An ongoing state of political paralysis is likely to continue in Bosnia and Herzegovina as separatist rhetoric increases and parties fail to agree changes to electoral law threatening the scheduled 2014 elections.
IHS Global Insight perspective | |
Significance | Bosnia Herzegovina (BiH) has repeatedly failed to pass constitutional or electoral reforms and its accession to the European Union (EU) has stalled. |
Implications | The semi-autonomous entities of Federation of Bosnia Herzegovina (FBiH) and Republika Srpska (RS) that comprise BiH will struggle to avoid higher public expenditure in an election year as parties engage in 'auction politics' on increasing benefits and pensions. |
Outlook | Separatist rhetoric is likely to intensify among the three ethnic groups ahead of the October 2014 elections. While Serb separatist rhetoric has so far been used for electoral gain, this could become a real political threat if the RS president Milorad Dodik and his SNSD party do not win the October 2014 elections. This scenario does not pose a significant risk of the dissolution of BiH in at least the next five years. |
Prospects of electoral reform
National elections are scheduled for October 2014 and senior representatives of the ruling Serb Alliance of Independent Social Democrats (Savez Nezavisnih socijaldemokrata: SNSD), the predominantly Bosniak Social Democratic Party (Socijaldemokratska Partija: SDP), and Croatian Democratic Union (Hrvatska Demokratska Zajednica: HDZ) have all committed to this schedule. However, parts of the existing electoral system, related to the election of the state parliament, have been ruled unconstitutional by the country's courts. For elections to be held, BiH's political parties must agree to amend the electoral law no later than May 2014.
The SNSD, SDP, and HDZ have each proposed different amendments to the electoral law that will delay the legislative approval process at least until February. If the law is not amended by May, BiH's electoral commission will have no legal basis upon which to hold elections in October. While new elections can be held at any time after the electoral law is amended, the President of the RS entity, Milorad Dodik, suggested in March 2012 that general elections should be merged with local elections due to be held in 2016 in order to reduce costs. There is, then, a small possibility that elections could be delayed beyond October.
If they are, BiH's legislative institutions at state, entity, and cantonal level would be suspended at the end of 2014. Immediately after this suspension governance would fall to state, entity, and cantonal administrations which be given a 'technical mandate' to govern until new elections. In most cases, day-to-day governance would not be affected by this change. However, BiH's political credibility would be undermined internationally, and the legitimacy and transparency of the political system domestically.
Likely post-election outcome
Assuming elections are held in October, local politicians are likely to use increasingly separatist rhetoric in the run up to the vote. There is a moderate risk of a repeat of the 2013 economic protests in BiH's main urban centres during the first nine months of 2014 (see Bosnia Herzegovina: 11 June 2013: Anti-government demonstrations in Bosnia do not signal major civil unrest). Small, non-violent demonstrations over the worsening economic situation and the increasing cost of living are unlikely to cause serious business disruption. However, political parties are likely to try to exploit the separatist undertones of such demonstrations. There is no major risk of inter-ethnic violence associated with pre-election campaigning.
Elections in the semi-autonomous Croat-Bosniak Federation of Bosnia Herzegovina
In terms of the Bosniak vote, the SDA and the Democratic Front (Demokratska Fronta: DF) – a new party recently formed by former SDP leader Željko Komšic – are expected to make electoral gains at the expense of the SDP. However, none of these parties can form an entity-level government in the Federation of Bosnia Herzegovina (FBiH) alone. Protracted coalition negotiations among Bosniak parties are likely to also involve the smaller Union for a Better Future (Savez za Bolju Buducnost: SBB) party led by Fahrudin Radoncic.
Among Croat parties, the HDZ1990 under the new leadership of Martin Raguž, is struggling to regain support lost to its main rival, the HDZ. The two parties ended their shaky alliance in December 2013 and will field separate candidates. Other smaller Croat parties, such as NHI-HSS, must choose whether to align with the HDZ or HDZ1990. The HDZ is still expected to emerge as the largest Croat party after elections. However, the HDZ1990 could become a political kingmaker, if it manages to win allies among smaller Croat parties and establish a firm coalition partnership with whichever party wins the Bosniak bloc.
Finance Minister's dismissal deepens political crisis in Bosniak-Croat FBiH entity
In early January 2014 when President Živko Budimir unilaterally dismissed the Bosniak-Croat FBiH entity's Finance Minister Ante Krajina from office following an allegation that war veterans' pensions had not been paid (see Bosnia Herzegovina: 8 January 2014: Dismissal of Bosnian finance minister raises political risk, but Croat Federation's budget unlikely to be threatened). Krajina's removal is seen as part of an effort by the leading Bosniak national Party of Democratic Action (Stranka Demokratske Akcije: SDA) to squeeze its main political rival, the declaratively multi-ethnic SDP, out of the FBiH government. Budimir is accused of attempting to replace figures in the coalition government with members of his own Party of Justice and Trust (Stranka Pravde i Povjerenja: SPP).
On the 16 January the FBiH constitutional court temporarily reinstated Krajina pending a final legal decision in the coming days on whether the president's dismissal of Krajina was lawful. The FBiH Prime Minister Nermin Niksic (SDP) is calling for Krajina's full reinstatement in order to resolve the political and legal vacuum. That position is shared by the international Office of the High Representative (OHR) under Valentin Inzko and EU representatives. The interim judicial decision suggests that the courts will favour this view. However, in the event that the dismissal is upheld, the entity-level government would be unable to make some budget payments without the signature of a fully functioning finance minister. The ministry has already delayed social benefit payments to 50,000 war veterans. In addition, BiH was unable to submit a letter of intent on 14 January, required by the International Monetary Fund (IMF) to transfer the next tranche of IMF loans. A transfer of part of the EUR385 million standby loan had also been delayed in December. Krajina's temporary reinstatement is likely to lead to the signing of the letter of intent.
If the constitutional court confirms the legality of Krajina's dismissal, political parties in the FBiH entity would have to reach a political consensus on appointing a new finance minister to the post. This is likely to take until at least late February. The longer the period without a serving finance minister, the higher the risk of socioeconomic protests occurring.
Elections in the Serb-run entity of Republika Srpska
The closest electoral race is expected between the main ethnic Serb parties. In Republika Srpska (RS) the main opposition SDS party, and the smaller People of Democratic Progress (Partija Demokratskog Progresa: PDP), have recently agreed to run joint electoral tickets in the race for RS president and the Serb member of the state presidency, against the SNSD. A unified opposition stands a moderate chance of achieving electoral parity with the SNSD.
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President of Republic of Srpska Milorad Dodik, left, with Serbian |
Increasingly fractious political environment in the run up to 2014 elections
The President of the Republika Srpska (RS) entity, Dodik, repeated statements on 3 and 9 January that ethnic Serbs were "talking more and more about independence" and that the disintegration of Bosnia Herzegovina should be a long-term "political goal".
Dodik may try to realise his separatist threats, if he sees that his political position is in danger ahead of 2014 elections. With Dodik facing possible investigation for corruption in the RS and Serbia, our assessment is that he is likely to fight hard to maintain his political career as president of the RS entity. If he is pressed, Dodik could call for a referendum on the RS breaking away from BiH. This is something which Dodik has repeatedly threatened to do, but which is strongly opposed by the EU and OHR. Alternatively, if Dodik and his SNSD party remain in power after the 2014 elections, it is highly likely that separatist rhetoric would continue but that actual political action to turn separatist ideas into a reality would move slowly.
Outlook and implications
Developments indicate that the BiH political scene has effectively disintegrated into a series political turf wars between the Croat, Bosniak, and Serb ethnic blocs, as well as within those blocs, and within each party. The resulting political crisis has obstructed the functioning of the country's state, entity, and cantonal institutions. Political stability is likely to continue to deteriorate ahead of the general elections scheduled for October 2014. There is little prospect of improvement until early 2015 when a new government could be in place.
Foreign investment companies operating in BiH are mainly concentrated in the metal production, automotive, agriculture, and textile sectors. A January 2014 investment survey by BiH's Foreign Investment Promotion Agency (FIPA) identified the lack of political and policy stability as the main concern for predominantly EU and regionally based companies. In addition, hesitant foreign investors have cited the failure of BiH's political system to harmonise regulations across all levels of government, and the opaqueness of decision-making. The politicised management of public finances and a large and inefficient public sector dependent on international loans, will continue to undermine investor confidence in 2014.