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Potential Awaiting Realisation

The example of the economic benefits gained by Bosnia-Herzegovina from joining CEFTA testifies in support of the deepening of regional cooperation, but that requires stronger political will

The issue of regional economic cooperation has been discussed in Bosnia-Herzegovina for decades. In declarative terms, everyone favours the strengthening of this kind of cooperation with the countries of the region, regardless of whether that implies the region of the former Yugoslavia or the Western Balkans as a whole, but a consensus isn’t even on the horizon when it comes to the parameters and model from bridging the divides of the regional economy, with the main stumbling block represented by contrasting views on the possibility of excessive enthusiasm for this type of integration leading to a loss of state sovereignty.

If we disregard that dilemma, which in recent years has mainly boiled down to a choice between the Open Balkan initiative or the Berlin Process, strengthening regional cooperation remains an undeniable imperative in the context of creating essential preconditions for the Bosnia-Herzegovina economy to take more serious strides, with the country’s economy repeatedly and worryingly assessed by the World Bank as lagging as far as 60 years behind the EU average.

Within regional frameworks, BiH has significant potential in the fields of tourism, energy and wood processing, and in the arms and metals industries as a whole

The basic argument in support of this claim, which isn’t refuted by local businesspeople, economic experts or even politicians, regardless of their party philosophy, lies in the fact that the BiH economy is too weak for it to be able to realise the country’s development potential through independent participation in the global market competition, which is proven by the fact that BiH has an annual deficit in trade with the European Union – its main foreign trade partner by volume – totalling more than three billion convertible marks. In contrast, since the introduction of the Central European Free Trade Agreement (CEFTA), which came into force at year’s end 2007, the value of BiH’s annual trade with the countries of the Western Balkans and Moldova has almost tripled, with the country’s coverage of imports by exports improving from a modest 60 per cent to an average of 95 per cent.

Demonstrating just how much the region’s economic interconnectedness isn’t only necessary, but also inevitable and primarily natural, is the recent period of the Covid-19 pandemic, when global supply chains collapsed and the EU placed temporary restrictions or fully halted exports of numerous strategic products, which compelled the countries of the region to focus exclusively on their own production capacities and mutual cooperation.

An additional reason to fortify regional cooperation arises from the reduced competitiveness resulting from the fragmentation of former large economic systems that was conducted under the auspices of the failed experiment to base economic development on SMEs, which led to BiH and the other countries of the region disappearing from the markets of Iraq, Libya and many others. countries of the so-called third world, where the region’s major companies had contracted jobs worth hundreds of millions of U.S. dollars in the not-so-distant past. The possible return of companies from BiH to the aforementioned markets, or their conquest of profitable new markets, such as those of Qatar or the UAE, can only come through the establishment of regional consortia that might be able to take at least a slice of that rich investment cake that is currently in the firm grip of Western multinationals. Unfortunately, despite such ideas having been long present in the public sphere, and even officially promoted through initiatives that are now gathering dust – like the SEE 2020 project of the Council for Regional Cooperation that included the so-called diagonal cumulation of origin provision, or the joint production of specific sophisticated items with high added value intended for third markets, the declared goal of which was to create a million new jobs – they have remained dead letters to this day.

The period of the Covid-19 pandemic taught the countries of the region to focus exclusively on their own production capacities and mutual cooperation

From the perspective of BiH, the swiftest possible transition from talk of regional cooperation to tangible action is also welcome in light of the fact that, apart from the borders of the EU remaining closed to many products carrying the Made in BiH label and that it is hampered significantly in the international exchange of goods and services globally by being among the few countries that aren’t members of the World Trade Organization, the narrowness of the country’s market ensures that it doesn’t represent a particularly attractive destination for FDI inflows, the already small volume of which is decreasing year-on-year.

In the context of regional integration, a specific problem of BiH is nonetheless represented by its internal disunity on the economic front, as manifested through the functioning of its capital market via different stock exchanges for each of the country’s two entities, the division of the banking system, disparate fiscal policies and the nonexistence of any state economic strategy, all of which significantly diminish its comparative advantages in positioning itself as a significant regional player. And here the story goes full circle – back to a lack of political will, but apparently also to a lack of knowledge, particularly within regional frameworks, of how to turn the existing significant potential in the fields of tourism, energy, wood processing, arms and metals industries as a whole into advantages that make BiH a desirable regional partner for economic cooperation, but also serve as drivers of projects that will shift the country and the entire region from the “bear market zone” that it has represented for multiple decades into a durably stable “bull market zone”.

Opportunities

From the perspective of BiH, the tangible implementation of regional cooperation is also welcome in light of the fact that the borders of the EU remain closed to many products carrying the Made in BiH label.

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