Download Bosnian Case

Bosnia and Herzegovina
Federation of Bosnia and Herzegovina
Federal Ministry of Energy, Mining and Industry
SPEAKER: Erdal Trhulj, Federal Minister of Energy, Mining
and Industry
(Ljubljana, Slovenia September 5-6 2011)
1. Retrospective overview of the economic and
technological situation
 Gross domestic product (GDP) in 1987 amounted to
68% of the average GDP of Yugoslavia ;
 The industry generated approximately 39% of the
GDP, employed approximately 44% of labor force and
participated with 99% in the export of the country. ;
 In 1991, BiH achieved a foreign trade exchange surplus,
and with a GDP per capita of approximately 2,400 USD it
was classified into medium-developed countries in the
world ;
1. Retrospective overview of the economic and
technological situation
 In 1961, the industry of BiH employed 54,3% of all labor
force, in 1971 57,8%, in 1981 58,4%, and in 2000 only
35,2%.
 After the war 1992-1995 GDP in Bosnia and
Herzegovina fell to approximately 25% of the pre-war
value, the industrial production decreased by more than
90%, with 70-80% unemployed and more than 1,4
million of people that fully depended on humanitarian
assistance;
 War damage in BiH were estimated exceeding 240
billion USD. The total damage for the economy of BiH
were estimated as more than 110 billion USD;
1. Retrospective overview of the economic and
technological situation
 The beginning of economy reforms in BiH starts
with the establishment of a macroeconomic
stabilization, introduction of a set of monetary
and financial measures: restrictive monetary
policy, convertible currency, financial discipline
and tight budgetary restrictions;
 The process of industry restructuring was very
slow, and the structure primarily included
branches based on the use of natural resources
and cheap labor force, while the industry of high
technology and large additional values
developed slowly;
1. Retrospective overview of the economic and
technological situation
 Numerous changes occurred in this post-war period. The
real GDP and export multiplied, the inflation was
stabilized, the banking system was almost completely
privatized, around 50% of production was generated by
the private sector. The infrastructure was continuously
improved, the banking sector was developed, and
privatization of state property started;
 By the end of 2000 the domestic market had been
almost fully liberalized and numerous measures of
influence of the state in market pricing were removed.
One of the key economic goals of Bosnia and
Herzegovina in this period was the economic
liberalization and deregulation with the aim of attracting
foreign direct investments
1. Retrospective overview of the economic and
technological situation
 The structure of the private sector that was developed in
the meantime was insufficient. In 2001 around 74% of all
private companies dealt with services, and trade made
54%;
 In 2003, there were more than 29.000 companies
registered in BiH the main activity of which was trade.
Only around 14% of private companies performed an
activity related to production or product processing
 Over the last several years the reform processes in BiH
have been slow .
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Adoption of the document „Development of the
Industrial Policy in Federation of Bosnia and
Herzegovina“
2. Management of state capital in companies
Legal framework for performance of companies:
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Constitution of Bosnia and Herzegovina,
Constitution of Federation of Bosnia and Herzegovina,
International agreements,
legal acts and bylaws.
2. Management of state capital in companies
 The Constitution of Bosnia and Herzegovina, i.e. Anex IV
of the General Framework Agreement for Peace in
Bosnia and Herzegovina and the Constitution of
Federation of Bosnia and Herzegovina take as a starting
point property or ownership as the basic human right and
it needs to be stressed out that the Law on
Transformation of the Socially Owned Property (Official
Gazette of the Republic of Bosnia and Herzegovina, No.
33/94) implemented the transformation of socially owned
property into state owned and unlike earlier socially
owned property, state property in Bosnia and
Herzegovina was completely made equal in everything
with privately owned property;
 Application of OECD principles of corporative
management and OECD guidelines for corporative
management of state enterprises.
2. Management of state capital in companies
The most significant regulations in this field are:
 Company Law (Official Gazette of Federation of Bosnia and
Herzegovina No. 23/99, 45/00, 2/02, 6/02, 29/03, 68/05, 91/07,
84/08, 88/08, 7/09 and 63/10);
 Law on Public Enterprises in the Federation of Bosnia and
Herzegovina („Official Gazette of FB&H“, No 8/05, 81/08 and 22/09);
 Decree on performance of authorisations of Federation of Bosnia
and Herzegovina authorities in companies with state capital
participation („Official Gazette of Federation of Bosnia and
Herzegovina“ No. 35/11);
 Decision of the Government of Federation of Bosnia and
Herzegovina on determining the list of companies where
authorisations on the basis of state capital participation are
performed by authorities of Federation of Bosnia and Herzegovina
(„Official Gazette of Federation of B&H“,No. 35/11).
2. Management of state capital in companies
Authorities of a company:
 Assembly, as the highest authority within which the stakeholders or
share owners express their interest, personally or through a
plenipotentiary ;
 Supervisory board, as an authority located between the assembly
and management and is responsible for ensuring optimal relation
between the owner and operative operation of the company ;
 Management is the management authority of the company the
specific role of which is reflected in the operative guidance of the
company's business operation, and
 Audit board, as an authority independent from the supervisory board
and company management executing continuous company's
financial management control, .
2. Management of state capital in companies
 There is a procedure ongoing for passing a specific law which would
regulate through the Parliament of Federation of Bosnia and Herzegovina
the field of state capital management in companies with state capital
participation in a unique and integral way.
 According to present contents of Pre-draft Law on Management of State
Capital in Companies in Federation of Bosnia and Herzegovina, with the
note that in later phases of passing it can go through significant
amendments, this law would regulate the issue of elaboration of adequate
strategies and plans in this field, then authorisations for management of
state capital, establishment of new companies with 100% state capital
participation, execution of authorisations on the basis of state capital
participation, administrative control of internal acts of companies with
majority state capital participation aiming at their mutual harmonisation, as
well as harmonisation with domestic regulations and European Union
regulations, specific provisions on the procedure in public registers and
certain restrictions regarding salaries and other payments in companies with
state capital participation in Federation of Bosnia and Herzegovina .
3. Privatization
 In Federation of Bosnia and Herzegovina
privatization respresents one of the most
important but most complex transition processes
with repercussions on numerous other
processes in the country .
 Privatization through the sale of state capital, but
also through investing of other type, such as
establishment of joint companies,
recapitalization of the existing companies,
establishment of new companies, acquisition
and merger of companies with adequate
strategic companies etc .
3. Privatization
The most significant regulations in this field are:
 Law on Privatization of Enterprises („Official Gazette of
Federation of B&H“, No. 27/97, 8/99, 32/00, 45/00,
54/00, 61/01, 27/02, 33/02, 28/04, 44/04, 42/06 and
4/09), as the basic law regulating this field;
 Law on Agency for Privatization („Official Gazette of
Federation of B&H“, No. 18/96 and 2/02) which
implemented the establishment of Agency for
Privatization in Federation of Bosnia and Herzegovina,
and
 Other legal acts and bylaws.
3. Privatization
Agency for Privatization in Federation of Bosnia and Herzegovina:
 approves and executes privatization of enterprises having parts in the area
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of more cantons and enterprises showing in their starting balance-sheets
partially or completely the same rights and obligations and the same capital;
organises and fosters education and professional training in the field of
privatization;
provides advisory assistance to canton agencies for privatization;
controls and supervises the enforcement of the law and other regulations in
the field of privatization and coordination of the work of canton agencies for
privatization;
arbitrates in disputes among canton agencies for privatization and other
participants in the privatization process, on their request, and
organises and coordinates information-propaganda activities in the field of
privatization.
3. Privatization
 The Government of Federation of Bosnia and
Herzegovina adopted the „Development Strategy of
Federation of Bosnia and Herzegovina from 2010 to
2020“ which, inter alia, elaborates the problem of
privatization and it defines global plans in privatization
until 2013.
 This subject matter is further elaborated in annual
privatization plans and work programs of the Agency for
Privatization in Federation of Bosnia and Herzegovina,
for which the Government of Federation of B&H gives its
consent.
3. Privatization
As regards the present privatization process,
the following situation is registered :
 - The total capital of 1450 enterprises with state ownership on the
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day December 31 1999 amounted to 18,72 billion convertible marks
(KM);
- The capital in state ownership amounted to 17,3 billion KM;
- Private capital (ownership transformation previously implemented)
amounted to cca. 1,4 billion KM;
- 13,5 billion KM determined for privatization, out of which 6,3 billion
KM through distribution of shares through the public;
- It is planned that cca. 3,8 billion KM remain in state ownership .
3. Privatization
Privatization results expressed through the number of enterprises on
the day November 30 2010 :
 Number of enterprises in the register of the Agency for
Privatization in Federation of Bosnia and Herzegovina 1450;
 Privatization process initiated for 1371 enterprises (93,9%);
 273 enterprises were privatized through the method of small
privatization;
 351 enterprises were privatized through the method of tender
sale in large privatization;
 747 enterprises were privatized completely or partially through
the distribution of shares through the public;
 Privatization of 1075 enterprises (73,3%) was finished;
 The total of 2526 subjects were sold according to conditions of small
privatization.