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Bosnia-Herzegovina
Please note: All linked documents are in PDF format
| Objective |
SO Number |
FY 2004 |
FY 2005 |
FY 2006 |
| Economic Restructuring |
168-0130 |
7,826 |
6,726 |
7,117 |
| Multi-Ethnic Democratic Society |
168-0210 |
11,999 |
13,101 |
12,790 |
| Minority Returns |
168-0311 |
3,856 |
650 |
0 |
| Cross-Cutting Programs |
168-0420 |
2,919 |
2,900 |
2,900 |
| Transfers |
|
18,135 |
17,623 |
17,193 |
| Total (in thousands of dollars) |
44,735 |
41,000 |
40,000 |
|
The Development Challenge: Bosnia and Herzegovina (BiH) has come a long way in the nine years since the end of the war. The economy has recovered substantially. Gross Domestic Product (GDP) growth is projected to be 5% in 2004, up from an estimated 2.7% GDP growth rate in 2003. More than one million refugees have returned to their pre-war homes. The banking sector has flourished, with numerous foreign banks entering the market, increasing the availability of credit. Bosnians have administered two free and fair elections. These achievements were made possible by the presence of NATO troops, adherence to the Dayton Peace Accords, and, in some cases, intervention by the Office of the High Representative (OHR).
Nevertheless, as the country strives toward European integration, it is becoming increasingly obvious that more responsible, effective, and efficient government in Bosnia is necessary for long term political stabilization and economic growth. Too many layers of government, especially in the 10 canton-Federation, have created poor definitions of responsibility and insufficient financing. Some improvements in the governance structure have been made. The Federation Constitution was amended prior to the municipal elections in October 2004 to enable the direct election of mayors.
On the economic front, while the country has achieved a remarkable degree of fiscal stability, the current account deficit (imports are three times exports) indicates that BiH has not yet managed to become competitive on the regional or the world market. Employee pension and social welfare contributions are too high and have contributed to the growth of the informal economy, a sector that may account for as much as three-fourths of the employment of young people. The dearth of foreign investment in BiH is also a significant factor in its slow development. Small market size with little spending power, weak rule of law, and poor or non-existent infrastructure all impede investment. BiH's main assets are its natural resources including hydro-electric power, which has the potential to make BiH the region's only electricity exporter.
Bosnia and Herzegovina's growth as a state is further stymied by a lack of consensus on a shared vision. The Serb entity is fiercely protective of its separate status and resists attempts to consolidate governance at the State level. Nonetheless, progress has been made in establishing a State-level Ministry of Defense, intelligence service, indirect tax administration. In addition, steps have been taken to establish a value added tax. Hard-line nationalist parties are still in power and often lack the political will to effect change, while opposition parties, especially in the Federation, remain weak and unfocused. BiH still functions as an international protectorate with the OHR acting as the ultimate governing authority. While OHR has certainly driven the reform process, their continuing international presence has also stifled political maturation by allowing politicians to avoid responsibility for taking tough decisions. This lack of ownership has delayed a thorough implementation of certain reforms.
U.S. anti-trafficking efforts helped BiH move from a Tier Three country to Tier Two and are ensuring BiH does not become a country-of-origin for trafficking. USAID assistance in creating new laws and robust institutions will help prevent terrorists from using BiH to threaten U.S. citizens and interests, a high priority goal. The overriding U.S. interest in BiH remains the conversion of this multi-ethnic country from a source of regional instability to a peaceful, viable state on the road to European integration.
The USAID Program:
USAID is addressing BiH's challenges through a program targeted at economic transformation, democratic reform and the reestablishment of a multi-ethnic society. USAID's economic programs focus on supporting small and medium-size enterprise development, implementing a tax administration system, and formulating a prioritized, transparent, and efficient government budget. USAID supports commercial court reform, assists in the strengthening of the banking regulatory sector, and helps to develop and implement a national energy strategy. These efforts contribute to creating an environment that encourages long-term investment in BiH.
The mission's democracy programs are focused on reforming political parties, promoting greater transparency and efficiency in government, improving the quality of and citizens' access to justice, strengthening local governance, and increasing citizen participation through support to non-governmental organizations (NGOs) and independent media. Cross-cutting programs support USAID's strategic objectives with a wide range of participant training activities, also addressing such issues as trafficking in persons. In the area of refugee returns, USAID provides income-generation grants and loans, promoting economic self-sufficiency in minority-return areas.
Other Program Elements: In addition to the resources managed by USAID/BiH, USAID's Europe and Eurasia Bureau's Office of Economic Growth is managing a program to promote, develop and support approaches to the resolution of commercial dispute. Also, the USAID Regional Services Center (RSC) in Budapest manages several programs in the BiH. These include support for: 1) the Balkan Children and Youth Foundation (BCYF) to strengthen the capacity of youth-serving NGOs in the Balkan region through sub-grants, technical assistance, exchange programs and networking, and promoting public-private alliances; 2) the Center for Democracy and Reconciliation in Southeast Europe (CDRSEE) to promote increased mutual understanding and the reconciliation process in Southeast Europe; 3) the Balkan Trust for Democracy which provides small grants to promote democracy and good governance in Southeast Europe; 4) the Cross-Border Cooperation and Reconciliation project that advances inter-ethnic reconciliation and local democracy in targeted border areas of Southeastern Europe; 5) the Stability Pact Anti-Corruption Initiative (SPAI) which fosters more effective implementation of anti-corruption reforms including anti-corruption training and public awareness campaigns; 6) the Fiscal Decentralization Initiative (FDI) to improve accountability and effective intergovernmental relations in transition countries. FDI supports debate and consensus-building among central and local governments, facilitates regional transfer of experience and exchange of best practices, and provides opportunities for local government reform advocacy; 7) the Europe Regional HIV/AIDS Initiative: Southeast Europe reduce HIV/AIDS and Sexually Transmitted Infections (STI) among high-risk groups.
Other Donors: The World Bank and European Union (EU) are the two largest donor institutions in BiH, with the U.S. being the largest bilateral donor. Other significant contributors include the governments of Germany, Sweden, the Netherlands and Japan as well as the European Bank for Reconstruction and Development (ERBD). USAID works closely with the German, Swedish, and Dutch governments who support minority returns through housing reconstruction in areas when USAID funds infrastructure. USAID has worked closely with the World Bank in the water sector, and the EU has played a major role in reforming water laws and policies on the entity level. USAID also has close collaboration with other major donors in the World Bank Power III project. Partners in this project include Spain, Italy, Norway, Japan, Canada, and the EBRD. On the economic front, USAID works closely with the European Commission, the World Bank, German SME bank (KFW), Japan International Cooperation Agency, EBRD, and GTZ (German Development Agency) in carrying out its activities. Rule of Law activities are coordinated closely with the Office of the High Representative. USAID and the Swedish International Development Cooperation Agency are each contributing $10 million to support the Governance Accountability Project, which will improve customer service and management in 40 municipalities throughout the country.
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