BALKAN BLOG: Moving beyond Dayton

BALKAN BLOG: Moving beyond Dayton
By Andrew MacDowall December 14, 2015

Twenty years to the day since the Bosnian War formally came to an end with the signing of the Dayton Agreement, it has become almost axiomatic that the country remains crippled by the legacy of conflict – and the peace deal itself.

Bosnia and Herzegovina is a divided country, culturally and administratively, along a border consolidated by Dayton. The administration is barely functional, weighed down by multiple layers of government and a self-serving bureaucracy that serves as a tool of patronage and clientelism for the political elite. For a period in 2013, babies requiring urgent medical treatment were trapped in the country because of a squabble over registration; at least one later died. Squabbling between parties can leave parts of the country without government for months or even years.

The country, one of Europe’s poorest, has endured two recessions since the international financial crisis broke, and is reliant on the support of international institutions including the IMF. From 2009 on, annual foreign direct investment has never been higher than a paltry €380m. Youth unemployment, estimated at 60%, is the world’s highest.

But not all of these woes can be put down to Dayton, and there is a growing understanding within the country and among its partners in the international community that the Dayton settlement will remain in place for the foreseeable future. The agreement has no expiry date, and there is thus an understanding that any changes to Bosnia’s constitution will have to come from within the structures provided by the peace deal.

If there are glimmers of hope for the country, they come from signs that progress can be made even under the unwieldy Dayton system, and from a revised approach from the international community, led by the EU, which prioritises economic development ahead of constitutional questions.

Cementing divisions

Annex Four of the Dayton Agreement functions as the country’s constitution 20 years after the deal was signed by the leaders of Bosnia, Croatia, and Serbia, and members of the international community. It recognises two highly-autonomous ethnically-defined entities: the Serb Republic (Republika Srpska, RS) and the Muslim (“Bosniak”) and Croat-dominated Federation of Bosnia and Herzegovina (FBiH). Each has powers over areas of public life as diverse as policing, prosecutors’ offices, electricity, and telecommunications. The Federation is further split into cantons, with responsibilities including education, which has become highly politicised and ethnically charged since the war.

Dayton was highly successful in the fact that it killed a horrific war stone dead after 100,000 deaths and widespread ethnic cleansing. That there has been no return to war in a notoriously combustible corner of Europe is arguably a singular achievement; no wonder Dayton is cited as a potential model for the likes of Syria and Yemen.

On the other hand, in separating the warring parties, it also cemented divisions. The RS’s president, Milorad Dodik, frequently clashes with “state”-level (i.e. central government) institutions. He sometimes threatens to declare independence, including in a referendum proposed for 2018. On December 10, the RS suspended cooperation with state-level courts and police, following state police raids on RS buildings and the arrest of alleged Serb war criminals. The RS has been accused of violating the Dayton agreement by doing so; its proposed independence referendum would also be contrary to Dayton.

Dodik repeatedly claims to be upholding Dayton, and insists on the return of powers to the RS awarded by the agreement but since removed under the direction of the Office of the High Representative (OHR), the international community’s joint organisation in the country.

Dodik’s sabre-rattling is widely seen as bluster to boost his flagging popularity in the RS, and prevent state-level intrusions that could erode his party’s power base. Nonetheless, they are still worrying, at a time in which Bosnia seems at last to have a chance of moving forward.

In July, the state-level government formally adopted the EU-led Reform Agenda, also adopted by the RS and Federation governments. Stemming from a Croatian proposal, driven by the UK and Germany, and also bringing in support from international financial institutions such as the IMF, the agenda seeks to boost Bosnia’s economy as a means of delivering jobs and income growth. Over the longer term, the hope is that the agenda will create an environment more conducive to political change, by weakening patronage networks and giving Bosnians of all ethnicities the hope of a better future in which ethnic divisions will not be the primary driver of politics. The programme goes hand-in-hand with an accelerated path towards EU accession, including the belated activation of Bosnia’s Stabilisation and Association Agreement (SAA) with Brussels.

The agenda is partly an admission of the international community’s failure to move Bosnia forward over the past decade. International interest in the country has waned, partly as a result of the country’s welcome stability, and partly as the US turned its attention elsewhere. The OHR has also become less interventionist; some who favour a more unitary state (largely Bosniaks and their international supporters) say that its failure to stand up to Dodik has created a potentially explosive situation.

Attempts have failed to resolve the so-called “Sejdic-Finci question”. This refers to limits on the political rights of those unwilling to declare themselves ethnic Bosniak, Serb, or Croat (for example Jews, Roma, and those who consider themselves merely Bosnian) by debarring them from standing for the presidency and upper house of parliament. The rights of nationalities still trump those of individual citizens.

While diplomats insist that Sejdic-Finci must be resolved before EU membership, they admit that the can has been kicked down the road somewhat, with pressure now on the political elite to enact economic reforms in the window before general elections in 2018.

The Reform Agenda is expected to include cutbacks to the state administration, the privatisation of state-owned enterprises, and improvements to the business environment, as the price of EU cooperation and IFI cash.

“[The goals are] shrinking the public sector, reductions in social security and welfare, and weakening patronage networks that keep politicians in power for ever and ever,” one diplomat of an EU country told bne IntelliNews.

While welcomed by many of those who wish to see a weakening of the ethno-nationalist political elite, as well as private sector growth, the plan is not without flaws. Firstly, it still needs to be fleshed out with fuller details. Talks with the IMF ended inconclusively in November, following the expiry of the country’s last deal in June. The entity governments, which are particularly cash-strapped, have instead resorted to the international markets to raise cash to plug budgetary gaps.

Secondly, there are real concerns about the job losses that might result from privatisations and cuts to the public administration, particularly in a combustible social situation. There were anti-government street protests in early 2014 in which buildings were torched; unions have already threatened to bring tens of thousands to the streets to protest labour liberalisation.

Finally, economic reform is inherently political anywhere in the world – but particularly in societies in which systems of patronage have become so ingrained as they have in Bosnia. Diplomats openly admit that one of the aims of the programme is to weaken the elites that have become entrenched during and after the war.

Whether those politicians will make changes that directly contradict their interests is a question worth asking. And if they do not, will the IFIs and EU cut off the money? The IMF does not want another Argentina on its hands, particularly not with a potentially explosive ethnic element.

Nonetheless, the Reform Agenda is seen as the least-worst option for the time being. There is little appetite for the OHR to become more interventionist again to deliver the changes that the international community desires, over the heads of Bosnia’s democratically-elected leaders. The passing of labour reform by the Federation is seen as a positive step, and even the RS claims that it is fully committed to reform.

“The RS is no blocking force, the RS is just not letting anyone undermine its position under excuse of EU integration,” Gordan Milosevic, Dodik’s international relations advisor, told bne IntelliNews. “There is a way to fulfil EU conditions with full respect to the strongly decentralised structure of BiH. That is all what RS wants. The RS will be the leader in BiH in [implementing the Reform Agenda].”

A recent deal that gave the green light to Bosnian dairy exports to the EU is also seen as a positive sign that, where economic interests align, progress can be made despite the political system.

As with the normalisation of relations between Serbia and Kosovo, the EU for all its problems is now arguably the leading driver of change in the Balkans.

“The EU agenda is very positive after five to six years of total catastrophe,” one Bosniak politician told bne IntelliNews. “More than 80% of citizens want the country in the EU.”

As the supporter of a more unitary state, he hopes that in the medium term EU accession can become a catalyst for constitutional change. But for the time being, Brussels has accepted that Dayton is going to stay.


Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.