An Agenda for Bosnia's Next High Representative - Democratization Policy Institute May 2002

An Agenda for Bosnia’s Next High Representative

May 1, 2002

I. Executive Summary

During the term of the next High Representative, Lord Paddy Ashdown, Bosnia’s fate will be determined. Bosnians either will gain “ownership” over a marginally modified version of the current system and suffer a future of dysfunction and conflict, or the international community will take bold steps to place Bosnia firmly on the road to self-sustaining peace and security. There is little middle ground. The stakes are high, and despite a desire for NATO troop drawdown and the reality of reduced donor aid, the new High Representative will need the full backing of pivotal governments and international institutions in the short term to make possible crucial reforms and reduced international engagement thereafter. The Democratization Policy Institute (DPI), following many discussions in Bosnia, Washington, and London, has sought to identify measures that the High Representative could undertake to tip the balance in Bosnia toward a future of democracy, prosperity, and European integration. 1. Remove remaining wartime obstacles to self-sustaining reform.

• Form an Organized Crime Task Force to vigorously tackle parallel power structures intertwined with corruption, terrorism rings, and nationalist politics;

• Assign a select commission of Bosnian experts and foreign advisors to craft dramatic changes to Bosnian election laws that provide natural incentives for election candidates to de-emphasize ethnicity;

• Push rapid unification of Bosnian intelligence services and militaries; • Remove structural obstacles to refugee return.

2. Strengthen state institutions.

• Empower a state-level General Accounting Office to audit state, entity, cantonal, and municipal finances;

• Create a State Customs Service and state customs auditing agency; • Shift customs revenues from the entities to the state; • Strengthen the State Border Service.

3. Foster and tap into Bosnian talent in place of international “experts” wherever

possible. • Form select Bosnian commissions to create unified business, tax and regulatory law,

overhaul legal and judicial infrastructure, remove inconsistencies from the criminal and civil law codex, and create a social welfare net;

• Create an internationally accredited university in Bosnia. International engagement in Bosnia will outlive the Office of the High Representative, but the United States and Europe must back Lord Ashdown in taking bold steps in the near term if Bosnia is to become capable of self-reform that puts Bosnia on track for full membership in Euro-Atlantic institutions.

Democratization Policy Institute An Agenda for Bosnia’s Next High Representative May 1, 2002

II. Premises

Numerous reports by many organizations and individuals have documented Bosnia’s problems and the challenges facing the international presence. This report does not seek to reinvent the wheel, or provide an academic diagnosis of Bosnia’s woes or theoretical remedies. DPI approached this project on the basis of a set of premises, or “givens”, in an effort to concentrate the report on constructive, detailed recommendations for finding the best way forward for Bosnia.

A. Government and Economic Structures in Bosnia

1. The political system negotiated at Dayton by corrupt and nationalist politicians was designed to reward corrupt and nationalist politicians, thereby enticing them to end the war; it has served both ends well. Major systemic changes are required to set Bosnia on a path to self-sustaining peace and democracy. Current structures and trends put the country on a path to partition and renewed conflict that could destabilize the region.

2. Extremists still control most levers of power and there are too many layers of government. Nationalist extremist politics is a lucrative business, and goes hand in hand with patronage.

3. Bosnia is both over- and under-governed. Too many layers of government accomplish too little; accountability is a victim of the political system’s opacity.

4. Judicial and legal reform is lagging, but recent actions by the Peace Implementation Council and High Representative Wolfgang Petritsch offer a welcome jump-start to enhancing the accountability, credibility, and efficiency of judicial officials.

5. The reliability of Bosnian law enforcement is spotty at best.

6. The slow pace of return for refugees and internally displaced persons is both a symptom and cause of Bosnia’s economic and security problems.

7. Endemic corruption and lack of clarity in ownership (see #6 above) cripple the investment climate in both entities.

8. Bosnia’s future is in Europe, including candidacy and eventual membership in European institutions like the EU and the Euro-Atlantic institution of NATO.

9. No viable state has more than one army, particularly if it desires European integration. The same can be said of the three intelligence services, which impede development of viable Bosnian governance.

10. Bosnian youth seek to leave the country as soon as possible, exacerbating the brain drain wrought by the 1992-1995 war. Until there are reasonable grounds to hope for a prosperous future, Bosnia’s main and most valuable export will be its youth.

B. International Attitude and Policy toward Bosnia

1. Giving free rein to the current powers that be in Bosnia is not “democracy.” Development of true democracy, to include not just representative self-rule, but also respect for human rights and good governance, demands international intervention that in the short-run may be “anti-democratic”, as were the international protectorates in post-WWII Germany and Japan.

2. It is counterproductive to talk of scrapping or renegotiating the Dayton framework. With power largely still in the hands of wartime leaders at all levels, any successor to the Dayton Accords would likely look, at best, much like the current version, and probably


worse. Going forward, a successful international strategy should use the wide latitude available within the Dayton Framework to change Bosnia’s political structures to a point where Dayton is transcended (Dayton as a floor, not a ceiling).

3. Sustainable peace and democracy in Bosnia are impossible while war criminals continue to enjoy impunity in Republika Srpska. SFOR’s standing failure to arrest Radovan Karadzic and Ratko Mladic undermines Bosnia’s future in the name of short-term political expediency. In addition, “smaller fish” who played integral roles in “ethnic cleansing” remain not only loose but in sensitive posts throughout Bosnia, sowing fear and undermining hope for stability.

4. Partition scenarios are non-starters—they would reward ethnic cleansing, lead to renewed violence, and prolong the need for international security forces and political oversight. In addition, such partition “solutions” would have profoundly corrupting influences on the still delicate transitions in Croatia and Serbia.

5. Bosnia can expect foreign aid to steadily decline.

6. Bosnians must live with the political structures created now well after current robust international oversight ends, and so must play a large role in defining working structures and be integrated into their operation. This is different from past attempts of international actors to fob-off “ownership” of a dysfunctional system on Bosnians when internationals have lacked the will to do heavy lifting.

7. Transforming Bosnia into a state capable of self-sustaining peace and democracy and European integration will mean, by definition, that the international community will have to confront current centers of power in all three ethnic communities. There is no low-cost, low-risk shortcut to fixing Bosnia, and sidestepping core problems will only aggravate them. Any real solution for Bosnia will require political will on the part of the High Representative, the Peace Implementation Council, SFOR, and SFOR’s contributing states.

8. Progress in Bosnia, in questions big and small, must be measured by reaching benchmarks denoting advancement toward goals of self-sustaining democracy and European integration, not by the size of incremental improvements over yesterday’s failures.

C. International Structures in Bosnia

1. Too many international actors with insufficient coordination and planning mean wasted and duplicated efforts, lost opportunities, infighting, and a lack of accountability for results.

2. The international community lacks its own policing mechanism and has insufficient oversight over local policing structures.

3. Staffing in six-month tours effectively means no institutional memory, insufficient job knowledge and commitment, and waste. This situation leads to understandable local resentment.

III. Benchmarks, Timelines, and Implementation

In putting forward a proposed action plan for the next High Representative, DPI reverse-engineered its recommendations from an ambitious benchmark that defines success. The timeframe for achieving this benchmark was derived from political desires limiting the duration of the international presence in Bosnia.


Perhaps the best overall indicator of Bosnia’s health, and the most accurate measure of hope in the country’s future, is the level of trust Bosnian youth place in that future. More concretely, ending the trend of brain drain and even reversing it should be the overarching goal for the country, and for the new High Representative. From this goal, the core issues that must be tackled come quickly to the fore. Young people will only stay or return to Bosnia if they have a chance at a decent education and if there are jobs. These in turn will only be created if Bosnia attracts investment. Investment will only flow once the rule of law is firmly established, excess layers of government are peeled away, and unnecessary hurdles to business are removed. Most of these problems can be addressed in a competent fashion only by a political system focused on solving them, not obsessed with the vagaries and trivia of ethnic politics. If the benchmark for success is a high one, the challenge for Lord Ashdown is even more daunting, considering the pace at which it must be achieved. The likely political reality is that Paddy Ashdown will be the last or penultimate High Representative. It follows that if Bosnia is to survive as a successful state without this level of international oversight, the timeframe for achieving this trajectory is two-to-four years. This report assumes the lesser of these two numbers, as four more years of OHR are by no means assured. Core reforms must be secured no later than May 2004, even though international engagement and assistance will continue thereafter. Bosnia can’t be expected to catch up to the reform status of many of the transitional countries of Central and Eastern Europe by 2004, but it should at least no longer be threatened by systemic, centripetal forces that currently block its ability to reform itself. In reality though, the timeline for the most difficult reforms is even tighter. Donor aid continues to taper off, and many reforms will need financial support before aid levels fall even further. Finite donor aid will have more impact if instead of supporting old, corrupt and dysfunctional power structures, it begins to flow to new, credible and functional political and economic systems. NATO is serious about its desire to draw down its forces even further by the end of 2002, so it makes sense to implement right at the outset some of the measures that will most rankle potential spoilers. However, the elections due in October 2002 and the international community’s desire not to spark a nationalist backlash prior to October are natural barriers to front-loading many reforms. A backlash could place the three main nationalist parties in power, and this time for a four-year term. There would also be a technical barrier to election reforms before October, unless elections were delayed. At this point election reform is one measure that will have to wait until fall. After determining from the benchmark for success a list of core problems that must be solved, and deriving from political realities the timeframe for doing so, DPI honed its notional recommendations by thinking through the following questions for each. 1. Does the recommendation conform to the Dayton Accords?

2. What are the costs of inaction or delayed action?

3. What must OHR do to implement a recommendation? Does OHR have the authority for the recommendation?


4. If OHR needs political backing from other international actors (the PIC, SFOR, OSCE,

etc., or individual governments) for a recommendation, which ones, what kind of support, and how could that support be obtained?

5. Is OHR adequately structured, staffed and resourced to take on this issue and the particular recommendation? If not, how must OHR reform itself to get the job done? (DPI will examine OHR’s structures in light of specific issues.)

6. Which of the recommendations can be undertaken immediately when the HR takes office, setting the tone for his tenure and helping clear the way for later action?

7. For each recommendation, how much can current Bosnian politicians be expected to do? If need be, how can they be persuaded/cajoled/pressured/forced into being helpful? How can some or most of this pressure be engineered to come from below? Or is direct international intervention preferable/necessary?

8. How much can Bosnian authorities be trusted with knowledge of the recommendation? Which ones?

9. Which Bosnian authorities stand in the way of a recommendation and must be removed?

10. Where a possible recommendation proposes new or reformed institutions, how can these institutions be devolved to eventual complete Bosnian control? Which levels of Bosnian government are best suited to take over?

11. Can a recommendation be implemented right away, or are there good reasons to wait?

12. How would the recommendation affect other issues that must be addressed, and other recommendations?

13. How do approaching elections affect the recommendation? Will the immediate post-election period be conducive to implementing it?

14. If the recommendation is unpopular with one or more ethnic segments of Bosnian society, how can it be made palatable? Which segments of society (not ethnically defined – youth, pensioners, women, etc.) could support the recommendation and dilute ethnic-based opposition?

15. How can objections from extremists otherwise be overcome/parried?

IV. A Proposed Agenda for the Next High Representative

Examining a catalogue of issues against practical questions of implementation resulted in a list of action items. They are listed here in order of their importance for achieving success in Bosnia.

1. Create an anti-terrorism/anti-organized crime task force.

Rationale: The war in Bosnia, the persistence of many wartime leaders in positions of power, the excess layers of Bosnian government, and impotent policing and judicial institutions have left the country paralyzed by parallel power structures and riddled with organized crime. Though not all politicians are corrupt, organized crime has thoroughly infiltrated the Bosnian political system at all levels, creating new barriers to reform because too many


politicians find the status quo quite profitable. Worse, Bosnia has become susceptible to use as a transit, or even base of operations, for foreign terrorists. Radical militants with wartime connections to the SDA and other Bosnian organizations and individuals pose a threat to Western targets in Bosnia and elsewhere, and endanger the long-term stability of the country. There have been recent improvements in international and Bosnian attitudes and actions toward organized crime and terrorism. The Alliance for Change has proved itself cooperative in identifying militants suspected of ties to terrorist organizations and providing information to Western authorities. The most notable example of Bosnian cooperation in the fight against terror was the controversial hand-over of the so-called “Algerian Group”. The State Border Service (SBS) has likewise been a great success in combating organized crime and making Bosnia less hospitable to w ould-be terrorists. The SBS has turned away thousands of people with suspect documents, and though the entity customs services are corrupt to the core, the mere presence of the SBS has markedly increased customs revenue.

Yet parallel power structures still wield major influence in the daily lives of many Bosnians, particularly in Republika Srpska and those Federation Cantons dominated by the SDA and HDZ. In Republika Srpska, the entity government, many municipal authorities, and most political parties remain influenced and intimidated by a parallel hard-line authority centered on indicted war criminal and former Bosnian Serb wartime leader Radovan Karadzic. The Karadzic network and other regional hard-line offshoots include other indicted war criminals and organized crime rings with deeply rooted connections in government. They continue to receive support from the Yugoslav Army and intelligence services, political encouragement from Yugoslav President Vojislav Kostunica, and thrive on RS customs corruption. In Hercegovina in March 2001, the HDZ openly pursued establishment of a parallel power structure, declaring their withdrawal from entity institutions and establishment of Croat self-rule. Of course the HDZ parallel power structure—a mafia peddling itself as a protector of the Croat nation—existed prior to this declaration. When the international community decided to strike in April 2001 by raiding the Hercegovacka Banka—the financial lifeline of the HDZ network—Croat self-rule collapsed. Though poorly planned and executed, especially on the part of OHR, the Hercegovacka raid was a welcome signal of international resolve to confront organized crime. HDZ leaders later admitted that their withdrawal from government had been a mistake. This episode, though imperfect, illustrates how fighting organized crime at the highest levels can undercut parallel power structures. Now there must be greater international capacity to target parallel power structures involving terrorists, crime bosses, and war criminals. This is particularly true if a bold reform agenda is to challenge entrenched criminal interests—something that must be done if Bosnia is to achieve self-sustaining peace and democracy. A new, international Organized Crime Task Force (OCTF) will be indispensable to achieving rapid progress on any front. Because corruption has festered and spread at high levels of government for far too long, initially the Organized Crime Task Force should be directed exclusively by internationals, with no local involvement in decision-making, and little Bosnian involvement in implementation. The prospect of taking on top crime bosses and terrorists at present intimidates even the bravest of local officials. Initial successes can pave the way for


Bosnians to play an ever-increasing role in the OCTF, with a view to its eventual hand-over to the Bosnian state government. Even then, the integration of some EU and/or or NATO personnel into the top ranks would maintain the organization’s credibility. A continued international presence would at that point no longer serve as a reminder of Bosnia’s dysfunction, but rather as a way station to its Euro-Atlantic integration. Mandate: The task force would exist to plan and execute a campaign to target parallel power structures, terrorist and organized crime activities, high-level political and large-scale corruption. It would also have a mandate to target for arrest war crimes suspects wanted by the International Criminal Tribunal for the former Yugoslavia or domestic courts. The small group would draw-in clearance-holding specialists from NATO countries, who could help build evidentiary basis for SFOR or, in some cases, local action. At the outset, local officials would only receive information from the task force on a need-to-know basis. The force would complement efforts at structural reforms (political, economic, judicial, etc.) by systematically and strategically removing spoilers engaged in illegal activities. It could also act to prevent or contain riots organized and implemented by parallel power structures, such as those surrounding the mosque-rebuilding ceremonies in Banja Luka and Trebinje, or the reaction to the Hercegovacka Banka raids. The task force would need to include an investigative judge and prosecutor for charges made to stick. These integral members of the task force would have to be vetted and cleared. The resulting cases would be tried in an interim special chamber (under the BiH State Court), where all involved personnel would have security clearances so even the most sensitive evidence could be presented, and defendants could be tried under law. The procedural rules that would apply to the task force would allow use of immunity, witness protection, and other innovations to facilitate the task force’s efforts. Personnel: The High Representative and COMSFOR, working with top NATO and EU governments, should jointly develop a list of targets, all based around the central goal of eliminating illegal parallel power structures. The High Representative and COMSFOR would take personal responsibility for selecting and assembling the team, which would commit to remain in place for the duration of the High Representative’s term. Any OHR staff privy to task force deliberations should be senior, from NATO countries, and have security clearances. The High Representative and COMSFOR should personally select the Task Force Director, who would be in charge of day-to-day activities. The Director should be a known quantity, and meet strict qualification criteria: • NATO security clearance • a known quantity to COMSFOR • high level of comfort and trust from the HR • intimate familiarity with Bosnia and the history of the past 10+ years • proven track record of OPSEC and COMSEC without any security breaches • significant investigative experience • significant operational experience Other task-force members would include:

• MSU commanders, perhaps under EU command; • the head of UNMiBH (until December 2002);


• SFOR intelligence personnel; • an international investigative judge with the following qualifications:

• a known quantity to the Task Force Director • NATO security clearance, • thorough knowledge of the Bosnian legal system • significant experience

• an international prosecutor with the following qualifications: • a known quantity to the Task Force Director • NATO security clearance • thorough knowledge of the Bosnian legal system • significant experience

• a panel of five judges to serve in an Interim Organized Crime Chamber with the following qualifications: • security clearance • thorough knowledge of the Bosnian legal system • no record of corruption or ethnic bias • significant experience as a judge

• a witness protection specialist with the following qualifications: • NATO security clearance • significant experience in witness protection in an international setting

• Locally recruited arrest teams placed under the command of the High Representative. These should be vetted along the lines of SBS members. These teams can gradually gain new responsibilities, and when the High Representative’s Bonn Powers expire, can be placed under Bosnian state command with the rest of the task force.

• as needed, other local hires vetted by the rest of the cleared team.

Beyond the investigative judge and prosecutor who will be included at the outset, the indigenous component of the task force should be built-up over time, as local institutions are vetted and professionalized. As international oversight in Bosnia tapers off, the Chairman of the Council of Ministers, the head of the State Border Service, and (if they still exist and are functional) the heads of unified BiH army and intelligence service should be included. When the international oversight in Bosnia ends, these local officials will take over, though maintaining some international involvement in the task force for the foreseeable future would serve the interests of the international community and Bosnia by better controlling security threats and crime. At this point, it is best to keep the political actors involved purely international. Implementation: The High Representative-Designate should begin consultations with COMSFOR now. He should also consult with leading SFOR contributors to convince them of the need for the task force, and gain their support for the necessary resources and political will to make it happen.

2. Assign a select commission of Bosnian experts and foreign advisors to craft

dramatic changes to Bosnian election laws that provide natural incentives for election candidates to de-emphasize ethnicity. Impose the resulting package if current authorities are not willing or able to pass meaningful reform.


Rationale Next to firmly establishing the rule of law, creating a normal political spectrum in Bosnia is the most important step that needs to be taken to make the country peaceful and democratically self-sustaining. Though several elections have been held in post-Dayton Bosnia, flaws in the election system have favored nationalists of all three ethnic groups, hindering democratic consolidation and development. Because it is possible for candidates seeking office to be elected solely by their ethnic group, playing on ethnic fears has proved effective in winning elections. This systemic reason for the dearth of elected moderates has made necessary the Office of the High Representative’s frequent removal of officials, use of intense pressure to make moderate coalitions viable, and imposition of legislation. The April 2002 decision by High Representative Wolfgang Petritsch, imposing entity constitutional amendments on the basis of the March 27, 2002 Mrakovica-Sarajevo Agreement, could provide some measure of moderation in Bosnian politics. The Bosnian Constitutional Court’s January-February 2000 “constituent peoples” rulings created a great opportunity for OHR to work with Bosnians to simplify and moderate entity structures and election laws. However, forcing incumbent Bosnian politicians to find their lowest common denominator has resulted in a complex system of ethnic quotas that make Bosnian government even less transparent. The decision makes both entities more multi-ethnic, but leaving nearly untouched built-in incentives for candidates to stress nationalist themes could still mean that the big nationalist parties are difficult to defeat in elections. If nationalist parties win elections, it is quite likely that the new quotas for ethnic balance in government and public administration will merely result in SDS-HDZ-SDA (and other nationalist parties) horse-trading over ministries and public largesse. Civil service reform could eventually mitigate this development in awarding of positions in public administration. But in the political realm, the meager constituent peoples decision will likely have as its unintended consequence that nationalists elected on the basis of fear simply meet post-election to divide their spoils. Bosnia will then have a multi-ethnic government, but it will still be one preoccupied with nationalist themes, power and personal enrichment, and unwilling to focus on the issue of most concern to all Bosnians: economic renewal. The main players could still be those who were in the ascendant in 1990. Under the current electoral system, a stable democracy reflecting political rather than ethnic differences will not emerge in Bosnia. Refugees will not return and stay in significant numbers, fundamental economic reforms will not be implemented, and NATO forces will have to maintain an open-ended mission to prevent a slide back into interethnic war. If the election laws are left alone, Bosnia’s prospects are bleak. Further action on this issue is of the utmost importance, especially if OHR and the Bonn Powers are to dissolve in two-four years. Comprehensive electoral reform that forces candidates to campaign beyond their ethnic base would make appeals to nationalism bad politics; voters would no longer be asked to vote based on their fears, but rather on their aspirations and needs, and self-sustaining democracy could develop in Bosnia.1

1 Three reports from the International Crisis Group provide more detail on the rationale for election reform,

and possible models worth consideration: Breaking The Mould: Electoral Reform In Bosnia And


Implementation At this point, new election laws cannot be in place in time for the October 5, 2002 elections. Following the elections, the High Representative should quickly convene a select commission of Bosnian experts, with a small group of international advisors intimate with Bosnia, to put forward a comprehensive package of election law reforms. The High Representative should present the commission with some parameters for reform. The new package of laws should: • conform with the spirit of the Dayton Accords; • conform with the Constitutional Court’s ruling on constituent peoples; • be designed to force candidates for office to look beyond their ethnic constituency; • and seek to simplify the current ballot.

The High Representative should introduce the legislation at all relevant levels of Bosnian government, but reserve the right to impose the package if quick action is not forthcoming. Lord Ashdown should begin working now to convince policy-makers in Washington and European capitals that far-reaching election-law changes in Bosnia are a must if the country is ever to achieve the ability to self-reform toward EU membership. It is extraordinarily difficult to design election laws that meet the above conditions. To follow are specific examples that could serve as models, though some of them admittedly make the ballot more complicated. At the state level: • BiH presidency: Each voter should have three votes: one to be cast for a candidate of

each ethnicity. All three votes would have to be cast for a ballot to be considered valid. A majority of a candidate’s electorate would thus be of a different ethnicity from his or her own, and there would be a natural disincentive to emphasize nationalist themes.

• House of Peoples: Seats in the House of Peoples should be divided in fourths (Bosniak, Croat, Serb, and Other); parties can run a list of candidates in each ethnic category, drawn from anywhere in BiH; each BiH citizen should have four votes—one per ethnic category. All four votes would have to be cast for a ballot to be considered valid. Under this system, nationalism of any stripe would be a losing election strategy.

• House of Representatives: Seats in the House of Representatives should be pre-apportioned into four groups (Bosniak, Croat, Serb, Other) based on the 1991 census. Parties can run lists of candidates in each ethnic category, drawn from anywhere in BiH; each BiH citizen would have four votes—one per ethnic category. All four votes would have to be cast for a ballot to be considered valid.

In Republika Srpska: • RS President: The president of the RS should be elected by the alternative-vote

system. Voters would rank the candidates on the ballot. A candidate with an absolute majority of first-choice votes would win; should no candidate receive an absolute majority of first-choice votes, the candidate with the least number of first-choice votes

Herzegovina, March 4, 1999; Doing Democracy A Disservice: 1998 Elections in Bosnia and Herzegovina, September 9, 1998; Changing the Logic of Bosnian Politics: Discussion Paper on Electoral Reform , March 10, 1998. The first two are available at www.crisisweb.org.


would drop out of the race, with their second preference votes automatically redistributed among the remaining candidates. This process would be repeated until one candidate received over 50% of the vote. This system would ensure that the winning candidate enjoyed at least some measure of support from a majority of the population. More importantly, successful candidates would not only pander to their niche of the electorate, but also try to attract as many second and third-choice votes as possible among the entire electorate, including other ethnicities.

• RS National Assembly: The RSNA should be elected in a similar fashion to the BiH House of Representatives.

• House of Peoples or similar body (if one is created as part of “constituent peoples” implementation): It should be structured and elected on the entity level in the same way as the BiH House of Peoples (above).

In the Bosnian Federation: • House of Peoples: The Bosnian Federation House of Peoples should be elected in the

same manner proposed for the BiH House of Peoples. • House of Representatives: The Bosnian Federation House of Representatives should

be elected in the same manner proposed for the BiH House of Representatives.

In the municipalities and Federation Cantons: • Municipal and cantonal assemblies should be elected in a similar manner to the BiH

House of Representatives.

3. The Refugee Return Task Force (RRTF) should maintain its current funding levels for the next two years. In his regional role, the High Representative should press leaders in the Bosnian entities, Serbia, Montenegro, and Croatia to adopt a simplified process to promote refugee return.

Rationale: Over six years after the end of the war, the pace of minority refugee and displaced person return is accelerating, albeit from a very low base. The goal of establishing freedom to return – Dayton’s Annex 7 - is far from complete, despite a pronounced upswing in the number of minority returnees over the past two years. The Refugee Return Task Force (a de facto arm of the OHR, coordinating with UNHCR, OSCE and the other RRTF members) has been an important factor in promoting conditions to make return possible.

Considerable returns have occurred in Cantons 1 and 10 of the Federation in Northwest Bosnia (Serbs), Sarajevo (Serbs), and some areas of the northern RS, particularly in the areas patrolled by British SFOR (Bosniaks and some Croats). The number of minority returnees in 2001 was estimated to be 92,000, despite a 30% reduction in reconstruction and return funding. The expected number of minority returnees for 2002 is roughly 90,000. Despite the rise in the number of returnees in 2001 over 2000 and the clear desire of thousands to return to their homes, the resources available to the RRTF are in steep decline. Furthermore, while thousands of Croatian Serbs have registered to return to homes in Croatia, and President Stipe Mesic has been vocal in calling upon them to return, they face serious obstruction from national legislation and local nationalist politics and receive little in the way of international political support. For refugee return to proceed optimally in Bosnia, the ability of those who wish to return to Croatia – currently living mainly in the RS, Serbia and Montenegro – must be facilitated. Furthermore, the Sarajevo-Mrakovica “agreement” on the constituent peoples issue that formed the basis


for High Representative Wolfgang Petritsch’s imposition in April 2002 includes a requirement for Bosnia’s 1991 ethnic distribution to be reflected in government and public administration. Fulfilling this requires acceleration of the return process. BiH continues to host some 55,000 refugees, while approximately 500,000 remain internally displaced. Further, during the war 68% of the housing stock (or approximately 451,000 housing units) were seriously damaged or destroyed, less than 25% of which has been rehabilitated (~110,000 units). Many housing units that were not damaged or destroyed were taken over temporarily by Displaced Persons and Refugees (DPRE's) and have resulted in over 253,000 claims to local housing authorities for the repossession of property. Although approximately 42% of these claims have been resolved, over 147,000 housing units remain occupied. The RRTF needs to have the wherewithal to facilitate increased returns via both reconstruction and increased implementation of the property laws. Bosnians wishing to return to areas where they will be a minority population face a double barrier. Nationalists in their former hometowns work to impede their return through administrative obstruction, intimidation and violence, more often than not with the connivance of local (and higher) authorities. Furthermore, the nationalist elites who rely on these derascinated populations as reservoirs of support also work to prevent their return. These local elites are plugged into the parallel power structures that impede other aspects of establishing rule of law in Bosnia. The process of facilitating refugee return is absolutely integral to promoting social stability, rule of law, the normalization of property relations, and government accountability throughout BiH. Removing obstacles to return largely involves enforcement of existing laws, like the OHR’s ban on allocation of socially owned property and the Property Law Implementation Process (PLIP). Manipulation of refugees and displaced persons as “kept populations,” reliant on nationalist parties and their patronage networks for their economic subsistence, has been a hallmark of post-Dayton Bosnian politics. Promoting conditions conducive to return involves squeezing these opaque corrupt political and criminal networks (typified in bodies like the RS Veterans Ministry, which garners well over 10% of the RS budget, with no transparency) that remain dominant in Bosnia and impede its entering the European mainstream. Clearing the way for increased returns will help uproot the deadwood that has no interest in Bosnia functioning for its citizens – of any ethnicity.

Personnel: The RRTF currently has a solid reservoir of talent, familiar with the environment and issues at hand. The quality of the human capital involved is essential to achieving progress. Retaining RRTF staff over the critical next two years will help ensure more and smoother returns. As the process advances, and local administrations become more representative, professional, and transparent in their duties, the functions of the RRTF can be indigenized in a phased fashion. Implementation: Before arriving in Bosnia, the High Representative should lobby hard with PIC members for funds to facilitate refugee return to be straight-lined at 2001-levels through his tenure. The aim would be to clear this logjam by the end of his term, after which the funds could be tapered-off significantly.


The High Representative should also make clear that his agenda for refugee return requires full cooperation from Zagreb, Belgrade, and Podgorica. Removing obstruction to refugee return, particularly in Croatia, must be a high priority. Lobbying among major donors, including International Financial Institutions (IFIs) and the European Union, to adopt conditionality on this score would help break the deadlock. While IFIs often proclaim they cannot apply such conditions, the clear violation of international agreements, including Dayton, on refugee return points out a rule-of-law deficiency that should be a factor under any circumstances. The European Stability Initiative (ESI) usefully suggests2 that promoting competition among municipalities on the basis of their relative implementation of property laws and other indices could accelerate professionalization of local administration and economic development. Such a focus would also forge direct state-municipal linkages, and give Bosnian citizens a palpable stake in the state. The High Representative should ensure that when the RRTF closes down at the end of2003, indigenous and accountable mechanisms are in place to allow normal property transactions through a regulated real estate market, including the availability of long-term loans and mortgages. Upon arrival in Bosnia, the High Representative should make clear through word and deed that there will be even stronger application of the BiH property laws. Officials— elected and appointed— who hold commercial or residential property for which they do not have legally acquired title should be dismissed from their positions with a ban on their re-appointment to other roles (to prevent their promotion). The strategy for the RRTF during the next High Representative’s term should be performance-pegged, directing resources toward localities with clear, planned trajectories toward full property law implementation. Donors should be pressed to adopt these uniform criteria. In addition, as the ESI paper suggests, local co-financing of proposed projects should be promoted by donors. The bar for compliance should be set high before conducting a new census. All jurisdictions should have better than 90% compliance before a new census is conducted to supercede the 1991 census.

4. Create an all-Bosnian task force(s) to write a comprehensive package of

unified business, tax, and regulatory law, to be imposed by the High Representative. This set of laws would replace all municipal, cantonal, entity, and state taxes and regulations. One of these task force(s) should pay special attention to the ongoing—and flawed—privatization process, with an eye to developing functional indigenous methods to enforce transparency and reasonable corporate governance in privatized firms, as well as in the Bosnian economy as a whole. Another related task force should develop improved regulations for Bosnian non-governmental organizations.

Rationale and Mandate: Current taxes and regulations make doing business legally in Bosnia nearly impossible. Overlapping rules at various levels of government drive away potential investors, both

2 “Return, reconstruction and local institutions: building on the success of the RRTF”, Discussion Paper,

April 2002. www.esiweb.de


domestic and foreign. In addition to fighting major graft and breaches of public trust, the black market can be fought by making it reasonable for businesses to comply with the law. If nothing major is done soon to create a unified economic space, economic vitality will never come to Bosnia. Many officeholders in Bosnia have a stake in the current dysfunctional system. Myriad inspections serve more often than not to enrich inspectors and their bosses, or to punish business owners who in other ways fail to support the “right” functionaries. Approaching reform in a piecemeal fashion, necessarily counting on largely corrupted bureaucrats and politicians, will never result in the reforms necessary to jump-start Bosnia’s economy. Bosnians of every ethnicity recognize a need for drastic action that only the High Representative can deliver. The voucher-based privatization scheme being undertaken at the entity-level in BiH has serious shortcomings, and will not in the foreseeable future rid the Bosnian economy of socially owned, defunct enterprises. Most of these enterprises—many of which would never be viable in a free market environment—are lost causes in terms of production and job creation. Moreover, their continued presence on the landscape (often literally) can impede investment and economic growth. Socially owned enterprises play an integral role in the patronage system of the nationalist power elites, providing sinecures for party stalwarts and “kept populations” under their sway. Worst of all, the hope that these enterprises could be resuscitated into job providers saps initiative in populations that need to essentially build new economies from scratch. However, revisiting the ongoing process now would only prolong the agony and divert attention from the more crucial effort to foster new businesses. The task force should therefore incorporate into its recommendations a clear set of corporate governance, disclosure, and associated regulations to promote transparency and shareholder rights for privatized firms. The High Representative should create a task force to quickly develop a complete set of business, tax, and regulatory law, which he should then impose in place of existing laws at all levels of government. He could require that the task force develop new statutes in line with many norms of the European Union, and can strongly encourage the task force to replace sales taxes with a Value Added Tax (VAT) that would strengthen state finances. The Bosnian NGO community, in much the same way as Bosnian enterprise, currently faces an onerous hodgepodge of conflicting regulations at various levels. The role of these organizations, particularly those born of ground-up initiative, is crucial in building a vibrant civil society in Bosnia, especially in an environment of governments deaf to the concerns of average citizens. The watchdog function of a strong unofficial sector is critical in a transitional society like Bosnia’s, and bolsters public participation in democratic self-governance in general. Unfortunately, the NGO sector is legally disadvantaged in Bosnia. NGOs have to register separately in each entity, subject to overlapping and conflicting administrative regulations, and are not favored by tax laws (and because of donor disclosure requirements are transparent to tax authorities, unlike much of the rest of the economy). To promote civic initiative in parallel to entrepreneurial initiative, a collection of Bosnians should be assembled to assess the current environment for NGOs and recommend to the High Representative a universal NGO law. Personnel: International experts are poorly poised to craft such sets of laws. The track record of internationals drafting laws for Bosnia is abysmal. Legal experts who parachute into Sarajevo on six-month contracts, have little grasp of the Bosnian context, no understanding of the language, and who don’t have to live with the results of their work, have made a mess of attempts to reform Bosnian statutes. While some internationals


have taken a genuine interest in doing a good job (and some have done a good job) too often “experts” are in Bosnia to enjoy high salaries, low expenses and a “per-diem rich environment.” The muddle resulting from internationals drafting detailed statutes leaves the Bosnian people understandably feeling like guinea pigs. Bosnian politics are broken, but there are enough skilled Bosnian legal experts, economists, and entrepreneurs to build the task force. While the High Representative should set the overall objective for the task force (a unified set of business, regulatory, and tax law anticipating EU integration), Bosnians should craft the details. Because the Bosnian political system is broken, OHR should not defer to it to determine membership in the task force, instead selecting the small group of Bosnians itself. The group should be multi-ethnic and include market-oriented economic and legal experts, business interests, labor unions, and environmental interests. Politicians should be excluded. Task force members can look at the current legal morass and weed-out both inappropriate international innovations, wartime laws, and communist-era laws that impede normal economic life. An international group of EU legal and economic experts could form a small advisory body to the task force(s), but not have any oversight role. In the case of reviewing the transparency and corporate governance of privatized firms, a greater international role—strictly advisory—could be envisioned. The NGO task force should be composed in the same fashion as the one addressing business law and regulation: Bosnians from the NGO sector, legal experts, and taxation specialists, with international experts serving in an advisory capacity. Implementation: Upon taking office, the High Representative should hold town-hall-style meetings with business owners around Bosnia and hold a televised round-table with foreign investors who have decided not to invest in Bosnia. A good airing of legal and regulatory horror stories—like the current laws requiring firms to belong to the payroll-funded business chambers—can prepare the ground for this initiative. The privatization process is already widely viewed by Bosnians as flawed, and post-facto corporate governance regulations would garner wide popular support. At the end of this string of events publicly identifying the problems, the High Representative should announce the formation of the task force. He should stress that it is all-Bosnian, that it is indeed designed as an end-run around corrupt elites, and that its mandate is to jump-start Bosnia’s economy, and build a coherent set of codes conducive to new business development, closer to European standards. The task force could even be named something like the “Job Creation Reform Council”. Its result, to be promoted and imposed by OHR could be titled the “Prosperity in Europe Decision”. A similar and simultaneous process should be pursued with regard to the NGO sector. The High Representative should act to impose these results by the end of summer 2002.

5. Create a State Customs Service and an independent state customs auditing

agency.

The High Representative should begin the process of building a State Customs Service (SCS), along similar lines to the State Border Service (SBS), that would collect customs duties on behalf of the BiH state government. Until the SCS can begin undertaking its duties, a state customs auditing agency should undertake supervision and auditing of the existing entity-level customs services until they are replaced. The auditors could


recommend dismissal of customs officials to responsible government officials or the High Representative, and report suspected criminal activity to the Organized Crime Task Force (see Recommendation #1). Once the SCS is fully operational, this auditing agency would continue to play a supervisory role, accountable to the government of BiH. Both initiatives should be launched within the first month of the High Representative’s term. Rationale: The costs of not undertaking the wholesale reform of customs collection and allocation (see recommendation #6) are high. Millions of KM in potential revenue is lost annually by corrupt entity customs administrations. The current CAFAO structure, while helpful at the margins, cannot professionalize services controlled by political elites who have no stake in a functioning customs system. These obstructionists benefit from the current system. The impetus for the reform of customs collection cannot realistically be expected from within Bosnia, given the current fractious nature of the Bosnian parliament and the strength of interests against moving customs to the state level. These will be pronounced across the political spectrum the RS and with the HDZ in Hercegovina. Increased customs collections of the SCS would decrease Bosnian donor dependency, and SBS-SCS control of the borders will reduce illegal immigration and security threats in Europe. Furthermore, the auditing agency would strengthen a nascent culture of accountability in Bosnia and the rule of law. The new institution would likely be welcomed by many Bosnians fed up with corruption in their midst. A strong public information campaign could detail the failings of the current customs services and the benefits to all Bosnians of having a professional service. Personnel: a) Customs Auditing Agency: This body would be composed around a cadre of dedicated,

and screened officials selected from the ranks of CAFAO and other (predominantly European) professional customs officials who would commit to a term of duty extending until the SCS is fully deployed - roughly two years. Bosnian personnel will also face strict vetting, and should not be drawn from the current customs authorities. As with SBS personnel, once blind-selected on the basis of qualifications, applicants should be selected in accordance with the 1991 census. As with the SBS, auditors should have their contracts reviewed on an annual basis

b) State Customs Service: The SCS should be recruited and vetted in same manner as the SBS, with annual re-evaluations. Once personnel are blind-selected, each administrative and field unit of the force should reflect the 1991 census. Recruits should be trained at a new state academy, with international staff. Initially, there should be an international supervisory cadre integrated, answering to the High Representative/EU Representative, including some of the EU police cadre slated to replace the IPTF. The aim must be to build a professional SCS officer class that will command the force as international supervision in BiH winds-down.

Implementation: Opponents of the SCS will raise objections ostensibly based on the Dayton Accords, but in reality based only on past practice of entity responsibility for customs. The High Representative justify a unified customs agency based on the Bosnian constitution’s assignment of customs policy to the responsibilities of the central government. The High Representative has the authority to begin creating the SCS, but needs strong international backing to make it happen. Donors will need to produce funds for the auditors and the academy to train the new professional SCS. The shift of European funds from entity-level


CAFAO oversight to the state customs auditing agency partnership should be nearly level. The shift from CAFAO to a domestic agency would probably involve savings in the medium term, with fewer foreign personnel involved, but for far longer terms. Cooperation with SFOR, as in the case of the Organized Crime Task Force, will be pivotal. The international head of the customs auditing agency, and a select cadre of EU police personnel should hold security clearances so as to be able to communicate with SFOR effectively. In terms of “making the sale” to the Bosnian public, and various constituencies within it, the construction of the SCS and the customs auditing agency should be placed within the overall context of building a culture of accountability and fighting corruption. Assurances that the SCS will not be a fiefdom of any particular ethnic group should reduce some opposition. No doubt, the SDS, HDZ and SDA will fight to maintain the status quo, decrying the new organizations as encroachments on their prerogatives. The most assured and consistent countermeasure against such attempts to rally their constituencies is exposure of specifics on elite corruption the public already suspects.

6. Shift Customs Revenues from the Entities to the State.

Rationale: Along with transfers from international donors, customs revenues provide the main revenue stream for the entities, which annually determine how much they will give the state of BiH. This is unsound on a number of levels: the entities’ customs services are profoundly inefficient and corrupt; the entities wish to keep the state weak and are in de facto collusion with international financial institutions like the IMF, which demands that the state have funding for its budgeted initiatives like the SBS (while in the meantime bailing-out the entities, which are consistently in deficit); the lack of ability of the state to plan policies due to uncertain revenues is untenable, and impedes Bosnia’s European integration. Adopting this policy will be almost as contentious as the constituent peoples issue, as it too involves entrenched powers that extend back to the war. In addition, it will be argued that Dayton presents an insurmountable obstacle. However, for the government of BiH to undertake its indisputable constitutional duties, it requires a more stable source of revenue. The direction of revenues can be imputed under customs policy, a clear state responsibility. Once the shift of funding streams is effected, with the customs auditors assuring it goes forward, negotiations over the next year’s budget can commence among the authorities of the state and the two entities. For a change, the state will be at the table not as a supplicant seeking funds from entities that wish it ill, but in a position of strength. The effect of this shift—and the resistance it will engender—should not be underestimated. While achieving the shift will be a major policy undertaking, with attendant risks, the results will be far-reaching. The entire dynamic of Bosnian politics could be changed, clearing the way for much more rapid progress toward putting Bosnia on a European trajectory. Furthermore, it would foment a total re-evaluation of Bosnian governance, with an eye to what sort of government makes sense for a country of its size, and what funding sources make sense. The future adoption of a VAT would reduce reliance on customs duties, but leaving current revenues in the hands of the entities only prevents a sober analysis of what sorts of rates and collection structures are appropriate. In addition, it is reasonable to believe


that given their own assured revenue streams, the entity and cantonal authorities will work to impede adoption of a BiH-wide VAT. Implementation: Once the auditing component of recommendation #5 is in place, the High Representative should impose a decision that customs revenues will be redirected to the state, which will then share funds out to the entities and municipalities, reversing the current practice. While the division of revenues for the entities will follow the established 2:1 ratio of the Federation:RS, the overall slice of the pie given the entities (and cantons in the FBiH) will have to be determined by negotiation. Well before imposition of the new policy, support in important capitals will have to be assured. Again, the rationale for the new policy is sound, and once in effect, it would serve a multitude of declared policy objectives on both sides of the Atlantic. Resistance can be foreseen from the same parties and structures that will resist the imposition of a state customs auditing agency and establishment of the SCS. While they will hardly be “defanged” with the full deployment of the auditors, they will at least be in a position of lesser strength, and their arguments – centered on loss of entity prerogatives and “independence” – will have been repeated for weeks by the time the redirection becomes public. Assurance that the current budgetary cycle in the entities and cantons will be allowed to finish with budgeted expenditures allowed should also reduce tension. The less this is allowed to be presented as a naked power grab, but rather a step toward professionalizing a critical aspect of public service and accountability, the better. Strong public outreach on the themes of government accountability (and IC accountability), anti-corruption, and simplification of a Byzantine bureaucracy, would be crucial. Making the shift will require the alignment of a few critical factors. First of these is to have the enforcement mechanism in place – the state customs auditing service, with an open line to the SFOR MSU in the event they are violently challenged or the entity customs services refuse to comply.

7. Move forward rapidly with the “East German model” of judicial reform

recently endorsed by the Peace Implementation Council and launched by High Representative Wolfgang Petritsch. Simultaneously, create one or more all-Bosnian task forces to overhaul remaining questions of legal and judicial infrastructure in Bosnia and Hercegovina. A select panel of international legal experts with knowledge of the existing codes would be plugged-into the process in an advisory capacity.

Rationale and Mandate: The international community appears to finally be geared to tackle in a comprehensive fashion the ills of Bosnia’s judicial system(s). The Peace Implementation Council’s Steering Board in its communique of February 28, 2002 endorsed aggressive efforts to reform Bosnia’s judiciary, insisting on “the need for measures that will contribute decisively to building an independent and more efficient judicial system that enjoys the confidence of the public and enhances the environment for foreign investment.”3 This is important, as solid political backing is essential to accomplish this necessarily complex

3 PIC Steering Board Communique, February 28, 2002, available on the OHR website: www.ohr.int


and daunting raft of reform. The precise roadmap toward accomplishing this end is as yet unclear. Bosnia’s judiciary is bloated, fragmented, and terribly inefficient at delivering justice, facts extensively described in a recent report from the International Crisis Group.4 Much of the problem lies with judicial personnel who are beholden to political actors, some of whom are not fit to play their roles at all. Those who are professionally inclined, hardworking and honest are trapped within a system that rewards corruption and improper links to political actors. Laws held over from the SFRY, war-time laws, post-Dayton laws, and the dabbling of international experts have left Bosnia’s multiple legal structures an a la carte Frankenstein, riven with redundant, nonsensical, poorly written, or contradictory passages. This has made it difficult for prosecutors, defense attorneys, judges, tax collectors and regulators to apply the law. It has also created an added burden for would-be investors uncertain of the legal environment for their investments. Consistency and clarity of laws throughout Bosnia and Hercegovina is essential to assure equal legal protection for all citizens. After the initial cleanup of the existing laws, a far more comprehensive overhaul of Bosnia’s legal infrastructure should take place to bring the laws and judicial bodies more into line with European judicial norms. The current criminal justice system includes investigative judges who work closely with police, raising questions of independence. In Brcko (and Kosovo), the criminal laws have undergone radical and progressive reform, changing the role of the investigative judge. In addition, the Brcko territorial judiciary has a detailed and seriously applied ethics code unrivalled in Bosnia. These models of success provide hope for efforts to seriously tackle judicial and legal reform Bosnia-wide. Personnel: As noted above, international legal experts should not be involved in the details of Bosnian legal codes, except on an advisory basis. Internationals have been a part of the problem, for example, by introducing Common Law codes that are foreign to the Bosnian legal tradition and clash with Roman Law already on the books. OHR should select members for the all-Bosnian task force(s) on the basis of competence and ethnic balance. The legal experts should hail from both entities and the Brcko special district. The staffing of the commission should be consistent with the constituent peoples decision and the 1991 census. In the following phase of full-scale revision of the criminal law system, handpicked qualified Bosnians should again take the lead. Foreign technical advisors should be familiar with the current Bosnian system, EU standards to which Bosnia aspires, and be willing to remain with the process until its completion. In Kosovo, for example, Slovenian legal experts, who had modified their own SFRY-based criminal laws, played an important advisory role. Especially when it comes to drafting codes appropriate for prosecuting organized crime, foreign experts with substantial experience, perhaps from the United States or Italy, will be important. In all cases, “parachute advisors,” who do not stay on the ground long enough to be attuned to local realities and implementation issues, are to be avoided. Cohesion among members of the advisory group and the reform task force is crucial to its success.

4 “Courting Disaster: The Misrule of Law in Bosnia and Herzegovina,” March 2002, available on the International Crisis Group’s website: www.crisisweb.org


Implementation: The High Representative-Designate should begin work now on securing the agreement of leading Bosnian moderates, the OSCE, and important international embassies for this plan. He should also begin thinking about potential Bosnian task-force members and suitable international advisors. Upon taking office, Lord Ashdown should encourage his relevant staff to push forward with current plans to implement the “East German model” of judicial personnel review, as recommended by American legal expert Charles Erdmann in his November 2001 report for the OHR. Under this general reappointment process, members of the Bosnian judiciary would be suspended from their positions while being reviewed according to strict professional criteria, including track records of adhering to international human rights norms, starting from the senior levels on down. The criteria of the recently imposed Sarajevo-Mrakovica Agreement, which requires public administration to represent the 1991 ethnic composition of BiH is another factor that should come into play in this review and reappointment process. The High Representative should see that the capacities of the International Judicial Commission are bolstered to enable it to tackle this major effort. The High Representative should appoint one or more task forces to review laws and procedures already on the books, weeding-out inconsistencies and errors, rewriting statutes to modernize and harmonize them with EU standards, and making suggested technical improvements. The Brcko Legal Review Panel, which developed a coherent package of 40 laws – many markedly improved - for the district, provides a model that the task forces should be strongly encouraged to consider. For each level of government, the package of suggested edits should be placed before lawmakers for an up-or-down vote. The High Representative should reserve the right to impose the task forces recommendations in each case. Following the initial review of technical shortcomings of the legal code and its revision, and completion of the work of the business law task force (recommendation #4), the High Representative should launch the more comprehensive effort at reform of the Bosnian legal system. He should begin by holding public meetings with legal practitioners to highlight the need for reform, then announce the creation of the legal-reform task force(s). The High Representative’s public information campaign should note that this effort to draft coherent legal procedures is consistent with the ongoing effort to vet and professionalize Bosnia’s judiciary, and aimed at building public confidence in the ability to have crimes and disputes fairly adjudicated in a reasonable window of time. He should stress that this effort amounts to a sizable advance in preparing Bosnia for European integration, and tearing down obstacles to investment and job development in the more immediate term. As with the first phase of legal reform, the new package of laws should be given to the requisite lawmakers for up-or-down votes, with the High Representative reserving the right to impose the revisions should they not be adopted by all Bosnian jurisdictions within a one-month window. The High Representative and the rest of the international community should work to ensure that the new BiH State Court, long in gestation and mandated by law in late 2000,


be properly staffed and funded. Then OHR should give it room to do its work, much as it has the Constitutional Court. The special interim chamber to deal with organized crime, terrorism, and special crimes (see recommendation #1) should be placed under the umbrella of the State Court. Beyond the Bosnian legal reform commission outlined above, the March 25, 2002 International Crisis Group (ICG) report “Courting Disaster: The Misrule of Law in Bosnia and Hercegovina” outlines in great detail the scope of Bosnia’s legal problems and makes a list of sensible remedies. In particular, we believe the High Representative-Designate should consider the following recommendations put forward by ICG:

• Personnel in UNMiBH’s Criminal Justice Assessment Unit (CJAU) should be actively

recruited to the International Judicial Commission to maintain their institutional memory and expertise, and bolster the IJC’s efforts.

• Ensure the Constituent Peoples Ruling and subsequent Mrakovica-Sarajevo Agreement imposed by current High Representative Wolfgang Petritcsh applies the 1991 Census key to judicial personnel throughout BiH.

• Maintain international judges in their positions through the full mandate of the new High Representative, expanding their role as necessary in the General Reappointment Process.

• Work to establish a statewide Bar Association • Make legal education reform a priority. This should be an integral component of new

internationally accredited university outlined in DPI’s recommendation #10, below. The OHR should arrange for donors behind the university to sponsor a Bosnian Legal Institute with a cadre of professional international and local faculty. The Institute could be made a permanent judicial training institute for continuing legal education.

8. Create a Bosnian General Accounting Office mandated to audit the finances

of public bodies—including entities, cantons and municipalities—on a regular basis. Rationale: Bosnia’s multiple layers of government and the predominance of nationalist party patronage networks are ideally suited to graft. Corruption among officials is considered endemic by both the Bosnian population at large, the international donor community, and would-be investors. Many budgets lack even elemental transparency – such as those of the Federation and RS Veterans Ministries. The continued existence of anti-Dayton ties to foreign militaries and intelligence services underscores the need to audit the books of the Bosnian military and security services. The disappearance of millions in aid funding alone points to the need for such an expansive, independent and professional body. Mandate: Every governmental ministry and agency at state, entity, cantonal, and municipal level should be audited on a regular, scheduled basis, to determine the provenance of funding flows and see that funds are properly spent when allocated. The GAO could do more detailed audits and investigations at the request of parliamentarians (though there would have to be a built-in safeguard against frivolous requests for investigation). The body would have the explicit authority to demand access to documents. Noncompliance or suspected malfeasance would be referred for investigation to a state prosecutor designated and vetted for this purpose.


Personnel: The General Accounting Office should be staffed with indigenous, vetted professional accountants, banking experts, and lawyers. Their pay should be sufficient to deter the allure of bribery. The GAO would have access to an advisory panel of international auditing experts, convened by OHR, particularly in the startup phase. The High Representative will designate a chief advisor to coordinate a small team of international experts. However, this body would have an explicitly advisory role. Authority would rest with the indigenous GAO structure. Implementation: Should Bosnia’s authorities not adopt the necessary legislation to build an independent accounting body within three months of the October elections, the High Representative should move to create one under the auspices of the OHR. While operating under OHR tutelage at the outset, the GAO would become an independent state agency upon OHR’s dissolution. The High Representative should, as part of announcing his rule of law focus, announce the need for a General Accounting Office to assure the transparency of government and the proper use of taxpayer (and donor) funds. As he builds public support for the Business Law task force (recommendation #4), the High Representative should make the case for the totality of measures to enforce accountability of public officials – both elected and appointed. The GAO would be the centerpiece of a longer-term effort to press for the creation of a professional Bosnian state civil service.

9. Create an internationally accredited university in Bosnia. Rationale and Structure: Existing Bosnian universities are disastrous. Poor pay and lack of accountability have led to the selling of degrees (even medical and legal degrees). Nearly all professors lack up-to-date training and knowledge, demand rote memorization of facts rather than independent thinking, and see their professorships as a status symbol rather than an obligation to teach effectively. Politics too often creep into academia, and nearly every major Bosnian politician doubles as a part-time professor. All Bosnian youth recognize the status quo as a failure. The failed university system is another reason why skilled Bosnian youth seek to leave the country. A new, internationally accredited university would serve to give Bosnian youth hope for a decent university education at home and to pressure existing Bosnian universities to modernize. The new university could be located in Sarajevo or, alternatively, campuses could be located in Sarajevo, Mostar, and Banja Luka, each campus having a different specialty (law, medicine, humanities, etc.) to attract youth from all over Bosnia. The university would draw on internationally accredited Bosnian professors and accredited foreign professors. The main language of instruction would be Serbo-Croatian. As a strict rule, professors and students would have the right to use any dialect of their choice, written or verbal, in any setting at the university. Visiting professors could teach in English, French, or German – the main languages of the EU. The university should include a journalism school, in the hopes of improving journalistic ethics and abilities in Bosnia. The few Bosnian students whose families can afford it should be charged tuition of KM 500-1,000


per semester, and those who can’t should eventually receive international, and eventually, state stipendiums. By eventually making the university a state-level institution, and having the majority of students dependent on the state for tuition support, a greater number of youth of all ethnicities will gain a stake in the success of Bosnia. To raise youth involvement in politics, valid voter registration could be required for all university applications. Implementation: Discussions to secure funding should start now. The EU should be expected to pick up most of the initial costs, though the U.S. and other donors should also be expected to contribute. Because Dayton leaves education to the entities, the university should initially be an internationally funded, extra-governmental institution. Once funding of the state is strengthened (through other recommendations listed in this report), the EU and other international sponsors could insist on a phased hand-off of the university to the Bosnian state. If the choice is between state funding and abolishment of the university, state funding can be expected to receive support among populations of both entities, particularly among youth. The High Representative’s intent to launch this university should be announced quickly upon taking office. In rolling out the idea for the university, the High Representative should hold televised town-hall-style meetings with disgruntled students in Sarajevo, Banja Luka, and Mostar. Similar meetings with high school students who would be the first to benefit from the new university would also be advisable. The support of the Council of Ministers is likely for eventually “Bosnianizing” this project, and OHR should work with them to draft and pass the enabling legislation. If the legislation gets caught up in the House of Peoples, the High Representative should impose it. Lessons should be drawn from previous attempts to create new universities in transitional countries, such as the Central European University in Prague/Budapest, and the EU/OSCE-funded Southeast European University in Tetovo, Macedonia.

10. Strengthen the State Border Service.

Rationale: The SBS is one of the few functioning state institutions in Bosnia. Its existence has curtailed significantly the number of illegal entries, and despite thoroughly corrupted customs agencies, has led to an increase in customs revenues. It serves as a model for the way other central agencies could and should work. Its impressive hiring and vetting system should, however, be improved through more comprehensive applicant background checks. Attention is also required to secure SBS funding, procure more and better equipment, provide better training, and build permanent infrastructure. Implementation: The High Representative should encourage the World Bank to provide resources for the SBS to build barracks for SBS officers at all 17 SBS border posts. (The SBS currently rents lodging.) Permanent facilities would also send a powerful signal to secessionists who hope the SBS is temporary. The High Representative-Designate should also immediately contact the IMF about its concern that the SBS doesn’t have a stable source of funding. The IMF should be informed that imminent reforms will strengthen state finances, soon allowing adequate sources of domestic financing for the SBS. The IMF should be sharply discouraged from bad-mouthing the SBS as a luxury Bosnia can’t afford.


The anti-terrorism/anti-corruption task force (recommendation #1) should be able to identify corrupted SBS administrators or officers for internal SBS review, or, where appropriate, external review and removal by Bosnian government officials or the High Representative. In his capacity as EU Envoy, the High Representative should introduce to the second phase of the SBS application process (screening of qualified applicants by a review panel) a polygraph test to probe each applicant’s wartime activities or ulterior motives for employment. The yearly review of each SBS officer should likewise include a polygraph to focus on corruption and ethnic intimidation. The SBS needs helicopters, low-flying aircraft, night-vision goggles, motion sensors, etc. and training. The demobilized armed forces (see Recommendation #13) could provide some of this equipment, especially helicopters. For training in interdiction, EU border agencies should be encouraged to enhance their training seminars for the SBS.

11. Establish an all-Bosnian Social Welfare Reform Panel. Rationale: Preceding recommendations—the task force against organized crime, the effort to create a better environment for business, and increased collection of revenue—will open new horizons for government. At present, no government in Bosnia, at any level, performs the traditional European function of ensuring a basic safety net for its citizens. As the country approaches Europe, this needs to change. The current provisions for social welfare in Bosnia are spotty, and almost entirely the preserve of nationalist parties with little, if any, public accountability. The maintenance of separate veterans benefits, pension schemes, and health care infrastructures is not only inefficient, but also maintains the significant leverage of nationalist parties over the population, particularly the elderly. One major exception was the unification of the pension systems in the Federation in 2001. Resistance to the merger was muted, as the new monthly levels were significantly higher than the Bosniak system at the Croat levels that were adopted. Pension rates in the RS are far below those in the Federation, and new funds would be needed to bring these pensions into parity. Payroll taxes are already extremely high in the Federation, and it is unlikely that raising them would be tenable. Even with the current OHR-mandated improvements in the pensions system, requiring pensions to be funded in full by payroll taxes, the Federation system is tenuous. Other options need to be explored. The cost of not reforming the current panoply of benefits structures is high. The lack of a comprehensive, needs-based social welfare system in Bosnia has a number of pernicious effects. It helps drive emigration and stall returns. The current “system” maintains segments of the population, especially refugees and IDPs as “kept populations” that nationalists see as vote and support reservoirs. The veterans affairs offices are particularly detrimental in this respect. All of the organizations involved are highly bureaucratic and with the exception of the FBiH pension fund, all of them lack elemental transparency. Mandate: The High Representative should convene a select panel of Bosnian experts to take a ground-up look at the need for a comprehensive social welfare policy, encompassing veterans benefits, pensions, unemployment benefits, and health care. The panel would have wide latitude to make suggestions on how needs-based social benefits could replace


the current hodgepodge throughout Bosnia. As part of its mandate, the panel will have to identify sustainable funding sources and mechanisms for their recommendations. The target date for the panel’s recommendations to the High Representative would be one year from the date it is fully constituted. After an OHR review process, the recommendations would be made public. Personnel: The panel’s members should be drawn from among Bosnia’s private business community, indigenous social service NGOs, labor activists, and academia. The panel would have access to a small international advisory panel headed by a permanent coordinator with deep experience in social service reform who would stay with the project through its completion. The coordinator, appointed by the High Representative, could draw on short-term expert advisors on an as-needed basis. Advisors from more advanced transitions in the former Yugoslav states, like Slovenia’s, and more broadly from other Central and Eastern European transitions, might be valuable. Implementation: In terms of Dayton, social welfare policy is not articulated, and a strict constructionist reading would leave it in the hands of the entities. However, there is nothing to preclude the convention of an advisory panel under the auspices of the High Representative. The panel would have no governing powers, but rather a (very high profile) public advisory role. The High Representative should begin implementation by encouraging IFIs and bilateral aid donors to insist on a joint audit of all the existing social welfare programs in these fields. Such an audit and assessment of the current system is well within the purview of international donors, who after all provide much of the funding for the entity budgets. By “following the money,” and documenting the untold graft in each of these systems, the assessment will give the all-Bosnian panel a clearer picture of the resources available and shortcomings of the current system. By making the assessment and audits public, OHR can build support behind the reorganization that the panel will suggest. Should the redirection of customs revenues to the state level go forward, this will further weaken the ability of vested interests in the entities to ignore the proposals of the panel, should they find resonance with the general population. The panel’s proposals to rationalize social welfare systems to provide for the needs of the population could be presented to the High Representative and international donors for review. If international donors endorse the recommendations as fiscally sound social planning, they should endorse them, and agree to help in the transition should they be adopted. The recommendations should then be made public and supported by an information campaign. The various governing bodies (state, entity, cantonal, local) that govern the currently existing programs would need to be encouraged to adopt the suggested reforms, many of which would involve shifting responsibility to higher (or lower) governing levels. Given sufficient pressure from below, even reluctant politicians may bow to the reforms proposed by the panel. Should the responsible political bodies in BiH refuse to discuss and vote on the necessary reforms, the High Representative could use his Bonn powers to impose them.


12. Unify all Bosnian intelligence services over the next two years, following on the unification of the intelligence services in the Federation this year. Rationale: Six-and-a-half years after Dayton, three mono-ethnic intelligence services still exist on the territory of Bosnia and Hercegovina. For most of this period all three agencies have had clear links and loyalty to the three major wartime nationalist parties, organized crime networks, and war criminals. This has changed to some extent in the Federation, where in recent months the Alliance for Change has spurred real reforms in the Bosniak and, to a lesser extent, Croat services. Even so, the organizations lack transparency and their murky operations make it difficult to assess the success of reforms and the reach of democratic control. Introduction of a bill to unify the two Federation services into a more transparent, professional service is welcome, and could provide a model for rapid subsequent unification of the Federation service with its RS counterpart. The RS intelligence service lacks any civilian, democratic control whatsoever, and is run largely from Belgrade. Hard-liners, mobsters and war criminals use the service to undermine any serious efforts at reform in the RS. Self-sustaining stability in Bosnia demands that this service be radically reformed and either folded into a unified Bosnian service or abolished. Implementation: The High Representative-Designate should use his diplomatic connections to urge the U.S. Administration to demand progress from Belgrade on the severing of support for the RS intelligence service. The HR-Designate should urge full transparency of the VJ and FRY intelligence service budgets for Federal cabinet and parliament members. Likewise, the Republic of Serbia Interior Ministry should be expected to open its books to the scrutiny of the Serbian government and parliament. The High Representative-Designate should use his contacts in Europe to urge Europe’s diplomatic support for U.S. conditionality, and agreement in withholding of IFI loans for the FRY/Serbia should the FRY continue its inappropriate and anti-Dayton support of RS secessionist institutions. Upon taking office, the High Representative should push for rapid passage and implementation of the Federation law on unification of the intelligence services. The High Representative should work with the Organized Crime Task Force (recommendation #1) to systematically target and remove and/or indict members of either of the old services who obstruct unification, continue to engage in illegal activities, or refuse to obey the control of the Federation government. Information from the Organized Crime Task Force could also feed into the vetting procedure established for applicants to the new agency. In his capacity as EU Envoy, the High Representative should include NATO-cleared EU monitors in the offices of the new intelligence service. Simultaneously, working with the Organized Crime Task Force, the High Representative should target and remove and/or indict key figures in the RS intelligence service involved in crime, political or ethnic intimidation, or who perpetuate RS ties to Belgrade. The High Representative should strongly encourage the IMF to audit the RS intelligence service, and if the IMF refuses, conduct such an audit under the auspices of OHR. These measures can remove the worst elements from the RS intelligence service, making it easier to merge with the Federation service.


Upon assuming office, the High Representative should talk about a unified Bosnian intelligence service as part of his vision for Bosnia, and begin pitching the idea to SFOR, the OSCE, and important embassies in Sarajevo. Following the October elections, the High Representative should increase his rhetoric about a unified service, and by the end of 2002 should announce that if the RS intelligence service refuses to reform and merge, it will be abolished. In this case, he should announce that a new, unified service will be created following much the same process as that for unification of the Federation service. Members of the entity services wishing to join the new agency would have to apply and be subjected to a rigorous vetting procedure. Early in 2003, if there is still no progress on reform and merger, the High Representative should impose legislation creating a new service, and the abolishment of the entity services. The new service should be funded directly from the central budget and answer to the Council of Ministers. As part of the imposed legislation, a BiH House of Representatives intelligence committee of cleared members should have full powers to subpoena and review intelligence materials.

13. Advocate accelerating the reduction of the armies in BiH to a total not

exceeding 10,500, coupled with diplomatic efforts to vastly reduce force and arms levels among all Yugoslav successor states.

Rationale: Bosnia’s defense outlays are extremely high for a European country, particularly for one under de facto NATO occupation and protection. The expenditure cannot be justified on the basis of an impending external security threat. At the signing of the Dayton Accords, Bosnia’s neighbors were run by two dictators who had fought to divide the country, and the Bosniaks justifiably felt threatened and compelled to maintain an army of their own, especially with the U.S. unwilling to commit to more than one year of peacekeeping. The circumstances that necessitated this state of affairs have passed. Despite years of talks about merging the forces, there remains clear lack of common cause among these armies. The existence of three militaries (despite some notable advances, the Federation forces have yet to gel after years of assistance from the Train and Equip Program) directly impedes Bosnia’s entry into NATO’s Partnership for Peace program, exacerbates the problem of tripartite division within the country, and drains valuable resources from necessary state and local functions. Despite major recent progress in reducing Bosnia’s armed forces, there appears yet to be an agreed strategy for the future. Unhealthy and murky links to militaries in Serbia and Croatia, and openly anti-reform forces within Bosnia remain. Elimination of all indigenous military forces in Bosnia would be preferable to maintaining them in their current form, even at a reduced level, but pursuing this goal per se is likely to be counterproductive in the near-term. Bosnia will need some state army to enable it to join NATO’s Partnership for Peace, and eventually the Alliance itself, a goal widely shared by junior officers and NCOs in both the Federation and RS. The current NATO and OSCE policy of deep cuts toward a targeted force level for Bosnia of 10,500 troops (7,000 Federation and 3,500 RS), coupled with ratcheted-up pursuit of total budget transparency in Banja Luka, Sarajevo, Zagreb and Belgrade, will essentially accomplish this goal in a phased fashion. The 1996 Florence Agreement, in addition to having glaring loopholes like not counting Interior Ministry forces and having a feeble


inspection regime, set force levels among the Federation, the RS, the FRY and Croatia at extremely high levels. With deep and selective cuts, the remaining forces and commands will be more malleable to the goal of creating a single army commensurate with Bosnia’s needs. As with the continuing joint MUP deployments to East Timor, the joint deployment of Bosnians under the Bosnian flag to the UN’s Eritrea-Ethiopian border observation mission illustrates that joint operations can be done. The young officers and NCOs involved should be cultivated as a potential leadership cadre for an eventual unified force. Demobilizing the armed forces in BiH, not just in terms of personnel but including weapons in cantonment areas, would reduce security risks to controversial but necessary policy initiatives while stanching a major drain on the Bosnian budgets. Furthermore, the remaining close linkages between the Army of Republika Srpska (VRS) and the Yugoslav Army (VJ) would collapse under intense scrutiny and budgetary pressures, thereby eliminating the major hurdle to building a Bosnian Army on a European, Partnership for Peace model, with the eventual goal of NATO membership. Implementation: The High Representative-Designate should use his diplomatic connections to urge the U.S. Administration to demand progress from Belgrade on the severing of support for the VRS. The HR-Designate should urge full transparency of the VJ and FRY defense budgets for Federal cabinet and parliament members. Likewise, the Republic of Serbia Interior Ministry should be expected to open its books to the scrutiny of the Serbian government and parliament. The High Representative-Designate should use his contacts in Europe to urge Europe’s diplomatic support for U.S. conditionality, and agreement in withholding of IFI loans for the FRY/Serbia should the FRY continue its inappropriate and anti-Dayton support of RS secessionist institutions. In implementing this recommendation, the High Representative has the power and the mandate to do some things directly, while other measures will rely more on diplomatic contacts and skills. Among steps directly available to the High Representative:

• The High Representative should, to the full extent of his powers in Bosnia, press for

total transparency of defense budgets (and also those of the veterans’ ministries) in the entities, removing personnel who fail to comply. His efforts in Bosnia on this score need to be coordinated in a strategy together with SFOR and the OSCE.

• Intensified efforts should be made, in the context of the projected overall force level (on a 2:1 ratio), to build the Standing Committee on Military Matters (SCMM) into a Bosnian state Defense Ministry, as some major powers, including the United States, see as desirable;

The High Representative should use diplomatic channels and his position as EU Envoy to encourage:

• OSCE supervision of accelerated force reductions targeted at a total force level of no

more than 10,500; • Full disclosure of defense expenditures and funding streams in both Belgrade and

Zagreb. This must become a fundamental tenet of aid conditionality to promote democratic governance and rule of law;


• Deep cuts in the Serbian and Croatian militaries. The High Representative should

advocate this idea with the EU, OSCE and NATO, and with leaders in Zagreb and Belgrade directly. Progress on this front should also be a factor in the decision to grant Partnership for Peace membership to Serbia and Montenegro, along with transfer of ICTY indictees, budget transparency, removal of specific personnel, and severing ties to the VRS.

• NATO to announce that despite reductions in SFOR, it intends to remain in Bosnia in some fashion until the country eventually forms a unified military and becomes eligible for Partnership for Peace;

• Donors to direct would-be military aid to the State Border Service. Not only financial aid, but also equipment appropriate for its role would be helpful to the broader endeavor of building-up the SBS. It should also receive the proceeds from the sale of drawn-down military equipment ill-suited to its duties.

After elections, the High Representative should intensify pressure on the entities to transform the SCMM into a Defense Ministry with joint command under the Council of Ministers. In collaboration with NATO and the OSCE, he should also encourage the establishment of a joint training center for contingency operations, drawing upon the experience of the deployments to East Timor and the Eritrean-Ethiopian border. As defense budgets are squeezed by other public priorities and international demands for transparency, the impediments to building a state force will wither.

14. Lobby staff and leading donors to International Financial Institutions (IFIs) to restructure their loan portfolios and projects in Bosnia by having central institutions guarantee and disburse them after their own review, in primacy over the entities. Member states should be encouraged to press the IFIs to coordinate their policies in Bosnia through the High Representative and other key actors in Bosnia. The High Representative should lobby IFIs to impose stricter vetting standards for loan beneficiaries.

Rationale: Too often, lending policies of the World Bank, International Monetary Fund, the European Bank for Reconstruction and Development, and other multilateral and bilateral donors have been at odds with the OHR and PIC goals of strengthening Bosnian central institutions and improving refugee return. Lending should be compatible with strengthening state institutions. Loans to entity institutions should be phased-out over time as central institutions develop greater competence. In the interim, loans to entities should be conditional on substantive coordination between them and review by state institutions. For project loans, current vetting procedures are inadequate, and loans can easily make their way into the hands of extremists with shady wartime pasts, and even individuals who have been removed or disqualified from positions by the OHR and OSCE. It is not enough to exclude indicted criminals (including ICTY indictees). Other lenders, such as the U.S. Agency for International Development (USAID) screen loan beneficiaries by stricter standards (even if their screening mechanism has at times been flawed). Implementation: The OHR should launch a review of current lending policies of the IFIs and bilateral donors to determine the extent to which they conform to the overall strategic goals of promoting BiH integration. It is likely that many of the programs on the ground do not


perform these functions, even if they are touted as doing so. The results of this review should lead to alliance with key sympathetic donors to bring other lenders into better coordination. The High Representative should contact IFI leaders and major bilateral donors to urge support of OHR strategy on strengthening central institutions. He should give priority to using diplomatic contacts to encourage European Union programs and those of its members to require promotion of integration and strengthening of state institutions. If, as is likely, the IFIs are reluctant to make substantial changes in their current lending policies, the High Representative should work with the European Union and United States to bring donor government pressure for change on IFI management. In the U.S. context, it would be important to work not only with the Administration, but also with influential members of Congress. Coordination with sympathetic Washington NGOs would serve to sustain pressure for systemic changes in lending policies. The High Representative should form an IFI and donor coordination cell to monitor foreign donor inflows, including bilateral aid from USAID, the EU and elsewhere. Local and international NGOs should be consulted in the project approval phase, as they sometimes are in the U.S. The High Representative should contact IFI leaders and board members to urge higher standards for the vetting of contractors. OHR staff should follow-up with IFI staff to work through issues of implementation. For project loans, beneficiaries (including subcontractors) should be disqualified and publicly blacklisted if they are: under international or domestic indictment; have been removed from office by OHR; have been disqualified from election participation by the Provisional Election Commission or Election Appeals Sub-Commission; removed from the military services by COMSFOR; or have been de-authorized or decertified by IPTF. The High Representative or his staff should enter discussions with USAID about the feasibility expanding to IFI loans use of the stricter U.S. vetting mechanism already in place.

An Agenda for Bosnia's Next High Representative - Democratization Policy Institute May 2002

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Transcript of An Agenda for Bosnia's Next High Representative - Democratization Policy Institute May 2002