Banja Luka, 17 December 2014   

Dear President of the Republic of Srpska  

Dear Vice Presidents of the Republic of Srpska, 

Dear Speaker of the RS National Assembly,

Dear Chairman of BiH Presidency and representatives of Republic of Srpska in joint institutions of BiH,

Distinguished members of the National Assembly,

Honourable religious dignitories,

Your Excellencies Ambassadors, 

Distingushed guests,

Dear people of the Republic of Srpska,

Ladies and gentlemen,

It is great honour, privilege and huge responsibility to be in the capacity of a Prime Minister Designate for the second time before the National Assembly of the Republic of Srpska and request the support of its members for the formation of the Government and its work in the next four-year mandate.

I am doing it this time with special sense of reponsibility bearing in mind that in the forthcoming period the Government would have to respond to numerous challenges, deal with many issues and simultaneously work on strengthening of institutional capacities of Republic of Srpska and its political and economic position. 

Our goal and our objective is strong, stable, prosperous and democratic Republic of Srpska with its competences preserved as granted by the Dayton Peace Accords and institutional capacities capable to respond to the needs of the citizens. 

Speaking of formation of the previous Government, I said that we were going to combine system with short-term measures. In agriculture we did it by creating conditions for boosting agricultural development through purchase of domestic products and the processing sector and in real economy by keeping the existing and opening new employment opportunities. 

However, very few noticed that we, the only in the region, reduced unemployment and raised employment rate. I know this is not enough but we know how important every step is, no matter how small it may seem. Very few mentioned that we, unlike anyone in our immmediate environment, managed that deductions in agriculture remain at the level of current obligations and also settled all outstanding debts from the previous years. 

The new Government shall continue to provide this type of support but it shall be more of a systematic and less of a intervention character. 

Although, today's address is not meant to provide the report about the past but to present the program for the future period, I regard it useful to remind ourselves of everything that the Government I led, achieved in the past 21 months. 

In spite of economc crisis, we managed to start new and implement ongoing projects such as construction of traffic infrastructure, energy facilities, students dorms, kindergardens, schools and faculties. We kept providing information technology equipment for schools, uniforms, vehicles and equipment for the police and other sectors and the new Government would continue creating conditions for improvement of material conditions at all levels.    

We provided for higher salaries and pensions and never jeopardized the functioning of the budget, nor have we entered the group of of countries with high or risky level of debt. The increase of pensions which as of January 2015 shall reach 10.5% was done in several steps in order not to jeopardize the whole system and has been secured by this Government. Further improvement of material status of pensioners remains the goal of the new Government as well. 

We increased the allowances for invalids and secured higher employment of young people coming from families of fallen soldiers, invalids of war and demobilised soldiers – more than 550 of them have been employed in the past year and a half and this trend would perisist in the next period. In spite of the crisis we managed to finalize the housing program for the families of fallen soldiers and invalids of war. 

We maintained the lowest costs of studies in the region including the costs of tuition fees, students accomodation and food and such determination would continue in the next mandate. 

At the beginning of the year we secured unburdening of the economy through introduction of non-taxable income, unburdening of small entrepreneurs and additional measures to that end are planned for 2015 and this concept shall be presented in more details in the Economic Policy and in this presentation. 

The Government intervened in the economy when it came to keeping employments or re-hiring as in the case of Alumina Factory in Birac, RAOP, Technical Repairs Company in Bratunac and Tobacco Factory Banja Luka. 

We established the most modern and the fastest business registration in the region and the issue of establishing new companies in case of outstanding obligations of the former company. 

Even though we have managed to solve many open administrative cases, citizens and the business community keep referring to the fact that their requests and business initiatives are not met with adequate institutional efficiency and that shall remain the objective of this Government. 

We were the first Government in the region to provide concrete assistance to the population affected by floods and to the business sector following disatrous floods in May that took away our annual budget. Over 80 million BAM have been provided for familes affected by floods through payment cards within the Srpska Recovery program, and the model of assistance  which included the Government, the Solidarity Fund, companies, banks and the people affected by floods and is said to be  one of the best. We were also the first to pass a set of measures to assist the economy. 

Before I present the work program of the new Government of the Republic of Srpska and its priorities, allow me to refer to certain macroeconomic parameters:

In 2013, Republic of Srpska registered a real GDP growth of  1.9%, and in 2014 it will be 1% in spite of disastrous floods during the year. In 2013 the industrial production output in 2013 was 4.1%, and the assessment is that it shall be 2% in 2014. Foreign trade exchange has a constant tendency of growth. In 2013 the export has risen by 9,7%, and for the first nine months in 2014 it was 4.9%, while the import rose by 1.6 % in 2013 and by 9% in the first nine months of 2014. 

Unemployment remains the major issue although the unemployment rate is declining. Unemployment rate in 2014 is 25.7% what is by 1.3 percent less compared to 2013, and according to IMF assessment the unemployment rate would continue to decrease. The number of unemployed in October 2014 is by 4.1 % lower than in October 2013 and by 6% lower than in October 2012. 

The emplyment rate in the RS has gone up from 34.6% in 2013 to 34.9 % in 2014. 

Average salary in the RS in the period January-September 2014 is by 2 % higher compared to average net salary paid in 2013. Salary incraese had been registered in all fields except in construction industry, finance services sector and insurance. 

Clearly, these indicators present the basis for the work of the new Government. 

Ladies and gentlemen, allow me to present to you the key areas of reform for the Government of the Republic of Srpska in the forthcoming period.  Those are: 

1) POLICY FOR ECONOMIC GROWTH AND ECONOMY RECOVERY

Our goal is to build more efficient and more effective public administration through implementation of planned reforms and policies that would offer better, faster and less expensive services to the citizens. At the same time with additional fiscal discipline and more effective collection of all public revenues and enhanced control of public funds spending, we intend to save public funds and thus provide additional sources of  support to economy. Additional support to the economy and better employment in the real sector shall be achieved through unburdening of the economy, removal of parafiscal charges and granting benefits for the newly employed workers. Reforms in the filed of labor market shall be aimed at greater flexibility of the market and higher work productivity in all areas. 

Fight against organized crime and corruption shall be the priority in the work of the Government. As for the Euroepan Integration, our position is very clear with regard to implementation of the European Human Rights Court Ruling in Sejdic and Finci case, establishment of the coordination mechanism and other aspects of BiH Euroepan path. We shall facilitate further improvement of higher education and also secondary level education what should lead to qualifications which are adjusted to the needs of the labour market, more certainty in employment and eventually to lower unemployment. The Government shall treat the young people, the pensioners and the veteran groups with particular care and respect. 

Realization of all planned policies shuold secure additional economic, fiscal and financial stability of the Republic of Srpska and consequently in the long term improve status of all social groups in a society. Those reform policies anticipate certain fiscal and structural adjustments which would be very restrictive and some unpopular but they have no alternative and must be implemented if we want faster growth, higher employment and better standard of living. 

Ladies and Gentlemen, distinguished members of the National Assembly,

The most important goal of the new Government in the next four-year mandate shall be building of a stable economy with positive economic growth  which would ensure long term improvement of standard of living and employment. The success of this Government shall be measured by the rate of economic growth. 

Building of a stable economy shall not be possible without the public sector reform and without fiscal consolidation. 

1. POLICY FOR ECONOMIC GROWTH AND ECONOMY RECOVERY 

The economic growth policy is intended to support and unburden the economy, to create better conditions for business activities and undertake labor market reform that should lead to economic growth, higher employment and eventually result in better standard of living. Economic growth during the years of crisis were not sufficient to generate positive effect on all citizens and entire economy of Republic of Srpska. 

We are aware that implementation of economic recovery measures would be the most important and the most difficults task of the new Government. Without economic growth in the long run we shall not be able to consolidate public finances or carry out the reform of the public sector. 

Key measures for economic recovery and boosting of economic growth are to be realized through following policies:

1) Stimulative tax policy through unburdening of the economy and improvement of liquidity 

2) Public investments 

3) Reform of the labour market and improvement of economic and social status of workers 

4) Upgrading of the bankruptcy procedure

5) Agricultural policy

Stimulative tax policy through unburdening of the economy and improvement of liquidity  

In 2015, the Government would maintain stimulative tax policy and lowest tax rates in the domain of direct taxes on property and income of citizens and business entities. 

Unburdening of the economy shall be carried out through reduction of contributions  for newly employed workers for a certain period of time. We expect that this shall motivate companies to employ new workers along with fewer obligations toward the RS. 

In addition to that, the Government would in 2015 carry out the project of establishing the Register of all ''parafiscal'' charges which started in 2014 and which was suspended due to the floods. In the Register we shall list all charges which are regulated by laws and other regulations which represent the revenues of the entity budget, budgets of cities and municipalities, Funds and other public funds users. Once the Register is established, it shall not be possible to introduce additional charges without the Government's approval and at the same time we shall work on removal or reduction of certain types of parafiscal charges. 

With regard to taxation of immovable property in 2015, in cooperation with the RS Association of Cities and Municipalities, in view of inconsitent policies of local communities with regard to establishing of annual tax rates, we would consider the possibility of introducing a single tax rate on immovable property applicable to all local communities. Additionally, the Government would consider the possibility of more favorable taxation of immovable property which is used directly for production purposes and for further sale and define the method of establishing the initial value of immovable property while establishing the tax base. 

Since many business entities submitted their requests in 2014 for settlement of total tax debt by the end of the year in view of the posibility granted by the law to write off the calculated interest, we would amend the Law on special ways of tax debt settlement in order to allow business entities this possibility in the first six months of 2015. 

We shall enact the Law on deadlines for financial obligations which shall precisely set the deadlines for settlement of financial obligations in order to improve the liquidity of  economy. To that end, we would implement the Law on single system for multilateral compensations which implementation was missed in 2014 due to extensive preparation activities. 

The Government shall through the Managing Board for Indirect Taxation initiate chnages of the Law on VAT in order to extend the deadline for VAT payment in accordance with the request of the community. 

Public Investments 

Investment activities would be the main generator of the new economic growth. Energy sector would be one of key levers of economic development of the Republic of Srpska. The Government would therefore provide continuous support to ongoing energy projects. Construction of Stanari Thermo-Power Plant 3 is at the moment the biggest investment in the region. Ongoing projects on construction of hydro power plants such as hydro-power plants Mrsovo, Dabar, Ulog, Bocac 2 would continue. It is realistic to expect in 2015 that construction of 12 mini hydro-power plants would be over and to start 10 more of the same type. In the field of other renewable sources of energy, in the forthcoming period we would activate the first wind-park in the Republic of Srpska - Trusina Wind Park. 

In traffic infrastructure, besides the newly built Banja Luka – Gradiska highway, we intend to construct the Banja Luka – Doboj highway. Those are two main priorities within the project of construction of the network of highways in the Republic of Srpska which connect us with European corridors, the west and south-east of Europe. Our goal remains to have the bridge on the Sava river in Gradiska constructed, however that project depends on Croatia and availability of EU funds. In addition to that, we would work on construction of the sections of highway which are part of the Corridor Vc which is one of the most important infrastructural projects in the Southest Europe. Within the project of construction of the network of highways in the Republic of Srpska, the talks are ongoing with Chinese partners regarding construction of the Glamocani–Banja Luka–Mrkonjic Grad –Mliniste motorway which is relevant for continuation of Gradiska – Banja Luka highway to the south. 

Within key capital investments in the health sector we are continuing the project of construction and equipping of Banja Luka Clinical Center – University Hospital and facilitate funds for the project of construction of the Hospital in Doboj and East Sarajevo and reconstruction of hospitals in Zvornik, Prijedor and Trebinje. These projects would bring many new positive effects in terms of opening new employment opportunities, engagement of domestic labor, domestic construction companies and accompanying services and generating of budget revenues and of extra-budgetary funds. 

Reform of the labor market 

The Government would continue dialogue and cooperation with social partners and work on creation of better ambiance for business activities, improvement of  collective negotiations, excerise and protection of the rights of the employees through conventional and alternative methods of disputes settlement. The Government would fight for every post in the economy through various measures of support and more creative employment programs so that funds designated for this purpose have clear objective and measurable result. 

The Government would in cooperation with the Trade Unions and the Employers Associations work actively on the incraese of the price of labor and improvement of economic and social status of workers. 

We would reform and modernize legal frameowrk on labor relations: enact the new law on civil servants that would enable greater efficacy, accountability and flexibility of staff in public administration. 

We would introduce the institute of a gross salary in order to motivate workers to care for their gross salary and be interested in the payment of deductions what eventually would be the basis for their  pensions. 

In order to establish the real offer of labor market we would make sure that the records of those in the Employment Institute who are registered only for the purpose of health insurance are transferred to the Health Insurance Fund since they do not account for active job seekers.

Upgrading of bankruptcy procedure

We shall enact the new Law on bankruptcy procedure which would be more efficient in regulating the control and supervision of the work of bankruptcy managers in order to create more favorable business environment and more efficient implementation of bankruptcy procedure, more efficient reorganization of companies and more transparent settlement payment to creditors. We would also sharpen the sanctions for those who led the company to bankruptcy due to their irresponsible conduct or actions. 

Agricultural policy

Agricultural policy would be among the highest priorities of the Government primarily for the purpose of economic development and fastest use of available natural resources, generation of a new value and as the basis for development of industry but also of rural areas.  

Agricultural sector can be developed through facilitation of stable income, bigger production and productivity and market oriented agricultural production which relies on sustainable use of domestic natural resources and balanced rural development. 

We would continue providing system support to developemnt of agriculture and rural areas through reorganization and strenghetning of institutions of the agrarian system and regulatory reform. All stakeholders in the sector of agriculture must be connected into a single agrarian system which consists of public, business and civil sector. Agricultural households must be developed as production and busines units.  In terms of support to agricultural housholds, social policy shall be separated from development policy so that housholds which are commercial and market-oriented would enjoy stronger support while others would be supported through rural development policy and social policy. 

In 2015 in line with the future Plan of Agricultural and Rural Development of the RS in the 2015-2020 period, we would define the budget envelope for mid-term financial support to agrarian and rural development and through enactment of the Law on incentives which should establish the main directions of support. The incentives would focus on market oriented primary agricultural production and processing in order to secure positive effect and economic growth. 

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It is particularly important to imrove the work efficacy of the public sector and the problems are particularly evident in the judiciary and other institutions dealing with property and contractual economic disputes. There shall be no long term developement without raising the quality of education from primary school to doctorate studies. Many public companies lack efficiency. Public sector reform means estbslihing of more efficient and more effective public administration what leads to cost saving in public consmuption and consequently better allocation of public funds. 

Efficacy of public sector can be improved either by cutting the costs or by raising the quality and scope of public services and both are relevent for the success of fiscal consolidation in any country. Improvement of business environment depends on public sector reform since with no efficient administrative and judicial bodies and good education, there is no economic or social progress. 

Reform of the public sector shall include the following areas:

1) Reform of the Government and public administration,

2) Reform of local self-government,

3) Reform of public companies,

4) Reform of health sector,

5) Reform of finance sector,

6) Reform of judiciary and fight against crime and corruption

7) Education reform 

8) Pension and invalid insurance policy

9) Veterans policy.

Reform of the Government and public administration 

Our objective is to reform the Government and public administration and have better positioning of departments with their respective ares of responsibility that would be able to react faster and act in certain fields. Further objective is to carry out better allocation of the resources in the public sector, to suspend certain non-functioning agencies and administrative organizations and at the same time to form government departments that would be more directly connected with areas in their direct competence. The aim is to reduce the costs of public administration and to establish efficient and professional administration which serves the people and economy. 

We would therefore carry out analysis and classification of posts in the civil service structures, make standardized job desciption for each post and harmonize it accordingly, strengthen capacities for human resources management in all bodies, modernize the work, improve accountability and the work of administrative inspection. 

Reform of local self-government 

In 2015 we would commence the work on the new strategic document that would outline the future development of local self-government in the Republic of Srpska in the period of 2016-2020. The vision of development envisages the establishment of multi-type concept of local self-governance, exploring possibility for further functional decentralization, better mechanisms of cooperation among municipalities and strengthening of the role of local communities. We would carry out comprehensive analysis of the territorial organization of the Republic of Srpska, especially taking into consideration th results оfthe census of population in 2013 and initiatives for founding new units of local self-government. 

Reform of public companies is aimed at establihing profitable companies with accountable management and tangible resuts. Optimal reducing of the number of employees and equalization of salaries with those in public administration would create space for additional investments and more efficient and more profitable business operations. The aim is to have efficient and successful management of business operations of public companies which would then generate profit that could be used for RS economy development. 

Reform of the health sector 

Reform of the health sector should lead to better system of accountability in every health institution within which every founder and management of that institutions must bear full responsibilty for its functioning that should not jeopardize the quality of services. Speaking of primary health care, it is clear that Health Insurance Fund is only buying services from Health Centers whereas its founders and managers are units of local self-government which should assume full responsibility for non-rational employment. As for the hospitals, the respective Ministry shall have more active role in controlling the work of hospitals and shall approve the employment of staff which must commesurate to the needs of population who live on the territory to which that hospital gravitates while the hospital managers must become aware that their available funds must fit the level of the services they provide without transferring the burden to other institutions. 

In order to facilitate additional funds for financing of health care, the Government has agreed that a part of proceeds from excises on tobacco and alcohol as health hazardous proucts should be allocated for health insurance and would during 2015 insist on enacting such laws which fall under the competence of joint BiH institutions. We would also insist on greater inclusion of population in obligatory health insurance through connecting agricultural subsidies with payment of deductions for health insurance. 

We would make detailed analysis of financial obligations of health institutions, restructure their loans wherever possible and harmonize the number of medical staff with standards and norms in health care system, effects and results of work and real needs, adjust the size of non-medical staff, enhance control and management of costs in all health institutions and on all levels. 

After that we would begin with the reform of the network of primary health care facilities. The aim is to introduce the treasury system of work in health care system in in 2015 in order to enable better control of spending. Hospitals shall be introduced into the treasury system through the Ministry of Health and health centers shall be connected through local governments so that each level of government assumes full responsibility for fiscal sustainability of the system it manages. 

The Government policy in 2015 would also include the reform be Health Insurance Fund and restructuring of its obligations, finding ways for additional cost savings. 

Reform of the finance sector 

Within the reform of the finance sector we would consider unification of finance sector supervision  aiming to achieve more efficient control by one supervision body instead of current three over the entire finance sector and work on further improvement of regulations.  

We shall prepare new Law on Banks taking into consideration recommendations of the Basel Committee and international financial institutions and EU directives. We shall pay special attention to enactment of regulations on bank risk management, to strenghtening of control capacities of the RS Banking Agency especially in view of developing a special system of consolidated supervision. 

In order to deal with bad assets, we would work on drafting legal perspective for restructuring of problematic loans, and sale and transfer of loan debts on other legal persons.  

The Committee for coordination of finance sector supervision of the Republic of Srpska shall monitor the situation in the banking system and other segments of the finance sector, propose measures for maintaining its stability, strengthen supervision over the finance sector actors and early detection of risk on the financial market. 

We would work on enactment of changes to the Law on investment funds which should enable preconditions for transformation of closed investment funds and their affirmation in line with the international practice. 

We shall additionally develop the sector of insurance and prepare regulations for gradual liberalisation of prices in the area of compulsory traffic insurance and change the Law on insurance companies, prescribe measure for more effective supervision of free formation of the premium and to adjust minimal level of capital requirements with EU Directives. We would develop awareness on advantages of insurance of property against natural disasters and analyse possibilities for raising demand for this type of insurance in the Republic of Srpska.  

In 2015 we would define the Development Strategy of the Investment-Development Bank of Republic of Srpska and the Development Strategy of the RS Guarantee Fund in order to have better positioning of these institutions as the main levers of economic development of Republic of Srpska. 

Due to dissatisfaction with the work of BiH judicial institutions and its initial establishment and with the work of High Judicial and Prosecutorial Council and bearing in mind that RS judicial system is a circled system which structure and competences are regulated by the RS Constitution  and laws, Republic of Srpska participates in the Structured Dialogue on Justice on the basis of the agreement recahed between the highest authorities of the Republic of Srpska and the EU.  

The Government of Republic of Srpska would within the Structured Dialogue on Justice insist on re-definition of the role and position of the BiH Court and Prosector’s Office and also of High Judicial and Prosecutorial Council taking into account the constitutional order and competences of the Republic of Srpska. To that end, the Republic of Srpska would insist on reorganization of selection of prosecutors bearing in mind experiences of the countries in the region. 

The Republic of Srpska has stated clear commitment for the fight against organized crime and corruption through formation of Special Prosecutor’s Office, the Service for combating organized crime and corruption, Agency for Seized Property Management and adoption of Anti-Corruption Strategy and Action Plan. The Republic of Srpska has thus acted in accordance with Chapters 23 and 24 of the Stabilization and Association Agreement which envisage strengthening of institutions which deal with fight against corruption and also improved legislative and institutional framework for combating crime and corruption.  

In order to enforce the rule of law, fight against crime and corruption would have primary role in the forthcoming period and to that end the Government would strengthen preconditions for unobstructed work of all judicial institutions and their work in full capacity. We would also undertake activities on prevention of such events and raise awareness of general public on the damaging effects of such things. 

Education reform 

Education is crucial for development of every society and would therefore have prominent place in the work of the Government of the Republic of Srpska. Education should be treated as a whole since only comprehensive reform of the education system can bring successful results. Such a reform requires not only the engagement of the Government but also involvement of broader community. 

With regard to preschool education, the Government would continue to faciliatte funds for inclusion of as many children as possible in the program of preschool education and make it an integral part of the education system. 

Primary and secondary  education  are the most important period in children’s development and represent the basis for successful preparation for the work and further education. Education process must respond to the requirements of the current times. Because of that reason the education objectives must be modernized, education standards defined and education applicable in practice. In order to modernize the teaching process, the Government would continue the project of introducing information equipment in schools. 

We would work on continuous analysis of school curriculum in elementry and secondary education in order to adjust them to the needs of modern society and future workers or students in terms of adequate areas of studies. 

Successful higher education requires a number of interventions beside the reform of elementary and secondary education. Higher education must place modern objectives before students in accordance with modern trends in a society, needs of the market and the society which also anticipates redefinition of the role of professors but also of studies which should prepare students for work and at the same time encourage them for continuous studying and improvement.  

In order to achieve these objectives, we would enact the new Law on higher education which should approximate higher education to the European standards and restore it on the track of checked and traditional values. The law would upgrade the autonomy of higher education institutions and increase social responsibilty of all stakeholders in higher education, then clarify and improve solutions which are related to ECTS points, management in higher education and the status of academic staff, licencing of studies, performance of doctorate studies and awarding academic titles. We would encourage improvement of the quality of higher education such as development of criteria for ranking of higher education institutions in Republic of Srpska. 

In the area of secondary and higher education it is necessary to create an enrollment policy which is agreed upon with social partners and business community and in accordance with the needs of the labor market and in order to reduce unemployment.  

Pension and invalid insurance policy 

The situation with regard to pension and invalid insurance policy has improved after enactment of the new Law but still is not satisfactory. There are positive trends in the structure of pensions since the percentage of beneficiaries using age pension is increasing and the percentage of those using invalid pension is decreasing while the number of rights granted in a year is going down especially the number of invalid pensions whereas the age of users of age pension on the day of fulfilling the right is going up. Material status of pensioners is improving but that is not sufficient. Although the reforms which have been implemented so far generated certain positive effects in the sense that they slowed down the number of pensioners, the pension system is still vulnerable since the most important indicator of the system, i.e. the ratio of the number od the insured and the number of beneficiaries is not on satisfactory level what is primarily the consequence of demographic changes and 'shadow' economy. The Government intends to pay particular attention to this issue. Positive effect is expected as the result of unburdening of the economy that should alleviate business operations to companies and enable more regular payment of obligations. Pensions would be dibursed regularly and the Government would strive to increase pensions. 

Veterans policy 

The Government would continue to provide regular disbursement of allowances for veteran groups and their families including annual and monthly allowance and if available funds permit, attempt to raise those allowances. 

Within the program of facilitation of housing for familes of fallen soldiers and invalids of war which at the moment includes provision of housing for 5,606 families, the Government would by the end of the year deliver remaining housing grants and in the first six months of 2015 award housing units. The Government would, once the finances allow, continue activities on provision of housing for the remaining familes who have not been included in this Program and are entiled to it.  

The Government would continue providing support to employment and self-employment of children of fallen soldiers, invalids of war and demobilized soldiers and those activities should be intensified at the level of local communities.  The project of spa rehabilitation of most severe invalids of war and families of fallen soldiers would continue and the funds shall be provided for health care of veteran groups. 

All in all, veteran groups and civilian victims of war would enjoy full support of the Government with regard to benefits granted by the law, housing programs and other activities. 

The Government would work on employment programs together with associations of veteran groups.   

Dear Members of the National Assembly, Implementation of fiscal consolidation is a big challenge and one of key preconditions for development of stable and sustainable economy. In order to avoid financial crisis and secure the level of budget deficit within the EU norms, the budget needs to be balanced.   

Since the beginning of the global economic crisis, all countries in the world have undertaken various types of fiscal consolidation, the majority opted for a combination of higher taxes and lower revenues accompanied with implementation of structural reforms. The Study which included 13 EU member states showed that 11 out of 13 of those countries froze employment in the public sector striving to reduce the number of the employed. Salaries  were decreased in 6 and frozen in 11 countries. Almost all countries undertook the public sector reform. 11 EU members states raised the VAT and excises, 9 raised income tax and in 5 countries the company profit tax was increased. Models of fiscal consolidation are quite similar in many countries however the results vary considerably and much depend on implementation of reforms in the public sector. 

In the previous period, Republic of Srpska has taken measures of fiscal consolidation through combination of structural reforms and spending cuts. However, we have not used one of most applicable mеasures, the increase of VAT. Therefore, the measures of fiscal consolidation would to a largest extent include reduction of public expenditures and to some extent increase of public revenues. 

Improvement of fiscal discipline accompanied with reduction of public spending would lead to better control of public funds spending that would generate additional savings and thus better allocation of resources which could be redirected to investments or as support to business activities.  

Improvement of fiscal discipline and lower public spending shall be realized through  following measures: 

1) Enhanced control of public funds spending 

2) New borrowing policy

3) Reducing the number of staff in public administration 

4) Improved collection of all public revenues

5) Program of combating underground economy.

Enhanced control of public funds spending 

As the result of adoption of the Law on fiscal accountability and the new Law on financial management and control in public sector, the control of public funds spending would improve. Consequently, it would be impossible for budget users to spend beyond the level of their budgets whereas higher transparency and accountability in spending of public funds would further improve fiscal discipline of the entire budget system of the Republic of Srpska. 

In addition to that, introduction of program budgeting in the public finances reform in the next mid-term period shall create space for additional savings.  

Training of budget users would continue with technical support of the EU project team for the purpose of stronger connecting of budget programs and strategic documents of ministries so that public funds are used for realization of goals with tangible results and in order to have clearer responsibility for fulfillment or non-fulfillment of set objectives and responsibility for public funds spending.

New borrowing policy

New borrowing policy shall clearly define areas of priority which could be financed from loans of  the Republic of Srpska. Key criteria for setting the priorities shall be the effect of the investment in question on the economic growth and new employment in Republic of Srpska. For that reason it might happen that we give up certain projects if the assesment is that they would not produce the anticipated result or are not profitable enough. 

Reducing the number of staff in public administration

The number of staff in public sector including local governments is too high in relation to the size of the Republic of Srpska and financial capacities of its economy which should pay that administration. 

In order to establish less costly, more effective and more productive public administration, we would request that all public institutions carry out the rationalization of the number of staff. In that way we would reduce the costs for salaries, decrease potential debts and open space for awarding the best workers and motivate staff for more productive work and consequently liberate funds that could be used for additional investments and as support to the economy. The Government would in the shortest time possible define measures for rationalisation of public administration including suspension of new employment, limitation of funds for salaries, reduction of the number of staff which shall be achieved when retired staff would not be replaced by new ones. 

In the process of implementation of the Law on Tax Procedure, special attention would be paid to activities of regular and forceful collection of all public revenues since the latter is not on a satisfactory level. Special attention should also be given to indirect ways of determining tax bases and „related controls“, what has not been exploited enough so far and could be very relevant for filling of the budget and extra-budgetary funds and for prevention of unlawful activities. 

Changes to the Law on Tax Procedure would enable Tax Administration to control not only payment of taxes and deductions but also to control their calculation in order to avoid the situation that taxes and deductions are paid on the lowest salary. 

As for ways for additional filling of budget, the Government would faciliate changes of the laws which regulate concessions and the level of concession compensations especially in the area of non-renewable resources in order to secure additional funds for the budget. 

Our tax policy is characterised with a very low profit tax for companies which is  10%, but in 2015 it is necessary to change provisions of the law which refer to associated companies, i.e. transfer prices, recognition of reserves for bad placements of loans by banks, more precise taxation of foreign companies, more precise acknowledgement of expenditures or decreased revenues in the tax balance in relation to acknowledged expenditures for the purpose of financial reporting and acknowledgement of different currency exchange rates in the tax balance. 

Program of combating underground economy 

Combating underground economy shall be one of the Government’s priorities. We would prepare the program for combating underground economy in order to reduce the participation of unformal economic activities in the overall GDP and affect better filling of the budget and extra-budgetary funds and lessening of non-loyal competition and uneven business conditions. In that way we would also take active measures on preventing the black labor market. 

We intend to pass the new Law on Inspections and if necessary enact other relevant laws only to improve the work of the Inspectorate and make the inspection control more effective.  

European path remains the commitment of the new Government of the Republic of Srpska which would continue to strengthen its institutional and personnel capacities for implementation of its European commitments and adjust its legislation with regulations of the European Union. The Republic of Srpska would continue to be the leader in this process within BiH and would advocate equal engagement of other partners so that overall result is adequate since the EU would make a cumulative assessment. I would like to stress that Republic of Srpska was the first, faster and better in fulfillment of those obligations than other levels of government in BiH provided that it was in accordance with its constitutional competences. 

In short, the Government would, as until now, strive to establish the coordination mechanism among all levels of government in BiH in order to secure its organized, balanced and coordinated movement toward the European Union and facilitate provision of EU funds. We are supporting a concept of coordination in which every level of government would maintain its constitutional competences and in accordance with those fulfill its European obligations. 

As for the Sejdic-Finci case, the ruling of the Human Rights Court in Strasbourg has determined the scope of changes to the BiH Constitution and only requests elimination of discrimination regarding candidacy for the member of BiH Presidency and representation of “others“ in the BiH House of Peoples but it does not require change of competences nor envisages that minorities become the fourth constituent people. The RS political subjects have long ago agreed on a formula for dealing with this issue and it would be binding for the Government. 

To summarize, with reference to the coordination mechanism and implementation of Sejdic-Finci Ruling, the Government would adhere to the conclusions of the RS National Assembly.  I wish to remind that this is also the obligation of all representatives from the Republic of Srpska in joint institutions of BiH. 

Regional cooperation and good relations with neighbouring countries would remain one of high priorities of the new Government not only because it is required from all candidates and potential EU candidates but also because it is the necessity and interest of the Republic of Srpska. 

We would continue good relations with European and non-European regions. Cooperation with Serbia is of utmost importance – institutional, economic and every other possible cooperation in accordance with the Agreement on Special and Parallel Relations between Serbia and the Republic of Srpska. The Government would continue working on the project of joint approach to disapora and other ongoing joint projects such as Podrinje Development Program which includes realization of certain individual infrastructural, tourist, agricultural and other projects.  

We shall be open toward the world and be more active in promoting our views and positions and our investment offer including the tourism industry that could contribute to more intensive economic activities in the Republic of Srpska, new employment and creation of more competitive market abut also affirmation of the Republic of Srpska.  

In order to boost economic activities, commercialize knowledge and raise employment we would continue the trend of higher allocation of funds for research and development in accordance with Strategy for Scientific and Technological Development. We would continue working on establishment of the innovations system which should integrate business sector, science and research sector, innovators and public sector into efficient whole. 

The New Government awaits the adoption of Changes and Amendments to the Spatial Plan of the Republic of Srpska until 2015 which is relevant for implementation of many infrastructural projects, utilization of new energy potentials and resources what can also boost economу and investments.

Ladies and gentlemen,

Preserving constitutional position of the Republic of Srpska and its competences, stability, accountability and functionality of its institutions, improvement of a democratic ambiance, strengthening of the economy and employment is the framework for the work of this Government. 

Our goal is strong Republic of Srpska with modern and stable institutions, sustainable economy and higher employment. Our goal is the Republic of Srpska with more population. To that end, the Government would treat population policy and demographic issues as issues of strategic national importance. Since there is no ideal time or ideal circumstances for dealing with negative demographic phenomena, we must be proactive. 

The Government would stregthen the Population Policy Council institutionally and in cooperation with it implement and instigate necessary policies on the entity level and at the level of local governments. 

Relation toward family, motherhood and the rights of mothers with many children and all other matters relevant for demographic and targeted population policy would be very important in the forthcoming period.  

It is crucial to have system support and with improvement of economic situation that would be reflected on a material and financial position of a family but must also include measures that would be supported by the budget funds. 

 

One of such measures is higher number of free attempts of 'in vitro fertilisation' compared to the current two. I am using the opportunity to announce this as one of the decisions of the new Government and as a form of assistance to couples who wish to have children. As the result of such support, 420 babies have been born in the Republic of Srpska in the last few years. That means 420 happy families, more children in kindergardens and schools where strength of every society is foremost reflected and from where activities relevant for every society development plans start.  

It is clear that interventions are necessary in many areas regardless if we talk about  big and painful reforms or those less problematic what shall be the objective of the new Government. The program that I have presented today contains both strategic determination and very concrete measures that we would implement in the forthcoming period.

Distinguished Members of the RS National Assembly, allow me to present members of the new Government I am proposing and to request your support for their appointment:

1. Minister of Finance – Zoran Tegeltija  

2. Minister of the Interior – Dragan Lukac

3. Minister of Education and Culture – Dane Malesevic

4. Minister of Labor and Veterans – Milenko Savanovic

5. Minister of Industry, Energy and Mining – Petar Djokic  

6. Minister of Justice – Anton Kasipovic 

7. Minister of Agriculture, Forestry and Water-Management – Stevo Mirjanic 

8. Minister of Health and Social Security – Dragan Bogdanic 

9. Minister of Science and Technology – Jasmin Komic  

10. Minister of Administration and Local Self-Government – Lejla Resic 

11. Minister of Trade and Tourism – Predrag Gluhakovic 

12. Minister of Family, Youth and Sports – Jasmina Davidovic 

13. Minister for Spatial Planning, Civil Engineering and Ecology – Srebrenka Golic

14. Minister of Traffic and Communications – Nedjo Trninic

15. Minister for Economic Relations and Regional Cooperation – Zlatan Klokic

16. Minister for Refugees and Displaced Persons – Davor Cordas