It is my great pleasure to address the participants of this year’s Regional Economic Forum for the South East Europe, which is held for the fourth time, topic is “Competitors and partners on the path to Europe”.

The presence of such a large number of Heads of States clearly speaks about the importance of the Forum itself and the selected topic.

Professor Zlatko Lagumdžija’s address about the latest Report of the World Economic Forum and the analysis of parallel indicators of competitiveness of the regional countries and the countries in the immediate neighborhood speaks enough about the seriousness of the economic situation in Bosnia and Herzegovina.

Unfortunately, I must assert that such economic state is a consequence of the political crisis, which has been, more or less, present since the Dayton Agreement. The crisis has escalated these days with the Bosnia and Herzegovina Council of Ministers Chairman’s resignation and the certain paralysis in both of the Parliament Houses at the state level.

Even though all politicians in our country agree that the road to the European integration is the only true solution, some of them persistently refuse reforms necessary for advancing in that road.

Unified political will, therefore, exists only declaratively, and in reality, it does not allow the implementation of reforms and decisions that are conditions for entering the European Union, with all negative political and economic consequences that are clear to us.

Cooperation with the countries of the South East Europe, for the mentioned reasons, is even more important for Bosnia and Herzegovina and we are very pleased it has been progressing with most of those countries in a satisfactory way, politically and economically.

The fact is that it ranks 104th in the list of 127 countries in the world, in relation to the global competition index, which is a lot worse then the previous two years and we must be seriously upset about it. I am still convinced that we have the potential for a relatively quick progress, economically speaking, if we can first solve the current political crisis.

I am not basing my optimism merely on a wish that Bosnia and Herzegovina would not be a country that the youth wants to leave and where a great part of the population lives in poverty, but also on the recent assessments and prognoses of the European Commission, the World Bank and the International Monetary Fund.

I will cite a few economic indicators on which at least moderate optimism of these prominent international institutions is based.

When it comes to the macroeconomic stability, several indicators are showing progress. GDP in 2006 was 6.2%, and 4.3% the previous year, which was a consequence of the growing domestic demand and the significant export increase. A significant contribution to it was provided from the industrial production and civil engineering, which is encouraging. The total export increased by 29% in relation to the year before and reduced our trade balance.

Direct foreign investments, so needed in our country, have significantly increased, in that way increasing the foreign exchange reserves by 25%. The foreign debt of Bosnia and Herzegovina has been reduced from 26% of GDP in 2005 to 21% in 2006.

The improved total macroeconomic indicators in 2006 also resulted in improving all indicators that depend on macroeconomic stability. For example, savings of the population have significantly increased reaching the level of 4.8 billion KM.

The financial sector development, in banking and other financial services as well, was significant in 2006. This especially refers to the leasing and the insurance services, as well as the micro credit sector reaching 2.5% of GDP.

Optimism can also be noticed in the human resources development, so important for gaining competitive advantages in the foreign markets. The Framework Law on the state-level higher education has been made, and the implementation of reforms in accordance with the Bologna Declaration should bring about higher successfulness and faster graduation of students at universities.

The export and industrial production structure, which was unfavorable for a long time after the war due to the domination of the products of lower phases of processing, is now gradually improving toward the products of higher phases of processing.

We are encouraged that small and medium enterprises in the private sector increasingly show dynamic growth, in spite of the still unfavorable overall business environment in our country. The total support to this business sector, which generates most of new jobs, has been improved in both entities, i.e. the Republic of Srpska and the Federation, even though it still has not been coordinated at the state-level.

Positive characteristics of the Bosnia and Herzegovina’s economy should include the fact that we are a small open economy with the total trade exchange of 103% of our GDP. That is encouraging and increases the chances for economic cooperation with the countries of the South East European region, especially after our signing the CEFTA Agreement.

The European Union is still our most important trade partner participating with almost 70% in export from Bosnia and Herzegovina, and around 60% in import.

BDP per capita in our country, corrected for the purchasing power index, has reached around 30% of the European Union’s average.

Ladies and gentlemen, the mentioned positive facts about the economy of Bosnia and Herzegovina, which exist despite the political situation and the unfavorable business environment, are not intended, on my part, to hide an extremely bad place in the rank order of countries monitored by the World Economic Forum, or our other objective and subjective weaknesses.

On the contrary, this address of mine at the today’s Regional Economic Forum for the South East is intended to motivate you all for cooperation with Bosnia and Herzegovina as a partner and a competitor on the way to Europe.

Thank you.

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