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Bosnia-Herzegovina flagBosnia and Herzegovina Country Brief

General

Bosnia and Herzegovina (BiH) lies at the heart of the Balkans. It shares its northern, western and southern borders with the Republic of Croatia and borders Montenegro and Serbia to the east. With a territory of 51,129 square kilometres, BiH is smaller than Tasmania. Its population of approximately 4.5 million (July 2007 est.) is made up of three main ethnic groups - Bosniaks (Muslims), Croats and Serbs.

Bilateral Relations

Australia recognised BiH in May 1992, soon after independence. BiH established resident diplomatic representation in Australia in late 1994 under a Charge d'Affaires, and the first Ambassador presented credentials in 2000. The first Australian Ambassador to BiH, resident in Vienna, presented credentials in Sarajevo in November 1995.

The 2006 Census recorded 24,628 born in BiH living in Australia.

Trade between Australia and BiH is small. In 2006-07 Australian exports to BiH were valued at A$ 1.14 million and consisted mostly of meat (excluding bovine). Imports from BiH to Australia in the same period were valued at A$ 3.48 million and comprised mainly styrene polymers.

Australia has a continuing interest in efforts to maintain peace and build prosperity in BiH. Since 1993-94, Australia has contributed humanitarian assistance worth over A$ 17 million to countries in the region, including to BiH. Most of these funds have been provided through international aid agencies, for example the UN High Commissioner for Refugees, the World Food Programme and the International Committee of the Red Cross. The Australian Embassy in Vienna has a small direct aid program for BiH aimed at grass root humanitarian needs.

In June 2005 the Chairman of the Presidency at the time, HE Mr Borislav Paravac, visited Australia. That was the first high level visit to Australia. Australia opened an Honorary Consulate in Sarajevo on 3 January 2005.

Political Overview

Previously a constituent republic of the Socialist Federal Republic of Yugoslavia, BiH proclaimed independence in March 1992. This triggered a three-year conflict during which the three ethnic groups were at war with each other in varying alliances. The Dayton Peace Agreement, signed on 21 November 1995, put an official end to the fighting.

The Dayton Agreement endorsed the principle that BiH remain a single state within existing borders. It divided the country into two entities: the Federation of Bosnia-Herzegovina (the Federation), populated mainly by Bosniaks and Croats and comprising 51 per cent of the country; and the Republika Srpska (RS), with a predominantly Serb population, holding 49 per cent of the territory. Dayton set up a federal government with the following elements:

The Federation and the RS both have their own parliamentary assemblies.

The Dayton Agreement also established the Office of the High Representative (OHR) as the highest authority with powers to impose legislation and remove unsatisfactory officials. The High Representative (Miroslav Lajcak, former Slovak diplomat, since 30 June 2007) holds wide-ranging powers to impose laws and binding decisions in cases where the Government is unable to agree, or where it is deemed to be in the interest of the economic and political development of the country. The willingness by successive High Representatives to use these ‘Bonn Powers’ has been crucial to progressing reforms. The High Representative is also the Special Representative of the European Union (EU) in BiH. The OHR is also helping Bosnia to conclude negotiations on a Stabilisation and Association Agreement with the EU, and to enter NATO’s Partnership for Peace program.

The NATO-led Stabilisation Force (SFOR) had the task of maintaining peace on the ground in BiH from the end of the war in 1995, when troops totalled 60,000, to early December 2004. As the situation in BiH improved, the focus of its activities shifted from peacekeeping to crime prevention, principally targeting the trafficking of people, weapons and drugs.

In July 2004, The Council of the European Union decided to conduct a military operation in Bosnia and Herzegovina in the framework of the European Security and Defence Policy. In December 2004, the EU Force (EUFOR) took over from SFOR. EUFOR aims to build a stable, viable, peaceful and multiethnic country which co-operates peacefully with its neighbours and is on its way towards EU membership

NATO has maintained a small headquarters in Sarajevo with the task of providing advice on defence reform and certain operational tasks such as counter terrorism, supporting the International Criminal Tribunal for the Former Yugoslavia (ICTY) and intelligence sharing with the EU.

BiH is a member of the Stability Pact for Eastern Europe, which was established in June 1999 at the EU's initiative. The Stability Pact is a long-term conflict prevention strategy, in which more than 40 partner countries and organisations are joined in their efforts to foster peace, democracy, respect for human rights and economic prosperity in the region.

BiH was accepted as a member of the Council of Europe in April 2002, a significant achievement in terms of BiH’s desire to be part of European integration.

In November 2005 the European Union commenced negotiations with BiH on Stabilisation and Association Agreement (SAA). Progress will depend on the implementation of the police reform as well as on full cooperation with the International Criminal Tribunal for the Former Yugolslavia (ICTY) which requires the capture of outstanding indicted war criminals.

Recent political developments

The most recent general elections in Bosnia and Herzegovina took place in October 2006. Results showed a slight shift towards moderate parties who are now represented in the tripartite Presidency and Council of Ministers (cabinet). The three members of the Presidency are elected for a four year term.

HE Mr Nebojsa Radmanovic, HE Mr Haris Silajdzic and HE Mr Zeljko Komsic will rotate the presidency chairmanship, in eight month periods, over the period 2006-2010. President Komsic is currently serving as Chairman.

In February 2007, following considerable coalition negotiations, the BiH House of Representatives confirmed the members of the Council of Ministers. Prime Minister Nikola Spiric headed a 7 party coalition government, representing a wide range of political views. Prime Minister Spiric resigned on 1 November 2007 in protest at internationally supported measures to reform the decision-making process in BiH’s central government and parliament. However, in December 2007 he secured the approval of the parliament to return as Prime Minister.

NATO invited BiH to join the Partnership for Peace program at its Summit in Riga on 29 November 2006. Membership of the Partnership for Peace program is an important step towards joining NATO.

The most recent local elections took place in October 2004. Mayors of municipalities were chosen for the first time in direct election. While preserving power at both state and entity levels, nationalist, ethnically based parties, the Bosniak Party of Democratic Action (SDA), the Croatian Democratic Union (HDZ) and the Serb Democratic Party (SDS) gained power in the local communities.

The process of return of refugees and displaced persons has proceeded well, with around one million having returned to their pre-war homes. Of these, just under half are minority returnees.

Economic Overview

In May 2005 the World Bank stated that BiH had been successful in achieving macroeconomic stability. Anchored in a currency board arrangement, the local currency Konvertibilna marka (KM) remains stable. BiH has adopted the most liberal foreign trade regime in South East Europe. The World Bank has ranked Bosnia and Herzegovina as a lower middle-income country with a gross national income per capita of A$ 1,941. Approximately 66 per cent of GDP is created in the services sector, 23.9 per cent in industry, and 10.2 percent in agriculture. Since 1995, GDP has tripled, merchandise exports are up tenfold, and price stability has been maintained with inflation rates below 1 per cent in the past two years.

The absence of a single, integrated market still hampers economic development and deters foreign investment. The economy currently stands at only 70 per cent of its pre-war level. Poverty levels are still high at 25 per cent, and a further 30 per cent of all citizens live just above the poverty line.

Its GDP per capita is one of the lowest of the region. Between 1996 and 1999 real GDP growth, fuelled by high levels of foreign reconstruction aid, averaged above 30 per cent. However, GDP growth has since slowed, citing inadequate growth in domestic sources, particularly in private sector activity. The estimated GDP growth in 2006 was 6.2%. However, methodological issues concerning the reliability of official figures and sizeable black economies operating in both the Federation and Republika Sprska mean that BiH economic data should be interpreted cautiously.

Estimates of unemployment vary considerably, ranging from the mid-20s to as high as 45 per cent. Most employment in the Federation is within the government sector, international organisations present in the country and other services sectors.

BiH has one of the lowest rates of foreign investment in the region. Faster progress is still needed on key structural reforms, such as privatisation of large state enterprises and improvements in the business climate. Foreign Direct Investments (FDI) has reached close to 5 per cent of GDP. The most important FDI came from Croatia, Lithuania, Austria, Slovenia, Germany and Kuwait. 57.5 per cent of the FDI was placed in industry, 15.1 in banking sector, 4.6 per cent in trade and 4.2 percent in services. BiH’s success story is the banking sector which has been successfully privatised.

Last updated: 8/01/2008