Vjekoslav Domljan CRES Mostar, BiH
IntroductionEscaping income trapMass unemploymentPolicy recomendation
Key causes of economic problems
internal external
•Bad legacy •Regional non-cooperation
•War damages •Global crisis
•Wrong privatization
•Wild liberalization
Middle income trapLow to middle income country -
industrialisationMiddle to high income country? -
HIGH INCOME(> 12,196 US$)
Country GNI pc
Greece 28,630
Slovenia 23,520
Croatia 13,810
MIDDLE INCOME (996-12,195 US$)
Country GNI pc
Moldova 1,590
Kosovo 3,240
Albania 3,950
Macedonia 4,400
BiH 4,700
Bulgaria 5,770
Serbia 5,990
Romania 8,330
Turkey 8,730
For moving up the value chain with knowledge and innovative-based products and services: investment rates >25-32 % of GDP innovation-conducive policy framework business environment
transition countries share the same 3 top business obstacles (EBRD, 2010): skills availability corruption tax administration.
BiH Albania Belarus Bulgaria Croatia Maced Hungary Moldova Mont. Romania Serbia Slovakia Slovenia
infrastrucutre -0.11 0.16 0.09 0.01 -0.17 -0.07 -0.11 0.07 0.09 -0.12 0 0.03 0.08
telecom -0.21 0.06 0.03 -0.05 -0.26 -0.17 -0.18 -0.05 -0.13 -0.22 -0.06 -0.12 -0.01
electricity 0.02 0.73 0.13 0.16 -0.15 0.14 0.11 0.15 0.36 -0.07 0.22 0.26 0.19
transport -0.10 -0.08 -0.04 -0.04 -0.13 -0.07 -0.17 0.01 0.07 -0.15 -0.03 0 0.08
land access -0.19 0.01 -0.02 -0.16 -0.2 0.02 -0.36 0.14 -0.06 -0.14 -0.08 -0.12 0.04
skills 0.04 0.13 0.3 0.01 0.11 -0.06 -0.17 0.25 0.1 0.15 0.04 0.16 0.11
tax administration 0.22 0.11 0.04 0.12 0.25 0.02 0.61 0 0.18 0.22 0.03 -0.02 -0.04labour regulations -0.10 -0.16 -0.24 -0.02 0.01 -0.11 0.09 -0.19 -0.03 0 -0.03 -0.05 0.22
customs -0.12 0.12 -0.1 -0.24 -0.17 -0.11 -0.29 -0.1 0 -0.25 -0.13 -0.29 -0.2
licencing -0.03 -0.16 0.08 -0.04 -0.1 -0.1 0.14 -0.14 0.04 0.01 -0.11 -0.08 -0.09
courts 0.04 -0.02 -0.22 0.06 0.2 0.22 -0.14 -0.05 -0.08 0.01 0.03 0.08 0.02corrupton 0.22 0.31 -0.06 0.16 0.08 0.12 0.32 0.02 -0.03 0.13 0.26 0.15 -0.12
crime -0.06 -0.15 0.14 0.06 -0.11 0.01 -0.2 0.02 -0.16 -0.16 -0.03 0.13 0.01
enterprises in transition countries with small private sector and higher unemployment rate▪ …complain less about skills.
R&D (% GDP) 2007 2008
High income 2.37 2.29
High income: OECD 2.41 2.29
Upper middle income 0.79
World 2.07
BiH 0.03
Bulgaria 0.48 0.49
Croatia 0.81 0.90
Greece 0.57
Montenegro 1.10
Romania 0.53 0.59
Serbia 0.35
Slovenia 1.45 1.66
Turkey 0.72
Researchers /1 mln people 2003 2004 2005 2006 2007 2008
High income 3726 3761 3840 3945
OECD members 3217 3257 3354 3442 3012
Upper middle income 1032 1025 1037 1029 1112
World 1281
BiH 61 63 67 177 197
Bulgaria 1223 1262 1299 1344 1466 1499
Croatia 1315 1605 1289 1303 1384 1514
Greece 1418 1771 1796 1873
Macedonia 551 526 547 521
Moldova 759 757 720 700 726
Romania 960 978 1061 952 877 908
Serbia 1196
Slovenia 1893 2018 2625 2921 3109 3490
Turkey 471 482 550 592 680
Patents 2006 2007 2008 2009
High income 808819 826192 813996 764583
OECD members 809402 827681 816102 766793
Upper middle income 44574 36842
World 994324
Albania
BiH 55 59
Bulgaria 243 211 249 242
Croatia 317 344 330 250
Greece 532 575 628 698
Kosovo
Macedonia 34
Moldova 303 333 273 134
Romania 814 827 995 1054
Serbia 432 395 386 319
Slovenia 287 331 301 373
Turkey 1072 1810 2221 2555
the labour market in BiH face many challenges: Activity rates are low Unemployment rates are long-term, largely
structural Very few new jobs are created Underemployment is significant Employment services have a very limited role Education programmes are not in line with labour
demand Young people are poorly prepared for labour
market Young people do not consider entrepreneurship as
an option for them.
Issue of human capital development is a priority for faster, export-oriented and sustaining growth
Improved skills will upgrading the skill content of exports (and reducing vulnerability to low-wage competition) lead to increased productivity and employability ... will also endogenize the creation of new
enterprises through the creation of more entrepreneurs.
mismatch between demand and supply of skills is a result of A) supply side failure▪ undeveloped private market for skills
provision, and a small number of the (un)employed are willing to participate in▪ lack of adequate government policies and
strategies addressing the problem B) demand side failure▪ Very few new jobs are created
wages are high relative to the product composition of exports productivity in a regional comparison
The policy recommendation Follow the export and competitiveness
strategy (agro-food, metal, wood, construction materials and tourism)
Introduce the private and develop public institutions mathing demand and supply
Create a tertiary education strategy Review the secondary school curricula Create an adult education strategy
frameworks/regulation Create cluster training centres
Review the primary and secondary education system – shift approach from ‘rote learning’ to ‘creative and critical thinking’
Increase emphasis on reintroducing technical and vocational training schools
Identify and nurture talent through a demand-driven process
Improve autonomy and accountability of educational institutions
Encourage R&D collaboration between terciary education and firms
Enhance English language proficiency
1. Increase talent base
Upgrade skills of the bottom segment of the labor force through continuing education and training
Develop tranining centres at employment agencies
Formalise international quality standards and certification of skills
Allow wage levels to be reflective of the skill level
2. Re-skill the existingthe labour force
Protect workers, not jobs, through a stronger safety net, while encouraging labour market flexibility
Revise legal and institutional framework to facilitate hiring and firing
Raise pay through productivity gains, not regulation of wages
3. Remove labourmarket distortionsconstraining wagegrowth
Create a strategy for tapping into the country’s diaspora
Review existing programmes to attract highly-skilled Bosnians-Herezgovinians overseas to return home
Offer permanent residence for ex-Bosnian and Herzegovinians and their families
Centralise oversight of foreign labour and expatriates to enable coherent practice
Build up critical mass of skilled professionals through simpler work permit and immigration procedures
Liberalise professional services through mutual recognition arrangements
4. Increase reliance on diaspora
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