This chapter examines Bosnia and Herzegovina’s progress in implementing selected measures under the draft 2025 Reform Agenda designed to promote a fairer, more competitive business environment through stronger oversight and greater transparency of state-owned enterprises (SOEs). Namely, it reviews ongoing and planned initiatives to strengthen SOE ownership and corporate governance frameworks, enhance performance monitoring, and improve public accountability. The chapter also explores efforts to embed sustainability into ownership policies and SOE operations, supporting long-term resilience and reinforcing broader green transition objectives set out in the Reform Agenda.
Assessing Bosnia and Herzegovina's Reform Agenda for Private Sector Development
Abstract
SOEs1 (“public enterprises,” “publicly owned enterprises” or “POEs” in local nomenclature) have a significant economic footprint in Bosnia and Herzegovina, accounting for an estimated 9% of total employment and operating in many systemically important sectors, such as energy, telecommunications and transport (European Commission Delegation to Bosnia and Herzegovina, 2024[1]). While state ownership of many SOEs in the country is economically justified—for example in network industries, where high infrastructure costs, natural monopolies and/or public service obligations can warrant state ownership to address market failures—SOEs also operate in sectors where the rationale for state ownership is less evident, such as construction, manufacturing and agriculture.
However SOEs’ underperformance, driven by unclear objectives, weak governance and limited accountability, can strain fiscal budgets and crowd out private-sector activity, ultimately constraining broader economic growth. Indeed, external reviews of SOE financial performance in Bosnia and Herzegovina suggest that, overall, these companies do not produce sufficient value from the assets and labour at their disposal, often paying wage premiums despite lower productivity (European Commission Delegation to Bosnia and Herzegovina, 2024[1]; IMF, 2019[2]).2 Delivery of public policy objectives, when not sufficiently compensated by the state budget, may also contribute to SOEs’ underperformance; however, the authorities have not clearly quantified the associated costs, making their true impact difficult to assess.
To address these challenges, several planned measures in the draft 2025 Reform Agenda seek to improve SOE ownership and monitoring arrangements, bolster their legal and regulatory framework (specifically to align with the good-practice standards of the OECD Guidelines on Corporate Governance of State-Owned Enterprises (OECD SOE Guidelines) and address targeted financial issues, including SOEs’ significant payment arrears related to tax and social security contributions.
Table 1.1 outlines six priority measures3 designed to strengthen SOE governance and performance, together with summary updates on the status of implementation. Overall, Bosnia and Herzegovina has achieved notable progress in certain areas, particularly in strengthening legislative frameworks for SOE governance and transparency, as well as enhancing oversight through formal monitoring units. However, progress remains limited or absent in other areas, including reducing arrears, aligning state aid legislation with EU standards and integrating climate and sustainability objectives into SOE guidance and reporting processes.
Notes: The authorities reported in the context of this report that progress in reducing SOEs’ tax and social security arrears will be assessed from a baseline amount as of 31 December 2023 and as reported by entity-level business registries that also maintain company financial statements. The table uses the terms “public enterprises” and “publicly owned enterprises (PoEs),” rather than “SOEs,” to reflect the exact terminology employed in the Reform Agendas.
Sources: Draft Reform Agenda for Bosnia and Herzegovina (European Commission, 2024[3]) and Economic Reform Programme of Republika Srpska (Government of the Republika Srpska, 2024[4]).
This chapter goes beyond the measures specified in the Reform Agenda to consider additional areas that remain outside its direct scope. Table 1.2 highlights two areas—strengthening non-financial requirements and better incorporating sustainability measures for SOEs—which signal issues that require further policy attention in line with the Agenda’s overall objectives.
See Annex 1.A for the OECD authors’ considerations on the methodology underpinning this chapter.
Improving SOE performance must start with stronger state ownership institutions, clear ownership policies and professional boards of directors equipped to shield management decisions from political influence.
Fragmented ownership of SOEs in Bosnia and Herzegovina has historically hindered public authorities’ ability to act as a professional shareholder, but progress is underway.
The OECD SOE Guidelines note that the state’s ownership rights should be clearly identified within the administration and, ideally, centralised in a single ownership entity. When centralisation is not possible, the Guidelines recommend that ownership functions should instead be exercised under the oversight of a co-ordinating body with a clear mandate to act on a whole-of-government basis.
Yet, SOE ownership responsibilities in Bosnia and Herzegovina are fragmented across the public administration without a unified ownership policy to steer shareholding decisions. In both the FBiH and RS, Laws on Public Enterprises formally assign state ownership responsibilities to the Government as a whole. In practice, however, these responsibilities are typically delegated to sectoral line ministries, which manage portfolios of SOEs while simultaneously setting policy or exercising regulatory authority in the sectors where “their” SOEs operate.4
Stronger centralisation, or co-ordination, of state ownership can make the exercise of ownership more effective by (i) separating it from potentially conflicting state functions and (ii) professionalising it through a dedicated entity staffed with shareholding experts. In contrast, fragmented ownership arrangements can more easily lead to ad hoc political interference in SOE decision-making, frequently at the expense of corporate performance. More broadly, dedicated state ownership entities can facilitate monitoring of the entire SOE portfolio and support the introduction and implementation of harmonised governance and disclosure standards, thereby strengthening accountability and performance. Table 1.3 provides a snapshot of state ownership arrangements in the two entities and Brčko District, while offers a brief overview of the portfolio characteristics of the FBiH, RS and Brčko District, based on recent external assessments.
Notes: Box 1.1 provides a complementary snapshot of SOE portfolio characteristics in the BiH entities. The reported numbers of SOEs for the FBiH, RS and Brčko District are based on inputs provided by relevant authorities and (European Commission Delegation to Bosnia and Herzegovina, 2024[1]), which employs an SOE definition aligned with the OECD SOE Guidelines, namely considering as SOEs all enterprises in which the government holds a majority share or otherwise exercises control, including indirect state ownership of SOE subsidiaries. Information on ownership arrangements is based on reporting by the authorities in the context of the Western Balkans Competitiveness Outlook 2024 (OECD, 2024[5]). One of the 64 SOEs in the FBiH is currently in the process of bankruptcy.
External studies drawing primarily on publicly available enterprise financial statements suggest the following general conclusions on the size and sectoral distribution of entity-level SOE portfolios in Bosnia and Herzegovina:
As of 2025, local portfolios include 64 SOEs in the FBiH, 67 in RS and 5 in Brčko District. 34 of these SOEs are indirectly owned by the respective authorities through SOE subsidiary arrangements. Most of these are subsidiaries of the two entity-owned energy companies Elektroprivedra BiH and Elektroprivedra RS.
Measured by their number, about half of entity-owned SOEs are, as of 2023, found in either the manufacturing or energy, gas and mining sectors (28% and 26%, respectively). This is followed by other activities (13%) and transport, roads and communications (including notably railways, ports, telecoms and postal services) (13%). Smaller shares operate in utilities and public services (9%), agriculture and forestry (6%) and the financial sector (5%).
Illustrating their significant economic footprint, 6 of FBiH’s 10 largest companies by asset value are SOEs and notably include two energy companies, a highway company and the national railway and telecoms operators. Similarly, 6 SOEs are among FBiH’s top 10 largest employers. Similar analyses were not available for RS or Brčko District, owing to the lack of comparably comprehensive company-level data published by the financial monitoring agencies.
The authorities of RS have taken important steps to address issues stemming from fragmented ownership of SOEs, namely through the establishment of the Public Enterprises Oversight Co-ordination Department (OCD) in 2022. Additionally, amendments to the Law on Public Enterprises have been drafted that would, among others, strengthen the OCD’s role and formally enshrine its functions in law.
Even before the establishment of the OCD, RS authorities had somewhat mitigated issues related to decentralised ownership by placing many SOEs (19 SOEs as of 2022) under the purview of the Share Fund,5 which does not have sectoral policy or regulatory functions (OECD, 2024[5]). However, line ministries continue to play a shareholding role for these SOEs, for example by providing formal input on state shareholder voting at general shareholder meetings and proposing, for Government approval, the Share Fund staff who will serve as state representatives at those meetings.6 The RS 2025-27 Economic Reform Programme notes that line ministries with responsibility for SOEs often focus their activity on implementing broader sectoral-development strategies rather than prioritising the maximisation of shareholder value by individual SOEs (Government of the Republika Srpska, 2024[4]). The ongoing strengthening of the OCD has the potential to help mitigate these issues, if the department is ultimately equipped with adequate resources, including qualified and experienced staff, to support a more professional exercise of ownership in RS.
RS has established a dedicated SOE co-ordination and monitoring unit with a robust formal mandate, while a similar unit is under development in FBiH.
Only RS has inaugurated a dedicated unit to co-ordinate SOE oversight, although the FBiH has announced, in its Government Work Plan, the intention to adopt the necessary regulations to formalise its ownership monitoring units. No such SOE monitoring unit was identified in Brčko District.
Concerning practices in individual entities, as highlighted above, the RS OCD was established within the General Secretariat of the Government in 2022. Its formal mandate, outlined in an internal regulation, incorporates several elements of good practice for an effective ownership co-ordination entity. These include the responsibility to co-ordinate the drafting of a state ownership policy and undertake robust monitoring and reporting on SOE performance, including through the development of a centralised IT platform for data collection (see Box 1.2 for a detailed overview of its mandate). Still, RS authorities note that current supervision arrangements do not cover all the functions typically expected of the state in its role as SOE owner. They highlight the potential to strengthen the unit’s role in professionalising the shareholding practices of line ministries and other entities responsible for SOE ownership (Government of the Republika Srpska, 2024[4]). The Draft Law on Amendments to the Law on Public Enterprises has the potential, if ultimately adopted by the National Assembly, to further strengthen SOE ownership practices in RS, notably by formalising a new system of SOE oversight and ownership co-ordination and more clearly outlining the respective roles of the RS Government, the SOE oversight co-ordination body (currently the OCD), the Ministry of Finance, the Investment Development Bank and line ministries.
The functions of the RS Public Enterprises Oversight Co-ordination Department (OCD) are as follows:
Undertakes centralised collection and processing of data for the needs of the Government on specially supervised public enterprises;
Creates, updates and administers the central Register of Public Enterprises of Republika Srpska, which is based on a modern and secure ICT platform;
Monitors and regularly prepares for the Government quarterly and annual reports on the state of public enterprises, including various measures of the size and basic financial results of public enterprises;
Initiates supervision and monitoring activities, performs monitoring of economic and financial indicators, analyses and evaluates the economic and financial indicators of specially supervised public enterprises;
Manages the results of analyses by giving recommendations to line ministries and specially supervised public enterprises;
Works on improving corporate governance in public enterprises;
Co-ordinates the drafting of the ownership policy;
Provides support to public enterprises in improving planning and reporting;
Proposes amendments to regulations relevant to the field of public enterprises to clarify institutional roles and responsibilities arising from ownership policy;
Co-ordinates the oversight of public enterprises between public enterprises, relevant ministries and the Investment and Development Bank of the Republika Srpska;
Prepares and proposes, in co-operation with the relevant line ministries, the categorisation of public enterprises and restructuring plans for selected public enterprises in accordance with international standards;
Proposes reforms of public enterprises with a significant potential for development;
Establishes procedures for systematic monitoring of the implementation of recommendations issued by the Supreme Audit Office and external auditors for public enterprises, including proposing sanctioning mechanisms for recommendations non-compliance;
Proposes changes to legal regulations with the aim of improving the oversight of public enterprises;
Monitors and supervises the overall implementation of the Action Plan for the reform of public enterprises in the Republika Srpska and reports to the Government on its implementation.
Source: Information provided by the RS authorities in the context of the 2024 Western Balkans Competitiveness Outlook (OECD, 2024[5]), drawn from Article 6 of the Rulebook on the Internal Organization and Systematization of Workplaces in the General Secretariat of Republika Srpska (Official Gazette of the Republic of Srpska“, no. 122/22)
In the FBiH, authorities announced plans to strengthen and formalise recently established SOE monitoring and co-ordination units within both the General Secretariat of the Government and the Ministry of Finance, in line with commitments made in the context of EU accession negotiations.7 These departments are expected to take on responsibilities such as for “monitoring the performance of public enterprises and fiscal risks, developing ownership policies and publishing annual reports on the performance of public enterprises” (Government of the Federation of Bosnia and Herzegovina, 2025[6]).8 The FBiH Government Work Plan for 2025 assigns the Ministry of Energy, Mining and Industry—which exercises ownership rights in the entity’s largest SOE portfolio—to lead the implementation of the regulatory reforms required to operationalise these new units. However, as these arrangements are still at an early stage of development, it remains unclear whether the designated departments will be provided with the legal mandate, staffing and resources needed to perform their functions effectively. Moving forward, it is important that both units have clearly defined, non-overlapping responsibilities. Even with this clarity, there is a risk that neither unit takes primary responsibility for state ownership co-ordination and SOE monitoring, which can result in reduced accountability due to overlapping roles.
These developments mark a shift from previous arrangements. Despite longstanding recognition of the need for stronger SOE oversight, the FBiH has historically lacked a formal institutional mechanism to co-ordinate state ownership or monitor SOE performance. Previously, an informal SOE monitoring unit operated within the Prime Minister’s Office, but it lacked the institutional mandate to act as a central co-ordinating body or carry out robust monitoring of SOEs (OECD, 2021[7]). In the absence of a formal co-ordinating entity, individual line ministries—particularly the Ministry of Energy, Mining and Industry and the Ministry of Transport and Communications, which hold the largest number of SOEs—have held delegated responsibility for exercising ownership over distinct SOE portfolios (OECD, 2024[5]). Internationally, many countries maintain decentralised ownership arrangements, wherein line ministries hold legal ownership rights over SOEs but rely on strong co-ordination and monitoring units to professionalise ownership and oversight.
No state ownership policies are in place defining why the state owns companies and what it expects those companies to achieve, although RS is currently developing such a policy.
Neither entity nor Brčko District has elaborated a formal policy defining the economic and policy rationales for state ownership or the broad objectives that SOEs are expected to achieve. However, in RS, an ownership policy is currently under development: provisions in the Draft Law on Amendments to the Law on Public Enterprises of RS, if adopted, would formalise the requirement for the RS Government to adopt a state ownership policy, for which co-ordination would fall under the formal mandate of the OCD. Similarly, in the FBiH, the government has launched legislative reforms that would legally mandate the adoption of an ownership policy. The draft amendments to the FBiH Law on Public Enterprises—led by the Ministry of Energy, Mining and Industry and expected to be adopted in 2025—would require the development of a comprehensive policy that clarifies ownership expectations, including through a dedicated dividend policy and the approval of strategic goals for individual SOEs.9
As such, many SOEs remain in state ownership without a clearly defined rationale for public, rather than private, ownership. For those operating under the dedicated Laws on Public Enterprises in the FBiH, RS and Brčko District, the pursuit of public-interest objectives is implicitly assumed to justify state ownership.10 However, for SOEs that fall outside the scope of these laws (i.e. typically those not established with a public-interest mandate), the reasons for state ownership are often not evident.11 Amendments to the Law on Public Enterprises under consideration in RS could introduce greater clarity in this respect by classifying SOEs according to whether they primarily pursue profit-seeking activities, activities of public interest on a non-market basis or a mixture of both. Although this classification helps clarify the state’s expectations of its companies, it does not clarify why the state should retain ownership, especially in enterprises operating on a market basis for profit. According to the OECD SOE Guidelines, the primary rationale for state ownership should be to create long-term value (OECD, 2024[8]). In Bosnia and Herzegovina, however, this principle does not appear to inform ownership decisions. Instead, many of the country’s 135 SOEs seem to remain publicly owned as a legacy of the economic system in place prior to the transition to a market economy, rather than as a result of deliberate policy decisions.
The absence of ownership policies clarifying the rationales for state ownership is particularly problematic given the large number of SOEs operating in competitive or potentially competitive sectors such as construction, manufacturing and services. Without a clear policy framework, there is a risk that new SOEs may be created on an ad hoc basis to serve short-term political interests, rather than longer-term goals like fostering competitive markets or improving public service delivery. This lack of clarity is compounded by the widespread absence of quantifiable performance objectives across SOEs in Bosnia and Herzegovina, contributing to losses across the SOE portfolio. Although not all companies are loss-making, the overall entity-owned portfolio achieved negative returns on both capital and assets in 2023 (European Commission Delegation to Bosnia and Herzegovina, 2024[1]).
The professionalisation of SOE boards is hindered by their politicisation and the absence of SOE-specific board nomination procedures based on professional qualifications and merit.
FBiH, RS and Brčko District have all taken some steps to introduce a degree of transparency into the SOE board nomination process. In the FBiH and RS, Laws on Ministerial, Governmental and Other Appointments regulate SOE board appointments, requiring transparent and competitive selection processes along with basic eligibility criteria, such as a clean criminal record. However, because these provisions apply to all public sector appointments rather than specifically to SOEs, there remains scope to introduce more specialised selection criteria—such as technical expertise, private-sector experience and independence—more adapted to the complexity of SOE oversight (OECD, 2024[5]). In Brčko District, the Law on Public Enterprises similarly requires public competitions for SOE board positions and excludes certain individuals, such as those with criminal records, SOE employees or those already serving on other SOE boards. However, again, these requirements are not specific to SOEs.
In practice, SOE board nomination procedures vary across the country, but all involve public announcements and dedicated commissions to carry out the process. In the FBiH, board nominations must be publicly announced in the Official Gazette and a daily newspaper. A government-appointed commission reviews applications from the public competition and then proposes shortlisted candidates to the shareholders’ assembly—typically the Government in the case of wholly owned SOEs. In RS, for SOEs with mixed ownership, board nominations similarly are subject to public announcements and candidate evaluations by a commission comprising ministry and company representatives, with appointments made by a shareholder vote. For SOEs entirely owned by the entity, the RS Government acts as the shareholders’ assembly and appoints board members by majority vote. Neither the FBiH nor RS maintains a central database of qualified board candidates, a measure that could support more efficient, merit-based selection (OECD, 2024[5]). In the context of this report, the RS authorities reported that the 2025 Work Programme of the Government foresees amendments to the Law on Ministerial, Governmental and Other Appointments to strengthen SOE-related criteria (Government of RS, 2025[9]). In Brčko District, the Selection and Appointment Commission of the District’s Assembly manages the nomination process following a public announcement on the Assembly’s website. Final board appointment decisions are made based on a ranking of candidates provided by the Commission.
While current legal provisions introduce a degree of public transparency in the SOE board nomination process, external studies suggest that concerns persist regarding the boards’ ability to effectively oversee management and safeguard decision-making from political influence (OECD, 2024[10]; Transparency International, 2018[11]). Neither entity nor Brčko District requires a minimum proportion of board members to be independent from both corporate management and (state) shareholders, although this may change under the planned amendments to the Law on Public Enterprises in RS. In extreme cases, SOEs are perceived as being under political party control, suggesting heightened corruption risks (U.S. Department of State, 2025[12]). Although both the FBiH and RS prohibit sitting political officeholders from serving on SOE boards, past assessments show that, particularly in the FBiH, former politicians often assume leadership roles in SOEs, indicating that appointments may be driven more by political considerations than by enterprise needs (OECD, 2024[5]). The OECD SOE Guidelines recommend that politicians who could materially influence SOEs’ operations be barred from serving on their boards and that any former such politicians to observe a pre-determined cooling-off period before becoming eligible to serve on SOE boards. In RS, the draft Law Amending the Law on Public Enterprises foresees that the SOEs in its scope include one independent member on their supervisory boards, a provision which has the potential to strengthen SOE board professionalism.
The potential risk for political influence over SOE boards is not unique to Bosnia and Herzegovina: among 50 jurisdictions surveyed by the OECD in 2024, 25% do not ban elected politicians from serving on SOE boards and 65% do not ban former politicians, subject to cooling off periods, from doing so (OECD, 2024[10]). Still, the absence of outright bans does not necessarily indicate that politicians on SOE boards is a widespread practice internationally. International good practice calls for an appropriate number of independent directors on SOE boards to be free of any interests, including ties to the state, that could give rise to conflicts of interest (see Box 1.3 for the definition of “independent board member” set forth in the OECD SOE Guidelines).
The 2024 OECD SOE Guidelines note that for the purpose of its recommendations on SOE board independence, “independent” SOE board members are understood as individuals who are:
Free of any material interests (including remuneration, directly or indirectly, from the enterprise or its group other than directorship fees);
Free of relationships with the enterprise (non-executive board members), the state (neither civil servants, public officials, nor elected politicians), its management, and other major shareholders, as well as with institutions and interest groups with a direct interest in the operations of the SOE, that create a conflict of interest that could jeopardise their exercise of objective judgement; and
Selected based on merit, in possession of an independent mindset and sufficient competencies to carry out board duties.
Source: Adapted from (OECD, 2024[8]).
Way forward
Move forward with plans to establish, or strengthen existing, central SOE monitoring and ownership co-ordination units. This institutional strengthening could be implemented prior to the recommended measures that follow, since state ownership units can play a key role in spearheading legislative and policy reforms and implementing corporate governance reforms in the SOE portfolio. The RS authorities should continue strengthening the monitoring, shareholding advisory and public reporting roles of the OCD in line with its formal mandate. Both the FBiH and RS authorities should move forward with adopting the legislation or regulations necessary to make their SOE monitoring and ownership co-ordination units operational and effective. The units should have adequate human and financial resources to ensure that they can effectively fulfil their functions of monitoring SOEs and reporting to the public on SOE portfolio performance. Brčko District should similarly establish a monitoring unit to track SOE performance and co-ordinate improvements in SOE governance. In the FBiH, authorities should ensure that any monitoring or co-ordination units have clearly defined, distinct responsibilities and consider assigning primary responsibility to a single body to prevent diluted accountability.
Develop state ownership policies. Entity-level authorities should articulate clear ownership policies aligned with international good practice, defining the rationale for state ownership and the state’s expectations regarding SOE operations and performance. A well-designed policy provides a basis for identifying which SOEs should remain in state ownership, the objectives they should pursue and how performance should be assessed. It also helps prevent ad hoc or politically motivated ownership decisions that might undermine enterprise efficiency and performance. The OECD SOE Guidelines recommend that ownership policies “define the overall rationales and goals for state ownership, the state’s and other shareholders’ role in the governance of SOEs, how the state will implement its ownership policy and the respective roles and responsibilities of those government offices involved in its implementation” (OECD, 2024[8]).
Align legal and regulatory frameworks on state ownership and SOE governance with good practice. While the OECD SOE Guidelines do not require dedicated laws on SOE governance or state ownership, many countries choose to implement them through dedicated legislation, often complemented by ownership policies and government resolutions. In Bosnia and Herzegovina, legal reforms, such as the ongoing efforts to update the Laws on Public Enterprises in both the FBiH and RS, offer an opportunity to anchor SOE reform ambitions into law. If well-designed, such reforms could lead to more durable improvements in state ownership, corporate governance and transparency practices. Bulgaria’s Law on Public Enterprises, adopted in 2019, provides a potentially useful reference for Bosnia and Herzegovina (select elements of that Law are summarised in Box 1.4).12 Both entities should ensure that the scope of applicability of SOE-specific legislation is aligned with international standards (i.e. that all enterprises under government majority ownership or control are included in the scope of related legislation).
Strengthen SOE board competencies by establishing transparent, merit-based nomination frameworks. Such frameworks should prohibit politicians from serving on SOE boards and include provisions to ensure boards have appropriate expertise through clear qualification criteria, such as experience in related industries, corporate strategy and/or finance. Competence requirements should be based on an evaluation of the incumbent board and the enterprise’s long-term strategic needs. Frameworks should also mandate a minimum proportion of independent board members, with independence defined in relation to the state, the involved companies and their shareholders as well as political leadership. To ensure consistent implementation across the SOE portfolio, these frameworks should be established through formal legal or regulatory instruments, such as a dedicated law, Governmental Resolution or their equivalent. The Draft Law Amending the Law on Public Enterprises in the RS, which recommends at least one independent member on SOE supervisory boards, could, if adopted, strengthen board professionalism.
Bulgaria’s Public Enterprise Act was adopted in 2019 following guidance and technical support from the OECD. It provided the formal framework for establishing a dedicated state ownership agency, in addition to introducing heightened corporate governance and transparency standards for SOEs’. Key elements of the Law can be summarised as follows:
Outlines general principles on the exercise of state ownership in public enterprises, notably setting forth the agreed rationales for state ownership (e.g. to eliminate market failures, provide goods or services related to national security and manage strategic state property) and outlining principles related to maintaining the level playing field with private enterprises.
Establishes a state ownership co-ordination function vested in a new Agency for Public Enterprises and Control, notably tasked with developing the state ownership policy (which is for approval by the Council of Ministries), leading the selection procedure for independent board members of “large” SOEs, monitoring SOEs, including e.g. through evaluation of their implementation of approved business plans, reporting on SOE performance and advising line ministries on shareholder decisions as requested.
Clarifies the respective ownership powers of different levels of the state regarding SOEs, including the Council of Ministers, the Agency for Public Enterprises and Control and individual line ministries.
Outlines the general conditions and processes for SOE board nominations, including by stipulating that SOE boards must comprise at least one third independent members (who cannot be employees, shareholders, persons with commercial relationships with the enterprise or state representatives).
Outlines accounting, audit and public disclosure requirements, including requirements for SOEs to have their financial statements externally audited, and for the Agency on to publish enterprise financial statements and an annual aggregate report on SOEs.
Source: Law on Public Enterprises of Bulgaria, adopted in October 2019 and last amended in September 2024, accessed in May 2025 here: https://lex.bg/bg/laws/ldoc/2137196641
Effective performance monitoring of SOEs requires the establishment of robust reporting systems that enable public authorities to act as informed owners. Without reliable data on SOE operations, financial and non-financial performance as well as service delivery, oversight bodies face challenges in assessing enterprise performance and making evidence-based ownership decisions.
Some steps are underway to develop more robust SOE databases allowing for systematic monitoring of SOEs’ performance and informed ownership decisions.
International good practice calls for the state to establish effective systems for monitoring SOE performance, which can be facilitated using digital technologies (OECD, 2024[8]). The lack of comprehensive, up-to-date databases on SOEs has historically hindered entity-level authorities from adequately monitoring financial and non-financial performance, operational efficiency and legal compliance, limiting informed ownership decisions. At the time of writing, both the FBiH and RS have established semi-public SOE registries, accessible to registered users, maintained respectively by the FBiH Financial Intelligence Agency (FIA) and the RS Agency for Intermediary, Information and Financial Services Banja Luka (APIF). No similar such registry was identified for Brčko District. While these registries represent a positive step, it should be noted that the RS registry did not appear to be up-to-date at the time of writing (although authorities report ongoing updates). As for FBiH, its registry includes basic company information, key financial indicators from balance sheets and income statements and details on sector and management structure.
Progress toward developing SOE databases has varied significantly across Bosnia and Herzegovina, although all levels of government face challenges that limit their oversight capacity. The most significant progress is perhaps being made in RS through the development of a centralised SOE data-collection platform, supported by a modern ICT system, as well as the preparation of legislation to empower the government of RS to gather key financial and non-financial data directly from SOEs. As noted earlier, RS Public Enterprise OCD is formally mandated to develop this platform, which would also enable it to co-ordinate the preparation of quarterly and yearly reports on SOEs’ performance for the Government. A first such report was published in 2025 concerning the 2022-23 performance of 20 specially supervised SOEs (Government of Republika Srpska General Secretariat, 2025[13]). Importantly, the report contains detailed information on issues with existing SOE data sources in RS, such as differences in SOEs’ registered areas of activity and missing financial data, and also includes recommendations for addressing those issues. According to reporting by the RS authorities in the context of this report, the IT platform was under development at the time of writing.
Although the FBiH’s SOE registry does not constitute an SOE performance monitoring tool per se, it does provide structured and regularly updated financial and organisational information and could therefore serve as a basis for more systematic monitoring. In the Brčko District, while the authorities maintain a central business registry that is available online, it does not include a dedicated section for the five enterprises owned by the Brčko District Assembly (Judicial Commission of the Brčko District of Bosnia and Herzegovina, 2025[14]).
The absence of SOE databases has historically hindered effective monitoring of SOEs’ economic footprint and performance.
Without comprehensive SOE databases in place, authorities in Bosnia and Herzegovina struggle to determine the total number of SOEs operating and to monitor changes in ownership portfolios and performance over time. In response to these gaps, several external efforts13 have sought to compile SOE data by drawing on information available through entity/District business registries and published financial statements. One such initiative is the public database developed by Transparency International, which seeks to provide detailed, enterprise-specific information. This includes data on the adoption of company annual and “work” reports, key financial indicators and the composition of supervisory boards and management. However, the available information remains uneven, and the database does not include actual company reports—only whether they were adopted—pointing to broader shortcomings in the accessibility and completeness of public data on SOEs.
While these initiatives have helped shed light on the country’s SOEs and highlight their performance issues and associated fiscal risks, they cannot serve as substitutes for systematic, up-to-date SOE databases at the entity/District level. Way forward
Continue developing SOE databases to allow entity authorities to effectively monitor SOE performance. These databases could initially consolidate information from SOEs’ financial statements and progressively incorporate key non-financial information, such as SOEs’ public-service obligations as well as board composition and remuneration practices. The recommendations contained in the RS aggregate report concerning identified irregularities that limit the robustness and consistency of available SOE data should be addressed by the relevant authorities. The Romanian state ownership agency AMEPIP, established in 2023, has developed a publicly accessible SOE “dashboard” that draws on its central SOE database. This tool not only supports more informed ownership decisions but also enhances transparency by serving as an interactive information resource on the SOE portfolio (Box 1.5).
Key features of the Agency for Monitoring and Evaluation of Performance of Public Enterprises’ publicly accessible “Dashboard” on SOEs include:
The dashboard provides an extensive overview of the characteristics of the state’s SOE portfolio, including information on companies owned both at the central government level and by municipalities.
Company-specific information is provided for all SOEs (users can select an SOE from a drop-down menu). Several categories of company-specific information are proposed, including: general information (e.g. main economic activity, company valuation, name of legal representative, shareholding structure as relevant), main financial indicators, non-financial indicators (e.g. customer retention rate), corporate governance (e.g. total amount of board remuneration and a breakdown by its fixed and variable components) and non-commercial indicators (e.g. total number of new jobs added by year, gender balance among senior management and hours devoted to employee training).
Portfolio-level data are also provided, examining notably total turnover and profit and allowing for users to access separate portfolio figures for each state ownership authority.
Comparative statistics are also provided, ranking SOEs by total annual profits and turnover and allowing users to select SOE rankings within individual sectors of operation
Source: Author compilation based on (Agency for Monitoring and Evaluation of Performance of Public Enterprises, 2025[15]).
Enhancing public accountability on the governance and operations of SOEs can help drive performance improvements. Mechanisms such as publicly accessible annual reports and data on the performance of the SOE portfolio are key for authorities to demonstrate responsible ownership and enable informed public scrutiny.
RS is the only entity-level authority to have produced an aggregate report on SOE performance.
Aggregate reports are crucial state shareholder accountability tools and serve a key feature of state ownership practices worldwide: among the 53 countries surveyed by the OECD in 2024, 38% produce an annual aggregate report on all SOEs, an additional 26% report on at least part of the SOE portfolio (e.g. a significant portfolio of companies overseen by a state holding company) and 13% publish an online inventory of SOEs (OECD, 2024[10]). Yet, the authorities of the FBiH, RS or Brčko District have not historically produced an annual aggregate report on the performance of their SOE portfolios or the exercise of state ownership.
A notable development in RS was the publication in 2025 of the “Aggregate Report on the State in Specially Supervised Areas Public Enterprises in 2022 and 2023” by the OCD, marking a significant step towards greater accountability and transparency in SOE oversight (Government of Republika Srpska, 2025[16]). The report, available on the government’s website, covers 20 specially supervised SOEs and, while not comprehensive of the entire entity-level portfolio, provides information of a notably high standard. It includes figures on the SOEs’ financial performance, ownership structure, received government subsidies and dividend payouts, as well as contextual information on recent legal or regulatory changes (e.g. related to energy tariffs or toll prices for state-owned roads). In addition, it offers insights into SOE board composition and remuneration levels.
Furthermore, the Draft Law Amending the Law on Public Enterprises in RS reportedly introduces provisions requiring the OCD to submit such annual aggregate reports to the Government, which would further enshrine the practice into law. Draft provisions in the Law, if adopted, would also oblige SOEs to provide key operational information through the newly established data-collection platform, creating an important channel for more systematic monitoring and reporting on SOE performance.14 Still, there is scope to strengthen the content of the aggregate report going forward, for example by expanding its coverage to all entity-owned SOEs and including reporting on the financial impact of SOEs’ public-service obligations or other non-commercial objectives.
This progress builds on earlier, more limited efforts to improve transparency in RS. The Ministry of Finance’s two editions of the Report on Fiscal Risks Related to Public Enterprises in 2023 and 2024 marked a first attempt at comprehensive reporting, though their scope was restricted to fiscal risks15 and the reports were not made publicly available (Government of the Republika Srpska, 2024[4]). Before that, the Share Fund of RS regularly produced annual reports for the 19 SOEs under its portfolio, placing RS among the 26% of countries worldwide that publicly reported on a distinct portfolio of SOEs (OECD, 2024[5]).
In the FBiH, a recent legislative development—specifically, a January 2025 Conclusion of the House of Peoples of Parliament—requires the Government to submit reports on public enterprises for parliamentary review. As this obligation is newly introduced, it is early to assess its impact on state shareholding practices or the extent to which the reports will align with international good practice. While parliamentary reporting is a positive step, it does not replace public reporting, which remains essential for transparency and accountability. The long-standing absence of aggregate SOE reporting in the FBiH largely reflects the lack of a central monitoring or ownership co-ordination unit tasked with developing such a report. Encouragingly, the regulatory updates under preparation to strengthen the FBiH’s recently established SOE monitoring units foresee these units publishing annual reports on public enterprises.
Making SOE databases publicly available, or developing other online tools, can strengthen accountability to the public who are the ultimate “owners” of SOEs.
While the SOE databases discussed earlier are primarily intended to support the state in its ownership and performance monitoring practices, making these databases publicly accessible—or developing other online tools such as a dedicated website related to the state’s SOE portfolio—can help bolster SOEs’ accountability to the public, who are their ultimate “owners.”
Among Bosnia and Herzegovina’s jurisdictions, as highlighted above, both FBiH and RS have, at least nominally, established semi-public SOE registries (i.e. they require user registration to access the content16). However, only the FBiH’s registry currently contains up-to-date information on the entity’s SOE portfolio; in RS, the SOE registry appears to date back to 2014 and contains no publicly available information.17 Separately, Transparency International has created a public database on SOEs in Bosnia and Herzegovina, though its coverage is incomplete, and it is not maintained by public authorities.
There is scope to improve the public availability of SOEs’ financial reports and to strengthen non-financial reporting requirements.
In the FBiH, RS, and Brčko District, SOE disclosure requirements are defined in the respective Laws on Public Enterprises. In both entities, these Laws require that all SOEs prepare annual financial statements in accordance with applicable accounting and auditing standards. For fully corporatised SOEs, this also includes provisions under general company law and related corporate legislation. SOEs must submit their annual financial statements to a central registry, which is expected to make them available online.
In Brčko District, public reporting obligations are more limited. SOEs are required to submit a report on the “work and financial operations” to the Brčko District Assembly and Government at least twice annually. Public disclosures are limited to basic information about the enterprises’ financial and organisational structure, which must be published on enterprise websites.
Both external assessments and reporting by the entity-level authorities point to gaps in SOEs’ compliance with financial-reporting requirements. In the FBiH, external assessments have found that, in practice, SOEs’ financial statements are frequently not available online (OECD, 2024[5]). However, when SOEs do submit their financial statements to the FBiH business registry, they are freely accessible through the business registry, subject to a one-time, free user registration. In RS, the recently published (partial) aggregate report notes that 32 enterprises (including many at the sub-entity level) did not make their financial statements available to the business registry as required by law. The report recommends that the APIF and the Tax Administration apply financial sanctions, which are foreseen by law, to the non-compliant companies. SOEs’ weak compliance with disclosure requirements across BiH were also confirmed by an earlier 2019 IMF review, which revealed that more than 100 SOEs (including some at the sub-entity level) reportedly failed to submit their financial statements to the relevant business registration agencies on time as legally mandated (IMF, 2019[2]).18
In terms of non-financial reporting, SOE-specific requirements and practices are minimal across Bosnia and Herzegovina.19 In the FBiH, SOEs are expected to submit annual reports on “work and employment” to Parliament via their annual general meetings, but these do not meet the standards of formal non-financial reporting. In RS, SOEs must prepare annual reports on their operations, with exceptions for micro and small SOEs, but their content is not fully aligned with traditional non-financial reports (OECD, 2024[5]). As mentioned earlier, SOEs in Brčko District are required to submit bi-annual reports on their “work and financial operations” to the Assembly and the Government, but the underpinning legislation does not specify any content requirements for non-financial disclosures.
Way forward
Develop robust aggregate reporting practices on the SOE portfolio at the entity/District level. In the FBiH, authorities should establish a formal requirement for the Government to produce aggregate annual reports that are publicly available (not only to Parliament). The mandate to produce such reports should be given to the SOE monitoring and ownership co-ordination unit recommended earlier. In RS, authorities could build upon the first SOE aggregate report by, for example, expanding the scope to include all entity-owned SOEs and providing information on the nature and financial impact of SOEs’ non-commercial objectives. The OECD’s Good Practice Guide for Annual Aggregate Reporting provides extensive guidance on the process for developing an aggregate report and the recommended content (OECD, 2022[17]). The Brčko District authorities should similarly commence public aggregate reporting on the performance of its five SOEs.
Strengthen disclosure requirements and enforcement at the level of individual SOEs. Although SOEs are generally subject to financial disclosure requirements, such as submitting financial statements to a central authority for online publication, available evidence points to weaknesses in enforcement. Authorities should therefore monitor and assess enterprise compliance with existing reporting requirements and apply sanctions as relevant.20 At the same time, non-financial reporting requirements should be strengthened, particularly regarding public-service or other non-commercial obligations as well as sustainability issues. In line with the OECD SOE Guidelines, the state shareholder should develop a disclosure policy for SOEs, which may involve amending existing legal and regulatory requirements to address gaps. When designing the policy, authorities should consider SOEs’ capacity and size to avoid over-burdening smaller enterprises. Efforts to improve non-financial disclosure could focus on: (i) public reporting on the delivery and funding mechanisms of any public service obligations or other non-commercial objectives; (ii) sustainability-related reporting aligned with international standards, at least for SOEs with significant environmental or societal impacts; and (iii) enhanced disclosures on corporate governance, including board composition.
A level playing field between SOEs and private enterprises is vital for promoting market efficiency and safeguarding the effective use of public resources. Comparable competitive conditions can help drive better performance and prevent market distortions that may arise from preferential treatment or uneven regulatory burdens.
SOEs have accumulated significant arrears, often reflecting broader operational inefficiencies that lead to market-distorting state support.
As of June 2024, SOEs accounted for 67% of all tax arrears in Bosnia and Herzegovina (European Commission Delegation to Bosnia and Herzegovina, 2024[1]).21 The accumulation of significant tax and social security arrears by SOEs distorts market competition, weakens the social benefits system and puts a strain on fiscal resources. Although the authorities have committed through the Economic Reform Programme to reducing these arrears, they have not yet defined a baseline or set concrete targets to allow for effective monitoring of progress.
These payment arrears are not an isolated issue but rather reflect broader operational inefficiencies in SOEs, which often create liquidity challenges that require direct budgetary support to sustain the enterprises. In 2023, SOEs held by the entity-level governments collectively generated negative returns on both capital and assets (-1% and -0.5%, respectively), underscoring public authorities’ failure to realise value from their investments (European Commission Delegation to Bosnia and Herzegovina, 2024[1]). While portfolio performance metrics were more promising in RS (3.3% return on capital and 2.4% return on assets), about half of RS-portfolio SOEs were nonetheless loss-making in 2023 (European Commission Delegation to Bosnia and Herzegovina, 2024[1]). More recent data provided by the Financial Intelligence Agency (FIA) of the FBiH suggest continued sub-optimal SOE performance: as of 2024, among 52 companies with some level of ownership by the Government of FBiH,22 the average returns were -1.6% on equity and -0.8% on assets. The exclusion of a large state minority-owned company (ArcelorMittal) from the analysis leads to slightly improved, but nonetheless negative, returns of -0.4% on equity and -0.2% on assets.
A comprehensive understanding of the root causes of SOEs’ underperformance, which could inform efforts to address operational shortcomings, is lacking. Excessive wage costs may be a factor, although up-to-date data are unavailable. In 2017, average salaries in SOEs were approximately 40% higher than in the private sector, despite lower productivity, with revenue per worker in SOEs estimated to be 8% lower (IMF, 2019[2]). Other contributing elements likely include public-service obligations or other non-commercial objectives that are insufficiently compensated by the state and are instead partially subsidised through commercial earnings (i.e. cross-subsidised). However, assessing the impact of these obligations is challenging because (i) non-commercial objectives are typically not systematically reflected in financial statements and (ii) authorities have yet to identify their nature or associated costs or ensure funding from the state budget. Ultimately, addressing SOEs’ significant arrears requires tailored, enterprise-specific measures to boost operational efficiency, potentially including restructurings, to enable sustainable debt repayment.
Bosnia and Herzegovina has not fully aligned its legislation or practices with EU rules prohibiting competition-distorting state aid.
EU rules prohibit state support to undertakings (which would include both private and state-owned companies) that distorts fair competition, subject to clearly defined exemptions, notably for companies that perform “services of general economic interest.” To ensure compliance, all planned State aid above a certain threshold must be notified to the European Commission in advance for an ex-ante examination. Many EU member states have established dedicated state aid councils to co-ordinate monitoring and notification procedures and to maintain national databases of all planned and approved State aid. Similarly, Bosnia and Herzegovina has a state-level State Aid Council responsible for monitoring and reporting on state aid. In both the FBiH and RS, entity-level Decrees require that any planned state aid must be pre-notified to the Council via standard templates.
However, several challenges remain. As of September 2025, the state-level Law on State Aid had not yet been amended to align voting procedures with the EU acquis. The European Commission found that the Council’s current use of ethnicity-based decision-making procedures are incompatible with EU State aid rules (European Commission, 2024[3]). Limitations in enforcement capacity were also flagged: the State Aid Council’s secretariat has only seven full-time employees and convenes only once or twice per month.23 These legal and institutional weaknesses, together with the routine provision of state subsidies without clear pre-conditions or ex-ante scrutiny, illustrate significant scope to strengthen oversight of state support to SOEs.24
Public procurement rules may disadvantage SOEs.
The application of public procurement rules to SOEs operating primarily on a commercial basis in competitive markets may distort the level playing field. Under the state-level Law on Public Procurement, any legal person “under government control” (including all enterprises with at least 50% state ownership) is defined as a public “contracting authority” and must apply its procedures when procuring goods and services. While these rules aim to promote transparency, competition and the responsible use of public funds, they can also inadvertently place SOEs at a competitive disadvantage by subjecting them to burdensome procedures not required of private firms.
In general, the OECD SOE Guidelines are not prescriptive regarding whether public procurement rules should apply to SOEs. Instead, they emphasise the importance of ensuring that “SOEs and their potential suppliers or competitors are not subject to undue advantages or disadvantages” (OECD, 2024[8]). They also recommend that “in cases where an SOE is fulfilling a governmental purpose […] the SOE should adopt government procurement procedures in line with best practices (OECD, 2024[8]). According to the RS authorities, the draft Law Amending the Law on Public Enterprises could, if adopted, partially mitigate these concerns by stipulating that SOEs performing market activities for the purpose of making a profit would not be considered “contracting authorities” subject to the rules set forth in the Law on Public Procurement. Implementation of these provisions is expected to be supported by a functional classification of SOEs into commercial, non-commercial and mixed purpose entities, to be set forth in the ownership policy currently under development in RS.
Way forward
Ensure that SOE databases, recommended under Section 3, include up-to-date, enterprise-specific information on tax and social security arrears. Addressing SOEs’ outstanding debts must be part of SOE reforms, take into account the operational realities and challenges of each enterprise and include adequate enforcement measures. A first step is to clearly identify and track these arrears within the context of broader efforts to establish a stronger central monitoring system. Depending on the capacity of the foreseen SOE monitoring bodies, initial efforts could first focus on a subset of SOEs, such as those with the largest outstanding debts, before expanding coverage over time.
Establish a baseline and targets for reducing arrears. Building on the database of enterprise-specific arrears, authorities should define a baseline for total arrears across the SOE portfolio and set quantitative targets to monitor progress in reducing them over time.
Clarify the nature and costs of SOEs’ public service obligations and other non-commercial objectives. A comprehensive mapping of these objectives is needed to better understand their nature, associated costs and impact on individual SOEs’ performance, and to ensure SOEs are adequately compensated for related activities.
Define and monitor financial and non-financial performance objectives for SOEs. Authorities should establish clear financial and non-financial performance objectives for all individual SOEs. These objectives could be communicated through enterprise-specific “letters of expectation,” which are formal documents that define the state’s priorities and expectations for SOE boards. Formalising expectations through such documents can help to safeguard board autonomy and prevent ad hoc government intervention in SOE operations. To pilot the approach, relevant authorities may begin by issuing letters of expectation for a small number of strategically important SOEs before expanding coverage across the broader portfolio. Box 1.6 provides an example from New Zealand of the content of a letter of expectation for a state-owned airport.
In New Zealand, state shareholder expectations are regularly enshrined in Letters of Expectation sent from shareholding entities to enterprise boards. The Letter of Expectation for Hawke’s Bay Airport includes the following elements:
Establishes a mechanism for implementation, notably requesting that the SOE identifies opportunities to address the state’s formal expectations through Strategic Issues Letter and by including planned related actions in the SOE’s business planning documents
Outlines overarching Government priorities, including raising national productivity, growth and prosperity for all New Zealanders and improving the “efficiency and effectiveness of the public service and of government-funded services”. Also references plans for the responsible minister to develop statements of the Government’s purpose for owning individual companies.
Sets forth specific expectations for Hawke’s Bay Airport, including to: focus on core business objectives and performance improvement; maintain efficient capital allocations; adapt and innovate to keep the SOE fit-for-purpose; link executive remuneration to outcomes; and deliver a commercial return and represent a value-for-money investment for the state as owner.
References the more broadly applicable Treasury’s Owner’s Expectations document, which outlines expectations applicable to all SOEs regarding boards of directors, transparency as well as financial and other performance metrics.
Source: (New Zealand Treasury, 2024[18]).
Integrating sustainability goals into policies guiding both public authorities and SOEs is essential for ensuring policy coherence and effectively supporting Bosnia and Herzegovina’s low-carbon transition. By aligning the state owner’s expectations of its SOE portfolios with these objectives, authorities can guide SOEs to contribute to broader national environmental objectives and promote sustainable practices across critical sectors.
Authorities have not elaborated general sustainability expectations for SOEs, reflecting the broader absence of state ownership policies to clarify owner expectations.
International good practice acknowledges the critical role that SOEs can play in advancing the low-carbon transition. The 2024 update to the OECD SOE Guidelines notably introduced new recommendations regarding the integration of sustainability goals into state ownership policies practices. The OECD SOE Guidelines recommend that “where the state has sustainability goals, the state as owner should set concrete and ambitious sustainability-related expectations for SOEs, including on the role of the board, disclosure and transparency and responsible business conduct” (OECD, 2024[8]).
In Bosnia and Herzegovina, authorities have yet to establish formal expectations regarding SOEs’ sustainability-related impacts and actions, largely due to the broader absence of state ownership policies that outline clear owner expectations. While some entity-level policies or programmes may set general economic sustainability targets, there is room to make the connection to SOEs more explicit. For example, the FBiH Government Work Programme for 2025 includes targets for increasing the share of renewable energy in total consumption but does not address sustainability goals specifically for SOEs, although it does feature objectives related to SOE restructuring and privatisation.
This lack of sustainability expectations is particularly significant given the prevalence of SOEs in sectors with high environmental impacts, such as energy production, mining and manufacturing, in Bosnia and Herzegovina. In 2023, SOEs (including those at sub-entity levels) accounted for an estimated 77% of total employment in the energy sector and 80% in the mining sector, positioning them as key actors in these high carbon-emitting industries (European Commission Delegation to Bosnia and Herzegovina, 2024[1]). Furthermore, many SOEs operate in the manufacturing sector, accounting for 28% of entity-level SOEs by number.25 While these SOEs can pose significant potential environmental risks, they also present an opportunity for the state to lead by example. Through its ownership, the state can set expectations for “its” SOEs to operate in a responsible and sustainable manner, such as by investing in renewable energy sources and gradually phasing out high carbon-emitting operations.
Efforts are underway to raise awareness and build capacity for stronger corporate sustainability reporting in line with EU standards.
Currently, SOEs in Bosnia and Herzegovina are not required to adhere to robust standards of corporate sustainability reporting, limiting their accountability to the public for their sustainability performance. Efforts to align legislation and practices with evolving EU sustainability reporting rules are underway. For example, two conferences held in autumn 2024 aimed to raise awareness of corporate sustainability reporting frameworks, with a particular focus on SOEs. These discussions highlighted that corporate reporting on environmental, social, and governance (ESG) issues remains voluntary and relatively limited in Bosnia and Herzegovina, which contrasts with EU’s regulations that establish mandatory sustainability reporting requirements for certain companies (Centre for Financial and Sustainability Reporting Reform, 2024[19]). In particular, under EU rules, large companies are required, starting in financial year 2024, to annually disclose information on their social and environmental risks and impacts in line with the EU Sustainability Reporting Standards, although the recent EU Omnibus Directive allows for delayed implementation for some companies (European Commission, 2023[20]; European Parliament, 2025[21]). Moving forward, EU companies operating in selected sectors, such as oil and gas, mining, road transport and energy production, will also need to align with sector-specific standards as part of the gradual shift towards more comprehensive sustainability reporting.
Way forward
Incorporate sustainability goals into state ownership policies and practices. As authorities take steps to clarify and formalise their expectations of SOEs, particularly through the development of state ownership policies (as recommended under Section 2), they should ensure that these policies reflect broader national objectives related to sustainable development, including related international commitments. International good practice calls for the state as an owner to elaborate concrete and ambitious sustainability-related goals for SOEs. Box 1.7 illustrates how Sweden incorporates sustainability expectations into its state ownership policy.
Include SOEs with significant environmental impact in the scope of any new corporate sustainability reporting legislation. When updating legislation to align with the EU acquis, authorities should ensure that SOEs, particularly those operating in high carbon-emitting sectors such as mining, energy production and manufacturing, are explicitly included in the scope of the new requirements.
Set and monitor sustainability targets for individual SOEs. General sustainability expectations for the SOE portfolio should be translated into targets that can be tracked over time and are tailored to the operations and impacts of specific companies. These targets should be included in enterprise strategies or other relevant documents (such as business plans) that communicate enterprises’ plans to the state shareholder. Authorities might consider prioritising a subset of SOEs with the greatest environmental impacts. Box 1.7 provides an illustrative example of how the Swedish state communicates sustainability-related expectations for its SOE portfolio, demonstrating how these are reflected in the corporate strategy and reporting practices of the state-owned power company Vattenfall.
The Swedish approach to integrating sustainability goals into state ownership practices and SOE operations can be summarised as follows:
1. Integration of sustainability expectations into the state ownership policy
The Swedish state ownership policy sets clear and ambitious expectations for SOEs’ sustainable operations: of seven overarching owner expectations, one is that “state-owned enterprises generate sustainable value creation.” The state ownership policy elaborates that this requires operating in a way that promotes sustainable development, observing relevant international agreements and commitments and paying particular attention to environmental issues, social issues and corporate social responsibility.
The state ownership policy establishes that enterprise targets related to environmental sustainability must be relevant to enterprise operations and “scientifically based.” Boards of directors are specifically tasked with “establishing overarching strategic targets for sustainable value creation.”
2. Integration of sustainability goals into enterprise strategic goals, operations and reporting: Example of Vattenfall
The state’s sustainability expectations are integrated into enterprises’ strategic goals, operations and reporting practices.
The practices of the state-owned power company Vattenfall offer an illustrative example. Vattenfall’s corporate strategy includes five strategic goals, two of which are related to reducing environmental impacts, namely “securing a fossil-free energy supply” and “driving decarbonisation.” Vattenfall establishes detailed targets related to these strategic goals and conducts comprehensive reporting on their achievement in its Annual and Sustainability Report, for example reporting on reductions in carbon emissions and on the specific implemented and planned actions to reduce emissions, such as through the closure of coal-based power plants.
References
[15] Agency for Monitoring and Evaluation of Performance of Public Enterprises (2025), Dashboard, https://amepip.gov.ro/en/tablou-de-bord/ (accessed on 24 June 2025).
[19] Centre for Financial and Sustainability Reporting Reform (2024), , https://cfrr.worldbank.org/news/bosnia-and-herzegovina-strengthening-corporate-governance-sustainability-reporting-and.
[3] European Commission (2024), Bosnia and Herzegovina 2024 Report, https://enlargement.ec.europa.eu/document/download/451db011-6779-40ea-b34b-a0eeda451746_en?filename=Bosnia%20and%20Herzegovina%20Report%202024.pdf (accessed on 17 February 2025).
[20] European Commission (2023), The Commission adopts the European Sustainability Reporting Standards, https://finance.ec.europa.eu/news/commission-adopts-european-sustainability-reporting-standards-2023-07-31_en (accessed on 14 May 2025).
[1] European Commission Delegation to Bosnia and Herzegovina (2024), State footprint in the economy of Bosnia and Herzegovina: Analysis of SOEs portfolio.
[21] European Parliament (2025), Sustainability and due diligence: MEPs agree to delay application of new rules, https://www.europarl.europa.eu/news/en/press-room/20250331IPR27557/sustainability-and-due-diligence-meps-agree-to-delay-application-of-new-rules.
[16] Government of Republika Srpska (2025), Aggregated Report On The Status In Specially Supervised Areas Public Enterprises in 2022 and 2023, https://vladars.rs/sr-SP-Cyrl/Vlada/Sekretarijat/odkordjp/izvjestaji/Pages/default.aspx (accessed on 29 August 2025).
[13] Government of Republika Srpska General Secretariat (2025), , https://vladars.rs/sr-SP-Cyrl/Vlada/Sekretarijat/odkordjp/izvjestaji/Pages/default.aspx.
[9] Government of RS (2025), Government Work Programme for 2025, General Secretariat of the Government, Banja Luka, https://vladars.rs/sr-SP-Cyrl/Documents/Program%20rada%20Vlade%20za%202025.%20godinu.pdf (accessed on 30 October 2025).
[6] Government of the Federation of Bosnia and Herzegovina (2025), Work Programme of the Government of the Federation of Bosnia and Herzegovina for 2025.
[4] Government of the Republika Srpska (2024), Economic Reform Programme of Republika Srpska (in Serbian language), https://www.narodnaskupstinars.net/?q=la/akti/ostali-akti/program-ekonomskih-reformi-republike-srpske-za-period-2024%E2%80%922026-godine (accessed on March 2025).
[22] Government Offices of Sweden (2025), State Ownership Policy 2025, https://www.government.se/reports/2025/04/state-ownership-policy-2025/#:~:text=State%2Downed%20enterprises%20have%20to,governance%20of%20state%2Downed%20enterprises.
[25] IMF (2019), Reassessing the Role of State-Owned Enterprises in Central Eastern and Southeastern Europe, https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2019/06/17/Reassessing-the-Role-of-State-Owned-Enterprises-in-Central-Eastern-and-Southeastern-Europe-46859.
[2] IMF (2019), State-Owned Enterprises in Bosnia and Herzegovina: Assessing Performance and Oversight, International Monetary Fund, https://www.imf.org/en/Publications/WP/Issues/2019/09/20/State-Owned-Enterprises-in-Bosnia-and-Herzegovina-Assessing-Performance-and-Oversight-48621 (accessed on 13 May 2025).
[14] Judicial Commission of the Brčko District of Bosnia and Herzegovina (2025), e-Register of Business Subject in the Brčko District of Bosnia and Herzegovina, https://bizreg.osbd.ba/.
[18] New Zealand Treasury (2024), Shareholder Expectations Letters 2024/25 Information Release, https://www.treasury.govt.nz/publications/information-release/shareholder-expectations-letters-2024-25-information-release (accessed on 24 June 2025).
[26] Odgovorno (2025), Public Companies (in local language), https://odgovorno.ba/registar-javnih-preduzeca/.
[8] OECD (2024), OECD Guidelines on Corporate Governance of State-Owned Enterprises 2024, OECD Publishing, https://doi.org/10.1787/18a24f43-en.
[10] OECD (2024), Ownership and Governance of State-Owned Enterprises 2024, OECD Publishing, Paris, https://doi.org/10.1787/395c9956-en.
[5] OECD (2024), Western Balkans Competitiveness Outlook 2024: Bosnia and Herzegovina, Competitiveness and Private Sector Development, OECD Publishing, Paris, https://doi.org/10.1787/82e0432e-en.
[17] OECD (2022), Monitoring the Performance of State-Owned Enterprises: Good Practice Guide for Annual Aggregate Reporting, OECD Publishing, Paris, https://doi.org/10.1787/7f0b1554-en.
[7] OECD (2021), Competitiveness in South East Europe 2021: A Policy Outlook, Competitiveness and Private Sector Development, OECD Publishing, Paris, https://doi.org/10.1787/dcbc2ea9-en.
[11] Transparency International (2018), Good Governance of Public Enterprises in Bosnia and Herzegovina, https://ti-bih.org/wp-content/uploads/2022/04/Dobro-upravljanje-u-javnim-preduzecima-u-BiH-.pdf.
[12] U.S. Department of State (2025), 2022 Investment Climate Statements: Bosnia and Herzegovina, https://www.state.gov/reports/2022-investment-climate-statements/bosnia-and- herzegovina/#:~:text=Bosnia%20and%20Herzegovina%20(BiH)%20is,under%20the%20indue %20influence%20of.
[24] Vattenfall (2025), Vattenfall Annual and Sustainability Report 2024, https://group.vattenfall.com/globalassets/com/sustainability/vattenfall-annual-and-sustainability-report-2024.pdf.
[23] Vattenfall (2025), Vattenfall: Our Targets, https://group.vattenfall.com/about-us/strategy/our-targets.
The information contained in this chapter relates to the situation as of end-July 2025, including as regards ongoing legislative reforms.
In this respect, it bears highlighting that, as of end-July 2025, a Draft Law on Amendments to the Law on Public Enterprises had been submitted for public comment in Republika Srpska (RS) but, according to publicly available information, had not yet been adopted by the National Assembly. While this report references the Draft Law throughout, no attempt has been made to comprehensively assess its content given that a final version had not been adopted at the time of writing.
In the Federation of Bosnia and Herzegovina (FBiH), the Government Work Plan foresees amendments to the FBiH Law on Public Enterprises, reportedly planned for 2025, which were not at a sufficiently advanced stage to assess at the time of writing. Concerning data on the SOE landscape, this report has not sought to undertake a comprehensive SOE data collection exercise, but relies on publicly available information.
The chapter focuses on SOEs held by the entity-level governments of the FBiH and RS, with limited coverage of the Brčko District’s SOEs due to the general lack of publicly available information. SOEs held at the sub-entity level (by cantons, cities and other municipalities) are not included in the scope of the chapter, in line with the Draft Economic Reform Agenda’s focus on entity-level SOEs.
The report generally employs the internationally recognised terminology set forth in the OECD Guidelines on Corporate Governance of State-Owned Enterprises (OECD SOE Guidelines) to refer to SOEs and their ownership entities, rather than local terminology. In particular, the term “state-owned enterprise (SOE)” is used instead of the terms “publicly-owned enterprise (POE)” or “public enterprise” employed in legal acts in BiH. Additionally, the term “state ownership entity” is used throughout and refers to the entity-level authorities responsible for exercising ownership rights (not the BiH state-level authorities).
← 1. As outlined in Annex 1.A, consistent with the OECD SOE Guidelines, this chapter employs the term “state-owned enterprises (SOEs)” to refer to enterprises majority-owned or otherwise effectively controlled by the entity-level authorities in BiH. In both the FBiH and RS, such enterprises are generally referred to as “publicly-owned enterprises (POEs).”
← 2. The wage differential figure should be interpreted with some caution since, as the authors of the underlying regional analysis report in (IMF, 2019[25]), the analysis does not control for other elements impacting wages, such as employee educational level and skills mix. The authors of the aforementioned report nonetheless conclude that these elements are unlikely to account for the entire wage differential.
← 3. The original draft Reform Agenda included a seventh priority related to the establishment of a public-private partnership for the management of airport infrastructure. This area was considered outside of the scope of the current report, which focuses on the broader SOE governance framework.
← 4. Information on how ownership rights are exercised in Brčko District was not available to the authors.
← 5. The RS Share Fund is managed by the Investment-Development Bank of RS and is the shareholding entity for all entity-level SOEs that are not 100% state-owned.
← 6. The RS authorities have reported, in the context of this report, that at the proposal of the relevant line ministries, the Government appoints Share Fund representatives in the enterprises majority-owned by the Share Fund.
← 7. More information on Bosnia and Herzegovina’s EU accession process is available online here: https://enlargement.ec.europa.eu/enlargement-policy/bosnia-and-herzegovina_en. The European Commission’s 2019 Opinion on BiH’s application for EU membership called on BiH to “de-politicise and restructure public enterprises and ensure transparency of privatization processes”.
← 8. The FBiH Government Work Plan for 2025 specifically references planned updates to the Regulation on the Exercise of Authorities in Companies with State Capital Participation, with respect to the foreseen strengthening of SOE monitoring units.
← 9. The Work Programme of the Government of the Federation of Bosnia and Herzegovina foresees that amendments to the Law on Public Enterprises be adopted in 2025 (see here: https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Ffbihvlada.gov.ba%2Fuploads%2Fdocuments%2Fprogram-rada-vfbih-za-2025-bos_1740403269.docx&wdOrigin=BROWSELINK).
← 10. The Law on Public Enterprises in the Brčko District applies to enterprises that “perform activities of general interest in energy, utility services and other activities, which the Assembly of the Brčko District of BiH designates as such”, based on a version of the Law available here: https://www.paragraf.ba/propisi/brcko/zakon-o-javnim-preduzecima-u-brcko-distriktu-bosne-i-hercegovine.html. In RS, the Law similarly defines the SOEs in its scope as those undertaking “activities of general interest”, as separately defined in sector-specific laws e.g. in mining, energy and transport. In FBiH, the Law on Public Enterprises similarly applies to SOEs performing “activities of public social interest energy, communications, utility services, management of public assets and other activities of public social interest” or otherwise defined as “public enterprises” subject to the Law, via a dedicated regulation.
← 11. It is possible that the legislation establishing specific SOEs may define the rationales for state ownership, but undertaking an assessment of such enterprise-specific legislation goes beyond the scope of this report.
← 12. The authors have not undertaken to assess alignment of the Law on Public Enterprises of Bulgaria against international standards, or to examine its implementation. Key elements of the Law are provided purely as an illustrative international example.
← 13. These include, most recently, a comprehensive review of SOE portfolios and performance undertaken by the European Commission Delegation to Bosnia and Herzegovina in 2024, a study of similar scope undertaken by the IMF in 2019 and a public database of SOEs created by Transparency International. See: (European Commission Delegation to Bosnia and Herzegovina, 2024[1]; IMF, 2019[2]; Odgovorno, 2025[26]).
← 14. In the Draft Law on Amendments to the Law on Public Enterprises of RS, Article 17a, “Availability of Information on Operations,” stipulates that (i) a public enterprise shall enter information on its operations into the information system accurately and in a timely manner and (ii) a public enterprise shall make information on its operations, including financial indicators, information about the organisational structure and other information relevant for the operations of the public enterprise, available to the public no later than 30 days from the date of their creation, via its website or in another appropriate manner. This solution has the potential to strengthen the transparency of SOE operations and related oversight.
← 15. This is based on report’s description in RS’s Economic Reform Programme. RS authorities have reported in the context of this report that a 2024 edition of the Report on Fiscal Risks was adopted in the third quarter of 2025.
← 16. The previous existence of a public list of SOEs in FBiH was reported in IMF (2019), but the link provided in the report directs to a restricted website of the Financial Information Agency (FIA) only accessible to users with an account.
← 17. The RS business registry agency’s website, which includes a section entitled “register of public enterprises”, can be accessed here: https://www.apif.net/index.php?option=com_content&view=article&id=92:registar-javnih-preduzeca&catid=21:registri&Itemid=141&lang=en.
← 18. According to IMF, Laws on Audit and Accounting in each entity require all SOEs to send their financial statements, respectively, to the FBiH Financial-Intelligence Agency and the RS Agency for Intermediary, IT and Financial Services, within two months from the end each reporting year (IMF, 2019[2]).
← 19. SOEs incorporated as limited-liability or joint-stock companies would be subject to the same non-financial reporting requirements as privately owned companies, but a review of this type of broadly applicable corporate reporting legislation goes beyond the scope of the current report.
← 20. Although not addressed in detail in this background report, it should be noted that international good practice calls for the state to ensure that SOEs’ financial statements be subject to external (commercial) audits assessing the extent to which they faithfully represent the companies’ financial situation.
← 21. Calculation based on the top 100 debtors in both FBiH and RS.
← 22. It is important to note that minority-owned companies are included in this figure.
← 23. Information provided via consultations with state-level government representatives in the context of this report’s development.
← 24. Information on state aid regulations applicable in the FBiH is available on the website of the Ministry of Finance here: https://www.fmf.gov.ba/Content/Read/drzavna-pomoc.
← 25. Existing research consulted for this report did not estimate the share of SOEs in Bosnia and Herzegovina’s manufacturing sector.