* Bosnian state paralysed by political rift
* No government, no budget, nobody qualified to certify
* Farmers face losing vital Croatia market in 2013
By Daria Sito-Sucic
SARAJEVO, Dec 22 Eighteen months from now,
Marko Damjanovic will practically be able to reach out and touch
the European Union from his farm on Bosnia's northern border
But he'll no longer be able to sell his eggs there.
"I feel like I could explode," he said. "It looks like I'll
have no other solution but to shut up shop."
Damjanovic sells 800,000 euros worth of eggs in Croatia
Sixteen percent of Bosnia's total food exports and more than
half of its milk and dairy exports go to its ex-Yugoslav
neighbour, bringing in 200 million Bosnian marka ($133 million)
But a year from now, six months before it joins the EU on
July 1, 2013, Croatia will start implementing EU market
regulations, and imports of Bosnian animal products will stop.
There's nothing wrong with Damjanovic's eggs, but Bosnia has
no one to certify that to the satisfaction of the EU.
Bosnia's farmers -- the mainstay of its economy -- face
becoming the latest victims of the political paralysis that has
gripped the country since an election in October 2010.
Bosnia has no central government, no state budget and --
most worryingly for Damjanovic -- no agriculture ministry.
The food and veterinary agencies it does have lack the
directives and legislation to harmonise Bosnia's food safety
regulations with EU standards, and some 400 pieces of
EU-standard legislation are sitting gathering dust.
"We are already too late," said Yuri Afanasiev, head of the
United Nations Development Programme (UNDP) in Bosnia. "We are
basically losing our primary market place, and it would be a
miracle if we make it by the deadline."
More than a year after Bosnians voted for a new central
government, their leaders are still bickering over how it should
be formed, what competencies it should have and how much money
Their inability to agree is a symptom of the opposing
visions of Bosnia's future that divide its Serb, Croat and
Muslim communities almost two decades after war broke out with
the collapse of socialist Yugoslavia.
A U.S.-brokered peace deal ended the fighting in 1995 but
only after 100,000 civilians died.
To do so it split the country into two autonomous,
ethnically-based regions so decentralised and unwieldy that
Bosnia barely functions at the state level.
Its administration is bloated, its institutions fragmented
and its politics polarised along ethnic lines. The European
Commission described the overlapping bureaucracy as a
"hyperinflation of competencies" in its October report on
Bosnia's halting progress towards EU membership.
While the Bosnian Muslims want to streamline and integrate
the state, the Bosnian Serbs are fiercely protective of the
autonomy they enjoy as enshrined in the Dayton peace deal.
The Serbs have blocked all EU-related laws in the national
parliament that they believe might usurp power from the regional
level to the state level.
The Serb Republic considers agriculture a regional
responsibility, for example, so EU money that would have gone to
the sector has been diverted to other sectors instead because
there is no agriculture ministry to receive it.
As a country that aspires to membership of the EU, Bosnia
receives funds from the bloc to help finance reforms and
development in preparation for future membership.
It's just one example of how, with no central government,
Bosnia is losing out on vital funding from the EU and the
International Monetary Fund. Foreign investors are steering
"We have lost and mismanaged millions of euros from the
European Commission (EC) and the World Bank because of Bosnian
Serb obstruction," said an official at the Ministry of Foreign
Trade and Economic Relations, who declined to be named.
More than 70 state agencies face grinding to a halt next
year because the politicians have been unable to agree on a
state budget for 2011 or 2012.
The border police, a state body, doesn't have the financing
to buy new uniforms or winter equipment to patrol Bosnia's
And now the farmers face losing their main export market, a
potentially crippling setback for Bosnia's 3.8 million people,
half of whom rely directly or indirectly on the agriculture
sector for their income.
"It's very urgent for Bosnia to establish very clear
competencies and chain of command (to be able to win product
certification)" said Jurgis Vilcinskas, a senior diplomat with
the EU delegation to Bosnia.
To make matters worse, those food products that Bosnia will
be able to export to Croatia will be squeezed through just two
crossing points on the 1,000-km (600-mile) border certified by
Croatia and the European Commission.
Experts say delays at the border will simply increase costs
Zeljko Marijan, whose Livno dairy plant exports over 60
percent of its cheese products or around 220 tonnes annually to
Croatia, said the loss of their Croatian market would come as a
"terrible blow" to Bosnia's milk and dairy producers.
"The problem is not with the dairies," Marijan told Reuters.
"Some of us invested a lot to harmonise production with EU
standards. But the state is putting the brake on progress. The
authorities didn't do their part of the job."
Farmers, experts and government officials admit there is no
solution in sight.
Some experts have called for a transitional period, rather
than a January cut-off, to allow some exports to continue and so
soften the blow. But there is no official indication this is
Damjanovic and Marijan both say they are looking to
alternative export markets, and are in early negotiations with
potential partners in Turkey. But this will drive up costs given
the transportation distances involved.
Mostly, they will just have to wait.
"Nobody knows what's going to happen," Damjanovic said.
(Editing by Matt Robinson and Sonya Hepinstall)