On the basis of the above objectives and guiding principles, the following priority sectors are proposed for funding in 1999 under the Phare and Obnova schemes:

1. Democratisation and Institution building
2. Sustainable Economic development
3. Integrated assistance activities for refugee return
4. Civil society and Social Development

6.1  DEMOCRATISATION AND INSTITUTION BUILDING

To create the basis for a democratic, market-oriented system, assistance is still required in a large number of governmental, economic and social sectors, including the development of comprehensive legal frameworks. Support will in particular be provided to those institutions which promote the rule of law. This component will also include support to custom related projects.

6.1.1  Dayton Human Rights institutions

The Human Rights Chamber, the Human Rights Ombudsperson and the Commission for Real Property Claims, all created under Annex 6 and 7 of the General Framework Agreement for Peace, are fundamental pillars of the establishment of a democratic society based on the rule of law and respect of human rights. To date, more than EURO 7,7 million have been allocated through EC programmes to support their functioning and activities. For 1999, and following the needs identified by the OHR, the Commission is proposing an additional contribution of EURO 2,4 million. Both the office of the Ombudsperson and the Chamber have addressed proper rights, particularly occupancy rights and issues involving JNA apartments. In addition, they can support the rule of law within Bosnia and Herzegovina, by ensuring incorporation of the European Convention on Human Rights and setting standards for independent and impartial consideration of cases. Despite gradual improvement and more responsible attitude on the part of the Bosnian authorities, the protection of human rights in Bosnia and Herzegovina is still insufficient and human rights violation remain endemic. For this reason it is essential that the Human Rights Commission receive adequate and stable funding to carry out the tasks envisaged by the Dayton Peace Agreement. However, this support is conditional upon the definition of a clear strategy ensuring the long term viability of the institutions. In particular, the government of Bosnia and Herzegovina should meet its funding obligations to ensure the sustainability the institutions.

6.1.1.1  Commission for Real Property Claims

The CRPC is the principal decision-making body on property issues affecting dispossessed people in Bosnia and Herzegovina. Its mandate is an integral part of the international efforts to reconstruct housing, prepare the legal basis for the return of refugees and secure the observance of basic human rights relating to property. The crux of its role is the confirming of property title thus re-establishing legal and social order, economic viability and long term greater prosperity.

To date, the EC has contributed with a budget of EURO 4,7 million. An additional contribution of EURO 1 million is proposed for 1999.

6.1.1.2  Office of the Human Rights Ombudsperson

The Office of the Ombudsperson is a judicial body which has for mandate, in a general sense, to consider alleged or apparent violations of the human rights set out in the European Convention on Human Rights (ECHR) and its protocols, as well as any alleged discrimination in the enjoyment of the rights set out in other international instruments. The Ombudsperson gives particular priority to allegations of especially severe and systematic violations, as well as those funded on alleged discrimination on prohibited grounds. In addition, it can support the rule of law within Bosnia and Herzegovina, by ensuring incorporation of the European Convention on Human Rights and setting standard for independence and impartial consideration of cases.

To date, the EC has contributed with a budget of EURO 1,6 million. An additional contribution of EURO 0,7 million is proposed for 1999.

6.1.1.3  Human Rights Chamber

The Human Rights Chamber is a judicial body that may issue final and binding decisions in cases where it has found violations of the ECHR and other international agreements listed in the appendix to annex 6 of the GFAP.

To date, the EC has contributed with a budget of EURO 1,1 million. An additional contribution of EURO 0,7 million is proposed for 1999.

6.1.2  Rule of Law

The following projects are proposed with a view of reinforcing the rule of law :

6.1.2.1  Police Academies in the Federation and the RS

The United Nations Mission in Bosnia and Herzegovina (UNMIBH) has designed a "building block" approach to developing a modern police force in the Federation and the RS in view of the strengthening of the rule of law⁵. In particular, the International Police Task Force (IPTF), established under its auspices, has for objective the restructuring, reforming and democratisation of the police so that civilian law enforcement agencies operate in accordance with internationally recognised standards (through the provision of training, advise and assistance to the local police).

Following an assessment of needs, the establishment of police academies in both entities has been identified as an area of high priority. This was further stressed at the December 1998 PIC meeting as the academies should allow a professional police force that operates under the control of democratically elected Governments. The academies should also help integrate minorities into the entity police forces by providing an environment in which all recruits can be trained together and in which cohesive professional identity can be constructed for all recruits. It is expected that the academies will be first developed at local level with as perspective for the longer term the creation of a more advanced training college at the State level to serve the needs of both entities and be at par with other European police colleges.

The EURO 6 million funding earmarked by the Commission should meet all the required expenses for the renovation of existing war-damaged buildings and supplies (equipment for offices, safety training, traffic safety training, criminal investigation, crowd control training, furniture, training aids and vehicles).

The specifications for the supplies and the necessary designs for the rehabilitation of the building are currently under preparation which should ensure rapid implementation once the EC funds are committed.

6.1.2.2  State Constitutional Court

The Constitutional Court is a keystone of the Dayton constitutional system. It acts as the ultimate arbiter in all controversies between the State of Bosnia and Herzegovina and its Entities and among State Institutions. And is the highest national authority for the application of State legislation and the protection of human rights and fundamental freedoms. Assistance to the Court has been allocated through the Phare programme in 1998. Further support is required to strengthen the capacity of the Court and 800,000 EURO are proposed for that purpose.

6.1.2.3  Judicial Reform

On the basis of the priorities identified by the OHR, and in close cooperation with the Council of Europe and the UN mission, the Commission will provide EURO 1 million for the judiciary at Entity and State levels. Consideration will be given to technical assistance to the entity Ministries of Justice, the training of judges, the drafting of legislation and minor equipment supplies.

6.1.3  Support to the Customs sector

Complementary support is proposed to the successful Customs And Fiscal Assistance Office (CAFAO). In addition, and for the first time in Bosnia and Herzegovina, funding will be made available for the establishment of an Automated SYstem for CUstoms DAta (ASYCUDA++).

6.1.3.1  Customs and Fiscal Assistance Office - the CAFAO programme

The importance of creating efficient and effective customs and taxation services constitutes a corner stone in the implementation of the General Framework Agreement for Peace' in Bosnia and Herzegovina. Such services can help in facilitating economic reforms, producing revenue to fund actions aimed at the achievement of economic and social objectives, ensuring that the flow of government revenue is not diverted to Pre-Dayton/Paris Peace Accords structures, and building confidence art border crossings to facilitate the return of refugees and displaced persons.

The Commission therefore proposes the continuation of the CAFAO programme for which a total of EURO 13,5 million will be available in 1999 through the OBNOVA programme (EURO 9 million under budget line B7-544 managed directly by DG XXI and EURO 4,5 million under budget line B7-541 to be transferred to B7-544).

The programme is aimed at building confidence between the administrations in the field of customs and taxation, and contributing to the reconstruction of the fiscal sector. It thus plays a key role in the overall peace implementation process and forms the basis for the development in a wide range of fields in Bosnia and Herzegovina. Since its deployment in January 1996, the programme has facilitated the development and implementation of a comprehensive customs and taxation policy throughout the territory of Bosnia and Herzegovina by providing assurances to all parties through the monitoring and auditing of the administrative services concerned. Assistance is also provided with the view to ensuring that persons crossing the frontiers of the State are treated in a even handed unbiased manner by the local authorities, that the customs laws and procedures are applied correctly and that the revenue is collected fully and is deposited in the appropriated revenue accounts.

In accordance with the policy of bringing Bosnia and Herzegovina closer to the European Union, the CAFAO programme will continue to assist Bosnia and Herzegovina in the development of modern customs and tax laws and policies. It will also assist the Custom and Tax Administration of the two entities to develop appropriate procedures to implement those laws and policies, all of which will be consistent with European standards. In view of the foregoing and the progress achieved to date, the programme will concentrate on specific project areas, including those requested by the OHR and other international donors, with a view to developing self-sustaining customs and tax systems in Bosnia and Herzegovina. The areas will include Internal Audit, Training, Computerisation, Law and Procedures, Customs Compliance and Enforcement, and Tax Compliance and Enforcement. The programme will also assist Bosnia and Herzegovina to develop customs and taxation co-operation with neighboring countries and other main trading partners. This action stems from the detection by officers employed under the programme of large-scale losses to the revenue of the Federation caused by customs fraud, as a result of the importation of high duty goods, which have been either incorrectly described or falsely claimed to have been re-exported.

6.1.3.2  An automated system for customs data : ASYCUDA++

The modernisation and development of the two customs services of Bosnia and Herzegovina to ensure that the customs can be operated in an effective, efficient and cohesive manner throughout the entire territory of Bosnia and Herzegovina can not be achieved without the introduction of an computerisation of customs data. The system will provide the automation of the declaration processing function, and thus will enable the production of similar accounting and statistic data, which will facilitate the production of statistics at the national level.

After considering the information systems available on the market, the authorities of Bosnia and Herzegovina have requested the introduction of ASYCUDA++, the computerised customs declaration system developed by UNCTAD.

The Commission proposes the installation and implementation of the ASYCUDA++ system throughout the territory of Bosnia and Herzegovina. It will replace three existing systems currently available in the two entities (one in the Republika Srpska and two in the Federation of Bosnia and Herzegovina). In 1999 the Phare programme will make EURO 2,3 million available (the total cost of the project is estimated at EURO 6 million).

The above mentioned activities of the CAFAO programme will include assistance in the implementation of the ASYCUDA++ as regards project management, training and changes to work procedures.

6.2  SUSTAINABLE ECONOMIC DEVELOPMENT

Economic development, which can provide employment and income for the inhabitants of Bosnia and Herzegovina will ultimately depend on the successful establishment of an economic environment conducive to private sector activities. In order to create this, Bosnia and Herzegovina will need to develop an appropriate institutional framework suited to a market economy, including a coherent legal framework, as well as a sound macro-economic environment. This should also be accompanied by infrastructure related activities and measures in the environment sector to make economic development sustainable.

6.2.1  Macro-Economic Assistance/Support to the Balance of Payments

Following a proposal from the European Commission in November 1998, the Community will make available to Bosnia and Herzegovina, through grants and loans, a macro financial assistance in the amount of up to EURO 60 million⁶. This should help provide a stable macro-economic environment within which economic and institutional reforms have a realistic chance of being implemented.

The funding, equivalent to 50% of the financing deficit calculated for 1998, shall cover the financing needs of Bosnia and Herzegovina under the agreed IMF macro-economic and structural reforms programme. As the country is of weak revenue, thus eligible for the IDA, at least half of this amount was proposed as non reimbursable. The assistance would be granted in the context of the on-going IMF programme and would complement resources made available by the IFIs and bilateral donors.

The proposed assistance consists of a loan element of maximum EURO 30 million, and a grant element of maximum EURO 30 million. The proposed assistance will be released in at least two tranches, in 1999 and the year 2000, each consisting of grants/loans or the combination of both. The OBNOVA programme will provide the source of financing for the grant element of up to EURO 15 million in 1999.

Disbursement of the assistance will be subject to satisfactory progress under the reform programmes agreed between the Bosnia and Herzegovina authorities and the IMF/WB. In addition, when establishing specific economic conditions for the implementation of the assistance, it will be ensured that due account is taken of the guidelines and objectives of the overall EC assistance within the framework of the PHARE and the OBNOVA programmes with particular attention given to the priority areas of economic reform as identified in the programming exercise.

6.2.2  Structural Reform and private sector development

Development of the private sector and hence the creation of employment in Bosnia and Herzegovina will depend on a stable macro-economic environment, a conducive business environment, implementation of structural reforms and re-stimulating the productive base. The Commission will therefore consider extending its technical assistance in a number of key areas which can contribute to the transition to a market economy. A total of EURO 7 million is earmarked for this purpose.

6.2.2.1  The ZPP Central Payments Bureaus

The ZPP Central Payments Bureau has been identified by the international community as an absolute priority in terms of reforms in the country's financial system. The Bretton Woods institutions have taken the lead on this and already have strategic plans drawn up setting out the steps required to dismantle this structure and the Commission will keep funds to one side to assist with this process. The Bretton Woods must express what participation they expect from the Commission.

This structure currently deals with all payment operations, tax collection and distribution, statistics collection, treasury services, cash management, accounting services, interaction with Financial Police and lending. The task lying ahead of the donor community is to transfer the essential functions of the ZPP in both entities to various public and private sector institutions, including the inter-bank payments systems, the Ministry of Finance Tax Administration Office, Securities Commission, Treasury, Statistics Bureau and Supreme Audit Institutions. The recipients of this decentralising process must also be prepared in turn to take on inherited responsibilities. It is envisaged that the Commission will support funding for the transfer of functions in statistics, accounting while providing the necessary human resource support for undertaking such a restructuring. It is vital that there is a well co-ordinated action between the donors.

The use of the EC allocation will be discussed within the International Advisory Group recently created (OHR, IMF, World bank, US Aid, US Treasury and Commission Delegation) and closely co-ordinated with US planned budget of $ 1,5 million for the Payment Bureaus reform.

6.2.2.2  Privatisation and Business Environment

Priority has been given to this area by the international community. USAID have worked extensively on introducing the legal framework and supporting the implementation of privatisation through the network of privatisation agencies. Privatisation is scheduled to be implemented by the end of the year although some delays are still expected. The Commission plans to support this process by mobilising a team of experts in order to assist the OHR with the monitoring and implementation of the privatisation programme, while addressing any of the bottlenecks that may arise. Since the privatisation process is on the verge of beginning this assistance will be mobilised as soon as possible this year.

In terms of business environment much work needs to be carried out on creating a uniform Commercial Code between the two entities in order to promote free movement of goods and capital while also strengthening the administrative and judicial system. The Commission will therefore continue a previous project to support the introduction a conducive legal framework for business while strengthening the institutions responsible for the implementation of these laws.

6.2.2.3  Foreign investment and enterprise support

Re-launching the enterprise and productive base in the country remains a challenge. Large industries have to be broken up in order to salvage the remaining economically viable components, privatised and invested in. Start up enterprises also have to be encouraged and the provision of credit lines is insufficient. Traditional markets for their products have collapsed while there is a general shortage of capital and know how. Under these circumstances, there is a real need to attract foreign investment into Bosnia and Herzegovina as well as to provide direct support to enterprises in order to restructure companies to become more competitive for domestic and foreign markets:

As part of its support to enterprises the Commission will continue with the previous Industrial Development Projects in the wood sector and support to women entrepreneurs which will be mobilised as soon as possible to ensure continuity: In addition, this programme will be expanded to other sectors such as food processing and metal and machine building.

In terms of foreign investment legislation has now been passed which stipulates that a foreign investment promotion agency will be established at state level in order to attract foreign investment. The Commission will provide support to strengthen the agency and to carry out institutional strengthening support to this agency as well as promotional activities.

6.2.2.4  Regional Development

The recent accord on Brcko in which the region becomes a district governed independently of either of the entities means that there is an immediate need to support this region, particularly as this region was severely affected by the war and now faces unemployment up to 90%. As part of a donor co-ordinated response the Commission plans to support economic regeneration activities for job creation, restructuring enterprises and starting up SMEs.

Under a previous programme the Commission supported an integrated programme for economic development and re-integration of refugees in the Tuzla region. This programme provided a range of support services for the development of SMEs, generating job opportunities and supporting local government initiatives. The Commission plans to continue with this programme while expanding the coverage into neighbouring regions in Republika Serpska.

6.2.3  Small and medium sized enterprise credit line facility

Unemployment still remains critically high (around 30-40% in the Federation, 40-50% in Republika Srpska) and the availability of credits to start up small enterprises is one of the most pro-active ways of combating the problem. Credit lines have thus far proved to have a great absorption capacity in the country and the Commission proposes to complement with EURO 5 million a ready functioning credit disbursement system. This could be along the lines of the Micro-Enterprise Bank under EBRD to which the Commission has already contributed to via credits and technical assistance. The chosen scheme the Commission will adopt will be one which is as pan territorial as possible (using several different commercial banks covering both entities if possible), where technical assistance is already in place both within the supervisory financial agency and in the commercial banks the credits will be passing through and, finally, where there is a comprehensive monitoring mechanism for the follow up of credit use and reimbursements. Commercial rates will be enforced.

6.2.4  Infrastructure development

Significant funding of infrastructure projects is still required to complete a solid foundation for Bosnia and Herzegovina's overall economic development. However, substantial grant aid has been provided to date by the EC for transport, energy, telecommunications, water and many projects are currently ongoing. It now appears essential to stimulate other forms of funding for infrastructure related activities such as loans from the International Financing Institutions. In this respect, the Commission in 1999 will promote infrastructure investments by the EIB, which has a budget of EURO 100 million over a two year period through the funding of interest subsidies to up to EURO 8 million in 1999.

6.2.5  Water and environment

In continuation of 1998 Phare institutional activities, EURO 2 million are proposed for the water and environment sectors. In the water sector, focus will be on the establishment of River Basin Bodies and will support their operations in both entities. The project will assist the government to establish the appropriate regional authority to take responsibility for the regulatory and licensing functions of water use and pollution, and gradually other activities having an impact on the environment. The project will be entirely consistent with EU policy and legislation on water use.

In the environment sector, the programme will assist the entity governments in defining a cohesive environmental policy for Bosnia Herzegovina, which is consistent with those of its neighbors. It will assist the entity governments, in particular the Ministries of Environment, in establishing appropriate environmental legislation, which is in line with the standards of the European Union. It will encourage inter-entity co-ordination on regional environmental issues. Activities will be coordinated with that of the LIFE programme in particular for the RS where technical assistance is currently supporting the government with the establishment of appropriate administrative legal and technical structures and the implementation of environmental policies.

6.3  INTEGRATED ACTIVITIES TO ENCOURAGE REFUGEE RETURN

6.3.1  Rationale

Following the endorsement by the International Community of the strategic objectives set forth at the December 1998 PIC meeting in Madrid, priority will again in 1999 be given by the Commission to initiatives furthering the return of refugees and displaced persons. A joint strategy has been established by ECHO and DG1A⁷ to foster progress especially with regards to minority return.

In the 1999 Action Plan, the RRTF estimates that at least 120,000 refugees and DP's would be prepared to return rapidly if the conditions were created to make such return possible. Experience in 1998 has demonstrated that political brokering and an effective use of economic leverage in selected target areas can achieve results thus creating opportunities for minority return. Persistent interventions to address human rights violations and remove administrative and legal obstacles to return also proved instrumental. The EC support to the 1999 Action Plan is therefore aimed at contributing with maximum impact to the creation of a self-sustainable flow of return by the initiating of a "last big push" without which the return and reintegration of minorities will become less of an option. The 1999 Plan sets out the requirements for the achievement of a "quantum leap" in return movement. This relies on three pillars:

• Creation of housing space (through reconstruction of houses, the implementation of the new property laws, the solving of the regional dimension of return with notably the return of refugees to Croatia)

• Creation of a secure environment for individuals to return to (police, IPTF, SFOR)

• Sustainability (through support to the economic sector, employment generation but also small infrastructure, education, health, social welfare, government structures)

Mindful that there are no easy solutions⁸, the Commission has developed a multi-sectoral strategy to remedy displacement patterns that resulted both from the war and the dissolution of the former Yugoslavia. Notwithstanding its unabated commitment in supporting actions designed to assist refugees and displaced persons to exercise their right to return to their place of origin, consideration should be given to the fact that not all populations displaced by conflict eventually return to their homes following the end of hostilities⁹. The 1999 strategy reflects the more "balanced approach"¹⁰ required in order to accommodate the socio-economic and political realities of Bosnia and Herzegovina and the necessity to address return within a regional perspective. Although the needs for rehabilitation of houses and reconstruction of basic infrastructure remain high, it is equally acknowledged that the process of return is placed within a changing socio-economic reality. In other words that for the return process to be sustainable, it must be accompanied by concurrent and deepening institutional, economic and social reforms. Based on the experience of the 1998 Integrated Return Programme, the Commission will ensure maximum synergy between the different components of the 1999 programme as presented in these Orientations.

6.3.2 Enhancing the efficiency of the Commission programme delivery

Taking into account the EC global contribution to the implementation of 1999 Action Plans, the objective of a more efficient delivery of the Community assistance to the region will be achieved by furthering planning and operational synergies between OBNOVA and ECHO's interventions in the field of Return. These goals will be achieved in the following manner:

• the OBNOVA programme will continue to support return movements along the major return axes identified in the RRTF Action Plan targeting a lesser number of geographical areas of intervention. In line with its mandate and, in support of the achievement of a sustainable return, DG1A will furthermore increase the employment generation element of the programme while consolidating the mortgage credit component introduced in the 1998 Integrated Return Programme.

• ECHO is planning to continue to use its more flexible procedures to focus its efforts on supporting spontaneous return movements and pilot projects of minority return.

The OBNOVA (EURO 15 million) and ECHO (EURO 5 million) support schemes to Croatia will also be closely coordinated.

6.3.3  Proposed programme

The following multi-sectoral assistance program is proposed:

1. Integrated return projects (follow-up of the 1998 program)
2. A 'Quick Impact Employment creation Fund' and business advisory service
3. Mortgage credits scheme
4. Micro credit scheme
5. Micro-projects notably for small scale infrastructures
6. Mine clearance related activities

6.3.3.1  Integrated return projects

The Commission intends to continue with the approach taken in 1998 and focus mainly on project enhancing minority return of refugees and displaced persons with an indicative allocation of EURO 44 million.

In order to increase the impact of the integrated approach which will include Housing and associated infrastructures or social measures, projects will be focusing on fewer priority geographical areas carefully identified in concert with the RRTF. Special attention will be given to potential return to Republica Srpska from the Federation and from outside Bosnia and Herzegovina.

This entity is presently overpopulated with Serb DPs and Serb Refugees who are occupying housing space of Bosniacs and Croat DPs and Refugees. In this regard, consolidated and concerted action is most especially required in order to break the current deadlock particularly in Eastern RS. With respect to the North West/Posavina region, the aim will be to accelerate returns in areas where groundwork has started in 1997 and 1998.

These actions will be accompanied by the implementation of activities on the RS/ Croatia axes of return that will include reconstruction of dwellings and additional initiatives to support the return of Serb refugees presently residing in Republika Srpska. In this regard and mindful of addressing return within the framework of a regional approach, the Commission has earmarked EURO 15 million under its budget for Croatia.

Within each project, the following indicative breakdown will be pursued:

- 75% Housing

- 15% Technical infrastructure (water, electricity, roads, etc) and Social infrastructure (education, health, sport, etc)

- 10% Job creation (small grants and advisory service).

The Commission will in addition support the proposed "Study on the Reform of Property System" endorsed by the PIC. Indeed, the creation of a legal and institutional framework supportive of refugees and displaced persons return that allows for the free and effective exercise of individual property rights is one of the fundaments of the Dayton Peace Agreement. It is now recognised that the reform of the property market and institutional and legal framework for real estate transactions must be tackled.

6.3.3.2  Quick Impact Employment Creation Fund and Business advisory service

Experience from the 1998 Return of Refugees and Displaced programme has shown that the complementarity between the "Integrated Return Projects" and the economic regeneration components of the Return Programme in conjunction with other areas of EC interventions¹¹ of direct relevance to the return process must be reinforced. The creation of an active linkage between the various elements is pivotal to the implementation of the 1999 multi-sectoral program of the Commission, thus linking in practice relief to longer-term economic development.

It is therefore proposed that an NGO tasked to establish this linkage be selected. Its role will be fourfold:

(1) Management of a "Quick Impact" Fund for economic regeneration projects primarily in EC return areas (this would include ECHO projects areas) but also in other areas where the RRTF would determine a special need. In order to meet the variety of economic needs the programme is designed to assist both returnees and receiving communities in two forms: material grants for the most vulnerable and micro-credits provision.

(2) Dissemination of information of concurrent EC programmes to the "Economic Advisory Services" built into NGO projects.

(3) Technical Assistance in economic development to NGOs and receiving communities (for e.g. municipal authorities, local companies) tailored to meet specific local circumstances.

(4) Provide the EC with an instrument to meet the request for flexibility under the 1999 RRTF Action Plan.

The pivotal role of the implementing partner would strengthen the synergy between the various components of the Commission's multi-sectoral integrated return strategy and thus maximise the impact of the 1998 and 1999 programmes. EURO 4 million is proposed for this component.

6.3.3.3  Mortgage credits

Building on lessons learned from the "Housing Construction Loan Programme", the Commission will channel further funding - EURO 10 million - through the already established revolving housing fund. The aim of the consolidation and extension of this successful programme is threefold. First and foremost, it is improving the availability of housing. Secondly and perhaps more importantly for the medium and long term, it is introducing a new banking product which will pave the way for the transition from grant based assistance to reconstruction aid on a loan basis. Finally, it is an important step in the creation of a sound housing market. These funds will be channelled through local commercial banks in the form of loans for rehabilitation and reconstruction of houses. The target groups of the housing loans will consist primarily of repatriates from the EU Member states, as well displaced persons. By consolidating the housing revolving fund, and supporting the Property Study, the EC places its assistance within a long-term perspective. Such an approach will ease the transition of Bosnia and Herzegovina from post-war reconstruction to sustainable economic recovery. This process can only be achieved through gradual reforms of the current socialist framework to a market oriented system. Given the central role of property issues, the need to tackle the legislative framework is all the more crucial. It is furthermore intended to increase the synergy between the integrated housing projects and, more generally areas of projects' implementation of both ECHO and OBNOVA with a view to direct returnees with sufficient colaterals to seek loans under the above scheme.

6.3.3.4  Micro-credits

Return will not be sustainable as long as returnees do not have the possibility to provide for their basic economic needs. Although economic growth has reached 30% at the end of 1998 and that it is anticipated that it will continue to grow albeit at a reduced pace, the labour sector is undergoing tremendous transformation in the light of the privatisation and restructuring of the Bosnia economy. High rate of unemployment and disparities between Entities with regards to employment opportunities remain a striking feature of the post-Dayton period. The situation is exacerbated for minority returnees and the economically most vulnerable.

With a view to combat high unemployment and foster the economic conditions for the sustainable return of refugees and displaced persons, the Commission intends to provide concurrent support to micro enterprises in areas of return with a total of EURO 5 million. Drawing on the economic development interventions, in particular micro-credit schemes, the Commission will apply appropriate mechanisms in support of job creation for returnees. The majority of donor credit line assistance presently concentrates on medium size enterprises whereas the individual must now be catered for. Several bilateral donor credit lines for micro-enterprises already exists but tend to be concentrated on urban areas. The Commission therefore proposes to extend the outreach of credits not only to areas which have so far not benefited from this type of assistance, but also to focus on the needs of individuals. Furthermore, EC assistance in this field will aim at the capacity building of local commercial bank by improving their disbursement mechanisms through technical assistance.

6.3.3.5  Micro-projects

On the basis of past experience, the Commission will continue to support micro-projects through implementing partners such as SFOR with a level of funding of EURO 2 million.

The functions assigned to SFOR in the implementation of the military aspect of the Dayton Peace Agreement is a fundamental element in building a durable peace in the country. Its role in the stabilisation of the peace process has over the last three years taken on a "civilian dimension" through an enhanced participation in the return process, be it by providing a more secure environment or by partaking in the reconstruction efforts along side civilian implementers. The role played by SFOR in 1998 in facilitating minority return movement has been instrumental. Under the 1999 Action Plan, its role has been endorsed and strengthened. The Commission in this context is proposing to continue supporting the implementation by SFOR of small infrastructure project, complementary to the integrated return programme.

6.3.3.6  Mine clearance

The continued existence of up to one million land mines presents a major obstacle to normal resumption of life and economic activity across the country. The proper marking of mined areas and the establishment of mine-free areas is in particular a prerequisite for the return of refugees and displaced persons.

Since 1996, the EC has donated over EURO 9 million for the establishment of state and entity De-mining and Explosive Ordnance Disposal (EOD) teams, the creation of national institutions to deal with sustainable mine clearance in the future and mine clearance operations that are necessary precursor to the reconstruction projects that help refugees return.

In 1999, the EC will further support with EURO 4 million the Civil Protection Programme in coordination with the National De-mining Commission (NDC) as well as specific mine clearance operations in areas where refugee return projects will be undertaken.

This component will be complemented by funding via the overall budget line managed by the Commission for mine clearance (B7-661).

6.4  CIVIL SOCIETY AND SOCIAL DEVELOPMENT

The programme will fund social development through projects in the social, health and education sectors as well as civil society activities. For the latter, closer coordination with the Democracy Programme (B7-700) will be ensured.

6.4.1  Small-Scale Operations (SSO)

The Commission has designed a quick-reaction mechanism to rapidly address requests for small scale funding put forward at local level by small NGOs, cooperatives, educational institutions, women's groups, sports groups, independent media, cultural groups. The benefit of the SSO programme is that funding can be provided to projects that would not normally attract major international donors because of their size (from 2,000 EURO). The facility can also fund urgent requests put forward by the Office of the High Representative. The allocation proposed will be EURO 2 million.

6.4.2  Social Development

6.4.2.1  Social Protection and Social Safety Net

The Madrid PIC of December 1998 highlighted the need to "develop a strategy to fight poverty, including social protection for vulnerable elements of society". In co-ordination with the World Bank and the ILO, the Commission will participate with a contribution of 400,000 EURO to the development of policy levers of a coherent and efficient strategy to address the issue of the efficiency and equity of public expenditures as well as to the definition of the relevant labor laws. On the long term, such assistance should ensure the sustainability of economic reforms and shield the vulnerable groups in the transition process. EC funding will however not be available for social funds for which public resources will need to be mobilised.

6.4.2.2  Social infrastructure

The Commission will further fund the rehabilitation of cultural landmarks such as the Zetra Stadium in Sarajevo with a maximum of EURO 1,5 million.

6.4.3  Education

The education sector has since 1996 been identified as a priority by the European Commission (EURO 8 million to date). The emergency supplies delivered under the Essential Aid Programme have been completed by more systematic interventions through the higher education TEMPUS programme and Vocational Education and Training -VET- which includes institutional strengthening, curricula development, teacher training and schemes for the reintegration of refugees and displaced persons. Other donors have also been active.

The needs in the sector remain however considerable. The latest RRTF Action Plan has in particular emphasised the links between educational reform and the return process. In this respect, the World Bank has for 1999 produced a report which presents an overview of educational related issues and identifies development needs in priority return areas. In more general terms, further impetus needs to be given to policy reforms and capacity building. Building on past activities, and in an effort to better integrate educational related activities, the following interventions are proposed for 1999 :

• An extension of the TEMPUS programme: EURO 3 million will be allocated to (a) Joint European Projects (JEP) focusing in particular on curriculum development (medicine, pharmacy, veterinary, political sciences, economy, public administration, business management, sociology, architecture, etc.) as well as the establishment of links between universities and public institutions or administrations, and (b) Individual Mobility Grants (IMG).

• Support to more systematic educational reforms with a shift of focus towards curriculum in support of economic development with a total of EURO 2 million. Funding will for example be made available for policy advice as well as for projects supporting curriculum development, continuing education, teacher training, and the development of links between universities, business schools and small and medium size enterprises.

6.4.4  Health sector

Following a review of ongoing programmes, EURO 3,7 million will be made available in 1999 for additional technical assistance to assure the long term success of the reform towards a sustainable health care and health financing system which could provide basic health coverage to an increasing number of returnees.

Although both entities have now established policy plans, partially thanks to Phare assistance (EURO 4,2 million in the 1997 budget), their implementation requires technical assistance, especially in the areas of management of health care institutions and health insurances, improvement of health information systems, development of basic legislation and the empowerment of the ministries as regulators in the health care sector. The pharmaceutical sub-sector will require special attention for reasons described below.

In 1999 ECHO is phasing out its massive presence in this sector (around EURO 30 million in 1998). Direct drug supply was one of its major expenditures (EURO 9,7 million in 1998) and technical assistance in pharmaceutical policy, especially including transfer of know-how in drug procurement and distribution, will be required by the health authorities should they engage in providing drugs to the populations they serve.

Public health, including health promotion and community development, is a key field for action when population changes are expected: ECHO provided investments and, partially, technical assistance (EURO 2,5 million) during 1998 and 1999 in the area of epidemiological control, food and water safety surveillance, and related fields. To attain a full impact of such investments, technical assistance is required to continue in training and capacity building activities.

6.4.5  Media

In continuity with actions carried out in previous years, the Commission will fund activities which support the long-term sustainability of the independent media when they are not in a position to do so due to difficult political and economic circumstances.

This will be completed by providing technical assistance for media management and training particularly with regards to radio stations in the RS. Of vital importance also is support to state television stations to ensure independent broadcasting and fair programming.

In addition, efforts will be made to support printing and distribution of written media.

Finally, as requested by the OHR and retained as a priority by the Peace Implementation Conference of Madrid, specific support will be considered to the following :

• Open Broadcast Network (OBN), to improve its long term commercial prospects and communication links with its affiliates;

• Independent Media Commission (IMC), to ensure a realistic transfer of this essential Regulatory body at a local level.

These two projects will be funded following an appraisal of their cost-effectiveness and viability.

A total of EURO 2,4 million will be made available for the above mentioned media related projects.

1999 PHARE AND OBNOVA - Table of Contents  |  Next: Cost and financing plan