OHR HAS COST BiH BAM 25 BILLION

BANJA LUKA, DECEMBER 15 /SRNA/ - Due to the increased political risk, which is largely generated by imposed decisions by high-ranking representatives and institutional crises, BiH is losing an order of magnitude of around BAM 1.1 billion to almost BAM 1.4 billion in potential investments annually, claims international and economic policy expert Nemanja Plotan.

Plotan stated in a column for SRNA that this kind of "political tax" directly reduces GDP growth, limits the creation of new jobs and, in the long term, reduces the economic competitiveness of Republika Srpska and the entire BiH compared to other countries in the region. We are publishing Nemanja Plotan's column for SRNA in its entirety: Over the past 30 years, all indicators suggest that the Office of the High Representative /OHR/ has done more harm than good to BiH. For three decades, the World Bank has classified BiH as a politically unstable country. This is reflected in the negative value of the political stability index, officially titled "Political Stability and Absence of Violence/Terrorism", which the World Bank defines as a measure of perceptions regarding the likelihood of political instability and politically motivated violence. Thus, for 30 consecutive years BiH has remained in a state of permanent political crisis. Whenever a period of stabilization emerges as a result of political dialogue, the High Representative disrupts any form of compromise through imposed decisions. This is clearly observable when comparing declines in the political stability index, which correspond directly with the imposed decisions of High Representatives. In other words, whenever the OHR has imposed a political decision, political stability across BiH has eroded. Such declines in the index have sent negative signals to foreign investors, adversely affecting inflows of foreign direct investment /FDI/ into BiH. Although it is undeniable that BiH has the worst corruption index in the region - meaning that the perception of public corruption is worse than in other Western Balkan countries - this alone does not explain why BiH receives proportionally the lowest FDI inflows in the region, given that differences between corruption indices are not dramatically large. Evidence for this argument can be found in other countries such as Chile, Israel, and India, which, despite relatively positive corruption index values, still experience reduced inflows of foreign capital. Chile has a relatively favorable corruption index, but mass protests in 2019, the constitutional reform process, and uncertainty surrounding property rights, taxation, and regulation discouraged foreign investment. In Israel, deep internal political polarization, disputes over judicial reform, and war-related risks linked to Iran and its proxy groups represent major challenges. In India, the main issues are political centralization, sector-specific regulatory unpredictability, and geopolitical tensions with Pakistan. Thus, political risk plays a greater role in deterring foreign capital than the perception of public corruption. It is important to note that the World Bank index also accounts for the potential for terrorism and political violence, which has never been fully neutralized in BiH. However, given that the main generator of political crises in BiH is the OHR, the focus of the analysis should be exclusively on that institution. Until now, all arguments against the illegitimate actions of High Representatives have been political and legal in nature, which is why the substantive consequences of their decisions have never been fully captured. An economic perspective shows that imposed decisions have far-reaching effects that destabilize BiH both politically and economically. According to World Bank estimates, the Western Balkans as a whole attract around 5–7 percent of GDP annually through FDI, while BiH attracts only about 2–3 percent of GDP. Therefore, a gap of at least 3 percentage points of GDP per year - often more - can be interpreted as a political risk penalty, which includes the imposed decisions of High Representatives. It would not be accurate to claim that 100 percent of this gap is exclusively the result of High Representative decisions, as factors such as market size and reforms may also play a role. However, given that BiH has the lowest political stability index in the region, persistent institutional blockages, and a series of political crises linked to OHR decisions, it can be argued that political risk generates the majority of this gap. The potential loss of FDI can be calculated using the following formula: Lost FDI /average FDI gap as percent of GDP/ multiplied with average GDP and number of years. If we attempt to estimate the economic damage caused by the OHR to BiH over the past 20 years, we should assume that the FDI gap has amounted to around 3–4 percent annually /a constant over the last two decades/, and that average annual GDP stood at approximately BAM 35.6 billion KM. Plugging these figures into the formula yields a preliminary result of approximately BAM 22 billion to BAM 28 billion. In other words, based on average annual FDI gaps and GDP values, BiH has missed out on between BAM 22 billion and BAM 28 billion in potential foreign direct investment. This means that due to elevated political risk - significantly generated by imposed decisions of High Representatives and recurring institutional crises - BiH loses on the order of approximately BAM 1.1 billion to nearly BAM 1.4 billion in potential investment annually. This kind of "political tax" directly reduces GDP growth, limits the creation of new jobs, and in the long run diminishes the economic competitiveness of Republika Srpska and BiH as a whole compared to other countries in the region. Economic projections indicate that the decisions of High Representatives have set BiH back not only institutionally and politically, but also economically. While in many Western European countries corruption is blamed for weak economic growth, high unemployment, and substantial emigration, the examples of Chile, Israel, and India suggest that the primary culprit should instead be sought in Sarajevo—at the address of the OHR.