When Peter Sorensen was asked in his final press conference as the EU Special Representative what should be the priorities for the future, his reply was simple: “Jobs, jobs and jobs.” It’s difficult to disagree. Unemployment in Bosnia and Herzegovina is the highest in Europe at around 30%, with youth unemployment – according to the International Labour Organisation – the highest in the world at 59%. Job creation was a key theme in the recent elections, and President Izetbegović has set a target of 100,000 new jobs during this term of office. So where to start?
I recently visited a local company called posao.ba. The company was born during the siege of Sarajevo when its inspiring Chief Executive, Edin Mehić, managed to secure access to some donated computers. Today, Edin has grown his business to the point where he overwhelmingly dominates online business recruitment in BiH, with a market share of 97%, and has ambitious plans for expansion into the rest of Europe. He employs around 80 people directly, but he is passionate about giving others the skills and the confidence to succeed.
Edin Mehić represents what Bosnia and Herzegovina could become if its political leaders were to empower this country’s greatest asset – its people. As a country, you produce lots of bright and talented people, but all too often they have to go abroad to find the opportunities that are denied them here. If the newly-elected leaders are serious about creating jobs, they must stop the brain drain, and begin now hard work of transforming this country into a modern, dynamic economy.
I have to say that I find it depressing when I hear – from politicians, from Trade Unionists or from ordinary citizens – incessant talk about the need to attract large companies to invest here. Of course, Bosnia and Herzegovina should seek to attract foreign investment wherever it can. But the age of the car factories is over, and will not return. Nostalgia for an industrial past is not a strategy for the future. If this country is to succeed, and I believe passionately that it can, it will succeed through innovation and entrepreneurship. By creating an environment where small and medium-sized businesses can establish themselves, succeed and grow.
I know that this isn’t popular, and many people don’t want to hear it. Politicians and workers alike want the return of heavy industries that will employ thousands of people. This is understandable. The scale of the unemployment problem is measured in the hundreds of thousands. And big deals would enrich the corrupt. But the global economy has moved on. Look at what is happening to Russia because of its failure to modernise and diversify its economy. The economies that are doing best are those which are fast-moving, flexible and creative. Like Britain’s.
Britain’s economic recovery has been built upon creating jobs in the private sector, while reducing the costs of government. As a public servant, I can certainly say that it hasn’t been easy. But people in the UK understood that tough times called for tough measures. And today, Britain is the fastest growing of the major European economies, with unemployment of just 6%.
How have we done it? Amongst other things, through systematic reforms to improve the business environment, to attract foreign investment and to support new businesses. We have simplified the procedures for setting up new companies, and reduced employment taxes. And we have invested in infrastructure and innovation – such as 4G Wifi networks – to support hi-tech industries. These sort of reforms and investments work, which is why the UK is the leading European destination for foreign direct investment, and why more overseas companies have their European headquarters in the UK than in France and Germany put together.
Ok, so Britain is a very different country, with a very different economy, from Bosnia and Herzegovina. But you have advantages that we don’t – in particular, a well-educated but relatively cheap workforce. With reduced bureaucracy, lower taxes and less corruption, and with a clear strategy to attract small and medium-sized investors, I believe that you would see a dramatic increase in investment by international companies, as well as the emergence of more home-grown entrepreneurs like Edin Mehić.
The good news is that we already know what needs to be done. The EU-led Compact for Growth and Jobs provides a roadmap towards a more stable economy that is better able to create new jobs and to attract foreign investors. We have put socio-economic reforms at the heart of the new EU strategy, because without economic stability, there can be no political stability.
The challenge is cultural. It requires a change of mindset. Posao.ba’s research shows that most people in this country still want to work for the government. The legacy of the disastrous privatisations of many state-owned industries has been a dislike and distrust of the private sector. Those who do want to work in business very often want to move abroad to do it. This has to change. The bureaucracy of this country already consumes around 60% of GDP just to sustain itself. That’s a huge burden on the economy. It is the private sector that creates value. It is the private sector that will enable Bosnia and Herzegovina to pay off its debts, rather than to increase them.
I do not want to suggest that economic reforms will be easy. They won’t. According to the World Bank, Bosnia and Herzegovina is one of the most difficult countries in Europe in which to do business, and one of the worst in the world at encouraging entrepreneurship. The problems run deep. You need serious structural reforms, and these will require strong leadership from your new government. Granted, the track record of previous governments has not been encouraging, but the EU’s new strategy provides the best possible framework to promote and support such reforms. It’s time to make the first step on the path to a new and brighter future for Bosnia and Herzegovina as a modern and vibrant economy that offers real opportunities for its citizens.