Improving SOE transparency, effectiveness and sustainability in Bosnia and Herzegovina.

Reformers in one Bosnia and Herzegovina entities are putting into place new systems that will make state-owned enterprises (SOEs) stronger and more accountable.

SOEs have a large footprint in Bosnia and Herzegovina’s (BiH) economy but have struggled to deliver. Despite generous direct and indirect government support, equivalent to five percent of GDP annually, most public companies function at a loss and have low productivity.

Financial Management Program works with state-owned enterprises in Bosnia and Herzegovina.

While SOEs operate across all sectors of the economy, the largest concentration of these companies is in the water utilities, information and communication technology, and energy sectors. An estimated 550 majority-public companies, operating at all levels of government and in all economic sectors, employ 11-14 percent of all workers in both Federation of Bosnia and Herzegovina and Republika Srpska entities.

SOEs’ under-performance reduces BiH’s GDP by an estimated three percent or more relative to potential. It strains the country’s budget, elevates fiscal risk, and undercuts value chains and service delivery. In the medium to long run, it also threatens to exacerbate the country’s already-elevated fragility.

To make SOEs more efficient, productive, and resilient, BiH governments have made SOE sector reform a policy priority. The FMP is supporting this reform through our Supporting Better, Effective, Sustainable, and Transparent SOEs (BEST SOEs) program.

The objective is to create approaches that will improve SOE transparency, effectiveness, and sustainability. Together, we are developing and implementing a new policy, regulatory, and institutional sector governance framework to do just that.

The SOE Modernization Program identifies gaps in SOE sector governance and their causes, and produces options and tools needed to select, design, and implement key reforms. The Program is also designed to deliver transparency: The public, media, and civil society will gain a better understanding of SOE sector challenges, reform options, and safety nets in place to mitigate adverse impacts of reform.

The most significant advances to date are in the Republika Srpska and are delivering foundational reform elements with the support of the BEST SOEs program. Those elements include:

The development of an updated comprehensive SOE Reform Action Plan for 2022-2024 and Government Action Plan for 2023 with several critical foundational reform commitments slated for 2023, including revision of the SOE legal-regulatory framework and the development of an SOE ownership policy.
The establishment of a central SOE Oversight Coordination Department, which has an oversight function. It is the first such institution to be established in Bosnia and Herzegovina and among the first in the broader Western Balkans region. The World Bank supports these efforts by providing capacity building, revision of the new department’s legal mandate, and development of information and communications technologies supporting tools.

There has also been a substantial corporate governance reform engagement with energy company Elektroprivreda BiH, the country’s largest SOE.

Bosnia and Herzegovina: Improving Transparency, Effectiveness, and Sustainability of State-Owned Enterprises

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