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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.

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1. Retrospective overview of the economic and technological situation

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1 retrospective overview of the economic and technological situation

Bosnia and HerzegovinaFederation of Bosnia and HerzegovinaFederal Ministry of Energy, Mining and IndustrySPEAKER: Erdal Trhulj, Federal Minister of Energy, Mining and Industry (Ljubljana, Slovenia September 5-6 2011)


1 retrospective overview of the economic and technological situation

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 situation1

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 situation2

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 situation3

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 situation4

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 .

  • Adoption of the document„Development of the Industrial Policy in Federation of Bosnia and Herzegovina“


2 management of state capital in companies

2. Management of state capital in companies

Legal framework for performance of companies:

  • Constitution of Bosnia and Herzegovina,

  • Constitution of Federation of Bosnia and Herzegovina,

  • International agreements,

  • legal acts and bylaws.


2 management of state capital in companies1

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 companies2

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 companies3

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 companies4

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

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 privatization1

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 privatization2

3. Privatization

Agency for Privatization in Federation of Bosnia and Herzegovina:

  • approves and executes privatization of enterprises having parts in the area 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 privatization3

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 privatization4

3. Privatization

As regards the present privatization process, the following situation is registered :

  • - The total capital of 1450 enterprises with state ownership on the 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 privatization5

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.


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