Transformation of the economic system of Republic of Srpska and its adaptation to global processes

Abstract

Republic of Srpska cannot boast of its economic system ever since the onset of the Global Economic and Financial Crisis (2008) to this day. Global Economic and Financial Crisis has produced negative effects onto a small economy like the economy of the Republic of Srpska (RS). In times of such crisis, RS has been faced with high unemployment rate (44%), reduced industrial production, enormous public debt, high deficits and colossal illiquidity. It indicates that the Republic of Srpska is characterised by poor macroeconomic indicators. The fact that RS possesses rich and diverse natural resources, which should be a key factor in its present and future development, did not help the economic system of RS in any way. The industry has been designated as a major segment of development by a long-term strategy of socio-economic development. Such long-term strategy has not given any results in terms of positive rate of economic growth, nor even the slightest improvement of any of the macroeconomic indicators so far. Urgent transformation of the economic system of the Republic of Srpska and its adaptation to the global processes is more than necessary. This can be achieved by offering investors numerous benefits and opportunities for investment under very favourable conditions, particularly in the industries and sectors representing significant natural resources. First of all, it is believed that there is great potential for the development of agriculture; exceptionally favourable conditions for the development of thermal and hydro energy sector; numerous possibilities of providing energy from renewable sources; vast areas covered by forests, mining and mineral resources; great tourist potential, etc. The above listed items are the essential ones, although there are others, which can represent a good basis for development of the economic system. Transformation of the economic system of RS will depend on many factors, primarily, of globalization that has contributed to the huge increase in trade, as well as of modern communication technologies. Globalisation has both positive and negative aspects, but it has certainly brought significant changes. The developed world is the bearer of the globalization process and it made the best use of current global circumstances. The solution is in creation of economic and political integrations, being in a cause-effect relationship with the process of globalization. Economic system of the Republic of Srpska simply has to be included in the such integrations.