Bosniak-Croat Federation 'Ungovernable' says ICG

“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,” the International Crisis Group, ICG, said in a report on Tuesday.

The ICG warned that the need for overhaul of the federation has largely been ignored out of a belief the state-wide constitutional reform would solve most of its problems.

But as an agreement on state-level reforms remains elusive, the federation problems continue to multiply, it said.

“Reform in the federation ... is achievable and could give impetus to state-level reform, while improving the livelihoods of the people in Bosnia’s larger entity,” the report said.

“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,” it added.

The 1995 Dayton Peace Agreement which ended Bosnia’s 44-month war, carved the country into two highly autonomous parts, the Croat-Bosniak federation and Serb majority Republika Srpska.

Each entity has its own government, parliament and presidency, but the two are linked by weak state-level institutions.

The federation was further divided into 10 cantons and endowed with only a few areas of exclusive jurisdiction. Most of its competences are shared with the cantons in a haphazard way.

This, ICG warned, has made the federation “one of Europe’s worst places to do business” and “chokes its people’s economic potential”.

As each of the 10 cantons has its own parliament and government responsible for local issues, it leaves a lot of government posts to fill and encourages large scale cronyism, ICG said.

“Big industries are beholden to party leaders. Friends in high places are indispensable to cut through complex regulations even for simple transactions,” the report said.

“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,” it added.

Ruling elites are buying public support with costly state payouts to favoured groups who often abuse the system.

The ICG said that revitalising the federation was “essential for Bosnia’s survival”, adding that some Croat and Bosniak leaders were showing signs of willingness to consider reforms.

The think-tank suggested establishing a special parliamentary commission to consider constitutional, legal and structural reforms through consultations with parties, civil society and local and international experts.

The successful overhaul “could turn the tide and create positive momentum for state-level compromises,” the report said.

“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,” it concluded.