#1>>OECD BETTER POLICIES FOR BETTER LIVES Western Balkans Competitiveness Outlook 2024 Fact-finding Meeting Banja Luka, Bosnia and Herzegovina 24 October 2023 OECD South East Europe Regional Programme " Co-funded by the European Union#2The OECD SEE Competitiveness Outlook: A tool for building competitive economies ABOUT The Competitiveness Outlook (CO) assesses reform progress across multiple policy areas crucial to competitiveness in the six Western Balkan economies: Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia, and Serbia. Competitiveness Outlook 2024 is the 4th edition of this assessment, following the publication of the Competitiveness Outlook 2021. Competitiveness and Private Se Development Competitiveness in South East Europ A POLICY OUTLOOK 2016 Competitiveness and Private Sect Development Competitiveness in South East Europe A POLICY OUTLOOK 2018 Competitiveness and Private Sector Development Competitiveness in South East Europe 2021 A POLICY OUTLOOK APPLICATION Guiding policy reform and acting as a change management tool through government self-evaluation. methodology ➤ Benchmarking performance between peer economies using internationally comparable databases ➤ Providing a source of information on international standards, databases and other tools across several policy areas ➤ Enabling gradual adherence to the OECD standards. ➤ Supporting monitoring of Sustainable Development Goals' implementation. OECD OECD OECD FE Western Balkans Summit Berlin 202 OCDE OECD OCC The Competitiveness Outlook supports the Western Balkan governments' EU integration efforts by providing analytical contributions supporting the Economic Reform Programmes and the EU progress reports and recommendations. Gacze S 30 Groce HOTE GMC * This designation is without prejudice to positions on status, and is in line with United Nations Security Council Resolution 1244/99 and the Advisory Opinion of the International Court of Justice on Kosovo's declaration of independence 2#3INVESTMENT POLICY & PROMOTION TRADE POLICY Assessment Approach and Methodology The CO 2024 methodology is designed to provide an evidence-based assessment of progress in the design, implementation and monitoring across 15 policy dimensions key to economic competitiveness Each of the 15 policy dimensions is split up into several sub-dimensions, reflecting the key areas of that policy dimension Sub-dimensions are composed of both qualitative and quantitative indicators ENVIRONMENTAL POLICY ENERGY POLICY BANK ACCESS TO FINANCE TAX POLICY 100 Policy Dimensions 13 Qualitative indicators Sub-dimension 1 Quantitative indicators Qualitative indicators 15 Sub-dimension 2 Quantitative indicators 01110 01100101 01100011 01101000 01101110 101111 Sub-dimension ... TRANSPORT POLICY & PERFORMANCE AGRICULTURE STATE-OWNED EDUCATION SCIENCE, ANTI-CORRUPTION ENTERPRISES & COMPETENCIES EMPLOYMENT POLICY TECHNOLOGY & INNOVATION DIGITAL SOCIETY POLICY TOURISM#4Scoring methodology - Qualitative indicators According to the level of policy development and implementation, the qualitative indicators are assigned a numerical score between "0" and "5" to permit comparison of performance across WB6 economies. An independent impact evaluation of policy measures is executed. Results of monitoring and impact evaluation inform policy framework design and implementation updates towards OECD and international good practices. 5 4 The policy framework is monitored and, if necessary, adjusted accordingly. The policy framework includes more advanced features to increase its impact. 3 The adopted policy framework is effectively being implemented. The policy framework includes key features which make it impactful. 2 A policy framework specifically addressing the policy area concerned has been officially adopted by the government or parliament (where applicable). 1 A draft / pilot policy framework with government activity exists addressing the policy area concerned. C No framework (e. g. law, institution, project, initiative) exists addressing the policy area concerned. 4#5Regional assessment Five distinct clusters The CO 2024 will introduce an enhanced regional profile methodology, built around five distinct clusters, to effectively encompass and show the policy landscape of the Western Balkans. Business Environment Connectivity & infrastructure Skills Greening Digitalisation INVESTMENT POLICY & PROMOTION TRADE POLICY TRANSPORT POLICY & PERFORMANCE EDUCATION ENERGY POLICY EMPLOYMENT POLICY & COMPETENCIES ENVIRONMENTAL POLICY ENERGY POLICY DIGITAL SOCIETY m 01110 01100101 01100011 01101000 01101110 0101111 0111 01100101 01100011 01101000 1101110 101111 0111 01100101 01100011 01101000 1101110 101111 SCIENCE, TECHNOLOGY & INNOVATION TRADE POLICY SCIENCE, SCIENCE, AGRICULTURE TRANSPORT POLICY & PERFORMANCE ACCESS TO FINANCE TAX POLICY ACCESS TO FINANCE DIGITAL SOCIETY TECHNOLOGY & INNOVATION TECHNOLOGY & INNOVATION A STATE-OWNED ENTERPRISES#6Datahub Competitiveness Outlook 2024 Useful components Complement the publication with the underlying wealth of qualitative and quantitative data in a visual and easily accessible way Economy-specific profiles Co-funded by the European Union OECD Competitiveness Outlook Datahub ◆ Montenegro WB6 AVR Albania ●Bosnia and Herzegovina ⚫Kosovo ◆ North Macedonia ⚫ Serbia 8. Science, Technology and Innovation 7. Employment Policy 9. Digital Society 6. Education Policy 10. Transport Policy 5. State-owned Enterprises 4. Tax Policy 3. Access to Finance 2. Trade Policy 1. Investment Policy and Promotion Score 5 4.5 4.2 4.0 3.8 3.6 11. Energy Policy 12. Environment Policy 13. Agriculture Policy 14. Tourism Policy 15. Anti-corruption Policy *The image shown is for illustration purposes only and will not be the exact representation of the final product. Access an economy-specific set of policy recommendations and source of information on international standards, databases and other tools across several policy areas 6#7Datahub Competitiveness Outlook 2024 Useful components Complement the publication with the underlying wealth of qualitative and quantitative data in a visual and easily accessible way Economy-specific profiles Go-funced by the European Union OECD Competitiveness Outlook Datahub ⚫Montenegro WB6 AVR Albania Bosnia and Herzegovina ⚫Kosovo North Macedonia ⚫Serbia 8. Science, Technology and Innovation 7. Employment Policy 9. Digital Society 6. Education Policy 10. Transport Policy 5. State-owned Enterprises 11. Energy Policy 4. Tax Policy 3. Access to Finance 2. Trade Policy 1. Investment Policy and Promotion Score 5 3.9 2.5 2.3 2.6 1.7 12. Environment Policy 13. Agriculture Policy 14. Tourism Policy 1.9 2.5 15. Anti-corruption Policy. *The image shown is for illustration purposes only and will not be the exact representation of the final product. Access an economy-specific set of policy recommendations and source of information on international standards, databases and other tools across several policy areas 7#8Q1 Revision of Design Assessment Frameworks and phase Questionnaires Assessment phase Consolidation phase Review & Publication Competitiveness Outlook 2024 Timeline 2023 2024 Q2 Q3 Q4 Q1 Q2 Q3 Kick-off meeting 15 Regional Co- ordination meetings Government Self- assessment Independent Assessment by OECD 24-27 October 2023 Fact-finding meetings 13 Dec 2023 Input analysis Preliminary results Meeting Publication & Data hub preparation Review phase & integration of updated data July 2024 (TBC) Publication & Datahub launch --------- Only OECD 요 04 Government involved Economy-specific launch meetings/Road show#9ווי Competitiveness Outlook 2024 Next Steps 14 July 2023 Second round of input collection 24-27 October 2023 Fact-finding meetings in BiH 13 December 2023 Presentation of preliminary findings February 2024 Draft publication shared Respond to OECD comments and update the demanded information Send the final qualitative and quantitative questionnaire ☐ Contribute to closing information gaps in policy dimensions related to the skills system by sharing additional information Identify achievements, challenges, and policy priorities ☐ Contribute to discussion and validation of the preliminary results Provide updated data if available ☐ Comment on initial OECD policy recommendations ☐ Provide updated data if available Provide final comments on the draft outputs Publication & Datahub release in July 2024 (TBC) & Economy-specific launch meetings in Q3 2024 6#10>>OECD BETTER POLICIES FOR BETTER LIVES Western Balkans Competitiveness Outlook 2024 BUSINESS ENVIRONMENT IN BOSNIA AND *** HERZEGOVINA - FOCUS ON REPUBLIKA SRPSKA DATA GAPS Banja Luka, Bosnia and Herzegovina 24 October 2023 OECD South East Europe Regional Programme www " Co-funded by the European Union#11Data gaps across 15 assessed policy dimensions as of 20 October 2023 Dimension Statistical sheet Remarks Questionnaire Not received Investment Policy and Promotion Minor gaps Not received Partial gaps Trade Policy Access to Finance Minor gaps Partial gaps N/A Second sub-dimension largely incomplete, unanswered questions Statistical sheet: Subdimension 3 is missing. Minor gaps Tax Policy Minor gaps Environment Policy Minor gaps Minor gaps Minor gaps Agriculture Policy Partial gaps Many quantitative indicators missing. Minor gaps Tourism Policy Minor gaps State-owned Enterprises Minor gaps Minor gaps Minor gaps Education Policy Minor gaps Minor gaps Employment Policy Minor gaps Science, Technology and Innovation Minor gaps Minor gaps Minor gaps Digital Society Minor gaps Minor gaps Transport Policy Energy Policy Major gaps (only 1st round received) Minor gaps Anti-Corruption Partial gaps (only 1st round received) Not received Responses to follow-up questions and reviewed version pending Responses to follow-up questions and 11 reviewed version pending#12Investment Policy & Promotion Sub-dimension 1: Investment Policy Framework Business environment - Data gaps Sub-dimension 2: Investment Promotion and Facilitation Sub-dimension 2: Mobilising Sustainable Investment Trade Policy Sub-dimension 1: Trade Policy Framework Sub-dimension 2: Digital Trade Sub-dimension 3: Export Promotion Access to Finance Sub-dimension 1: Bank Financing Framework Sub-dimension 2: Access to Alternative Financing Sources Sub-dimension 3: Digital Finance Tax Policy Sub-dimension 1: Tax Policy Framework Sub-dimension 2: Features of Tax Administration Sub-dimension 3: International Cooperation SOES Sub-dimension 1: Efficiency and Performance Through Improved Governance Sub-dimension 2: Transparency and Accountability Sub-dimension 3: Ensuring a Level Playing Field Minor information gaps Partial information gaps Largely incomplete 12#13Business environment - Data gaps (qualitative) Investment Policy and Promotion Strategic framework and governance for sustainable investment Digital trade Trade Policy Access to finance Main policies envisaged in the Trade Development Strategy of the Republic of Srpska 2022-2028 Changes in the regulatory framework for public-private consultations Fintech firms and crowdfunding providers. • Regulatory requirements on digital payment service providers. Tax Policy No data gaps have been identified. State-owned enterprises Details on new SOE performance- monitoring unit Information on SOES that operate as "public enterprises" Details on composition of boards and SOE board nomination procedures 13#14>>OECD BETTER POLICIES FOR BETTER LIVES Western Balkans Competitiveness Outlook 2024 BUSINESS ENVIRONMENT IN BOSNIA AND *** HERZEGOVINA - FOCUS ON REPUBLIKA SRPSKA KEY CHALLENGES & POLICY SOLUTIONS Banja Luka, Bosnia and Herzegovina 24 October 2023 OECD South East Europe Regional Programme www " Co-funded by the European Union#15Economic convergence with OECD standards over five CO policy clusters 711.25 1$61.21 1711.25 417.52 1417.52 3215.24 3215.25 1552.52 1711.25 1527 52 1417.52 3215.24 1561.21 1711.25 1561.21 2427.52 21505 • 184.13 5184.13 6542 52 1552.52 155252 1552.52 518413 5184.13 2124.13 5184.18 8794.22 5124.67 5124.67 5124.67 5124.67 114.87 6124.87 6124 87 6824.87 2114.87 6124.87 3121146 9711.88 9521,46 124.76 3124.76 114.61 324.61 Economic Convergence size 9918.87 Scoreboard for the 05.67 7605.05 Western Balkans 2023 75145 (Draft Regional Version) 3051 195570 3 14.61 991887 8 512461 7605050 13155 21345 3432 305654 125570 • New OECD scoreboard to assess economic convergence with EU and OECD standards Presented at the Berlin Process Western Balkan Summit 2023 in Tirana Scoreboard highlights each economy's convergence relative to EU policy outcomes and OECD good practices across five clusters: »OECD BETTER POLICIES FOR BETTER LIVES Business environment Connectivity & infrastructure Skills 1010 Greening 1010 Digitalisation 15#16Economic convergence of Bosnia and Herzegovina in the business environment cluster The data related to the outcome indicators show the BIH performance relative to the EU, i.e., EU = 1. (OECD= 1 for the OECD good policy practices, standards, and tools). Policy outcomes Score 0 1/3 2/3 1 Performance relative to the EU Change OECD good policy practices, standards, Performance relative to the OECD Change 2008- 2013- 2018- 2012 2017 2022 2008-12 to 2018-22 and tools 2016- 2018- 2020- 2017 2019 2022 2016-17 to 2020-22 BUSINESS ENVIRONMENT Services Trade 0.83 0.86 0.88 +0.05 Restrictiveness Index Trade openness (% of GDP) 1.03 1.03 1.02 -0.01 Trade Facilitation Index 0.63 0.70 +0.07 CO Trade Policy 0.48 0.44 0.50 +0.02 SMEs in total exports (% of exports) 1.41 1.21 -0.20 SME Policy Index 0.56 0.59 0.65 +0.09 FDI net inflows (% of GDP) 0.63 0.54 1.41 +0.78 FDI Restrictiveness Index 1.73 1.70 1.70 -0.03 Private gross fixed capital formation 0.91 0.91 0.85 -0.06 (% of GDP) New business density (registrations CO Investment Policy and Promotion 0.54 0.42 0.54 0.00 0.36 0.31 -0.05 per 1,000 people) Domestic credit to private sector 0.61 0.63 0.61 0.00 (% of GDP) CO Access to Finance Policy 0.26 0.38 0.46 +0.20 Bank nonperforming loans 0.86 0.74 0.62 -0.24 (% of total gross loans) Estimated informal employment 0.33 0.35 0.44 +0.11 (% of total employment) CO Anti-corruption Policy 0.32 0.34 0.40 +0.08 Control of corruption 0.63 0.61 0.54 -0.07 Convergence with OECD good practice: • Overall, policies in Bosnia and Herzegovina are gradually aligning with OECD good practices in most dimensions of the business environment cluster. However, while advancements exist, they remain modest; as of 2021, none of the four examined policy areas had achieved more than 54% convergence with OECD standards. The strongest and most consistent progress was made in the finance policy dimension, as well as in policymaking for SMEs, under the SBA assessment. access While Bosnia and Herzegovina remains open to trade in services, it remains restrictive compared to regional peers. Convergence of policy outcomes: • Net inflows of foreign direct investment as a share of GDP strongly improved and surpassed the EU level by over 40% by 2022. Estimated informal employment decreased and made gradual progress in converging to the EU level. Significant room for improvement remains to boost convergence across all policy outcome indicators. Strengthening policies to improve SME exports, performance of loans, business creation and control of corruption will be key in this regard. 16#17● Bosnia and Herzegovina's Competitiveness Outlook performance since 2018 From 2018 to 2021, Bosnia and Herzegovina improved its performance in all policy dimensions related to the business environment In 2021, Bosnia and Herzegovina achieved its biggest improvement in score in the tax policy dimension, and also achieved. considerable progress in access to finance and investment policy and promotion. However, Bosnia and Herzegovina's performance remains below the regional average in all dimensions of the business environment cluster. Investment Policy and Promotion 2018 2021 5 INVESTMENT POLICY & PROMOTION TRADE POLICY TAX POLICY INIL ACCESS TO FINANCE Trade Policy Tax Policy Access to Finance 300 SoEs STATE-OWNED ENTERPRISES 0 2018 2021 0 2018 2021 0 WB6 2021 average WB6 2021 average WB6 2021 average 2018 2021 0 2018 WB6 2021 average 2021 WB6 2021 average 5 5 5 5 17#18- Business environment cluster – Key progress and remaining challenges since CO2021 (at the level of RS) Progress Investment Policy and Promotion Challenges . New guidelines for consultations in . ● the drafting of regulations have been adopted in 2022 including digitalisation of the process through the eConsultation web application. In November 2021, RS adopted its Strategy for Attracting Foreign Investments 2021-2027. Legal basis for the establishment of an autonomous investment promotion agency has been adopted. • Intellectual property rights enforcement and awareness raising remain challenging. Provisions governing arbitration are underdeveloped. 18#19- Business environment cluster – Key progress and remaining challenges since CO2021 (at the level of RS) Progress Trade Policy Challenges The government adopted the Action Plan (2025-2028) for the implementation of the Trade Development Strategy The scope of export promotion programmes focusing on the introduction of new technologies increased. . · Environmental objectives are not included in trade policy formulation The impact of stakeholder participation in trade policy formulation remains underreported 19#20- Business environment cluster – Key progress and remaining challenges since CO2021 (at the level of RS) Progress Tax Policy Challenges • • • Large majority (90%) of tax returns filed electronically Developing an automated system for selecting high-risk taxpayers Conducted tax expenditure accounting for the first time in March 2023 and will continue routinely • Regular assessments of Tax Administration ensure adhesion to legal regulations . . . Little progress toward increasing progressivity of tax system No preparations to introduce Global anti-Base Erosion (GloBE) rules or Qualifying Domestic Minimum Top-Up Tax (QDMTT) Limited personal income tax incentives aimed at incentivising employment or job creation No independent management board of the tax authority 20#21- Business environment cluster – Key progress and remaining challenges since CO2021 (at the level of RS) Progress Access to Finance Challenges • • The Banking Agency of the RS has adopted a new Decision on banks' liquidity risk management for further harmonization with the Basel III liquidity standards. The European Commission confirmed that the BiH has aligned its banking regulations and supervision with EU standards. Substantial legal progress with the implementation of the amendments to the Laws on Securities Market and Investment Funds to develop capital markets and private equity. • • The adoption of Basel III standards has not been fully implemented yet. The current definitions of collateral are too restrictive and not customized to meet SMEs' needs. The capital markets' legal framework remains unaligned to the EU acquis. The legal framework for digital finance remains incomplete. 21#22- Business environment cluster – Key progress and remaining challenges since CO2021 (at the level of RS) Progress State-owned enterprises (SOEs) Challenges . G In 2022, an SOE performance- monitoring unit ("Department for Coordination of Supervision of Public Enterprises") was established. • . The rationales for state ownership remain unclear and are not established through an ownership policy. There is no SOE-specific board nomination framework in place to ensure that SOE boards are professionally qualified and independent. • Derogations to SOEs' legal and regulatory treatment exist, raising concerns related to the creation of a level playing field. 22#23Competitiveness Outlook 2024 Business environment cluster The business environment cluster includes the various factors that ultimately shape the landscape in which businesses emerge and expand. Business creation Barriers to investment and trade Market entry Trade Trade facilitation Trade promotion % Regulatory framework Level playing field Financial accessibility Taxation Financial services Informality State-owned enterprises (SoEs) Financial inclusion 23 Tax policies and requirements Tax administration and its services#24Business creation Market entry Barriers to investment and trade How easy and cheap is it to start a business, and how supportive are the government services? Do trade policies restrict market access/foreign entry for certain sectors? How easy and cheap is it to get business licensing and permits? How easy is it for a business to start exporting? Select priorities#25Trade Trade facilitation Are digital trade facilitation measures widely enforced and used among businesses? (e-signature, electronic customs, e-certificates) Trade promotion Does the government actively promote businesses' participation in international trade? (through trade fairs, capacity building, trade missions) Select priorities#26Regulatory framework Financial accessibility Financial services Financial inclusion Are credit information systems sufficiently advanced, and can individuals easily access this information? Are bank financing conditions easy and favourable for businesses? (interest rate, collateral requirements etc) Are there sufficient efforts to reduce the cost of financing for businesses? Does the existing regulatory framework support the development of capital markets and digital finance? Are alternative sources of financing well-developed? Do business have enough capacity to leverage them? Are policies ensuring that all individuals and businesses have access and can effectively use financial services in place? Select priorities#27Tax policies and requirements Taxation % Tax administrations and its services Are tax regulations clear and transparent for businesses? Do tax administration systems lower administrative compliance burden? Are there any tax incentives fostering business activities? How do tax compliance requirements and processes affect businesses? Select priorities カッ#28Level-playing field 4/4 Informality Is the current level of informality a serious challenge to the business environment? Do policies incentivize firms to formalize and workers to be formally employed? What more can be done in this area? State-owned enterprises (SOE) Are public enterprises subject to the same. treatment as private companies? Do they compete on equal footing? Select priorities#29>>OECD BETTER POLICIES FOR BETTER LIVES Thank you for your attention! For further information please contact: Mr. Umur GOKCE Economic Advisor at the OECD South East Europe Division e-mail: [email protected] Co-funded by the European Union Mr. Martin KOHTZE Project Manager of the SEE Competitiveness Outlook OECD South East Europe Division e-mail: [email protected] Mr. Ali-Fuad TURGUT Project Manager of the SEE Competitiveness Outlook OECD South East Europe Division e-mail: [email protected] Mr. Matija LOJPUR Policy Analyst and Country Co-ordinator for Bosnia and Herzegovina OECD South East Europe Division e-mail: [email protected] OECD South East Europe Regional Programme