Prof. Anto Domazet, PhD Economic Institute Sarajevo School of Economics and Business University Sara

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Prof. Anto Domazet, PhDEconomic Institute
SarajevoSchool of Economics and Business
University Sarajevo

• BOSNA AND HERZEGOVINA IN CEFTA
• Round Table
• Regional Cooperation for Development and European
  Integration The Future of CEFTA
• Zagreb, October, 10, 2007

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New CEFTA in EU environment
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Questions for BH related to the free trade in
the region

• Is free trade good for postconflict destroyed
  economy?
• Is there better way to protect the economy and
  than to expose it to foreign competitive
  pressures gradually?
• How to liberalize trade in low competitive
  country without support of sound macroeconomic
  and trade and industrial policies?
• Liberalization and underdeveloped state
  institutions what are the consequences?

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Free trade benefits and costs for BH in
2001-2006.

• Benefits
• Political stabilization
• Macroeconomic stabilization,
• Export contribution to the growth (5,5 GDP
  average)
• Regional framework for restructuring economy,
• FDI atractiveness (4.051 MIL EUROS, June 2007)
• Competitiveness growth on regional level
• Costs
• Loses in industry and agriculture
• Big trade deficits (43,5 of GDP in 2006.)
• Public revenue loses (tariffs)
• High unemploymnet rate (43 officialy, 23
  unofficialy)

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The potentials of trade for growth in BH are not
expoloited
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Trade creation and trade diversion BH vs CRO and
SMN
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Transition gap (GDP from 1989.) and exports
Index GDP 2006/1989

• ALBANIA
• CROATIA ROMANIA
• BULGARIA
• MACEDONIA
• BH
• MN
• SERBIA

150 140 130 120 110 100 90 80 70
60
POLAND ESTONIA HUNGARY
CZECH R
Export as GDP 2006.
20 30 40 50 60 70 80 90
100
20
ff
20
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New CEFTA - A Step Ahead Towards EU

• Replacing 32 bilateral with one multilateral
  agreement of free trade
• Tecnical barriers removal
• Rules of competition (State aid, State
  monopolies, public procurements)
• Better administrative procedures in agreement
  implementation
• Diagonal cumulation of product origine
• EU and WTO procedures
• CEFTA and EU integration (FDI and SME support)

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CEFTA Advantages
CEFTA 2006 (AL, BIH, HR, MK, MD, CG, SR, UNMIK)
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Different position in transition and EU
integrations
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2005 - BH the highest level of import dependency
in CEFTA
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2005 - BH one of the highest level of export
dependency in CEFTA
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BIH vs CEFTA vs EU27 vs WTO
Membership
(SAA)
CEFTA 2006
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CEFTA trade based on gravity model
Import BiH (mil. KM)
Hrvatska
2.400 2.000 1.600 1.200 800 400
Srbija
Albanija, Moldova
Makedonija
Export BiH (mil. KM)
150 300 450 600 750 900 1.050
1.200
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Low export growth in 2007EU-18, CEFTA - 5,
others 3
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High import growth total 17, CEFTA 4, EU 28,
others 10
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BH in CEFTA competitive framework - GCI
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Business competitiveness - a lot things to do
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Candidate status-of critical importance for BH
future
Progress in reforms
Political, economic and social reforms Acquis
implemantation Pre-accession funds New
constitution of BH Real convergence in growth
Export, FDI, employment, salaries and pensions
growth Free movement of people Eu ropean
education Sharing european values
Initial economic, political and social reforms,
constitu-tional reforms
Progress in EU integrations
SAP Candidate status
Membership in EU 2007 2009
20..
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Agenda for converting CEFTA into developmental
opportunities for BH future challenges

• EU SAA and candidate status for BH
• Macroeconomic reforms
• Better business environment
• Reintegration and single economic space
• Privatization and restructuring
• Rural development and agriculture policies
• Reindustrialization
• Institutional capacities
• Export and FDI promotion policies