Document of
The World Bank
Report No:ICR00003802
(IBRD-84360)
ON A LOAN
IN THE AMOUNT OF EUR 37.4 MILLION
(US$ 50 MILLION EQUIVALENT)
TO
BOSNIA AND HERZEGOVINA
FOR THE
BUSINESS ENVIRONMENT DEVELOPMENT POLICY LOAN
February 28, 2017
Trade and Competitiveness Global Practice (GTCDR)
South East Europe Country Unit (ECCU4)
Europe and Central Asia (ECA)
BOSNIA AND HERZEGOVINA
FISCAL YEAR
January 1 – December 31
CURRENCY EQUIVALENTS
(Exchange Rate Effective as of February 28, 2017)
Currency Unit = Convertible Mark (BAM)
BAM 1.84 = US$1.00
US$ 0.54 = BAM 1.00
ABBREVIATIONS AND ACRONYMS
BiH Bosnia and Herzegovina
BAC Business Environment Adjustment Credit
BAM Convertible Mark
BEEPS Business Environment and Enterprise Performance Survey
CAD Current Account Deficit
CCS Compliance Cost Savings
CPS Country Partnership Strategy
DB Doing Business
EC European Commission
ESW Economic Sector Work
EU European Union
EUD Delegation of the European Union
FBH Federation of Bosnia and Herzegovina
FDI Foreign Direct Investment
GDP Gross Domestic Product
HBS Household Budget Survey
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IFC International Finance Corporation
IFI International Financial Institutions
IMF International Monetary Fund
INTOSAI International Organization of Supreme Audit Institutions
IPA Instrument for Pre-Accession
LLC Limited Liability Company
MDGs Millennium Development Goals
MoAFW Ministry of Agriculture, Forestry and Water Management in Republika Srpska
MoAWF Ministry of Agriculture, Water Management and Forestry in Federation BiH
MoEMI Ministry of Energy, Mining and Industry in Federation BiH
MoERC Ministry of Economic Relations and Regional Cooperation in Republika Srpska
MoF Ministry of Finance at the entity level
MoFT BiH Ministry of Finance and Treasury
MoJ Ministry of Justice
MoSPCEE Ministry of Trade and Tourism, and Ministry of Spatial Planning, Civic
Engineering and Ecology in Republika Srpska
MoT Ministry of Trade in Federation BiH
MoTT Ministry of Trade and Tourism in Republika Srpska
MoU Memorandum of Understanding
MTEF Medium-Term Expenditure Framework
NPL Non Performing Loans
OSS One-Stop Shop
PFM Public Financial Management
REER Real Effective Exchange Rate
RS Republika Srpska
SDR Special Drawing Rights
SEA Strategic Environmental Assessment
SECO Swiss State Secretariat for Economic Affairs
SEE South East Europe
Sida Swedish International Development Cooperation Agency
SOE State-Owned Enterprise
TA Technical Assistance
TSA Treasury Single Account
USAID United States Agency for International Development
VAT Value-Added Tax
WBG World Bank Group
Regional Vice President:
/Cyril E. Muller
Senior Global Practice Director:
/Anabel Gonzalez
Country Director:
/Ellen Goldstein
Practice Manager:
/Paulo Guilherme Correa
DPL Team Leader:
/Ruvejda Aliefendic
ICR Team Leader:
/Dusko Vasiljevic
BOSNIA AND HERZEGOVINA
Business Environment Development Policy Loan
CONTENTS
Data Sheet
A. Basic Information
B. Key Dates
C. Ratings Summary
D. Sector and Theme Codes
E. Bank Staff
F. Results Framework Analysis
G. Ratings of Program Performance in ISRs
H. Restructuring
1. Program Context, Development Objectives and Design 1
2. Key Factors Affecting Implementation and Outcomes 4
3. Assessment of Outcomes 10
4. Assessment of Risk to Development Outcome 18
5. Assessment of Bank and Borrower Performance 19
6. Lessons Learned 20
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 21
Annex 1 Bank Lending and Implementation Support/Supervision Processes 22
Annex 2. Beneficiary Survey Results 23
Annex 3. Stakeholder Workshop Report and Results 24
Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR 25
Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders 26
Annex 6. List of Supporting Documents 27
Annex 7: Detail of Analytical Work that Contributed to the Operation ……….….….28
Annex 8: Map of Bosnia and Herzegovina……………………………………………29
A. Basic InformationCountry: / Bosnia and Herzegovina / Program Name: / BiH DPL
Program ID: / P146740 / L/C/TF Number(s): / IBRD-84360
ICR Date: / 12/10/2016 / ICR Type: / Core ICR
Lending Instrument: / DPL / Borrower: / BOSNIA AND HERZEGOVINA
Original Total Commitment: / USD 50.00M / Disbursed Amount: / USD 42.49M
Revised Amount: / USD 50.00M
Implementing Agencies:
Ministry of Finance and Treasury BiH, Ministry of Finance of Republika Srpska, Ministry
of Finance of Federation BiH
Cofinanciers and Other External Partners:
B. Key Dates
Process / Date / Process / Original Date / Revised / Actual Date(s)Concept Review: / 10/09/2013 / Effectiveness: / 09/30/2015 / 09/30/2015
Appraisal: / 12/13/2013 / Restructuring(s):
Approval: / 10/03/2014 / Mid-term Review:
Closing: / 12/31/2015 / 12/31/2015
C. Ratings Summary
C.1 Performance Rating by ICROutcomes: / Satisfactory
Risk to Development Outcome: / Moderate
Bank Performance: / Satisfactory
Borrower Performance: / Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank / Ratings / Borrower / Ratings
Quality at Entry: / Satisfactory / Government: / Not Applicable
Quality of Supervision: / Satisfactory / Implementing Agency/Agencies: / Not Applicable
Overall Bank Performance: / Satisfactory / Overall Borrower Performance: / Satisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Implementation Performance / Indicators / QAG Assessments (if any) / Rating:
Potential Problem Program at any time (Yes/No): / No / Quality at Entry (QEA): / None
Problem Program at any time (Yes/No): / No / Quality of Supervision (QSA): / None
DO rating before Closing/Inactive status:
D. Sector and Theme Codes
Original / ActualSector Code (as % of total Bank financing)
Other Industry, Trade and Services / 72 / 72
Other industry / 14 / 14
Agricultural markets, commercialization and agri-business / 14 / 14
Theme Code (as % of total Bank financing)
Other Private Sector Development / 29 / 29
Regulation and competition policy / 43 / 43
Trade facilitation and market access / 28 / 28
E. Bank Staff
Positions / At ICR / At ApprovalVice President: / Cyril E. Muller / Laura Tuck
Country Director: / Ellen A. Goldstein / Ellen A. Goldstein
Practice Manager/Manager: / Paulo Guilherme Correa / Paloma Anos Casero
Program Team Leader: / Ruvejda Aliefendic / Wolfgang Fengler
ICR Team Leader: / Dusko Vasiljevic
ICR Primary Author: / Dusko Vasiljevic
F. Results Framework Analysis
Program Development Objectives (from Project Appraisal Document)The development objective is to improve BiH's business environment through facilitating business start-up, streamlining investmentprocedures in inspections and construction, and simplifying processes of cross-border trading.
Revised Program Development Objectives (if any, as approved by original approving authority)Not applicable
PDO Indicator(s)Indicator / Baseline Value / Original Target Values (from approval documents) / Formally Revised Target Values / Actual Value Achieved at Completion or Target Years
Indicator 1 : / FBH: Business registration cost and time reduced by up to 20 percent
Value
(quantitative or
Qualitative) / BAM 3.7 million registration cost; BAM 1.3 million time equivalent cost / Start up cost and time equivalent cost reduced by up to 20 percent / Start up cost savings of 1.016 million (27.5% of savings compared to baseline) and time equivalentcosts of BAM 0.62 million (47.7% of savings compared to baseline)
Date achieved / 12/31/2012 / 03/31/2015 / 11/01/2016
Comments
(incl. %
achievement) / Fully achieved, exceeded the target. Verified based on data collected with all 10 registration courts in Federation BiH and compared with the established baseline values. There have been significant savings for the 825 new companies that have been registered since December 2015.
Indicator 2 : / FBH: Specific notary tariffs for start-up businesses reduced by 15 percent
Value
(quantitative or
Qualitative) / Specific start-up notary tariffs in FBH for businesses in the range from 175 to 1000 BAM / Reduction in notary tariffs on aggregate up to 15 percent / Notary not mandatory anymore for registration, and notary tariff reduced
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved, exceeded the target. Verified based on comparative analysis of notary tariffs prior and after the reform as well as with data collected with all 10 registration courts in Federation BIH, and reports based on the decree of Constitutional Court of Federation BIH.
Indicator 3 : / RS: Incorporation capital for newly established Limited Liability Company is 1 BAM
Value
(quantitative or
Qualitative) / 2,000 BAM / 1 BAM / 1 BAM
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved. Total cost of new single registration for LLC (incl. cost of business registration, Official GazettePublication, Court certificate, statistics number and tax registration receipt, receipt on VAT registration) down from avg. BAM3500in 2012 to 250 in 2015
Indicator 4 : / RS: Tariffs on notary reward reduced by 30 percent.
Value
(quantitative or
Qualitative) / BAM 351 / reduced by 30 percent / No notary required, tariff fully eliminated
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved, exceeded the target. Tariff eliminated through amendments to Notaries Law
Indicator 5 : / RS: Business registration procedures reduced to 5 steps (from 11)
Value
(quantitative or
Qualitative) / 11 steps / 5 steps / 5 steps
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved. The number of procedures has been confirmed by interviews during preparation of ICR in October 2016 (details also available at: http://www.investsrpska.net/index.aspx?PageID=292&langid=2).
Indicator 6 : / RS: Business registration time reduced to 3 days (from 23)
Value
(quantitative or
Qualitative) / 23 days / 3 days / 3 days
Date achieved / 12/31/2012 / 03/31/2015 / 03/31/2015
Comments
(incl. %
achievement) / Fully achieved. The number of days has been confirmed by interviews during preparation of ICR in October 2016 (details also available at: http://www.investsrpska.net/index.aspx?PageID=292&langid=2)
Indicator 7 : / FBH: Increased effectiveness of inspections by 15 percent
Value
(quantitative or
Qualitative) / avg. 311 certificates issued per day / increase of 15 percent in avg. number of certificates issued per day / 13 percent increase
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Partially achieved (missing the target by 2 percentage points). Based on 2015 Annual Report of FUZIP, avg. of 350 certificates were issued per day, improvement of 13percent over the baseline. Further improvements are anticipated in 2016 (to be confirmed once the Annual Report for 2016 is issued in mid-2017).
Indicator 8 : / FBH: Reduced cost for businesses by at least 10 percent following introduction of risk based inspections
Value
(quantitative or
Qualitative) / BAM 9 million / reduced by at least 10 percent / reduced by 12 percent
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved, exceeded the target. Amendments to respective secondary legislation regulating inspection control yielded reduction ofcosts for businesses in amount of 1.01 million BAM (based on CCS methodology), i.e., ca. 12 % reduction. This trend continues in 2016, and there are additionalsimplifications planned
Indicator 9 : / RS: Time required to obtain individual permits reduced to a maximum 15 days
Value
(quantitative or
Qualitative) / avg. 45 days to obtain each permit / 15 days / 15 days
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved. Verified based on reporting from authorities (Annual Report of Ministry of Spatial Planning, CivilEngineering and Ecology)
Indicator 10 : / Direct and indirect cost savings resulting from the new law est. at 17 million BAM annually
Value
(quantitative or
Qualitative) / Total indirect and indirect costs estimated at BAM 180 million / Savings of at least BAM 17 million p.a. / Savings of BAM 18.1 million
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Fully achieved, exceeded the target. Introducing streamlined and simplified permitting regime yielded estimated BAM18.1million of savings onannual basis. These savings are significant given that in 2015 there was an increase of ca. 7% in number of issued construction permits over 2014. Preliminary data showtrend continues in 2016
Indicator 11 : / Reduction of direct and indirect costs to obtain licenses, permits and approvals, related toimport/export procedures for seven key export sectors by a one-off 5 percent (2 mln BAM) over both entities
Value
(quantitative or
Qualitative) / Total costs 47mn (FBH costs: 9.3mn, time eq.costs: 9.9mn; RS costs: 8.8mn, time eq.costs: 19mn / Reduction of total costs by one-off of at least 5 percent (ca. BAM 2mn) / approx. BAM 1.9mn
Date achieved / 12/31/2012 / 03/31/2015 / 12/31/2015
Comments
(incl. %
achievement) / Largely achieved (reduction was of BAM 1.9mn missing the target of BAM 2mn by 5 percent). Cost estimates based on the Compliance Cost Savings methodology (CCS). Savings per items: FBiH 1.1 million savings in costs, i.e., ca. 12% reduction and ca. 1% reduction in time. In RS the cost has been reduced by BAM 0.6 mn, i.e. ~8% and time by ~5%.
G. Ratings of Program Performance in ISRs
No. / Date ISRArchived / DO / IP / Actual Disbursements
(USD millions)
Not Applicable
H. Restructuring (if any)
Not Applicable
1. Program Context, Development Objectives and Design
1. The Business Environment Development Policy Loan (BE DPL) was a single Development Policy Operation to Bosnia and Herzegovina (BiH) in the amount of EUR 37.4 million. The operation was approved by the Board of the World Bank on October 3, 2014. The program supported a range of initiatives to improve BiH’s business environment through facilitating business start-up, streamlining investment procedures in inspections and construction, and simplifying processes of cross-border trading. The activities of the DPL were complemented by technical assistance (TA) provided by the World Bank and advisory services provided by IFC.
1.1 Context at Appraisal
2. After several years of lackluster performance in the aftermath of the global economic crisis of 2008, BiH economy experienced a modest recovery in 2013. Following a recession in 2009, BiH went through two years of fragile recovery, and then experienced a second downturn in 2012. The 2012 downturn was due to deteriorating external conditions, a severe winter at the beginning of the year, and wildfires in the second half of the year. Consumption, investment and exports each contracted in 2012.
3. The post-crisis period was also marked by continued political fragmentation. After the October 2010 elections, it took 18 months for the Council of Ministers to be formed. As a result, the BiH institution-level budget for 2012 was not adopted in a timely manner.