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Federation of Bosnia and Herzegovina – A Parallel Crisis
Federation of Bosnia and Herzegovina – A Parallel Crisis
Table of Contents
  1. Executive Summary
Report 209 / Europe & Central Asia

Federation of Bosnia and Herzegovina – A Parallel Crisis

Whether the Federation – the mostly Bosniak and Croat part of Bosnia and Herzegovina – can solve its government crisis after 3 October elections will go a long way to determining whether the country can survive.

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Executive Summary

The Federation of Bosnia and Herzegovina (FBiH), the larger of Bosnia and Herzegovina’s two entities, is in crisis. Disputes among and between Bosniak and Croat leaders and a dysfunctional administrative system have paralysed decision-making, put the entity on the verge of bankruptcy and triggered social unrest. Much focus has been on the conflict that pits the Serb-dominated Republika Srpska (RS) against the Federation, but the parallel crisis within the Federation also deserves attention. The need for overhaul of the FBiH has been ignored because of belief that state-wide constitutional reform would solve most of its problems, but any state-level reform seems far off. Bosnia’s challenges all have echoes at Federation level, though in simpler form. Reform in the Federation, starting with establishment of a parliamentary commission, is achievable and could give impetus to state-level reform, while improving the livelihoods of the people in Bosnia’s larger entity. If it does not happen, Bosnia, which was wracked by three and a half years of war in the 1990s, may well slide toward new political and economic ungovernability.

General elections on 3 October 2010 will likely produce more unwieldy, divided coalitions at state and Federation levels that will have to confront urgent economic and social woes. In stark contrast to RS, however, the Federation, primarily a Croat-Bosniak condominium, is highly decentralised. It is loved neither by the Bosniaks, who would like to abolish it together with RS in favour of a unitary Bosnian state, nor by the Croats, who want an entity of their own. A workable balance between majority rule and minority rights eludes the Federation. Its elaborate, internationally-designed mechanisms and quotas are easily circumvented and subverted.

The Federation is endowed with only a few areas of exclusive jurisdiction and shares most of its competencies in a haphazard way with lower levels of administration. The result is a dense bureaucracy, whose various parts function in competition or open conflict with one another, and a suffocating thicket of confusing and often contradictory legislation and regulation. Federation administrative bloat and disorder make Bosnia’s larger entity one of Europe’s worst places to do business and choke its people’s economic potential.

Long dominated by two large parties, the Bosniak Party for Democratic Action (Stranka demokratske akcije, SDA) and the Croatian Democratic Union (Hrvatska demokratska zajednica, HDZ), the Federation political scene has fragmented. The SDA-HDZ duopoly broke down in acrimony a number of years ago, as both lost dominance of their respective ethnic constituencies to hard-line or civic-oriented competitors. A bizarre five-party coalition of rivals, with no common platform or interests apart from retention of power and sharing economic spoils, governs the Federation but since 2009 has been unable to take basic decisions, such as the appointment of judges to the Constitutional Court. As the coalition spans the political and ethnic spectrum, however, it is hard to unseat.

Nevertheless, the Federation cannot ignore the economic crisis for long. It has resources and revenues, but they are ineffectively exploited and distributed. Big industries are beholden to party leaders. Friends in high places are indispensable to cut through complex regulations even for simple transactions. Private companies – often belonging to politicians’ families or friends – exploit the poorly-regulated natural resources for their own gain, with little benefit to local communities. Voters expect their share of benefits, too; Bosniak parties especially have bought support with costly state payouts to favoured groups – notably veterans, pensioners and persons with disabilities – who often abuse the system. International Monetary Fund (IMF) mandated cuts sparked violent demonstrations in 2009-2010. The new government will face a difficult choice; to cave in to protests and lose international financial support, which would lead to Bosnia’s financial collapse, or make long-needed budget cuts and reforms and face public wrath.

Revitalising the Federation is essential for Bosnia’s survival. A well-functioning entity would be more attractive to Bosnian Croats and Serbs and would be more convincing in negotiations with RS at the state level. There are signs of a more realistic attitude among some Croat and Bosniak leaders, a willingness to consider reforms short of their respective ideals. The Federation has much unrealised economic potential waiting to be unlocked by privatisation and regulatory reform. Its successful overhaul could turn the tide and create positive momentum for state-level compromises. On the other hand, continued worsening of relations among Bosniak, Croat and Serb leaders, compounded by a fiscal meltdown after the 2010 elections, could transform public dissatisfaction into ethnic tensions and violence.

Sarajevo/Istanbul/Brussels, 28 September 2010

Report 232 / Europe & Central Asia

Bosnia’s Future

While the physical scars of the 1992-1995 Bosnia war have healed, political agony and ethnic tension persist. Real peace requires a new constitution and bottom-up political change.

Executive Summary

Bosnia and Herzegovina (BiH, or Bosnia) poses little risk of deadly conflict, but after billions of dollars in foreign aid and intrusive international administration and despite a supportive European neighbourhood, it is slowly spiralling toward disintegration. Its three communities’ conflicting goals and interests are a permanent source of crisis, exacerbated by a constitution that meets no group’s needs. The political elite enjoys mastery over all government levels and much of the economy, with no practical way for voters to dislodge it. The European Union (EU) imposes tasks BiH cannot fulfil. A countrywide popular uprising torched government buildings and demanded urgent reforms in February 2014, but possible solutions are not politically feasible; those that might be politically feasible seem unlikely to work. Bosnia’s leaders, with international support, must begin an urgent search for a new constitutional foundation.

The international project to rebuild Bosnia has had success: war’s physical scars are largely gone, and the country is peaceful. The political agonies, however, show the intervention’s limits. Years of well-intentioned reforms, imposed or urged, have left a governing structure leaders circumvent, ignore or despise. May’s floods left scores dead and thousands homeless, exposing the price of poor governance. With growing frequency, Bosnians ask the questions that preceded the 1992-1995 war: shall it be one country, two, or even three; if one country, shall it have one, two or three constituent entities, and how shall it be governed?

The heart of the problem is in Annex 4 to the Dayton Peace Agreement, known as the constitution (and in several changes imposed by courts and international officials). It defines BiH as a state of two entities, in effect but not explicitly federal, but also the state of three constituent peoples (Bosniaks, Croats, Serbs), and yet, simultaneously, of all citizens. A suffocating layer of ethnic quotas has been added, providing sinecures for officials increasingly remote from the communities they represent. The tensions created by constitutional schizophrenia are pushing BiH to the breaking point. A new design is needed: a normal federation, territorially defined, without a special role for constituent peoples, but responsive to the interests of its three communities and the rights of all citizens.

The state administration’s need to reform is made acute by a 2009 decision of the European Court of Human Rights (ECtHR) that in effect requires BiH to change the ethnicity-based way it chooses its chief executive and part of its legislature. Existing proposals try to squeeze the constituent peoples into an ostensibly ethnicity-blind structure on top of which a complicated network of indirect elections would allow party leaders to choose the executive with as little democratic input as possible. The EU and the outside world support this tinkering with Dayton to satisfy the decision, though such proposals have manifestly failed. Bosnians need to rebuild their political structure from the bottom up.

There is no consensus on where to start, but Bosnia may have to break from its political system based on constituent peoples and their rights. Crisis Group has not reached this conclusion lightly. It reflects long experience and observation that no one has been able to frame a broadly attractive vision on the existing flawed basis. With stresses and frustrations accumulating in all communities, Bosnia must conceive new foundations to survive. Agreement may take years and much experimentation and debate, but the search should begin.

BiH is home to three political communities: those primarily loyal to the Bosnian state, usually but not always Bosniaks; those loyal to Republika Srpska (RS), usually Serbs; and those desirous of Croat self-government, usually Croats. Giving the Croats what they want, their own entity to make a three-entity Bosnia, is absolutely rejected by Bosniaks. Building virtual representative units for the three communities, possibly with new emphasis on municipalities as basic building blocks, is intellectually plausible but requires a leap of faith few seem ready to take. A purely civic state is inconceivable to Serbs and Croats.

Neither leaders nor civil society have deeply explored alternatives to three constituent peoples in two entities; any consensus would take time. Nevertheless, the goal should be clear. The head of state should reflect Bosnia’s diversity, something a collective does better than an individual. The same body could be the executive government. Some decisions should require consensus, others a majority. All three communities should be represented, not necessarily in equal numbers. There should be no ethnic quotas; representation should reflect self-defined regions and all their voters. Poorly performing, unnecessary state agencies and ministries should be slimmed or abolished, with powers reverting to the entities; but the state would need new ministries and agencies required for EU membership. The ten cantons in the larger of BiH’s two entities, the Federation (FBiH), are an underperforming, superfluous layer. They could be abolished, their powers divided between the municipalities and the entity government.

Political culture is part of the problem; an informal “Sextet” of party leaders in effect controls government and much of the economy. A multi-ethnic coalition persists, election to election, with only minor adjustments. Membership is earned by winning opaque intra-party competitions in which voters have little say. Change in this system can only come from within: Bosnians should join parties and participate in genuine leadership contests. Sextet power is further buttressed by control of hiring, investment and commercial decisions at state-owned firms, a situation that chokes private investment and growth.

Bosnia is unimaginable without the work of international officials who did much to shape political institutions and implement peace, but the international community has become more obstacle than help. BiH is trapped in a cycle of poorly thought-out, internationally-imposed tasks designed to show leaders’ readiness to take responsibility but that put that moment forever out of reach. The only way to encourage leaders to take responsibility is to treat the country normally, without extraneous tests or High Representatives. The EU could signal a new start by stating it will receive a membership application – the first of many steps on the long accession road. It should then be an engaged, not over-didactic partner in Bosnia’s search for a way to disentangle the constitutional knot.