BMI's Executive Summary

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In 2007 Bosnia Herzegovina hit an obstacle in its long journey back towards the normalisation of political institutions after the war of 1992-1995. The obstacle was the failure of the state's two entities, the Muslim and Croat Federation on the one hand, and the Republika Srpska (RS) on the other, to agree on reforming the police to create a single non-ethnically based and non-political force. The creation of such a force was one of the main preconditions required by the EU for reaching a Stabilisation and Association Agreement (SAA), seen as the first step in the process of Bosnia joining the EU. Gallingly, while Bosnia appeared to be left out in the cold, neighbouring Serbia, arguably the main instigator of the war in the 1990s, was able to initial its own SSA with the EU. The potential knock-on effects also raised concern if Kosovo, the Albanian-dominated enclave within Serbia, were to secede and declare independence. In such a scenario analysts believed that the RS, with support from Belgrade, might seek to secede from Bosnia, reawakening the centrifugal forces that played so much havoc in the preceding decade.

In short, the defence and security outlook for Bosnia Herzegovina as the country entered 2008 was decidedly mixed. A new compromise agreement between the different communities capable of satisfying the EU was still within reach, but would require concessions being made on all sides. The alternative was a further step in the Balkans fragmentation process leading to a proliferation of pocket-sized states, each likely to suffer isolation and to have a rather poor defence and security rating.

In contrast to the deadlock over the police, earlier the country was able to combine the military forces of Bosnia-Herzegovina and the Republika Srpska under a single Defence Ministry. The small defence industry currently meets the demands of the Bosnia-Herzegovina armed forces, but is now pushing to concentrate on establishing an exports market due to the limited internal demand. A major factor limiting internal demand is the steadily decreasing defence expenditure – a prerequisite for the much sought after membership in certain international 'clubs'. The 'catch-22' of the situation is that the lower defence expenditure is lowering Bosnia-Herzegovina's ability to export more advanced military hardware, and thereby reducing its inter-operability with the likes of NATO's ever-advancing armed forces.

Under these conditions BMI believes it will be some time until Bosnia-Herzegovina can think about making significant improvements to its defence industry. For the time being it will have to rely on the good will of the international community and the protection of the EU for its security.

Chapter 1 - Executive Summary

SWOT Analysis

Bosnia-Herzegovina Security SWOT

Bosnia-Herzegovina Defence Industry SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

After The High Representative…

The Point Of No Return

No Secession Ahead

Constitutional Deal Reached

Popularism Precedes Poll

SDS Ousted

External Political Outlook

Long Road To Independence

Obstacles To EU Accession

Chapter 3 - Security Risk Ratings

BMI’s Security Ratings

Risk Ratings

Table: Bosnia-Herzegovina Regional Risk Ratings

Table: Bosnia-Herzegovina State Terrorism Vulnerability Index

Regional Security: Europe Overview

Internal Terrorism

International Terrorism

Criminal Activities

Bosnia-Herzegovina Security Risk Ratings

Bosnia-Herzegovina Conflict Risk

Bosnia-Herzegovina Terrorism Risk

Bosnia-Herzegovina Physical Safety Risk

Chapter 4 - Security Overview

Internal Security Situation

Ethnic Tensions And National Integration

Land Mines

External Security Situation

Chapter 5 - Market Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Defence Reforms

International Deployments

Foreign Deployments in 2006

Chapter 6 - Market Overview

Arms Trade Overview

Imports

Table: Imports Of Military Equipment 2004

Exports

Table: Exports of Military Equipment 2004

Industry Trends & Developments

Procurement Trends & Developments

Chapter 7 - Industry Forecast Scenario

Table: Bosnia-Herzegovina Historical Data and Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 8 - Macroeconomic Forecast

Table: Economic Activity

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 10 - Appendix A: Security Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index Methodology

Competitive Landscape for European Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's European Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: