Bosnia and Herzegovina
of Ministers, the law has never come before parliament. ● The Law on Conflict of Interest was adopted at the state level in 2002, while the entities were obliged to adopt their respective laws within sixty days.3 They have not done this, and so the BiH Central Election Commission is still in charge of preventing and punishing conflicts of interest, but it is questionable whether it has the necessary capacity to do so successfully. The Central Election Commission also lost credibility following the withdrawal of international members from its line-up. The commission’s integrity was further put into question following its decision to stop implementing the law at the entity level, thereby leaving an enormous legal and institutional gap that it does not have the capacity to fill. Transparency International BiH sued the commission for the silence of the administration in a case of conflict of interest involving the FBiH prime minister. The court decided in favour of TI BiH and ordered the commission to make a formal decision on the case, as the institution in charge.
Opaque private negotiations in the privatisation process While BiH’s score of 3.3 in the Corruption Perceptions Index 2007 showed some improvement, anecdotal evidence from TI BiH’s Advocacy and Legal Advice Centre (ALAC) provides a clearer picture of the spread of corruption. As of February 2008 8,500 private and legal entities reported corruption on the ALAC’s toll-free hotline. Most frequent were reports on the work of the local government institutions, the education sector, public enterprises, privatisation, public procurement and the judi-
ciary. Furthermore, the Heritage Foundation’s 2008 Index of Economic Freedom places BiH as one of the least free economies in the world, ranking 121st out of 162.4 The size of the government, property rights and freedom from corruption are seen as the biggest problems.5 The privatisation of the Republika Srpska oil industry demonstrates how the government has taken a leading role in privatising the energy sector, but also how the process has been burdened by a lack of transparency. While this has had a strong impact on the process itself, it has also paved the way for similar practices in the future and sent a clear message to other potential investors on how to do business in BiH. Republika Srpska’s oil industry consists of an oil refinery in Bosanski Brod, a lubricant refinery in Modrica, and Petrol,6 a company that distributes oil through a network of gas stations throughout the RS. All three companies have been stateowned by majority. The Bosanski Brod oil refinery suffered a number of difficulties, including enormous debts to the state in the form of unpaid taxes and levies, unpaid salaries resulting in strikes, and outstanding payments to foreign companies delivering crude oil. According to the RS government’s information on the privatisation of the oil industry, TI BiH estimated that by June 2008 the oil refinery in Bosanski Brod had accumulated debts of approximately BAM 300 million (US$250 million). In practice, the oil refinery was out of production for more than two years.7 Because of these difficulties, the RS government decided to privatise the oil industry, and began
3 BiH is constitutionally divided into two entities: the Federation of BiH (FBiH), which is largely Bosniak and Croat, and Republika Srpska (RS), which is primarily Serb. 4 The index covers 162 countries across ten specific freedoms, with 100 per cent being interpreted as totally free. 5 Heritage Foundation, ‘2008 Index of Economic Freedom’ (Washington, DC: Heritage Foundation, 2008). 6 The names in Serbian are Rafinerija nafte a.d. Bosanski Brod, Rafinerija ulja a.d, Modricˇa and Petrol a.d. Banja Luka. 7 RS government, ‘Information on privatisation of companies from the Republika Srpska oil industry’, June 2008.
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