World Bank2012-06-212012-06-212005-05https://hdl.handle.net/10986/8676This Country Economic Memorandum (CEM) takes stock of economic developments in Bosnia and Herzegovina (BH) since the end of the 1995 war, and, discusses potential sources of high, sustained growth that BH could exploit, as European Union integration advances. The report formulates policy recommendations that would help maximize the potential of the country's economy to achieve higher real GDP growth, and increased job generation. In doing so, the CEM focuses on four priority policy areas: macroeconomic management, international trade policy, business environment and enterprise reform, and, labor market policies. The report conveys the need to significantly build human capital, strengthen the institutional framework, particularly focusing on social sectors, and, develop infrastructure. Despite the country's recent macroeconomic stability, there are still uneven structural policies, and a largely unfinished agenda. The single most important macroeconomic imbalance is the persistent current account deficit. The analysis presented in this report suggests that it is the result of low domestic savings rates, rather than high investment. The rate of investment is not above the average for transition economies, whereas the share of domestic savings that can finance it is particularly low. The need for higher domestic savings raises the question of the adequacy of BH's current fiscal policy stance to serve economic growth. In the area of trade, the recent sluggish performance can hardly be attributed to a policy stance that has pursued liberalization and integration. The real constraints to a more dynamic export performance lie in the business environment and investment climate. The challenges of broad-based enterprise reforms essentially center around two main issues a) removal of structural barriers to the creation, and functioning of competitive markets; and, b) establishment of rules, procedures and related institutions that create incentives to facilitate business transactions. Challenges in the labor market are numerous: unemployment is high and rising, and, jobs being created are scarce, mainly in the informal sector. The report provides several recommendations, among which some suggest the need for changes in privatization regulations, of increased labor market flexibility, of fundamental changes in corporate ownership rules, as well as in the rules for privatization of investment funds, and most importantly, for adequate sequencing of reforms and improved governance.en-USCC BY 3.0 IGOADEQUATE SAFETY NETSADMINISTRATIVE ARRANGEMENTSADMINISTRATIVE FRAMEWORKAGRICULTUREANTI-COMPETITIVE PRACTICESAPPARELAPPAREL INDUSTRYBANKING SUPERVISIONBANKRUPTCYBANKRUPTCY LAWSBARRIERS TO ENTRYBILATERAL FREE TRADE AGREEMENTSBORDER TRADEBRAIN DRAINBUSINESS ENVIRONMENTCAPITAL MARKETSCOMMERCIAL BANKSCOMPETITION POLICYCOMPETITIVE MARKETCOMPETITIVE MARKETSCOMPETITIVE PRESSURESCOMPETITIVENESSCONSENSUSCONSOLIDATIONCORPORATE GOVERNANCECORRUPTIONCOURT SYSTEMCPICROWDING OUTCURRENCYCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT DEFICITDEBTDECISION - MAKINGDEPOSITSDEVELOPMENT STRATEGYDOMESTIC COMPETITIONDOMESTIC MARKETECONOMIC GROWTHECONOMIC TRENDSEMPLOYMENTEMPLOYMENT GENERATIONENTERPRISE REFORMENTERPRISE RESTRUCTURINGEXCHANGE RATEEXCHANGE RATE POLICYEXCHANGE RATESEXPORT PERFORMANCEEXPORTSEXTERNAL DEBT RATIOSEXTERNAL FINANCINGFINANCIAL INSTITUTIONSFINANCIAL SECTORFISCALFISCAL COSTSFISCAL DEFICITFISCAL POLICYFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN RESERVESFOREIGN TRADEFORESTRYFORMAL EMPLOYMENTFREE TRADEGDPGLOBAL MARKETSGOVERNMENT INTERVENTIONGOVERNMENT SECTORGOVERNMENT SPENDINGHUMAN CAPITALHUMAN RESOURCESIMPORTSINDUSTRIAL POLICYINDUSTRIAL PRODUCTIONINFLATIONINFORMAL ECONOMYINFORMAL SECTORINSTITUTIONAL ARRANGEMENTSINSTITUTIONAL REFORMSINTEREST RATESINTERNATIONAL TRADEINTERNATIONAL TRADE POLICYINVESTMENT CLIMATEINVESTMENT SPENDINGLABOR FORCELABOR MARKETLABOR MARKET FLEXIBILITYLABOR MARKET INSTITUTIONSLABOR MARKET POLICIESLABOR MARKETSLABOR PRODUCTIVITYLABOR SUPPLYLEGAL SYSTEMLEGISLATIONLEVEL PLAYING FIELDLIQUIDATIONMACROECONOMIC MANAGEMENTMACROECONOMIC POLICYMACROECONOMIC STABILITYMARKET DISCIPLINEMARKET LIBERALIZATIONMARKET SHAREMINIMUM WAGEMONETARY POLICYNATIONALSNET INFLOWSPOLICY UNCERTAINTYPOLITICAL APPOINTMENTSPOLITICAL ECONOMYPRIVATIZATIONPRODUCTIVITYPROFIT SEEKINGPROFITABILITYPROPERTY RIGHTSPROTECTIONISMPROTECTIONIST POLICIESPUBLIC ADMINISTRATIONPUBLIC EXPENDITUREPUBLIC EXPENDITURESPUBLIC FINANCEPUBLIC SECTORPUBLIC SERVICESRATIONALIZATIONREAL EXCHANGE RATEREAL GDPREGULATORY FRAMEWORKRESERVE REQUIREMENTSSAVINGSSAVINGS RATESSOCIAL CAPITALSOCIAL PROGRAMSSOFT BUDGET CONSTRAINTSSTATE-OWNED ENTERPRISESTARIFF RATESTARIFF SCHEDULETAX ADMINISTRATIONTAX AUTHORITIESTAX AUTHORITYTAX RATESTAXATIONTRADE DATATRADE FACILITATIONTRADE PERFORMANCETRADE POLICIESTRADE REGIMETRANSITION ECONOMIESUNEMPLOYMENTUNEMPLOYMENT RATEUNSKILLED LABORWAGE DISTRIBUTIONWAGESWORKING CAPITALWORLD MARKETSWorld Bank10.1596/8676