (JP PTT BiH – Public Enterprise PTT Bosnia and Herzegovina in Sarajevo) established "BIHNET" – the first and the biggest commercial Internet Service Provider (ISP) in the country. It is state-owned. The major commercial ISP in RS is INECCO and it is private company. Both companies have their own links to the international Internet community – BIHNET to the USA and INECCO to Norway.

There are also some smaller ISPs – mostly established with donations and help from international institutions (Soros Foundation, WUS Austria etc.). The most important among them are Centar za obuku u Mostaru (Training Centre Mostar) which is sub-provider of BIHNET, and Univerzitetski telekomunikacijski centar Sarajevo (University of Sarajevo Telecommunication Centre) with links to the University of Vienna in Austria.

In 1998 the BIHARNET Centre (Bosnia and Herzegovina Academic and Research Network) was established by all universities in Bosnia and Herzegovina. The BIHARNET Centre has the strongest link to the international community and is connected to the European research network TEN-155 via the similar Slovenian Academic and Research Network (ARNES). It is the only ISP in the country with its own infrastructure that covers the whole country (regardless of Entities). This is achieved by the concept of a strong backbone with several access points. The usage of the BIHARNET network is limited to users from the educational, research and cultural sphere, which enjoy free access. The BIHARNET network is the result of the project funded by the Government of the Republic of Slovenia through the framework of the Donation Programme for Bosnia and Herzegovina.

2.6 Electronic Commerce

Electronic commerce is non-existent. There are several individual attempts but only as "Internet shopping" which is far beyond the concepts of e-commerce.

2.7 Education and research

No legal act concerning IS under this heading and issued by relevant ministries is known. Because of lack of official actions universities, some schools and research institutions took their fate into their own hands. Six major universities from both entities together founded a special organisation (legal entity) for building and managing an educational and research computer network (BIHARNET) for providing a modern computer infrastructure and services, including an Internet access by broad international and intercity capacity. In FBiH, the Ministry of Education, Science, Culture and Sports agreed with concepts of BIHARNET.

2.8 Transport

No legal act concerning IS under this heading and issued by relevant ministries is known.

2.9 Health care

No legal act concerning IS under this heading and issued by relevant ministries is known. Independent group consisting of some physicians and other experts brought out an initiative for creating the Health Information System. The goal is to provide help to relevant ministries in health policy decision-making. After pilot studies it is expected that ministries will take some appropriate steps. Related to this is also legal background for management and access to medical records

2.10 Labour

No legal act concerning IS under this heading and issued by relevant ministries is known. Quite contrary, as result of German appeal for 20.000 informatics jobs vacancies, Agency of Employment Service ("Zavod za zapošljavanje" in local language) is preparing an act to prevent an uncontrolled "brain drain" of young experts. As there already exist some bilateral agreements between Bosnia and Herzegovina and Germany it is general idea that every such would-be employee should have a special permission issued by domestic authorities. Of course it is known that such actions are in direct opposition with all European principles of free travel, work and exchange, but their fear has to be understood. (It is stated that 62% of young people in Bosnia and Herzegovina intend to leave the country!)

The Office of the High Representative worked with the local authorities to develop a Labour Law that would compensate all those who have been on waiting lists, without damaging country’s fragile economy. The waiting list question was one of the factors that would prevent foreign investment and unfortunately the Government only undertook action to resolve this to the benefit of those on waiting lists and to potential investors under the international community pressure.

In RS, the Law on Working Relations is the equivalent of the above-mentioned law and is similar in composition and legal requirements. This law is a modern labour law that is ILO compliant and appropriate for a market economy, providing the necessary balance of safeguards for employees and employers. Key provisions such as minimum compensation payments based upon length of service are exactly the same as that provided in the FBiH. This new law also eliminates the waiting list system in the RS, with compensation for those currently on the waiting list.

The new Law on Job Placement in FBiH is designed to established a legal framework for the Federation Employment Service, an Entity-wide job placement service creating the opportunity for private employment services and establishing a more viable and financially sustainable unemployment benefit insurance system. While the exact benefit structure has yet to be finally approved by the Government, the draft submitted reduces the duration of benefits to a maximum of six months (from 24 months), with a maximum replacement rate (benefit formula) of 45% of the average monthly wage. Further attempts to improve the financial viability of the system include an elimination of the obligatory cross fund transfers (pension and health insurance contributions) from the Employment Fund.

In RS, similar to the above mention law is the Law on Employment and the Rights of the Unemployed, insofar as the law establishes an Entity-wide employment, job placement service and a revised unemployment benefit system. The maximum duration of unemployment benefits has been reduced to twelve months (from 30 months), but with a more graduated range. The maximum replacement rate has been set at 40%.

2.11 Competition

As for other sectors, market is relatively liberalised. However, monopoly still exists in the sectors of electricity/power, gas distribution and water supply. There are more than one big company for these purposes but each of them covers its own geographic and/or ethnic area and they do not compete between themselves. The following table represents liberalisation status on some basic issues of our concern:

Liberalisation Status

Comments

Infrastructure

    

Public telecommunication network

Monopoly

Three state owned operators

Local networks for voice telephony

Monopoly

Three state owned operators

Leased lines

Monopoly, no resale

Three state owned operators

Alternative Infrastructure (highway, railways, electricity utilities)

NA

NA

Broadcasting and cable TV

two state owned, private broadcasters exist

TV companies are not allowed to provide telephony in any way

Voice telephony

    

Local Communication

Monopoly

three state owned operators

Domestic Long - Distance

Monopoly

three state owned operators

International communication

Monopoly

three state owned operators

Provision of voice services to closed user groups

NA

NA

Mobile communication

    

Analogue

NA

NA

GSM digital

Allowed, but the concession is required

Two state owned operators, the third from abroad

DCS 1800 digital

NA

NA

Paging

Allowed, but the concession is required

MIBO Trading; no significant value

Satellite communications

Monopoly

Ministry of Civil Affairs and Communications

Data transmissions

Monopoly

Three state owned operators

Value Added Services

NA

NA

Internet services provision

No restrictions

Only two greater providers - Public Enterprise PTT BiH and BIHARNET

Equipment provision

NA

NA

2.12 Access for all

No official policies and/or acts were issued on this topic.

2.13 Copyright, intellectual property rights

There has been no development in this area following regulations and legal acts. Copyright law and intellectual property rights exist on paper. No new laws have been adopted, while the existing laws were inherited from the former Yugoslavia. It is very difficult to supervise the active situation. International pressure from the United Nations, OHR, OSCE and other bodies ensures that this process is ongoing.

Whereas there is (at least de-iure) an existing legal framework (although inherited from the pre-war Yugoslavia) the main problem regarding copyright and intellectual property rights is the lack of adequate knowledge, application of laws, international conventions and similar regulations, organised and qualified organisations of authors and other copyright owners and the habit of authors and users to regulate their relations without contract and thus protect their respective rights. The only body in Bosnia and Herzegovina that is the closest to the concept of "a national copyright and intellectual property rights agency" is the "Sine Qua Non Copyright Agency", covering both Entities. Registered three years ago, the Agency has the most eminent experts in these fields and co-operation with Faculty of Law, Academy of Science and Arts, Institute of Economy etc. is expected. The Agency acts as an advising body to all parties in the country, has its own consultancy team and a legal task force working group. Its goal is also to support, empower and strengthen authors' organisations and non-governmental organisations for promotion of intellectual property rights. The Agency started initiatives for co-ordination of educational activities of international organisations that are active in Bosnia and Herzegovina (like OHR, OSCE etc.). They work on compilation of copyright laws, international conventions and other regulation effective in Bosnia and Herzegovina and on translation the EEC directives in the domain of the copyright and the intellectual property rights. The Agency organises open discussions, workshops, round tables, tribunes and conferences.

Peace Implementation Council meeting in Brussels (May 2000) stressed out that preparing and adoption of the Law on copyright and similar rights is of utmost priority. Draft text was sent to the WIPO for comments and suggestions. The answer is still waiting for. The deadline for adoption of this law is the end of first quarter 2001 and if the parliament fails to adopt it, then the Office of the High Commissioner will do it.

2.14 Public access to data

The Office of the High Representative announced a draft Freedom of Information Law at state and entity level, which will help laid the legal foundations of a more open society in Bosnia and Herzegovina. An expert group, sponsored by the Organisation for Security and Co-operation in Europe and in co-ordination with the Office of the High Commissioner, has prepared the draft. Under the new law, every member of the public will have the right to access to information held by the government and other public bodies. The new law aims to put as much information as possible into the public’s hands at the lowest reasonable cost. It also gives individuals the right to amend or correct their personal information and to attach a commentary to it. Members of state and entity governments, representatives of the media and political parties have been briefed about the proposed law. A series of public meetings have been planned immediately. The meetings will allow for comment from members of the media, non-governmental organisations, civic groups, legal practitioners and members of local governments.

This kind of legislation will promote much greater openness and accountability of government actions as it will limit the grounds on which information can be withheld and make it possible to challenge any unjustified secrecy. It will also lead to a more informed public discussion of policy, greater review of the facts before decisions are taken, and more opportunities for outside experts and the public to scrutinise data previously available only to government insiders. The Freedom of Information Act applies to all "public authorities", defines as "all government and administrative departments, agencies and related bodies, the courts, and bodies set up by statue that perform a public function". This means that the entire government as well as utilities, public hospitals etc. "Information" is very broadly defined as "any material which communicates facts, opinions, data, or any other matter, including any copy or portion thereof, regardless of physical form …". Further, this Act provides an institute of the "Information Ombudsman".

2.15 Privacy, data protection, consumer protection

There are no specific acts for privacy and data protection.

2.16 Security

Encryption is not forbidden, but no legal acts deal with crypto-security.

2.17 Freedom of expression and information as far as the distribution via electronic networks is concerned

Apart from standard clauses in Constitution and similar acts, there are no specific legal acts concerning freedom of expression and information. However, this field is somehow related to the draft Freedom of Information Law, mentioned in 2.14.

An expert group, including international and domestic lawyers, has begun preparing a draft Defamation Law that will be presented to the parliaments later this year. I view both laws as crucial to ensuring that citizens enjoy their constitutional right to Freedom of Expression and that elected representatives and governmental agencies are held accountable.

2.18 Others

2.18.1 Media

Bosnia and Herzegovina currently contains the densest concentration of radio and television in the world. According to the OHR Report from 16 July 1999 there are over 270 broadcasters that are using nearly 750 radio and television transmitters. Today there are two major television broadcast companies (up to February 2000 there were three) that are state-owned and should reflect the Entities division, and there is the third that is internationally sponsored alternative TV media:

Prior to November 15, 1999, there was another major broadcasting system in Bosnia and Herzegovina – the Mostar-based TV Erotel, covering the Croat population in FBiH. On November 15, 1999, the Independent Media Commission declared its decision to take the Erotel TV off the air because it violated the new legal environment for TV broadcasting and the IMC Provisional Broadcast Licence. In the middle of February 2000, the IMC carried out action to shut down Erotel TV.

Regulations also permit private television broadcast stations, with the result that there are some smaller private television stations, mostly targeted at local areas, like TV Oscar C, TV Mostar, TV Hayat, KIS, etc.

In the broadcasting arena, there is growing competition between a few state-owned "national" stations and numerous small, local independent stations. Television is the only media form, which can achieve countrywide coverage.

As was made clear by the Peace Implementation Council’s declarations, the State and Entities must establish genuine public service broadcasting that serves all the citizens of Bosnia-Herzegovina. The existing laws on Radio-Television were amended primarily to eliminate discriminatory provisions that violated international standards and to ensure compatibility between the Entities in this field. However, the laws were inadequate, and they fell short of the minimum international standards. The High Representative requested the adoption of public broadcasting legislation in February. A new Board of Governors was to be chosen by the National Assembly under the terms of the new legislation. So far, no public broadcasting legislation was adopted.

The High Representative issued a Decision, naming the entire Governing Council of the Radio-Television of the Federation of Bosnia and Herzegovina, in order to expedite the establishment of genuine public broadcasting in Bosnia and Herzegovina. The High Representative was forced to take this step after the Federation Parliament failed to appoint seven members of the 21-member Council as required by the Law, despite repeated appeals from the Office of the High Representative. Any further delay would jeopardise the right of citizens to have access to public broadcasting that operates in accordance with the Law and which fully represents the cultural diversity of Bosnia and Herzegovina. The High Representative has also named the international supervisor, who is obliged to ensure that international principles of public broadcasting are respected and that the Law's key provisions are implemented.

The Office of the High Representative issues a Decision ending the mandate of the previous Board of Governors of Radio Television Republika Srpska and at the same time naming a new one. This decision was taken in view of the failure of the RS authorities (Government and National Assembly) to meet several deadlines to pass new legislation for RTRS in order to bring it in line with international standards for public broadcasting. The new Board more closely reflects the cultural and professional composition required by the High Representative’s Decision an Amending the Law on RTRS from last year. Despite numerous discussions in the RS National Assembly, little has been achieved. The RS Ministry of Information created several draft laws on RTRS, none of which came close to the international standards required.

Given the failure of elected representatives to agree on appropriate legislation, the lack of cultural diversity of the actual Board of Governors of RTRS and the urgency of establishing a coherent legal framework for public broadcasting at the Entity and State level, the Office of the High Representative issued the Decision on Appointment of Board of Governors of RTRS to bolster the Constitutional right of Freedom.

This new Board shall be charged with the task of drafting appropriate legislation for RTRS, which shall conform to the highest international standards. Such legislation shall be prepared in consultation with the Founding Board of the Public Broadcasting Service of Bosnia and Herzegovina, legal experts in both Entities, the Government of RS, and the Office of the High Representative. Such legislation will be put forward to the RS Government and National Assembly of RS at the earliest opportunity and no later than October.

In full cooperation with the management of RTRS and the International Supervisory team, the Board shall develop and oversee the implementation of a strategic development plan with the aim of putting the broadcaster on a financially self-sustaining basis. In full cooperation with the International Supervisory team, the Board shall develop and oversee the implementation of a personnel and recruiting policy to ensure that the composition of the staff of RTRS reflects the cultural diversity of the citizens of the Entity and the constituent peoples of Bosnia and Herzegovina.

Old structures left over from the war and from the former Yugoslavia had to be replaced with efficient organisations that are editorially independent and financially transparent. The importance of replacing the legacy of "state" broadcasting with genuine public broadcasting that informs citizens and is free from political interference or ethnic prejudice led to the establishment of Public Broadcasting Service of Bosnia and Herzegovina. Quality public broadcasting should reflect also the diverse cultural identities of Bosnia and Herzegovina. Public Broadcasting Service of Bosnia and Herzegovina should produce an evening news program that would be broadcast at the same time in both Entities. Public Broadcasting Service of Bosnia and Herzegovina has been accepted as a member of the European Broadcasting Union.

That is why on 30 July 1999, the OHR brought in the Decision on Restructuring the Public Broadcasting System in Bosnia and Herzegovina. By this Decision, the Public Broadcasting System in Bosnia and Herzegovina will be established and will consist of three Public Broadcasters:

As this did not happen, the High Representative issued the Decision on Amending the Law on Radio-television of Republika Srpska on 31 August 1999, as an interim measure, by which the Public Company Radio Television of Republika Srpska was founded. On March 1, 2000, the High Representative issued the Decision on Amending the Law on Radio-television of Republika Srpska, obviously due to lack of relevant actions form institutional bodies of RS.

The financing of these three public broadcasters shall be supported through a mixed funding system, which includes users' fees, appropriations from the general public budgets, and revenue resulting from advertising. This reconstruction of the public broadcasting system leads to a fully multi-ethnic state-level television broadcaster.

Active reform of the Public Broadcasting System (starting at the end of 1999) is continuing. The illegal broadcast of Erotel TV was successfully halted in a joint operation by Independent Media Commission, the Office of the High Representative and SFOR. Strategically important network frequencies were thus liberated.

Legislative reform of the public broadcasters remains behind schedule. The FBiH Parliament has yet to ratify the legislation imposed by the High Representative in July last year. The RS Government has failed to develop an acceptable draft law for Radio Television of Republika Srpska. The Law on Public Broadcasting System therefore cannot be drafted until the Public Broadcasting System's Board of Governors has agreed on a concept for the nationwide public broadcaster.

The second phase of the licensing procedure (announced by the Independent Media Commission in November 1999) is expecting to begin to live. This entails the granting of long-term licenses. The required information on all existing broadcasters is now known to the Independent Media Commission. This allows for the development and implementation of a frequency spectrum plan. In this second phase, all broadcasters will have to meet much higher standards, including those technical standards laid down by the International Telecommunications Union. In order to address the specific problems of broadcasting in Bosnia and Herzegovina, the Independent Media Commission has developed a detailed body of regulations for the second phase of licensing.

Facing the approaching elections, all broadcasters and print media are required to give fair coverage and equitable access to all registered political parties, coalitions and independent candidates. The Independent Media Commission will supervise that all actions run according to its rules and guidelines.

Just at the end of year 2000, the High Representative issued a Second Decision on Restructuring the Public Broadcasting System in Bosnia and Herzegovina.

2.18.2 Non-Governmental Organisations (NGOs)

The progress and development of civil society in Bosnia and Herzegovina varies depending on the political situation and legal environment in each Entity. This of course affects the work of local NGOs. The present framework is preventing the effective and easy operation of NGOs throughout the country and fails to address certain basic needs such as:

  • NGOS cannot register to operate throughout Bosnia and Herzegovina

  • NGO registration processes are not harmonised

  • There is a membership requirement of 30 individuals to establish an association

  • There is no distinction between mutual and public benefit organisations (vital to tax deductible contributions and access to government grants and contracts)

  • Norms that regulate economic (income generating) activities of NGOs are locking or inappropriate etc.

The Office of the High Representative is thus focusing on the passage of a new legal framework for associations and foundations. After the general framework is established, the Office of the High Representative will be concentrating on the review of the current legislation that regulates financial issues affecting the work of NGOs and those issues that represent an important obstacle to the sustainable development of a civil society.

In April 1999, a conference titled "Non-governmental Organisations as Vehicles for Social and Political Change" was held in Sarajevo, with the participation of over sixty NGOs from across the country. The event was designed to support domestic NGOs with designing their own strategies for assuming more vigilant and responsible roles in BiH society.

3. Institutions and organisations in charge of IS regulation

Nobody (ministries, offices, agencies, organisations...) is officially in charge of IS regulation. Even more, there is no IS regulation at all (in terms we are speaking of). Some bodies sometimes deal with particular subjects that can be related to the IS areas. Examples are mentioned under appropriate headings in Paragraph 2.

4. International relationships and agreements

Even in the beginning of this year there were still anomalies in the international telephone connectivity services offered by the three telecom operators. Bosnia and Herzegovina is connected to international networks via neighbouring countries. A call from one Serbian area to another was routed out of the country through Yugoslavia and then backs again. The RS telecom operator exhibited a strong Yugoslavian influence by both the country and the Yugoslav telecom operator. Similarly, FBiH displayed a Croatian influence in the Croat populated region of FBiH. The influence of Yugoslavia and Croatia was so strong that sometimes it has been sometimes possible to access telephone numbers in Bosnia and Herzegovina using country codes for Yugoslavia or Croatia. This was very unusual in the global sense, and as there were very strong presses from the outside community this practice finally terminated and is no longer present.

The most of the pre-war international organisation membership was not inherited automatically. Today, Bosnia and Herzegovina is a member of following international organisations: Central European Initiative, Economic Commission for Europe (ECE), European Bank for Reconstruction and Development (EBRD), Food and Agriculture Organisation of UN (FAO), Intelsat, International Atomic Energy Agency (IAEA), International Bank for Reconstruction and Development, International Civil Aviatic Organisation (ICAO), International Development Association (IDA), International Fund for Agriculture Development (IFAD), International Finance Corporation (IFC), International Monetary Fund (IMF), International Standard Organisation (ISO), International Telecommunication Union (ITU), Interpol, Organisation for Security and Co-operation in Europe (OSCE), United Nations (UN), United Nations Conference on Trade and Development (UNCTAD), United Nations Educational, Scientific and Cultural Organisation (UNESCO), United Nations Industrial Development Organisation (UNIDO), Universal Postal Union (UPU), World Health Organisation (WHO), World Intellectual Property Organisation (WIPO), World Meteorological Organisation (WMO), World Trade Organisation (WTO).

Besides, Bosnia and Herzegovina has a status of guest in European Council and status of observer in International Emigration Organisation and Islam Conference Organisation.

5. Market: Privatisation, foreign investment, mergers, acquisitions, call for tenders, ...

A non-navigable bureaucracy, legislative barriers, resistance from enterprise managers, and political resistance have been the central obstacles to a rapid privatisation. The Economic Task Force is considering measures including the establishment of a central tendering office, the appointment of international experts to the privatisation agencies and a strategy to address co-capitalised companies.

As the Office of the High Representative has repeatedly pointed out, a successful privatisation process is key to economic reform in Bosnia and Herzegovina. Thus, OHR very closely supervises the whole situation. The adoption of tender regulations of the proper international standards was delayed behind all reasonable deadlines, thus leading to unsatisfactory tender results and obvious lack of transparency.

Because of this and also some other obstructions and unreasonable actions, the Office of the High Representative has taken some drastic actions to advance economic reform (including the removal of the president of the Management Board of the Federation Privatisation Agency). The major action is the issuance of a decision amending the banking laws in each of the Entities. This Decision, simultaneously amending banking laws in both Entities, creates the conditions for sound banking examination, which is essential for the establishment of a reliable and efficient banking system.

The transformation of the Payment Bureaux, to be completed by the end of the year 2000, is an imperative economic reform. The International Advisory Group on Payment Bureau Transformation advises and assists the authorities in both Entities. In both Entities, the Governing Boards of the Payment Bureaux have committed to the transformation process.

Based on the Law on the Policy of Foreign Direct Investment, a new Foreign Investment Promotion Agency at the State level was founded. The Foreign Investment Advisory Service (a joint service of the International Finance Corporation and The World Bank) presented a framework on foreign investment promotion strategy for this new Foreign Investment Promotion Agency. Further technical assistance will be provided.

The Office of the High Representative states in his Report (16 July 1999) that all necessary laws for the implementation of the privatisation process are adopted. This Report further states that this is a good legal basis for the beginning of the process, although laws on restitution as to real estate, which are also essential to the process, remain under discussion.

In May 2000, The Office of the High Representative issued a Decision amending the Framework Law on Privatisation of Enterprises and Banks in Bosnia and Herzegovina to protect investors from restitution claims. The Decision tackles the result of the combination of two problems, which had a deterrent effect on potential investors because they created a situation of great uncertainty. Firstly, there is still no restitution law on the level of the State. Secondly, the actual ownership of many enterprises and banks that are slated for privatisation is unclear. As a result, potential investors intending to buy assets in Bosnia and Herzegovina did not know whether a former owner might appear and be given the assets that the investor wanted to acquire.

Investors are now legally protected form such situations. The Amendment issued by the Office of the High Representative states that the privatisation of enterprises and banks will not prejudice possible restitution claims that may be brought in accordance with the future Entity restitution laws but only if these restitution laws incorporate the following two conditions: they exclude from restitution in kind those enterprises and banks as well as their land, assets and buildings, which are in the process of being privatised; and they stipulate that competent authorities will provide fair compensations if there are legitimate restitution claims. The Law, interalia, ensures the establishment of a secure legal environment for privatisation, protects the principles espoused in the Dayton Peace Agreement and ascertains the eligibility criteria for general claims based on the criteria of pre-war citizenship and permanent residence. To ensure that basic rights embodied in quoted Law are respected, the Office of High Representative issued the paper "Eligibility to Vouchers" that defines the eligibility of citizens for different categories of voucher, considering the differences in the Entity laws.

The bank privatisation in FBiH is being implemented, pursuant to the Law on Privatisation of Banks. Majority of state-owned banks should be privatised by August 2000. Concerned with the slow pace of bank privatisation and reform, the Office of the High Representative is working with international community to develop a strategy to address technical, legal, and political problems in the near term.

At the request of the International Community, the FBiH Prime Minister cancelled the tender privatisation. A number of reasons underlie this decision. Certain privatisation transactions were seen as sub-optimal, non-transparent, and some doubts had been raised about their fairness. Potentially, 143 companies were to be sold through tender process. Freezing of the process would not affect those deals that have been signed (24 companies).

To resume tender operations, three conditions have to be fulfilled. Firstly, new tender regulations prepared and proposed by the International Advisory Group on Privatisation have to be adopted. Secondly, the International Advisory Group on Privatisation would choose the companies proposed for tender privatisation, where potential foreign investor interest exists. Thirdly, international experts proposed by different agencies will be named and should be involved in the preparation and evaluation of the bids of the companies selected. Cantonal privatisation agencies are expected to follow this tender process.

The process of privatisation (on all sectors) is very slow. In RS, the Minister of Industry appointed a working group to analyse the Law on Enterprises in order to assure its consistency with EU Company Law directives, the privatisation process and modern corporate governance practices. The group also examines related enactments, like the Decree and the Law on Entry in the Court Registry. Proposed amendments will be introduced to the National Assembly. Another working group has drafted 32 accounting standards and Codex based on internationally accepted accounting principles for businesses. A similar package on internationally accepted auditing standards are in the process of preparation. Enterprise preparation has been slow. There are estimated 1600 companies subject to privatisation, but very few of them have reported to have done opening balance sheets and prepared privatisation programs. About 70% of state companies that are expected to require an ownership audit to prepare for privatisation already have compiled.

Privatisation in Republika Srpska is benefiting from the support afforded by high level officials including the Prime Minister. This attention was instrumental in extending the deadline for registration in the middle of May for citizens eligible for privatisation. In parallel, 1,118 enterprises have been registered in the RS Directorate for Privatisation, out of which 960 submitted their privatisation programs. So far 22 enterprises have been privatised.

In FBiH, the Law on Business Companies became effective and all companies must re-register until March 2000. The work on two other important laws for the privatisation process (the Law on Restitution and the Law on Concessions) show no progress. A series of regulations regarding the share registry and investment management companies and privatisation investment funds was adopted. The Share registry adopted its internal operations procedures. The legal framework for privatisation process is in place, but the Federation Privatisation Agency is proposing more comprehensive instructions for international tenders to make the process more consistent and transparent. Like in RS, the enterprise preparation continues to lag behind scheduled legal deadlines. Only 21% of companies that must privatise have done opening balance and 16% prepared privatisation programs.

In FBiH, the main instrument for privatisation questions is the Agency for Privatisation in the Federation of B&H. This Agency also manages a kind of Survey on Legal Framework for privatisation in the FBiH, including texts of laws, regulations, instructions, directives etc.

In February 2000, the US Government has decided to suspend its assistance to the FBiH privatisation program and further technical assistance will be conditioned on proven commitments and progress. Ways to reduce the influence of political parties and to advance the privatisation process are reviewing so that growth led by private sector could replace declining foreign aid.

In spring the privatisation through Public Offering of Shares will start. The recent changes to the regulation of the sale of property and shares of large enterprises allowed their sale in the large-scale privatisation through tender and with a 10-percent cash payment. However, all companies will not be allowed to privatise through tender program and determined financial effects of privatisation. By the same token, a chance is given to companies with poor performance and facing liquidation, but because they have attractive business premises, it would be hard to let them waste, especially if a foreign investor can be provided.

Little tangible progress on the privatisation of state-owned enterprises was made in the Brcko District. An expedited privatisation programme for the District is to be established with the help of a foreign development agency.

One of the main reasons for slow progress of privatisation process is the transformation process of the Payment Bureaux. There is an aim to close down "payment bureaux", a completely non-transparent institution through which all commercial and public bank transfers must pass. International experts are brought in to help oversee the tender privatisation of large enterprises. Parliament adopted the Law on Amendments to the Law on Internal Payment Operations. Among others, the Law will remove the monopoly of the payment bureaux over payment transactions. In addition, the Law calls for cessation of internal payments in German and Croatian currencies. The current Governing Board of the Federation Payment Bureaux agreed to establish a new Government Board, consisting of five members including the Governor of the Central bank of Bosnia and Herzegovina. For straightening public financial management and improving transparency, Parliament adopted the State Law on Audit.

In RS, the Development Bank forms a legal entity with the RS Payment Bureau, and functions as a combination of a payment bureau and a commercial bank. Before the transformation of the RS Payment Bureau starts, the Development bank should be separated from the RS Payment Bureau. The RS Government will decide the final outcome regarding the Development Bank.

It is increasingly accepted that overall economic reform must include the public utilities and infrastructure sectors given their size and strategic position in the economy. There is also a wide recognition to develop State-level mechanisms in this area. Principles of a market economy, deregulation, creation of an environment to attract private sector investment including foreign investment to renew the industry, are important.

An Inter-Governmental Working Group of senior experts form the State-level, the Entities and the International Community has recently been created to draft modern legislation of concessions for all levels of government in Bosnia and Herzegovina. Leading international experts will assist to draft the legislation. Significant opportunities for concession-type arrangements exist over a wide spectrum (including posts and broadcasting transmission infrastructure).

In September, fifteen public officials have been removed (by the Office of the High Representative) from office for obstruction of the implementation of the property laws. Those officials had various positions, including mayor, deputy minister, head of office etc.

The arrangements for external debt and the liquidations of the National Bank have been completed. There has been important progress in budgetary and fiscal policy and in customs and trade. The establishment of the BiH Agency for the Promotion of Foreign Investments is in development. In addition there is an ongoing process for privatisation and liberalisation.

In the context of a loan agreement from the European Bank for Reconstruction and Development it was required that all three telecom operators (JP PTT BiH Sarajevo, HPT Mostar and Telekom Srpska) must have completed and submitted their financial reviews. Both operators from FBiH (JP PTT BiH Sarajevo and HPT Mostar) already did. The reviews suggest that many anomalies and inappropriate accounting practices are present in the financial management of both companies. There will be changes to their accounting systems in accordance with International Accounting Standards, and fully audited accounts should be available in the year 2000. This requirement is urgent in order to enhance accountability of public utilities. Telekom Srpska is still in the process of selecting an auditor.

Telecom and postal sectors of the Public Enterprise PTT BiH will operate separately in first half of this year. The goal of the test separation is to determine whether or not these sectors can operate independently and profitably, which are the main preconditions for the privatisation of telecommunications. The telecom sector should be privatised in the final privatisation stage. The postal sector will not be privatised and the main idea is to make it capable of operating as a legal entity. The true division of telecom and post is expected at the end of the year, when they should be registered as two separate firms. According to information form Public Enterprise PTT BiH, the European Bank for Reconstruction and Development (EBRD) wants the division to take place as soon as possible and is willing to provide assistance in that respect. The separation of telecom and post in the Republika Srpska was conducted in 1993, while in the Croat-based HPT Mostar both sectors still operate within the enterprise.

6. Standards

The Office of the High Representative together with representatives of the Council of Ministers established the joint working group to review a wide variety of pre-Dayton governmental institutions and to propose modernised legislation for these bodies where appropriate. Among its first points of focus are the Institute for Standardisation, Metrology and Patents.


Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.
 

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