economic diplomacy – high priority challenge for...

12
Economic Diplomacy – High Priority Challenge for Bosnia and Herzegovina Non nova sed nove (Not new, but in a new way) Sarajevo, August 2013. Analysis 1/13 Policy analysis

Upload: ngothuan

Post on 09-Sep-2018

220 views

Category:

Documents


0 download

TRANSCRIPT

Economic Diplomacy –High Priority Challenge for

Bosnia and HerzegovinaNon nova sed nove

(Not new, but in a new way)

Sara

jevo

, Aug

ust 2

013.

Ana

lysi

s 1/

13Policy analysis

With the support of:

Contact: [email protected] www.vpi.baDTP

and

prin

t: A

rch

Des

ign

Prin

t run

: 30

0

This Independent analysis has been prepared by the Foreign PolicyInitiative BH (FPI BH) with the financial support of the Friedrich EbertStiftung. The views expressed here are those of the Foreign PolicyInitiative BH and are not to be understood as in any way reflecting theviews of Friedrich Ebert Stiftung.

Economic Diplomacy – High Priority Challenge forBosnia and Herzegovina

Non nova sed nove (Not new, but in a new way) – Resolving economic issues in international relations has become an inherent part of diplomatic theory andpractice. Increased globalisation and trade liberalisation led to fierce competition on domestic and foreignmarkets. Consequently, countries which have not embraced the concept of economic diplomacy cannot havea proactive role in relations with other countries and they become objects of economic diplomacy of othercountries. In the post-war period, time of aid receiving and partial rebuilding in the country, development ofa strong concept of economic diplomacy emerged as the highest priority in the foreign policy of Bosnia andHerzegovina. The concept of economic diplomacy of Bosnia and Herzegovina has not yielded satisfactoryresults, which is best manifested in the large trade deficit. In order for the concept of economic diplomacy ofBosnia and Herzegovina to be more efficient, it is necessary to undertake permanent activities and apply thetools of economic diplomacy that are developed in a manner suitable to the given time and place. Despitenumerous difficulties associated with the concept of economic diplomacy in Bosnia and Herzegovina, it is,nonetheless, taking a clear shape and has a real chance to develop into an effective leverage that will enhancethe growth of the domestic economy.

1. Economy as an integral part of diplomatic practice At the beginning of the 21st century, the increasing pace of globalisation created, in terms of theeconomy, a new reality in international relations. Increasing globalisation diminishes the distancebetween countries, reducing the travel or transport time and transaction and transport costs andenabling direct communication with business partners by means of Internet or telephone, regardless ofthe distance. State economies are increasingly integrated and the volume of world trade is growing atever increasing pace. Investments are planned all over the world and there is a free flow of capital on aglobal scale. The resources are depleting because the population growth and adoption of values of aconsumerist society have led to the resources being exploited faster. The classical understanding of astate sovereignty is challenged by continuously growing interdependence of states, which, togetherwith trade liberalisation, enables the establishment of networks within and between regions that weakenstate borders and trade barriers. Under the circumstances of ever increasing free movement of people,goods, capital and services that resulted in enormous competition both on foreign and domestic markets,diplomacy should give priority to the economic prosperity of the country, so that geoeconomics takeprecedence over geopolitics.

2. Developed concept of economic diplomacy as apriority of foreign policy in the contemporary era

responsible governments respond to the events arising from the recent globalisation processes bydeveloping the efficient concept of economic diplomacy, which can respond to the challenges we face.Developing the concept of economic diplomacy is the best method to successfully carry out the foreignpolicy under the circumstances when it is necessary to continuously look for best foreign investors andnew markets for domestic products as a requirement for economic development and reduction ofunemployment in the country.

Economic diplomacy means diplomatic activities directed towards improving and protecting theeconomic interests of a country, while the concept of economic diplomacy should ensure that theactivities of economic diplomacy are efficient and successful.

A concept of economic diplomacy should be strategically designed, coherent and coordinated inpractice. Development of the concept of economic diplomacy must be preceded by a political decisionand it has to be constantly accompanied by political support based on the determination to achieveresults. Political will and political decision to put the economic diplomacy as a priority implies creationof a business friendly atmosphere at the internal political level. It is necessary to resolve internal issuesin the country, which have an impact on the reputation of the country in the international community.The manner of business operations is very important and it has to be compliant with global regulatoryrequirements and standards. Foreign investors should be protected at the level to which they areprotected in other countries and general business environment has to be such that they feel welcome.

1EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

It is necessary to identify the most attractive sectors and research economic processes in a concreteenvironment in order to recognise the benefits offered to foreign investors and business people, whoprincipally driven by the profit motive. Economic diplomacy has to make the connection between theplans and desires for economic development of a country and the foreign policy and diplomacy, as theinstrument of that policy.

The concept of economic diplomacy is primarily based on the work of diplomatic missions and consularoffices. However, significant assistance can also be provided by representative offices of the foreign tradechamber or chamber of commerce or specialised agencies for promotion of export and foreigninvestments in Bosnia and Herzegovina, as well as by honorary consuls.

3. Economic diplomacy in foreign policy of Bosnia andHerzegovina

Following the war, period of aid receiving and partial rebuilding of the country, development of a strongconcept of economic diplomacy emerged as the highest priority of the foreign policy of Bosnia andHerzegovina, together with the membership in the EU and nATo, which are to ensure, for Bosnia andHerzegovina, sustainable peace and necessary level of security and make it more attractive for businesses,both foreign and national.

3.1 Why does Bosnia and Herzegovina need the efficient concept ofeconomic diplomacy?

3.1.1 Trade deficit

In order to effectively achieve economicstability and economic growth, Bosnia andHerzegovina has to reduce trade deficit,which currently amounts to approximately €7 billion each year. This is possible to achieveby increasing the total exports and reducingthe imports and by ensuring the constantinflow of foreign investments, primarily inproduction capacities.

Total exports will increase if we increase thevolume of exports, which means that the BiHeconomic diplomacy must look for partnersall over the world. Products and services fromour country should be present at the marketswhere they can make best profit, whetherthose are the markets of our neighbouringcountries or the markets of distant countries.Therefore, it is necessary to strengthen theposition of the BiH export companies at themarkets where their products are alreadypresent and introduce them at the marketswhere they have not been present so far.

Companies from Bosnia and Herzegovina thatdo not export their products should beencouraged and supported to start exportingthose products and services which can beoffered at foreign markets. In order to boostexports, it is also necessary to increase thenumber of exporters from BiH. In Bosnia andHerzegovina, only 100 companies participate in70% of the total exports and this number has

2 EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

Table 1

Trade deficit in € billion

Source: BiH Central Bank

Table 2

Number of exporters in Slovenia and the Republic ofAustria

Sources:For Austria: Advantage Austria

For Slovenia: Statistical Office of the Republic of Slovenia

not changed in years. out of those 100 companies, 40% of them have foreign capital. In the European Union,8% of all companies are exporters. Following this criterion, it means that in Bosnia and Herzegovina around12.000 small and medium enterprises should be exporters.1 The number of exporters in Slovenia and Austriais presented in the Table 2.

In order to boost the BiH export sales, economic diplomacy of Bosnia and Herzegovina can provideassistance in making analysis and providing high-quality information about foreign markets, promotingand branding BiH, removing trade barriers and establishing direct contacts. However, it cannot be asubstitute for a series of measures that have to be implemented in order to increase the exports fromBosnia and Herzegovina and which are related to economic policy such as: introduction of subsidies forexporters, simplification of export procedures, establishment of an export credit bank which would keeppace with exporters and financially support their activities, establishment of a local company whichwould own a chain of markets and guarantee sale of agricultural products, initiation of establishment ofconsortiums of local companies and also of consortiums with foreign companies for the purpose of a jointaction on third markets, increasing the quality of domestic products, certification of products,establishment of an association of BiH exporters, discounted prices for energy-generating products,telephone and internet services for exporters, etc.

The basic strategy for decreasing the trade deficit should be the strategy of export growth, while thedevelopment of an import strategy may not be the right approach as such strategy would not be incompliance with the free trade requirements and applicable trade rules of the WTo and other multilateraland bilateral agreements. However, it would be necessary to implement a series of different measures,such as quality control of imported products, affirmation of domestic products and measures to ensurestable import of those products which are necessary to the BiH economy and BiH does not have them.

3.1.2 Promotion of foreign investments

In order to create new jobs and reduce the unemployment rate in BiH, it is necessary to enable a constantinflow of foreign direct investments, particularly of investments in production capacities and services. In

addition to lowering the unemployment rateand ensuring the distribution of goods andservices on the BiH market, foreigninvestments involve production of goods forexport sale, thereby influencing the increaseof the overall exports from Bosnia andHerzegovina and consequently, reduction ofthe trade deficit.

The data in the table indicate that Croatiaand Serbia had the highest level of foreigninvestments, while Albania had a constantgrowth of foreign investments. Bosnia andHerzegovina, ever since 2009, has had aconstant growth of foreign investmentsand activities of economic diplomacyshould be directed to maintain this trendand increase the overall volume of foreigninvestments.

The BiH Central Bank data on the inflow offoreign direct investments have beenrevised in line with the recommendationsof the International monetary Fund andorganisation for Economic Cooperationand Development (oECD). In line with thestatistical principles, the amounts for the

inflow of foreign direct investments have been revised for earlier years. In 2007, Bosnia and Herzegovina,thanks to the privatisation of large state-owned companies, had the inflow of foreign direct investmentsin the amount of € 1.3 billion, which is the largest amount in the last fifteen years. The largest foreigndirect investment in Bosnia and Herzegovina, which is the privatisation of Telekom of republika Srpska,

3EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

Table 3

Foreign direct investments in the countries of the regionin € million

Sources: For BiH: the Central Bank of BiH, FIPAFor Albania: the Bank of AlbaniaFor Montenegro: Montenegrin Investment Promotion Agency (MIPA)For Croatia: Investment and Competition Agency, State Institute for StatisticsFor Serbia: the Ministry of Finance of Serbia

Note: Data for 2005 and 2012 for some countries are not available

1 Draft Export Growth Strategy of BiH for the period 2012-2015, BiH Export Council, november 2011.http://komorabih.ba/wp-content/uploads/2013/05/6nacrt-strategije-rasta-izvoza-nov-11.pdf, download 20. 06.2013. p. 23

was also realised in 2007. Foreign direct investments in the amount of € 684 million in 2008, withoutexpected privatisations, can be considered to be satisfactory, particularly having in mind their favourablestructure (investments in the production sector and high percentage of greenfield investments). Theworld economic crises affected the FDI inflow. The increase of FDI over the two previous years isencouraging, but the FDI levels remain significantly lower compared to the period prior to the globalcrisis. regardless of the lower levels of FDI, the FDI in 2011 increased by 31.6% compared to 2010. Havingin mind the announced investment projects, this trend is expected to continue.2

Economic diplomacy of Bosnia and Herzegovina should brand Bosnia and Herzegovina, promote apositive business environment in our country for foreign direct investments, provide support inestablishing the business contacts, establish direct contacts with potential foreign investors and assistthem in finding partners in Bosnia and Herzegovina. In order to increase the inflow of foreigninvestments, it is, however, necessary to undertake a series of measures which do not fall under the scopeof economic diplomacy: infrastructure investments, good education system, simplified administrativeprocedures, creation of a friendly environment for foreign investors in Bosnia and Herzegovina,facilitation of visa issuance for potential and existing foreign investors, furthering the concept of tax-freezones, development of the concept of business zones and services and reduction of costs of energy andtelecommunication services which should be lower and not higher than the prices for households, etc.

3.2 What measures need to be taken in order for the concept of BiHeconomic diplomacy to be more efficient?

3.2.1. Organisation of economic diplomacy in the BiH Ministry of Foreign Affairs Economic diplomacy has been promoted as a priority of the BiH foreign policy since 2002. The ministryof Foreign Affairs sent to the Washington D.C. a group of around 20 diplomats, at the level of minister-advisor and advisor, who gained specialist knowledge in the field of economic diplomacy. Followingthat, a number of these diplomats were posted to the positions of economic advisors in BiH embassiesand two of the diplomats started working in the Economic Diplomacy Department within the ministryof Foreign Affairs of Bosnia and Herzegovina, which was established in 2003. In the BiH ministry of Foreign Affairs, there are currently two departments dealing with the economicdiplomacy. The Economic Diplomacy Department organisationally falls under the Sector for Bilateralrelations and it has 8 diplomats. In terms of monitoring, analysis and promotion of bilateral economicrelations between Bosnia and Herzegovina and other countries, it combines in its work regional andfunctional approach. The Department closely cooperates with the diplomatic missions and consularoffices and coordinates their activities. Bilateral dimension of the economic diplomacy is quintessentiallysimilar to the economic diplomacy of majority of countries like BiH, because that is realistically themaximum they can accomplish. most important activities of bilaterally-oriented economic diplomacyare focused on concrete markets and situations on these markets, establishment of bilateral economic

4 EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

2 Foreign Direct Investments (FDI) – Condition and Performance, FIPA 2013http://www.fipa.gov.ba/informacije/statistike/investicije/default.aspx?id=180&langTag=bs-BA, 27 June 2013.

cooperation and on B2B contacts, i.e. concrete projects, companies, products and services, as wellindividual investors. This approach requires the engagement of significantly smaller scope of resources,while preparations for certain business activities and events, being less complex, demand significantlyless time. In addition, control of the entire process is considerably cheaper. In practice, this implies working on the establishment of an alliance of BiH institutions, organisation ofbusiness forums, investment conferences and other economy-related events in the world, staff trainingand education, provision of high-quality instructions and information to diplomatic and consular officesin the area of economic diplomacy and guidelines for their work in the host countries, as well as resolvingconcrete problems in practice. Department for multilateral Economic Cooperation and reconstruction has 7 diplomats and it is in chargeof coordination of activities with multilateral financial organisations, economic forums, internationalorganisations and specialised agencies. This Department mobilises foreign donors and coordinatesinternational assistance in Bosnia and Herzegovina. In order for the concept of economic diplomacy to better function, it would be beneficial for thesedepartments to merge into one Economic Diplomacy Sector, which would be managed by the Assistantminister for Economic Diplomacy. Thereby, economic diplomacy would also, in terms of its organisation,be supported as a priority of the BiH foreign policy. There might be a dilemma that, due to the existenceof the BiH Export Promotion Agency and FIPA, there would be an overlap of competences. However, bycarefully defining the competences of the Department for Export Promotion and Department for ForeignInvestment Promotion, it will not be the case, because the main task of these departments is tocoordinate the work in these areas between BiH institutions, primarily the BiH Export Promotion Agencyand FIPA and diplomatic missions and consular offices. In mid-2012, the BiH ministry of Foreign Affairs made changes in staff appointments, followed up byintensive efforts to make the economic diplomacy a real and not only a declarative priority of the foreignpolicy of Bosnia and Herzegovina. Departing from earlier reactive approach, priority is given to proactiveapproach to work. Communication is significantly enhanced though the efficient use of information-technology, while the concept of economic diplomacy is also designed at a theoretical level. Under thenew circumstances, BiH diplomatic missions and consular offices receive adequate instructions andsupport from the Head Quarters (BiH mFA), in line with the new concept and the manner of itsimplementation. Based on the strong decision to give real contribution to the establishment of anefficient concept of economic diplomacy in Bosnia and Herzegovina and with a full political support,the concept of economic diplomacy is theoretically designed and implemented in practice, in spite ofaggravating circumstances. This concept is not a novelty compared to what is done in the region and theworld, but it is made in a new way and adjusted to the conditions in Bosnia and Herzegovina. TheDepartment changed the way of work and, instead of a reactive approach, starting applying a proactiveapproach, implementing a series of activities which transformed the economic diplomacy from adeclarative to the real priority of the BiH foreign policy. A shift was made towards a systematic approachin this area. Prior to this, economic diplomacy was reduced to individual success of BiH diplomats whohad enough predisposition, desire, initiative and strength to implement noteworthy activities in this

5EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

area. Such an example would be the engagement of the ambassador Ferhat Šeta in libya, which, fromthe point of view of economic diplomacy, can be evaluated as very successful. In order for the concept of economic diplomacy to truly come to life, it is necessary to pay attention topersonnel issues and take into account the opinion of the Head of Department when selecting staff towork in the Department. Also, it is necessary to pay much more attention to improving the technicalequipment in the Department. In the forthcoming stages, it will be necessary to establish better links withthe business sector, whereby the economic diplomacy will be more business oriented.

3.2.2 Organisation of BiH Economic Diplomacy AbroadThe concept of economic diplomacy abroad is primarily based on the work of diplomatic missions andconsular offices of Bosnia and Herzegovina supported through the work of honorary consuls andbusiness clubs or business councils, as well as the representative offices of the BiH Foreign Trade Chamberwhich need to be established. Diplomatic missions and consular offices have, without any doubt, the most important role in the conceptof economic diplomacy. From the point of view of economic diplomacy, it is necessary to appointeconomic advisors in the most important embassies, who will exclusively deal with the economicdiplomacy. They should have good insight into the economic situation in the host country and wellestablished contacts. In the focus of their interest should be the following: information about theeconomic sectors of interest for BiH export, contacts with potential investors, legislation pertaining to thebusiness operations in the host country, possible trade barriers, etc. Diplomatic missions and consularoffices should be able to provide practical advice concerning the manner of business operations ofdomestic companies in the host country. In addition, they should be able to give proposals as to whichproducts and in which manner can find buyers at the market of the host country. reporting on economic sectors of the host country, which are attractive to exporters from BiH, shouldbe focused on the following: description of the market for a specific economic sector, production anddemand for products within that sector, information about the policy of the host country in that sector,assessment of opportunities for BiH businesses in that sector, conditions and manner of payment, dataand assessments about the competition in that sector, specific or aimed fairs and tenders and projectswhich are to be implemented in that specific sector. majority of BiH diplomatic and consular offices have two to three persons with diplomatic status.Therefore, it is difficult under such circumstances to organise specialists who would, as diplomats, bededicated only to the issues concerning the economic diplomacy. In any case, it is necessary in a decisionon appointment to determine which person in a diplomatic mission or consular office is in charge of thetasks related to the economic diplomacy, in order to achieve the quality of work through accountabilityand performance appraisal. In addition, it is very important that diplomatic missions and consular officeshave an adequate budget for economic diplomacy tasks, since the economic diplomacy withoutbudgetary support remains a “paper dragon”. An assessment of opportunities for economic cooperation with a country should not be crucial, but itshould be one of the most important factors when deciding on opening or closing of a diplomatic

mission or consular office of asending country in a hostcountry. Spokesperson of theministry of Foreign Affairs of thePhilippines, raul Hernandez, onthe occasion of closing of 10Philippine embassies said thatthe decision on closing of theembassies was made based onthe three pillars of the nationalforeign policy: national security,promotion of economicdiplomacy and protection ofrights and prosperity of theFilipinos living abroad.Hernandez said that, in additionto the costs of the embassy andstaff, main factors affecting the

6 EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

decision to close a diplomatic mission are the scope of trade with a host country, investments ... Filipinoswho live there.3

on 08 April 2011, the rnW broke the news that the netherlands would close 9 embassies, primarily ledby the redesign of the priorities of its own foreign policy. The then Dutch minister of Foreign Affairs, Urirosenthal said that economic interests of the netherlands had the priority over the provision of assistanceto developing countries. Accordingly, the Dutch embassies were closed in four African countries (BurkinaFaso, Cameroon, Eritrea and zambia) and in five countries of latin America (Bolivia, Ecuador, guatemala,nicaragua and Uruguay). Simultaneously, the netherlands opened two new diplomatic missions inPanama and Chinese city of Chengdu, while the embassy in Tanzania was transformed into an economicrepresentative office.4

Particular support to business-related lobbying and networking can be provided by honorary consuls.The Council of ministers of Bosnia and Herzegovina has so far appointed 17 honorary consuls in 13countries, while the appointment of additional 46 honorary consuls is in process. In 2013, the Presidencyof Bosnia and Herzegovina took over the task of appointment of honorary consuls. In order to achieveresults in their work, honorary consuls should complete training in duration of at least 7 days in the BiHministry of Foreign Affairs, particularly in the Department for Economic Diplomacy. It is also necessaryto develop a reporting system for them to report on their activities, particularly in the field of economy.The existing practice is that honorary consuls report to the BiH Foreign ministry once a year.reappointment of honorary consuls should depend on the quality of work and reporting. In addition to the partnership within the strategic alliance of BiH institutions, it is necessary to buildanother significant partnership, which is a partnership with the BiH diaspora in the world. nobody knowsa country better than the people who live in it and make their living and struggle for the advancementof their families. Diplomats come and go, while diaspora share their destiny with the citizens of the hostcountry. In principle, experiences with the BiH diaspora are very positive, but it is necessary to maintainthe existing and establish new relations with our diaspora. BiH diaspora, by its structure, isheterogeneous. There are BiH citizens abroad who made great success in business, science and art. Theyearned respect in the host country solely on the basis of their work and conduct and there are numerousBiH citizens abroad who were awarded prestigious awards. Therefore, it is necessary to pay particularattention to the development of bilateral relations with the countries where there is a large BiH diaspora,primarily to protect the interests of BiH citizens in those countries, to improve cultural relations, but alsoto include diaspora in bilateral economic relations. In that sense, a very good approach would be toensure support for the concept of economic diplomacy abroad through the network of business clubsand business councils. Business clubs should be a place of gathering of business people, establishmentof business to business contacts (B2B), fast organisation of business meetings and a place where businesspeople can meet each other and exchange information. of particular importance is to maintain contactsbetween businessmen from Bosnia and Herzegovina who live and work in the host country andbusinessmen from Bosnia and Herzegovina who intend to start a business in the host country.

3.2.3 Strategic alliance of BiH institutions

Department for Economic Diplomacy initiated theestablishment of a strategic alliance of BiH institutionswhich acts as an informal group composed of the BiHministry of Foreign Affairs, BiH ministry of Foreign Tradeand Economic relations, Foreign Investment PromotionAgency and BiH Foreign Trade Chamber. The main reasonbehind the establishment of the strategic alliance of BiHinstitutions is to create a competitive synergy of theinstitutions that are members of the strategic alliance. Inthis way, communication in the field of economicdiplomacy was improved. All other state and entityinstitutions and chambers which want to do so can assistin improving the export of BiH products to other countriesand promoting foreign investments in BiH and they arewelcome to join the strategic alliance of BiH institutions.

7EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

3 Tina g. Santos, 10 PH embassies, consulates to be closed, 25 January 2012. http://globalnation.inquirer.net/23935/10-ph-embassies-consulates-to-be-closed-palau-appeals, downloaded 20 June 2013.

4 John Tyler, Netherlands to close nine embassies, radio netherlands Worldwide, 8 April 2011,http://www.rnw.nl/english/article/netherlands-close-nine-embassies, downloaded 24 June 2013.

3.2.4 Environment in which economic diplomacy operates The concept of economic diplomacy cannot remain at the level of ideas. It operates in a real environmentwhere there are real processes going on and whose subjects are real people. For that reason, activitieson the development of a strong concept of economic diplomacy have to be implemented continuallyand related techniques must be developed and tailored in a manner suitable to a particular place andtime. The environment in which the economic diplomacy of Bosnia and Herzegovina currently operatesis very complex. EU and nATo integration has significantly stagnated, our country is not yet a memberof the WTo and as of 01 July 2013, Croatia, which is a very important BiH trade partner will leave CEFTAand become a member of the EU. Export of BiH products is harder due to a strong currency, which is, atthe same time, important for attracting foreign investments. There is an obvious lack of adequatelegislation in BiH, particularly of those regulations governing the area of certification of domesticproducts which are to be exported. In addition, budgets are ever tighter, while the need to financeeconomic diplomacy activities is increasing because good marketing is costly. In addition, it is necessaryto have in mind conditions on foreign markets: fierce competition, overcrowded markets with goods ofdifferent quality, very cheap products, as well as the economic crisis in today’s globalised world. Still,even under such conditions, the BiH economic diplomacy is implementing its activities and investingfurther efforts to ensure BiH businesses find their place on the world market. Thanks to the activities under the realm of economic diplomacy, Bosnia and Herzegovina is today amember of CEFTA and it has a Free Trade Agreement with Turkey, which, in addition to 4 million citizensof our country, increases the market to around 100 million consumers. In addition, it is also planned tojoint EFTA, which would further increase the number of consumers. Economic diplomacy also has some wider implications, because good economic cooperation acts as afactor of stability in the region. A logical path towards renewal of trust in the region is implementationof large economic projects of regional significance.

3.2.5 Strategic markets for BiH

markets of strategic importance for BiH and thereby for economic diplomacy are the neighbouringcountries, other countries of the Western Balkans, EU market, mediterranean countries, middle Easterncountries and large markets in expansion, such as India and China. In the current situation, so called thirdmarkets are the most promising markets because BiH has had a positive economic memory with themand it has already realised significant business projects there. Having in mind the global recession, thesemarkets are the ones with the most dynamic development as they are still not developed or crowded andobjectively they offer wide room for business activities. The fact is that the competition is getting fiercerin these markets, wherefore the time is one of the key factors and requires that the activities in thesemarkets start as soon as possible.

3.2.6 Local communities in the concept of economic diplomacy

local communities, from municipal to cantonal or regional level, are insufficiently used as a potential toattract foreign investors in Bosnia and Herzegovina, although they could be the best acceptors of foreigninvestments in our country. local communities which have well designed development projects in linewith the global standards are very attractive to foreign investors and BiH economic diplomacy should infuture rely on this potential much more. on the other side, authorities in a local community can resolvemajority of issues that foreign investors face. e strane, vlasti u lokalnoj zajednici mogu riješiti većinupitanja s kojima se strani investitori susreću.

3.4 Business Forum – a positive example of efficient concept of BiHeconomic diplomacyEfficient organisation of economic diplomacy involves a systematic approach to precisely defined activities.organisation of a business forum abroad represents a proactive approach to economic diplomacy, considering thatBiH diplomacy takes over the initiative by analysing and precisely determining the countries that have potential forfurther development of economic cooperation. Business forums are based on the idea that improvement of exportsand increasing of inflow of foreign investments can be achieved by establishing direct contacts between businessmen.This is the way to create a friendly environment for businessmen from both countries. In the first half of 2013, the BiH ministry of Foreign Affairs, in cooperation with the BiH Foreign Trade Chamberand FIPA, organised 6 business forums in the United Arab Emirate, Qatar, India, Austria, russia and the UK.

8 EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

Having in mind the increasing oil prices,potential of investment in the countries thatsell oil has been recognised as high yielding.Considering that BiH has good politicalrelations with the gulf countries, it is logicalthat the UEA and Qatar were the firstcountries to organise business forums in2013. The business forums in India andrussia were next, because these are thecountries with large markets. The fact thatthe number of business forums organisedabroad in the first half of 2013 is larger thanthe number of business forums organisedover the three previous years speaks howmuch the BiH economic diplomacyactivities have been intensified. The BiH Foreign Trade Chamber, in cooperation with the BiH ministry of Foreign Affairs, announces a callfor applications, which practically means that any BiH company, member of the BiH Foreign TradeChamber, can be a member of the state delegation, which is a sort of “innovation” compared to earlierpractice. Companies from BiH attend the forums on the basis of their own interest and costs of traveland accommodation of their representatives are borne by the companies themselves. Diplomatic missions and consular offices, together with the host, i.e. institutions of the host countryattempt to bring esteemed partners from the host country, which means that the BiH companies are inthe position to establish high-quality contacts. organisation of a business forum is linked to the visit ata high or highest level, whereby linking the politics and economy. Every visit within which a businessforum is organised also includes the signing of an agreement with a host country in order to removepotential barriers to economic cooperation and foreign investments. A business forum starts with opening remarks by high-level officials, usually the BiH minister of ForeignAffairs, followed by presentations of the existing trade cooperation and possibilities for investments inBosnia and Herzegovina. An important element of the business forum is a time for B2B contacts and around table. The forum is closed by a reception where businessmen can exchange information andfurther already established contacts in an informal atmosphere. Following the business forum, diplomatic missions and consular offices of Bosnia and Herzegovinaprovide further support to the BiH companies for their engagement at the market of the host country.

4. Conclusion Bosnia and Herzegovina has faced different challenges over the years. one of these challenges is how toachieve successful economic development. Bosnia and Herzegovina is a country with great potential.An expression characterising the country boasting about its unused potentials is that it is a “... rich countryof poor people...”. good leadership and good organisation is required to achieve that rich people live ina rich country, or at least people who are not on the verge of poverty. This therefore means that potentialsshould be transformed into economically attractive and environmentally acceptable projects that can beoffered to domestic and foreign investors. However, development of an efficient concept of economic diplomacy implies much more than theactivities related to the development of such projects and it includes a series of other activities.Development of such a concept requires a multidisciplinary approach both in terms of the areas coveredand institutions involved in this concept. The ultimate objective of the economic diplomacy must beeconomic development of the country. Therefore, it is an imperative that every government that wishesgood for the country it governs has such concept. Despite numerous difficulties accompanying the concept of economic diplomacy in Bosnia andHerzegovina, it is taking a clear shape and has a very real chance to develop into an effective leveragethat will enhance the growth of the domestic economy. Empty political catchphrases and apathy will notresolve the economic problems and a problem of mass unemployment in BiH. only consistent hard workon a daily basis (nulla dies sine linea) on economic growth and development of economy of our countrywill move things forward, while it is necessary to use offered opportunities, which always exist. goodand efficient concept of economic diplomacy can certainly contribute to move from poverty toprosperity, but only if it is supported by a proactive policy which will engage institutions at all levels inthis country, as well as the civil society and non-governmental sector.

9EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA

Reading:

Adriano m., Hrvatska gospodarska diplomacija priprema ofenzivu na nova tržišta, “Hrvatski vjesnik”,br. 3438,06.11.2006.

Aso T., Global Management and the Mission for Japanese Diplomacy, svibanj 2007.

Bayne n. and Woolcock S. The new economic diplomacy: decision-making and nagotiation ininternational economic relations, london: Ashgate Publishing limited, 2003.

Coolsaet, r. Historical Patterns in Economic Diplomacy, From Protection to Globalisa tion-The case ofBelgium, Chichago, 2001, http://isanet.ccit.arizona.edu/archive/coolsaet.html, downloaded 2013.

Domazet A., Jovic m., rakita B., Sinanagic, m. Međunarodni marketing, Ekonomski fakultet,Univerzitet u Sarajevu, Sarajevo, II. Izdanje, 2002.

End H. Erneuerung der Diplomatie, neuwied und Berlin: luchterhand, 1969.

grønnegaard, J. C, Petersen, n.: Managing Foreign Affairs: A Comparative Perspective, prosinac 2005.

Harrop W., The infrastructure of American Diplomacy, American Diplomacy Publishers, 2000.

Kissinger H. Diplomatija, verzalpress, Beograd 1999.

Kostecki, m., naray, o. Commercial Diplomacy and International Business, netherlands Institute ofInternational relations “Clingendael”, travanj 2007.

medeiros, E. S., Fravel, m. T. The changing face of Chinese diplomacy, “Asian Wall Street Journal”,25.11.2003.

mellisen, J. Innovation in Diplomatic Practice, macmillan Press, london 1999.

menzel U. und varga K. Theorie und Geschichte der Lehre von den Internationalen Beziehungen,Hamburg: Schriften des Deutschen Übersee-Instituts, 1999.

mesić, S., Hrvatskagospodarska diplomacija, izvoz i ekonomski rast, predavanje predsjednikaHrvatske u mvP-u, srpanj 2003.

nicolson H. Diplomacy, london new york Toronto: oxford University Press, 1963.

ogütcü m. Balancing commercial interests with geopolitical goals, “Turkish daily news”, 12.12.2001.

Pašić m. Ekonomska diplomatija - izazov na početku 21. stoljeća, Pravni savjetnik, decembar 2002.

Pašić m. Diplomatija, Šahinpašić, Sarajevo, 2008.

Prvulović v. Ekonomska diplomatija, megatrend, Beograd, 2002.

Sadžak dr. sc. m., Europski menadžment u kontekstu europskog kulturnog heterogeniteta, “Hrvatskamisao”, matica hrvatska, 13/99, zagreb-Sarajevo, 1999.

Sadžak dr. sc. m. Europsko poduzeće, Synopsis, Sarajevo, 2000.

Sadžak dr. sc. m. Europski menadžment - Europsko poduzeće u globalnoj ekonomiji, Synopsis,zagreb-Sarajevo, 2006.

Sadžak dr. sc. m., mujanović mr. sc. E., Tutnjević mr.sc. m., Ekonomska diplomacija – menadžerskipristup, Synopsis, zagreb-Sarajevo, 2008

Sadžak dr. sc. m. Ekonomska diplomacija – kroskulturalni pristup, Synopsis, Sarajevo, 2011.

Šunje A. Top- menadžer, Vizionar i Strateg, Tirada d.o.o., Sarajevo, 2002.

10 EConomIC DIPlomACy – HIgH PrIorITy CHAllEngE For BoSnIA AnD HErzEgovInA