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Low Hanging Fruit - Towards a Compact for Agricultural Growth in Bosnia and Herzegovina

14 June 2015 by Valery Perry

Low Hanging Fruit -Towards a 'Compact for Agricultural Growth' in Bosnia and Herzegovina

DPC Blog post, Valery Perry

June 8, 2015

( BHS verzija - BCS version )

It’s official – after years in deep-freeze, the Stabilization and Association Agreement (SAA) entered into force on June 1. Judging from the press releases, this should pave the way to a new commitment by BiH’s political leaders as they demonstrate renewed commitment to BiH’s progress in the regatta towards Brussels. The reform agenda will be guided in spirit by the requirements of the EU accession process, but shaped, prioritized and implemented by BiH’s ruling parties, elected in October and co-existing in a shaky and ideologically incoherent range of coalitions at various levels.

This development follows an absurdly long post-election process of drafting an ultimately vague, non-committal and un-measureable "irrevocable written commitment to reform,” through which governments at all levels – state, entity, canton – have adopted the talking points propounded by the international community since the inauguration of the EU’s new approach towards BiH following the autumn elections. These talking points are reminiscent of Bill Clinton’s successful 1992 campaign, which centered on the slogan, "It’s the economy, stupid.”

References to uncomfortable topics such as Sejdic-Finci or constitutional reform are "out.”

References to vibrant small and medium enterprises, business friendly legislation and regulatory frameworks, labor-responsive educational systems and youth- and women-focused entrepreneurial schemes are most definitely "in.”

It is therefore surprising that one example of – literal – low-hanging economic reform fruit is not being aggressively pursued or promoted by top-level actors, whether domestic or international: agricultural reform and rural development through the establishment of a state-level Ministry of Agriculture and accompanying development strategy.

This need has long been acknowledged. A vast proportion – some statistics suggest up to 20% – of BiH’s population is reliant directly or indirectly on the agricultural sector.[1] The 2006 April Package included a reform to establish such a ministry, recognizing the pain the lack of a strategic direction for this critical economic sector was having on BiH’s still rural-dependent economy. While the package failed (by a mere 2 votes, in spite of securing the support of SNSD at the time), BiH’s need for this capacity continues, and has became even more dire.

Through 2010, the annual European Commission Progress Reports openly discussed the possibility of BiH having this Ministry.[2] BiH’s loss of market access for BiH dairy and meat producers once Croatia entered the EU in 2013 and left CEFTA was an economic disaster long in the making.

In addition to being directly relevant to the new focus on economic development, agriculture is also closely interlinked with another "hot” topic: corruption. Present agricultural subsidy practices remain married to clientelistic patronage games and divorced from market demand and long-term sectoral strategic development.[3]

Some will immediately suggest that a Ministry is not needed; the parties and institutions and politicians and leaders simply need to "coordinate” to get the job done. There is over a decade of evidence showing that while this could happen, it quite clearly has not, and is not happening. BiH’s inability to "coordinate” its way out of its policy mess has been evident for years; some estimates suggest that the country lost out on over 300 million Euro in IPARD funds from 2007-2013. [4] If there had ever been genuine interest in coordination, these problems would have long since been solved. The 2014 floods had a disproportionate effect on rural communities in the third of the country affected by this natural disaster. The notion that there will be an arduous process of negotiation to regulate each and every agricultural product (today potatoes, tomorrow…. turnips!) would be laughable if it were not so short-sighted.[5]

There is a ready-made constituency of support for the establishment of a state-level Ministry of Agriculture. The NGO Green Council has studied the issue and the impact of the lack of this capacity on the BiH economy, including a cost-benefit analysis demonstrating how much the country – itself a very small market in dire need of economies of scale to compete – loses due to its inability to exploit this sector. [6] A group of farmers from throughout BiH interested more in economic common sense than political party-driven policy agendas has coalesced as well to seek support for this initiative.[7] In mid-May, a discussion on the topic of BiH’s agriculture potential and challenges was held with the support of the Belgian Embassy, including local officials, business and civil society representatives and several embassy representatives.

All of the pieces needed for a policy-driven reform initiative are in place.

So, why isn’t this issue front and center on the agendas of all policy makers?

A cynical observer might suspect that as long as the RS leadership remains ideologically against any development at the state level, international officials who often confine their interactions to such party players might be reluctant to say anything at all that could make their primary interlocutors uncomfortable, without regard to the extent to which such a position may be out of step with economic realities or the interests of the country’s citizens.

However, even the most hardened observers would have to admit that the EU’s influence in terms of agricultural markets – and the amount of money allocated to agricultural subsidies throughout the Union each year – place it in the key position to drive this agenda. The EU justifiably requires that its food safety standards be met through rigorous and consistently implemented inspection and certification mechanisms. How might the average EU consumer choose between organic berries certified as high quality from Poland, Germany or Serbia, vs. one of BiH’s myriad and completely unknown sub-units? Entities and cantons mean nothing to the average non-Bosnian EU consumer. Is it realistic to think that BiH’s farmers can compete in the absence of a concerted strategy aimed at ensuring that every opportunity to exploit EU market access is exploited?

The Chairman of the Council of Ministers, Denis Zvizdić, has noted his interest in pursuing the establishment of a Ministry of Agriculture on several occasions; however, there has been neither domestic legislative movement on this, nor international statements of support for such a reform.[8]Continued vague pronouncements and endless peripheral workshops and project activities are trumping prioritization of this concrete policy goal, with real implications for hundreds of thousands of citizens.

The fact that it is well known that Milorad Dodik will oppose this move should in fact make support for this policy easier; his position and objections are predictable, and easily debunked with the available cold, hard economic facts. Polling shows citizen support – including in the RS – for this reform, and organizations like Green Council and the Union for Rural Development in BiH show that there are civic actors willing to work to strengthen this constituency and support policy change and implementation. These activists need top-down support, from reform-minded BiH politicians and the international community alike.

BiH has missed out on millions of Euro of economic opportunities due to the proven ineffectiveness of ill-thought out and unworkable "coordination” built on promises rather than on institutions working according to a concrete strategy and mandate. If there is truly interest in improving the country’s economy, support for this reform should be a no-brainer, and should be moved to the top of the reform agenda.



[1] See World Bank data available at http://data.worldbank.org/indicator/SL.AGR.EMPL.ZS. Before the war agriculture in BH made up around 12-14% of GDP, and with regional variation has played a similarly significant role in the post-war period. Bajramovic, Sabahudin. "The Status and Contrains [sic] of the Agriculture Sector in Bosnia and Herzegovina and the Country Food Security Situation.”FAO project TCP/BiH/3302. Available at http://www.fao.org/fileadmin/user_upload/Europe/documents/Events_2011/BIHNAPFS/AgricBiH_en.pdfEstimates suggest that the sector employs approximately 20% of employment in BiH. "Bosnia and Herzegovina Agriculture and Food Processing Industry.” BiH Foreign Investment Promotion Agency (FIPA). 2011. Available at http://fipa.gov.ba/doc/brosure/Agriculture%20and%20Food%20Industry.pdf

[2] Dick, Patrick. "Requirements and Reform, Cause and Effect: A Review of the European Union Progress Reports for Bosnia and Herzegovina for the Fulfillment of the Copenhagen Criteria.” Democratization Policy Council Policy Note #1. November 2012. Available at http://www.democratizationpolicy.org/uimages/pdf/dpc_policy_note_new_series_final.pdf

[3] A 2013 Transparency International report identified several cases of irregularities regarding the allocation of agriculture subsidies. See "BiH: Korupcije najviše u državnoj upravi.” Al Jazeera. 25 March 2013. Available at http://balkans.aljazeera.net/vijesti/bih-korupcije-najvise-u-drzavnoj-upravi. In addition, the Republika Srpska Ministry of Agriculture, Forestry and Water management received a negative audit report for both 2013 and 2014, with the general auditor reporting irregular subsidy allocation practices, and noting that many people/farmers that received subsidies are not even registered as farmers or agricultural workers. See "Negativan izvještaj o Ministarstvu poljoprivrede.” BN Televizija. 10 February 2015. Available at http://www.rtvbn.com/333131/Negativan-izvjestaj-o-Ministarstvu-poljoprivrede;"Ministarstvu poljoprivrede RS ponovo negativan revizorski izvještaj.” Istinito. 5 July 2014. Available at http://istinito.com/index.php/bih/drustvo/item/22104-ministarstvu-poljoprivrede-rs-ponovo-negativan-revizorski-izvjestaj.html

[4] "Cost Benefit Analysis of Establishment of the Ministry of Agriculture, Food and Rural Development of Bosnia and Herzegovina. Green Council. 2014. Available at http://green-council.org/publications/; for a list of IPARD funds lost due to the lack of a strategy for receiving such funds, see http://green-council.org/1037/. See also "Comparison of Croatia and Bosnia and Herzegovina Rural Development Funding Absorption.” Catalys. Available at http://www.catalys.org/wp-content/uploads/2013/03/Comparison-of-Croatia-and-Bosnia-Herzegovina-rural-development-funding-absorption.pdf

[5] For more on the Great Potato Export Debate, see "Export of Potatoes to the EU.” Delegation of the European Union to Bosnia and Herzegovina. 31 March 2015, available at http://europa.ba/?post_type=post&p=11403; see also "Bosnia and Herzegovina: EU to Allow Export of Potatoes from BiH.” US Department of Agriculture, Foreign Agriculture Service. 8 May 2015. Available at http://www.fas.usda.gov/data/bosnia-and-herzegovina-eu-allow-export-potatoes-bih

[6] "Establishment of the BiH Ministry of Agriculture, Food and Rural Development and Other Structures, as a Way of Achieving Economic Progress for BiH In the EU Integration Process.” Green Council. June 2013. Available at http://green-council.org/WP/wp-content/uploads/2013/09/Broshura_engleska-verzija_v3.pdf

[8] "Zvizdić: Neću insistirati na prenosu nadležnosti.Sarajevo-rs.com.3 April 2015. Available at http://www.sarajevo-rs.com/index.php?option=com_k2&view=item&id=1763:zvizdic-necu-insistirati-na-prenosu-nadleznosti&Itemid=120