bne -

Preliminary results in Bosnia’s October 12 elections show that nationalist candidates are ahead in the race for the country’s rotating presidency, which is rotated between presidents representing the country’s Muslim, Croat and Serb populations. Meanwhile, a fragmented parliament is expected, meaning weeks of negotiations before a new coalition is formed. 

Bosnian Muslims have backed Bakir Izetbegovic, the Party of Democratic Action (SDA) candidate for the presidency, with 33% of votes cast, putting him seven points ahead of runner up Radoncic Fahrudin. 

Dragan Covic has a decisive lead among Croatian voters, taking 51.52% of votes, according to preliminary results, while Zeljka Cvijanovic and Mladen Ivanic are neck and neck for the Serbian presidency. 

The vote for the presidency of the Serb-dominated Republika Srpska, the ethnic Serb half of Bosnia and Herzegovina, is also too close to call. The vice president of incumbent Milorad Dodik’s Independent Social Democratic Party of the Republika Srpska (SNSD) claimed on October 13 that with 53% of votes counted, Dodik had a narrow lead over his rival Ognjen Tadic. However, according to Serbian daily Blic, an earlier count put Tadic narrowly ahead. 

Bosnia also held early parliamentary elections on October 12. However, since as expected no party took a majority, the result merely opens the way for negotiations to form a new coalition. “Votes don’t mean much - the party with the most votes will not necessarily be in government because at least five or six parties are needed to form a government at the state level,” Ivana Maric of Sarajevo-based think tank Populari tells bne. 

Early elections were called in February after protests over corruption and unemployment erupted into the worst outbreak of violence since the end of the war in 1995.

The latest round of elections has brought the complex power-sharing structure of the Bosnian government under scrutiny. The system of two autonomous republics, intended to ensure peace within Bosnia, has the downside of creating conditions for political deadlock that has prevented reforms from being introduced, as well as creating opportunities for corruption. Nearly 20 years on from the signing of the Dayton Agreement that established the system, frustration has come to a head this year. 

Faced with an electorate tired of politicking, and unable to impress voters with concrete achievements in tackling unemployment or raising living standards, politicians of various stances have used calls for secession as a rallying cry. This has been most extreme in the Republika Srpska where Dodik is fighting to hold onto the presidency, though some Croat leaders have also called for their own entity within Bosnia.

However, economic issues remain the most pressing tasks for Bosnia’s new leaders. According to Maric, while national issues are still important, the population is “moving forward from national topics to real topics - unemployment, corruption and living standards”.

At the beginning of this year, Bosnia was on track for annual GDP growth of around 2%, but forecasts have now been slashed to close to zero, because of a combination of flooding and slow recoveries in Croatia and Bosnia’s other trading partners within the EU.

Investment decisions have also been put on hold during the last eight months of political uncertainty. “Bosnia has a history of coping with an unstable political environment, but it is difficult to predict the outcome of the elections, and investors want stability,” Erste Bank analyst Alen Kovac tells bne.

Nor has there been much progress on reforms to the business environment, while privatisations of major companies including BH Telecom have stalled. Just under a year ago, the European Bank for Reconstruction and Development’s (EBRD) “2013 Transition Report” identified areas where work was needed, including infrastructure development, improving the business climate, energy sector reform and privatisation of state owned enterprises.

“Since then, there hasn’t been much progress, especially in recent months due to the combination of the pre-election period and the aftermath of the floods,” says the EBRD’s lead economist for Southeast Europe, Peter Sanfey. While things are “not at a complete standstill” – there has been some progress for example on business registration and within the framework of Bosnia’s IMF programme – “we would hope after there is a new government there would be progress,” Sanfey says.

Sarajevo is also hoping to be included in one of the major gas pipeline projects due to cross southeast Europe. The Republika Srpska authorities have struck a deal to receive gas via Serbia from the Russian-backed South Stream pipeline, while the Bosniak Croat Federation that makes up the other half of the country is lobbying for a connection to the Trans-Adriatic Pipeline (TAP), which will transport Azerbaijani from the Turkish border to central Europe. 

Bosnia’s journey towards EU entry is also faltering. The latest EU enlargement report published on October 8 criticised the country’s “very limited” progress and declared there was an urgent need for socio-economic reform. “Bosnia and Herzegovina has not overcome the standstill in the European integration process while most other countries in the region are moving ahead decisively. This regrettable situation is caused mostly by a lack of collective political will on the side of the leadership,” the report said.