First meeting of the EU-Bosnia and Herzegovina Stabilisation and Association Council (Brussels, 11 December 2015)

STABILISATION AND ASSOCIATION BETWE THE EUROPEAN UNION AND BOSNIA AND HERZEGOVINA The Stabilisation and Association Council Brussels, 7 December 2015 UE-BA 3856/15 COVER NOTE Subject: First meeting of the EU-Bosnia and Herzegovina Stabilisation and Association Council (Brussels, 11 December 2015) Delegations will find attached the position paper of Bosnia and Herzegovina tabled on the occasion of the 1st meeting of the Stabilisation and Association Council between the European Union and Bosnia and Herzegovina. UE-BA 3856/15 1

The first meeting of the Stabilisation and Association Council between Bosnia and Herzegovina and the European Union Bosnia and Herzegovina Position Paper on the Stabilisation and Association Process Brussels, 11 December 2015 UE-BA 3856/15 2

1. Introduction Bosnia and Herzegovina is committed to the principles, values and objectives that underpin the European Union and the EU membership is its strategic objective. Bosnia and Herzegovina and its citizens are determined to become an integral part of the European social, political and economic structures. In line with the renewed approach of the European Union towards Bosnia and Herzegovina in the conclusions of the EU Foreign Affairs Council of 15 December 2014 and its unequivocal commitment to Bosnia and Herzegovina's EU perspective, the country's authorities have resolutely embarked on the path of reforms. On 29 January 2015, the Presidency of Bosnia and Herzegovina signed the Joint Statement on the commitment to undertake the necessary reforms in the EU accession process. On 23 July 2015, the Master Plan of the integration of Bosnia and Herzegovina into the European Union was adopted. The Joint Statement of the Presidency of Bosnia and Herzegovina was adopted by the Parliamentary Assembly of Bosnia and Herzegovina on 23 February 2015. Consequently, all levels of government in Bosnia and Herzegovina, including the Council of Ministers, the Entity governments, the government of the Brčko District of BiH and cantonal governments adopted a comprehensive set of social, economic and judicial reforms in July 2015 - the Reform Agenda of Bosnia and Herzegovina for the period 2015-2018. In October 2015, the Action Plan for its implementation was adopted. The Reform Agenda and the Action Plan represent a response to the legitimate requests and interests of citizens and civil society. They contain proposals that have been developed in the framework of the Compact for Growth and Jobs. The Reform Agenda is implemented at anticipated pace and within the set deadlines. UE-BA 3856/15 3

In order to establish a more efficient coordination among the institutions, the Council of Ministers of BiH appointed a new team in June 2015 to draft a paper on the coordination mechanism in the process of European integration. Subsequently, in July 2015, the Council of Ministers of BiH endorsed a Conclusion adopting the Decision on the coordination mechanism which had been submitted to the Council of Ministers of BiH for adoption in 2013. The Conclusion stipulated the commitment of the Council of Ministers of BiH to align the Decision with the Stabilisation and Association Agreement. The Conclusion states that the Decision on the system of coordination of the European integration process in Bosnia and Herzegovina will take effect after the obligation of alignment with the Stabilisation and Association Agreement has been fulfilled, fully agreed upon and adopted by the Council of Ministers of Bosnia and Herzegovina, the governments of the Federation of Bosnia and Herzegovina and of the Republika Srpska. The process of agreeing on the said paper is under way. Looking ahead, the Council of Ministers of BiH adopted the Information on the preparedness of Bosnia and Herzegovina to submit an application for EU membership, which contained the guidelines for further action to address the requirements set out in the Conclusions of the Foreign Affairs Council in December 2014, March and October 2015. An action plan has also been developed on preparation for the Questionnaire of the European Commission. Along with a new approach to the EU membership, the perspective of Bosnia and Herzegovina was further reinforced with the entry into force of the Stabilisation and Association Agreement on 1 June 2015. Bosnia and Herzegovina is aware of the obligations assumed under this Agreement and it is fully committed to their fulfilment. UE-BA 3856/15 4

Bosnia and Herzegovina has already outlined its commitment to the EU membership in a number of key documents, such as the Declaration on Special Relations with EU from 1998, Decision of the Council of Ministers of BiH on the initiative for the accession of Bosnia and Herzegovina to the EU from 1999 and the Resolution of the Parliamentary Assembly of BiH on European integration and the Stability Pact for South Eastern Europe, also from 1999. Furthermore, in 2003, the Parliamentary Assembly of BiH adopted the Conclusion on the full political consensus that EU membership was a top priority. In addition, the Presidency of Bosnia and Herzegovina set out General directions and priorities for the implementation of the foreign policy of Bosnia and Herzegovina in 2003, according to which the basic principles and activities of Bosnia and Herzegovina included further approximation and institutionalization of the relations with the European Union in accordance with the Stabilization and Association Process. Bosnia and Herzegovina has been approaching the EU for the past 15 years. Since the launch of the Stabilisation and Association Process in 1999, Bosnia and Herzegovina embarked on the fulfilment of the EU Road Map requirements in 2000 in order to commence a feasibility study in 2003. It included the answers to the questions from the EC for the opening of negotiations for the conclusion of the Stabilisation and Association Agreement with the EU. The SAA negotiations began in late 2005. The Agreement was initialled at the end of 2007 and signed on 16 June 2008 in Luxembourg. The Interim Agreement on trade and trade-related matters entered into force on 1 July 2008. In 2008, the Parliamentary Assembly of BiH adopted the Resolution on accelerating the process of accession of Bosnia and Herzegovina to the European Union. The dialogue between Bosnia and Herzegovina and the European Union has taken place through joint EU-BiH bodies to monitor the implementation of the Interim Agreement and the SAA, namely the Interim Committee for Stabilization and Association with six sub-committees, and the Structured Dialogue on Justice. In February 2008, Bosnia and Herzegovina signed the Framework Agreement with the European Union on the rules for cooperation concerning EC financial assistance to BiH under the Instrument for Pre-Accession Assistance (IPA). In January 2014, the EU introduced a new Instrument for Pre- Accession Assistance - IPA II for the period 2014-2020. In August 2015, the Framework Agreement on the arrangements for the implementation of the Union's financial assistance to Bosnia and Herzegovina under the Instrument for Pre-Accession Assistance II -IPA II (2014-2020) came into effect. UE-BA 3856/15 5

An important milestone in the relations between Bosnia and Herzegovina and the European Union was the introduction of a visa-free regime for citizens of Bosnia and Herzegovina on 15 December 2010. Structured Dialogue on Justice between Bosnia and Herzegovina and the European Union was launched in 2011. One of the major initiatives of the EU was the High Level Dialogue on the Accession Process in 2012 when Bosnia and Herzegovina was presented the road map for the application for EU membership. The European Commission has published Bosnia and Herzegovina 2015 Report, which recognizes the progress made in the country. The authorities will begin to implement the recommendations from the report in order to accelerate the European integration process and to achieve the ultimate goal of BiH membership in the European Union, which is in the interest and for the benefit of its citizens. 2. Relations between the EU and Bosnia and Herzegovina, including relations in the framework of the Stabilisation and Association Process 2.1 Pre-accession strategy, especially in light of Bosnia and Herzegovina 2015 Report Political criteria According to the Enlargement Strategy 2014-2015, public administration reform is one of the fundamental pillars of the enlargement process. Hence, Bosnia and Herzegovina joined the process of applying SIGMA principles of public administration and participated in drafting the SIGMA baseline measurement report on the administration. Institutions at all levels participate in financing the projects in the field of public administration reform. The paper titled Basis for the Development of the Second Action Plan of the PAR Strategy is in the adoption process. It has been adopted by the Council of Ministers of BiH and the Government of the Brčko District of BiH. It determines the principles and steps for the development of the public administration reform strategy for the coming period. The Information about the method of development of the strategy has been adopted by the Council of Ministers of BiH, the Government of the Federation of BiH and the Government of the Brčko District of BiH. Its adoption by the RS Government is pending. UE-BA 3856/15 6

Bosnia and Herzegovina has become the 65th member of the Open Government Partnership. BiH has signed the Agreement on Participation in the Europe for Citizens Program 2014-2020. The competent authorities have co-funded the projects of civil society organizations aimed at implementing specific sectoral strategies and financing the programs of the civil society organizations themselves through public announcements. The authorities at all levels have cooperated with civil society organizations and the academic community in the framework of improving the administrative capacity programs. With a view to further building the rule of law in the country at all levels, the Justice Sector Reform Strategy in Bosnia and Herzegovina 2014-2018 was adopted. It had been drafted by the relevant authorities at all levels of government as well as NGOs. The Action Plan for the implementation of the strategy is being developed and it is expected to be adopted in December 2015. The EU assistance continued through the IPA programme aimed at reducing the backlog of war crimes cases and implementing the National War Crimes Strategy. Judicial reform has been carried out through continuous consultation with the EU within the Structured Dialogue on Justice. The conclusions of the EU Foreign Affairs Council are clear. Serious concern has been expressed about the preparations for holding an entity-level referendum on the state-level judiciary in the Republika Srpska and it has been noted that the outstanding shortcomings of Bosnia and Herzegovina judiciary should be addressed in the Structured Dialogue on Justice. New BiH Anti-Corruption Strategy 2015-2019 and the Action Plan for its implementation were adopted. Those had been developed by the relevant institutions at all levels of government, the academic community and relevant civil society organizations. Commitment to combat corruption in Bosnia and Herzegovina was demonstrated by the adoption of the Law on the Protection of Whistleblowers in the Institutions of Bosnia and Herzegovina in 2013. The State and Entity laws relating to the prevention of conflicts of interest are in force. The Federation of BiH adopted the Law on Combating Corruption and Organized Crime. The Anti-Corruption Strategy 2013-2017 and the related Action Plan provide for the strategic framework for the fight against corruption in the Republika Srpska. UE-BA 3856/15 7

Strategic framework for the fight against organized crime is defined by the Strategy for Combating Trafficking in Human Beings in BiH 2013-2015, the Strategy for Fight against Organized Crime in BiH 2014-2016 and the BiH Strategy for Prevention and Fight against Terrorism 2015-2020. Upon the adoption of the amendments, the Criminal Code of BiH is in compliance with the recommendations of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - Moneyval. The Council of Ministers of Bosnia and Herzegovina has confirmed its strategic commitment to fight against terrorism and organized crime by increasing the financial support to law enforcement agencies in the 2015 Budget, aimed at strengthening the administrative and technical capacities of the institutions in this field. In addition, working groups were formed and tasked to supervise the implementation of the measures set out in the Action Plan of the Financial Action Task Force (FATF). Task Force to Fight Terrorism has held a number of meetings, which unanimously confirmed its full commitment to fight against all forms of extremism and terrorism and set out further steps for strengthening institutional capacities. The Council of Ministers adopted the proposal of the Agreement on operational and strategic cooperation between Bosnia and Herzegovina and the European Police Office (EUROPOL) in September 2015. The FBiH Ministry of Internal Affairs and the FBiH Police Administration have started activities on signing the Agreement on mutual assistance and operational cooperation of police bodies in the FBiH in crisis situations with the cantonal ministries of internal affairs aimed at establishing a more efficient forms of cooperation in the fight against all forms of crime and improving the overall security situation. Bosnia and Herzegovina recognizes the importance of its obligation to implement the judgement of the European Court of Human Rights in the Sejdić-Finci case. In this regard, the Council of Ministers of Bosnia and Herzegovina on 8 September 2015 adopted the Action plan for the implementation of the European Court of Human Rights judgements in the case of Zornić v. Bosnia and Herzegovina and the case of Sejdić and Finci v. Bosnia and Herzegovina. It assigned the Ministry of Justice to prepare a draft Decision on the establishment of the Working Group for the preparation of proposals for constitutional amendments and harmonisation of the BiH Election Law. UE-BA 3856/15 8

In order to improve the situation of the largest minority people, the Roma, the BiH Strategy for Resolving the Issues of Roma is in force, and its principles have been incorporated in the Action Plan for Resolving the Issues of Roma in the areas of employment, housing and health care (adopted in 2008 and revised in 2013). The Strategy and action plans are being implemented in coordination with the European Commission and international organizations. In addition, the Roma Committee with the Council of Ministers of BiH includes the representatives of Roma and representatives of relevant institutions. Bosnia and Herzegovina has been continuously working to improve the situation in the field of human rights. BiH Law on Prohibition of Discrimination and BiH Law on Gender Equality are in force in Bosnia and Herzegovina. BiH Gender Action Plan 2013-2017 is a strategic document containing the objectives, programs and measures to achieve gender equality in all areas of life and work, both in public and private spheres. BiH ratified the Convention on preventing and combating violence against women and domestic violence and adopted the Framework strategy for implementation of the Convention for the period 2015-2018. The Action plan for children 2015-2018 was adopted providing for the implementation of the Convention on the Rights of Child. The Council for Children of BiH was established as professional, inter-agency, advisory and coordinating body of the Council of Ministers. Discrimination as a criminal offence has been defined under the criminal law of BiH, Entities and the Brčko District of BiH, which clearly indicates the commitment of BiH authorities to respect human rights of all of its citizens. The law includes the prohibition of discrimination on grounds of sexual orientation or gender identity. The Rulebook on the manner of collecting data on discrimination cases in BiH provides for adequate implementation of the law. Additional legislative anti-discrimination framework includes a set of Entities' laws (including regulations adopted at the cantonal level in the FBiH) in specific areas, which are based on the respect of anti-discrimination rights and protection against discrimination. Freedom of expression is guaranteed by the provisions of the Constitution of BiH, the Entity Constitutions and the Statute of the Brčko District of BiH. The legal framework regulating a free access to information has been in force as of 2000 and consists of state and Entity laws on free access to information. UE-BA 3856/15 9

Regional cooperation and good neighbourly relations are of the essential importance for Bosnia and Herzegovina. Regular meetings of the Western Balkans countries officials have been held, both at bilateral and multilateral gatherings, aimed at cooperation in various fields of common interest. The Council of Ministers has held several joint session with the Government of the Republic of Croatia, and in November 2015, the joint session with the Government of the Republic of Serbia was held for the first time. Bosnia and Herzegovina actively participates in the following regional initiatives: the South-East European Cooperation Process (SEECP), the Regional Cooperation Council (RCC), the Western Balkans Six initiative, the Energy Community Agreement, the Regional Initiative for Migration, Asylum, Refugees Regional Initiative (MARRI), the EU Strategy for the Adriatic-Ionian region (EUSAIR) and the Central European Initiative (CEI). Bosnia and Herzegovina has continued to play active role at the international level. It successfully completed its chairmanship of the Council of Europe's Committee of Ministers. Bosnia and Herzegovina adopted the National Action Plan for implementation of the Resolution 1540 of the United Nations Security Council on combating the proliferation of weapons of mass destruction and their means of delivery. Two rounds of negotiations on the text of the Additional Protocol 4 to the CEFTA agreement were held in 2015. Concerning accession to the WTO, the bilateral negotiations with certain member countries are underway. As for the liberalisation of the visa regime for citizens of Bosnia and Herzegovina travelling to the Schengen area, reforms introduced under the Roadmap for visa liberalization have been continuously implemented. Cooperation with Frontex in joint risk analysis has continued and implemented within the network of the Western Balkans Risk Analysis (WB-RAN). Further alignment of laws in Bosnia and Herzegovina with the EU law was achieved by adoption of a new Law on Asylum in October 2015, which transposed several EU directives, and a new Law on Foreigners in November 2015. UE-BA 3856/15 10

Bosnia and Herzegovina has taken appropriate actions in order to effectively cope with the refugee crisis that has engulfed Europe. The Council of Ministers adopted the Information on the estimates and possibilities of Bosnia and Herzegovina regarding the refugee crisis in the region and in the European Union. All the institutions and agencies are tasked to implement the measures defined in the Plan of urgent measures for the provision of additional capacities, control and management of large-scale influx of refugees to Bosnia and Herzegovina. Ministry of Security of Bosnia and Herzegovina and the Coordination Body for Migration Issues in BiH were tasked to monitor the implementation of the Plan of urgent measures in cooperation with other relevant institutions, and if necessary, to modify it and inform the Council of Ministers thereof. Ministry of Security is tasked to urgently analyse and propose to the Council of Ministers improvement of necessary regulations and procedures for receiving refugees, with the aim of timely technical and administrative response of the competent services and institutions in terms of proper registration of refugees. Economic criteria The BiH Council of Ministers adopted the Economic Reform Agenda for BiH and the Action Plan for the implementation of the Reform Agenda at all levels of government in Bosnia and Herzegovina. The Agenda includes significant reforms necessary for BiH's progress in the accession process, and is closely linked to the objectives of new EU economic governance. Thus, BiH will encourage the comprehensive structural reforms in order to maintain macroeconomic stability and foster growth and competitiveness. Given the broad set of the medium-term priorities covered by the Agenda, BiH adopted the accompanying Action Plan with the list of measures and plans for the second half of 2015 and first quarter of 2016, with the aim of translating priorities into initial concrete measures and actions to be prepared and implemented in the said period. Action Plan measures are being implemented at anticipated pace and within the set deadlines, and a number of measures have been implemented at all levels in the previous period. The following laws have been adopted at the state level: Law on Customs Policy and Amendments to the Criminal Code in order to comply with the recommendations of Moneyval. The Federation of BiH adopted the Labour Law, the Law on Companies, and the Law on Internal Payment System, while the Republika Srpska adopted the Law on Fiscal Responsibility, the Law and Amendments to the Law on Health Care, and the Law and amendments to the Law on Investment Funds. The first report on the level of implementation of the Action Plan is being prepared, along with updating the Action Plan for the purpose of harmonising deadlines and including the comments of the international financial institutions and the Delegation of the EU to BiH. UE-BA 3856/15 11

For labour market conditions to improve, BiH is undertaking steps related to adoption of the labour law. The Federation of BiH has already adopted the Labour Law, while the Republika Srpska has planned to adopt it by the end of 2015. In order to improve the business environment, which is one of the measures, in the next few months BiH plans to pass new laws in the financial sector aligned with the EU legislation and Basel requirements to reach the stability of the financial sector and improve the level of credit activity in the domestic financial market. The Law on Customs Policy has simplified customs procedures and enhanced foreign trade activities. According to the BiH 2015 Report of the European Commission, Bosnia and Herzegovina is at the early stage in developing a functioning market economy. Some progress has been made to improve the business environment, particularly on the ease of market entry and the granting of construction permits. Flood damages that hit BiH in 2014 did not substantially affected the economic growth. The institutions of Bosnia and Herzegovina are tasked to prepare the Economic Reform Programme for 2016-2018 (ERP 2016-2018), which represents an improved version of the Economic and Fiscal Program (EFP), submitted by the potential candidates for EU membership. The ERP sets out a medium-term macro-fiscal framework together with fiscal policy framework, including fiscal measures, and includes a comprehensive programme of structural reforms aimed at supporting country's growth and competitiveness. The first ERP was prepared for 2015 in February 2015 and submitted to the European Commission. The EC recommendations were discussed in the institutions of BiH and will be taken into account while developing the future ERP. The ERP covers the period from 2016 to 2018 and should be submitted to the European Commission not later than 31 January 2016. UE-BA 3856/15 12

Alignment with the EU legislation On the date of signing of the Stabilisation and Association Agreement (Article 70), Bosnia and Herzegovina assumed the obligation of gradual alignment of its legislation with the acquis in accordance with the programme to be agreed with the European Commission. Based on the experiences of the countries from the region (Republic of Croatia, Montenegro and Republic of Serbia), and with the assistance of EU project experts, utilised by Bosnia and Herzegovina to date, it was found that the Program of Integration of Bosnia and Herzegovina to the European Union (the PI) would serve as an appropriate instrument for the implementation of the obligations referred to under the Agreement, as well as a solid preparatory exercise for the fulfilment of obligations for the candidate status, i.e. development of the National Programme for the Adoption of the Acquis (NPAA). In accordance with its competences and pursuant to the conclusions of the Council of Ministers of BiH, the Directorate for European Integration has carried out key activities that were prerequisite for organisation and development of the PI programme (technical aspect). The activities carried out in cooperation with the EU experts under the technical assistance project relate primarily to the PI development methodology, defining the framework action plan for the PI development, defining the PI content structure and preparing the technical documentation for the information system to be used to monitor the PI's implementation. Given that the PI should serve as a comprehensive plan for the transposition of EU legislation into BiH legislation, all levels of government in BiH and their competent institutions should be involved in its development. Accordingly, a key prerequisite for development of the PI is to establish an improved coordination mechanism that would provide for the establishment of bodies consisting of all relevant representatives of competent institutions from all levels of government in BiH. UE-BA 3856/15 13

In the area of justice, BiH has adopted several important documents such as the Justice Sector Reform Strategy 2014-2018 and the Anti-Corruption Strategy 2015-2019. The European Commission stated in Bosnia and Herzegovina 2015 Report that BiH was at an early stage concerning the public administration reform. BiH is also at an early stage of approximation to the European standards. A certain level of preparedness has been reached in terms of public procurement, intellectual, industrial and commercial property rights, the internal market, customs and taxation, as well as the inclusion of Roma. Bosnia and Herzegovina is at an early stage in the transport sector, and the adoption of the Transport Policy is viewed as a positive step forward towards enabling Bosnia and Herzegovina to benefit from the Connectivity Agenda (interconnecting infrastructure in the Western Balkans). In May 2015, Bosnia and Herzegovina established the National Investment Committee in order to ensure relevant inter-institutional coordination in the planning and implementation of investment projects in transport, energy, environmental and social infrastructure. In addition, Bosnia and Herzegovina 2015 Report notes that BiH should make significant efforts in majority of areas as to align its legislation with the acquis even further. The Report also stresses the importance of implementing the adopted legislation given that the noted lack of implementation was likely due to non-systematic regulatory impact assessment. 2.2 Bilateral relations under the Stabilisation and Association Agreement Bosnia and Herzegovina is strongly committed to further development and strengthening of regular political dialogue with the EU on bilateral and international issues that are of mutual interest, including regional aspects and taking into account the EU Common Foreign and Security Policy (CFSP) in the spirit of the SAA provisions. As already mentioned, a preparatory meeting of the SAA Parliamentary Committee between the EU and BiH was held on 28 October 2015 in Strasbourg, while the first inaugural session was held on 5 and 6 November 2015 in Sarajevo. The participants of the first meeting did not agree on the Rules of Procedure in the part referring to decision-making in this joint body. An agreement was made that the following meeting should be held on 8 and 9 June 2016 in Strasbourg. The first meeting of the Stabilisation and Association Committee between the EU and BiH is expected to take place on 17 December 2015 in Brussels. UE-BA 3856/15 14

In terms of the Common Foreign and Security Policy, Bosnia and Herzegovina has been striving to align its foreign policy as much as possible with the EU foreign policy. As a result, the recent compliance with EU declarations and decisions of the Council of the EU was respected in 62% of cases. In determining and implementing the common positions on security and stability in Europe, Bosnia and Herzegovina has regularly consulted with the EU delegation and keeps joining the EU common positions via the Mission of Bosnia and Herzegovina to the OSCE in Vienna. The Framework Agreement on the participation of Bosnia and Herzegovina in EU crisis management operations has been signed. The EU, through its Military Operation EUFOR Althea, participates in the capacity building and training of the BiH Armed Forces. As an expression of institutional strengthening of relations between BiH and the EU under the Common Foreign and Security Policy, Bosnia and Herzegovina i.e. the city of Sarajevo hosted the Ministerial Forum EU-Western Balkans in the field of justice and home affairs on 7 and 8 December 2015. In this way, BiH has firmly joined the common positions on security and stability in Europe as well as the efforts to strengthen solidarity and cooperation in border management, the fight against organized crime, human trafficking and migrant smuggling. Following the adoption of the Action Plan on the implementation of UN Security Council Resolution 1325, the activities have started on development of the BiH strategy against proliferation of weapons of mass destruction. A fresh impetus has been given to regional cooperation of Bosnia and Herzegovina through the Berlin Process and the Western Balkan Six (WB6) initiative notably regarding the EU s connectivity agenda. The second Summit Meeting on the Western Balkans was held on 26 and 27 August 2015 in Vienna within the Berlin Process framework. In the text of the final declaration by the chair of the Vienna Western Balkans Summit, published on 27 August 2015, a strong political support was pledged to the European perspective of the Western Balkans, to addressing of bilateral and regional issues, financing and development of priority infrastructural projects to the purpose of regional connectivity, intensifying the countries' own efforts to address bilateral disputes and to the commitment to abstain from misusing outstanding issues in the EU accession process. The participants welcomed the signing of the Border Agreement between Bosnia and Herzegovina and Montenegro in the margins of the summit. The said Agreement has been sent to the ratification procedure. UE-BA 3856/15 15

Concerning regional cooperation with other countries that have signed the Stabilisation and Association Agreement and concluded bilateral conventions on regional cooperation pursuant to Article 15 of the Agreement, Bosnia and Herzegovina has initiated negotiations for the conclusion of agreements related to the EU accession process, between the Council of Ministers of BiH and the Government of Montenegro, the Government of the Republic of Macedonia and the Republic of Serbia. - Implementation of the SAA - State of Play Stabilisation and Association Agreement between European Communities and their Member States and Bosnia and Herzegovina entered into force on 1 June 2015, and for BiH it represents the main and the most important agreement establishing relations and cooperation with the EU. Bosnia and Herzegovina expresses its full committment to implementation of this Agreement, being the fundamental guidance for full EU membership. Until the entry into force of the SAA, the Interim Agreement on Trade and Trade-realated Matters between the European Community and Bosnia and Herzegovina was being applied, on the basis of which Bosnia and Herzegovina had progressively and fully liberalised its market for products originating from the EU over the interim period od five (5) years. Monitoring of the Interim Agreement implementation was conducetd by joint EU-BiH bodies, the Interim Committee and sub-committees, and through constant communication between the secretariats of these bodies facilitating the realisation of conclusions and recommendations adopted at the meetings, with the aim of proper and timely implementation of the Interim Agreement. In total seven (7) annual cycles of meeetings of the Interim Committee and subcommittees were held, which made a total of 50 formal meetings of these bodies. The meetings of the joint bodiesconfirmed that the implementation of trade provisions had been satisfactory and that there were no problems identified in free movement of goods. For the purpose of the SAA implementation, the European Union and BiH are currently establishing joint bodies to monitor implementation of this Agreement. UE-BA 3856/15 16

In the course of 2014 the trade with the EU slighly increased, especially given the low growth of export from BiH to the EU-28. The export to EU-28 increased only by 1.6%, while the import from the EU-28 grew by 4.8%. The main cause of export growth in the EU-28 lies within the fact that export to Croatia fell by 20%, while the export to Germany and Slovenia grew only by 0.5% and 1.6% respectively. A favorable circumstance was that the more significant growth rates were recorded in exports to some other important partners in the EU-28 (Italy 19.4%, Austria 9.9%). As for imports, the drop in import was recorded in Croatia, amounting 5.4%, while import from other important EU-28 partners is mostly above the average value of 6.8%. The EU is by far the largest trading partner of BiH, accounting for 72.1% of exports and 58.9% of imports. The EU is also a major investor in BiH, accounting for nearly 63% of the total foreign direct investments. Positive steps were made towards encouraging exports to the EU, in line with the recommendations of the Economic Reform Agenda, and in that sense the European Commission approved import into the EU of heat-treated milk and milk products from four BiH dairies. In addition, the European Commission Decision of July 2015 enabled export of potatoes from BiH into the European market. The Presidency had reviewed and analysed the progress in negotiations on the Protocol to the Interim Agreement on trade and trade-related matters between the European Communities, on the one hand, and Bosnia and Herzegovina, on the other hand, to take account of the accession of the Republic of Croatia to the European Union, as well as the conclusions of the EU Foreign Affairs Council of 16 April and 12 October 2015, in order to create conditions for submission of a credible application for membership. At its 14 th regular session, held on 28 October 2015, the Presidency adopted the conclusion requiring revision of the Basis for negotiations to conclude Protocol to the Stabilisation and Association Agreement, establishment of the new BiH negotiating position and proposal for the new composition of the delegation for negotiations. In June 2015 the Presidency of BiH adopted the Decision to extend the application of the Agreement to the Republic of Croatia, to be applicable from the date of entry into force of the Agreement to the date of application of the Protocol to the Agreement, in order to take account of the accession of the Republic of Croatia to the EU. UE-BA 3856/15 17

For the purpose of implementation of the said BiH Presidency conclusion, activities are underway related to the formation of a new delegation for negotiations, and development of draft amendments to the Basis for negotiations to conclude Protocol to the Stabilisation and Association Agreement between BiH and the EU, including draft of the amended BiH negotiating position. Upon consideration and adoption of the said documents by the Council of Ministers of BiH and the Presidency of BiH, the BiH delegation for negotiations will inform the European Commission, through competent BiH institutions, that conditions are met to continue with negotiations. - Financial Cooperation The EU Delegation to BiH is responsible for implementation of financial assistance programmes, as well as for ensuring coordination of assistance with the Member States. Implementation of the IPA National programmes for the period 2008-2013 is underway. IPA II Framework Agreement covering the 2014-2020 period in Bosnia and Herzegovina came into force in August 2015. Arround EUR 160 million was approved for the period 2014-2017, including over EUR 40 million for further flood recovery measures. In the absence of country strategies in many sectors, IPA II Country Strategy Paper is limited to the period 2014-2017 (the full IPA II period is 2014-2020) and to the following sectors: democracy and governance; rule of law and fundamental rights; competitiveness and innovation; local development strategies; education; employment and social policies. Within the IPA programming, a National IPA 2014 and IPA 2015 packages have been prepared, including the Sector Planning Documents (SPDs): Public Administration, Justice and Fundamental Rights and Internal Affairs, while development of the SPDs for the two remaining IPA II sectors is underway. Adoption of the country wide strategies still remains a key challenge for BiH in order to make full use of the IPA funds. Together with other IPA II beneficiary countries, BiH participates in the planning and implementation of the assistance programmes financed under Multi-country IPA II programme. Together with countries from the Western Balkans region, BiH takes part in the implementation of the South East Europe 2020 Strategy. In addition, BiH has started preparing for active participation in the implementation of the EU Strategy for the Adriatic and Ionian Region (EUSAIR), in cooperation with other participating countries (Member States and non-eu Member States), the European Commission and the European Parliament. UE-BA 3856/15 18

As for the use of the WBIF instrument, in the course of 2015 BiH has implemented a series of activities to establish a NIC framework in line with the EU requirements and priorities of the Western Balkans Connectivity Agenda. Activities are under way in relation to the adoption and transposition of the Methodology for Prioritization of Infrastructure Projects in BiH, including development and adoption of the SPP (transport sector) by 10 December 2015 and coordinated preparatory activities for applying for 2016 co-financing funds. Implementation of cross-border and trans-national cooperation programmes for the period 2007-2013 is underway (six programmes), as well as preparations for implementation of the territorial cooperation programmes for the period 2014-2020 (six territorial cooperation programmes). Bosnia and Herzegovina participates in the following EU programmes: Horizon 2020, Creative Europe, Erasmus+ (partial participation), Fiscalis 2020 and Customs 2020. Bosnia and Herzegovina is in the final stage of acceeding to the Europe for Citizens Programme (Agreement on Accession to the Programme was signed on 27 November 2015). In addition, Bosnia and Herzegovina expressed interest in becomming a member to the COSME Programme and activities are under way related to conclusion of an international agreement to acceede the Programme by 2015. There is also an interest for accession to the Health for Growth Programme. UE-BA 3856/15 19