346 10 3494 https://omeka.ibu.edu.ba/files/original/6745184c706eaf40b6d013e869fb447f.pdf 7af892ca277a16243482916fdd5a7af0 PDF Text Text An Analysis of the Factors Determining the Working Capital Requirement for Non-Financial Companies Seyda Kadayifci International Burch University Bosnia and Herzegovina seydakadayifci@gmail.com Ali Coskun International Burch University Bosnia and Herzegovina alicoskun@hotmail.com The main purpose of this study is to investigate the factors determining the working capital requirement of firms. Companies require working capital to improve the capacity, expand the business volume, reduce the risk of failing to meet their financial obligations, and become profitable and efficient. An inadequacy of the working capital causes interruptions in the business operations. This study investigates the determining factors of the working capital requirements of non-financial companies. The research analysis was done on publicly traded firms, and the data was collected from BIST-100 in Turkey for the years between 2011 and 2016. In this study, working capital requirement was used as the dependent variable. Factors such as profitability, leverage, growth, firm size, age and industry were tested as determining factors. PLS-SEM technique is employed in the research. Results reveal that two explanatory variables- company's leverage, and profitability- are significant factors that determine the companies’ working capital requirements for the period under study. Key words: Working Capital Requirement, Profitability, Leverage, Growth, Size, Age, Industry Introduction Managing the financial needs and operations of any business is very important to the management of the company, as it has an effect on both the company's profits and liquid assets. The literature on business finance focuses on three key areas. These are capital budgeting, capital structure, and working capital management. Capital budgeting and capital structure concerns long-term investment and financing decisions. Working capital management can be expressed as the short-term investments of firms and the selection and management of financial strategies in these investment decisions. If there is not enough working capital to fulfill the obligations of a company, it may cause financial insolvency, legal problems, and liquidation of assets (Hawley, 2015). For this reason, it is very important for all enterprises to have sufficient management of their working capital. 225 �The amount of financing an entity needs to carry out its day-to-day business activities is a working capital requirement, and it is the minimum amount of resources that a company needs to effectually meet the usual costs of business operations. There are several factors in determining working capital requirement and some studies such as Nazir and Afza (2009), Gill (2011), and Saarani and Shahadan (2012) have examined these factors. The purpose of these studies was to designate the determinants of the working capital requirement. On the other hand, many studies that have been conducted in the area of working capital (Deloof, 2003; Raheman & Nasr, 2007; Perkovic, 2012) have examined the relationship between firm profitability and working capital. Nazir and Afza (2009) and Gill (2011) have focused on determining the factors of working capital requirements. Since the identification of working capital requirements is of great importance in businesses, the purpose of this study is to investigate the working capital requirements and determining factors in non-financial companies in BIST 100 by using the Partial Least Squares – Structural Equation Model (PLS-SEM) technique. Literature Review The working capital management as the management of current assets such as cash, marketable securities, trade receivables and inventories that a firm has and the financing (specially, current liabilities) necessity to support current assets (Van Horne and Wachowicz, 2005). According to Palombini and Nakamura (2012), any researcher who conducts an overview of the corporate finance literature will find no robust, widely accepted theory about working capital management. Saarani and Shahadan (2012) put forward that for working capital management, the closest relevant theory is the Pecking Order Theory, popularized by Myers and Majluf (1984). According to the theory, companies should first use the funds necessary for financing their investments from internal sources. If internal resources are inadequate, firms tend to use debt to meet their funding needs. If the companies cannot meet their funding requirements with the use of debt, the issue of shares should cover the fund requirement in the company. In theory, internal resources are prioritized over external resources. So, this theory explains why the most profitable firms use less debt because these companies are highly profitable and do not need external sources. Enterprises with lower profitability rates export debt (Yakar, 2011). Several aspects of such working capital practices around the world been discussed in the literature. Some of these studies attempted to determine the effect of the working capital on the factors, while some others examined many factors that determined the working capital and its requirements. 226 �Nazir and Afza (2009) used panel data to study 132 firms from 2004 to 2007 in Pakistan, and used the OLS (ordinary least squares) regression model to find the determinants of working capital. Authors designated working capital as a dependent variable, operating cycle, level of economic activity, operating cash flow, sales growth, return on assets, Tobin’s q, leverage, size and industry as a determinants of working capital. According to the results, operating cycle, leverage, ROA, and Tobin’s q are internal factors that significantly affect working capital requirements. BintiMohamad and MohdSaad (2010) investigated the impact of market valuation and profitability on working capital management during the period 2003–2007 with a sample of 172 firms in Malaysia. The authors applied the Tobin Q, return on asset, and return on invested capital as dependent variables, and used cash conversion cycle, current asset to current liability ratio, current asset to total asset ratio, current liability to total asset ratio, and total debt to total asset ratio as independent values. Correlation and multiple regression analysis results proved that working capital variables and the firm’s performance have a negative relationship. Another study that is effective in this regard was performed by Saarani and Sahadan (2012). The authors used a sample of 285 firms for the period 2006–2008 in Malaysia. To determine the factors of working capital requirements, the authors used working capital for a dependent value, assets tangibility, profitability, debt, growth, non-debt tax shield, size, industry type, and age as independent values. According to the results of the analysis of the structural equation model, working capital requirement factors were found to be debt, profitability, non-debt tax shield, and tangibility of assets. Perković (2012) investigated the 131 manufacturing companies listed in Bosnia and Herzegovina in 2005–2009 by using Pearson’s correlation test and regression analysis. According to his findings, while the cash conversion cycle and financial leverage have a significant negative impact on the profitability of the company, the impact of the size of the firm (sales) is significant and positive. Since the implementation of this thesis will be on the publicly traded non-financial companies in Turkey, studies about working capital management conducted in Turkey were reviewed in detail. The studies conducted in Turkey are summarized below. Uyar (2009) obtained data from the Istanbul Stock Exchange for the year 2007. The cash conversion cycle is employed as a measure of the working capital. Return on assets and return on equity are used for profitability. The results showed that the cash conversion cycle has a significant negative relation with the firm size and the profitability. 227 �Akbulut (2011) explored the profitability relation between the working capital management from 2000 to 2008, in the ISE manufacturing sector. In the study, working capital management is measured by cash conversion cycle and profitability is measured by the return on assets. Regression analysis has shown that there is a negative relationship between working capital management and profitability. The other study done in Turkey was done by Khajeh (2014), who examined the effect of 18 firms belonging to the textile and leather sector from 2007 to 2012, regarding firm profitability of working capital management, using panel data analysis. According to the results of the study, there is a significant relationship between stock turnover, debt turnover, and gross profit. Methodology Data source Data for this study were sourced from the annual financial reports of the companies, BIST 100. In all, this study utilizes data from 70 non-financial firms for the 6- year period 2011-2016. So, the total of 426 observations are included in the analysis. Variable description and expectations Dependent Variable: The working capital requirement is the minimum amount of resources that a company needs to effectively cover the costs and expenses essential to operate the business (Gill, 2011). As seen in some of the studies examined earlier, CCC was used to gauge the efficiency of working capital, such as Sharma and Kumar (2011), Saarani and Shahadan (2012), Palombini and Nakamura (2012), and Goel and Sharma (2015). The working capital to total assets ratio gauge the ability of a company to cover its short-term financial obligations by comparing its total current assets to its total assets. Qurashi and Zahoor (2017) and Abbadi and Abbadi (2013) used this formula to try to find the determinants of working capital requirements. Other measures used to measure working capital requirement are working capital to expenses and working capital to revenue Saarani & Shahadan, 2012). Independent variables: Profitability, leverage, growth, firm size, age and industry are employed as independent variables. Wang, Feng, and Lawton (2015) indicated that a multi-dimensional perspective reflects firm performance more comprehensively than a single measure of profitability. There are many different ways and indicators to analyze profitability such as; return on equity, return on asset and gross operating profit.Nazir and Afza (2009), Sharma (2011), Gill (2011), Saarani and Shahadan (2012), Abbadi and Abbadi (2013), Agha (2014), Keskin and Gökalp (2016) used 228 �ROA to measure profitability. The return on equity ratio is a profitability ratio that measures how much profit each equity shareholder's capital generates. To gauge the profitability Saarani and Shahadan (2012), Naser, Nesuibeh and Al-Hedaya (2013) used return on equity. Lazaridis and Tryfonidis (2006), Perković (2012), Dong and Su (2010) employed gross operating profit to measure profitability. Leverage is the financial debt ratio, which is used in order to bring into connection with the external financing of the company and total assets (Abbadi & Abbadi, 2013). Deloof (2003), Raheman and Nasr (2007), Nazir and Afza (2009), Gill (2011), Sharma and Kumar (2011) used the total debt divided by total assets to calculate the leverage. Studies show that more growth opportunities will increase the cash hold and short-term investment of a firm (Abuzayed, 2012). Two different indicators (sales growth and growth rate of GDP) were used to measure growth in this study.Deloof (2003), Appuhami (2008), Nazir and Afza (2009), Sharma and Kumar (2010), Palombini and Nakamura (2011), Gill (2011), Naser, Nuseibeh and Al-Hadeya (2013), Goel and Sharma (2015) used sales growth to measure growth. Nazir and Afza (2009), Abbadi and Abbadi (2013) used growth rate of GDP to measure growth. Uyar (2009), Nazir and Afza (2009), Gill (2011), Sharma and Kumar (2011), Abbadi and Abbadi (2013), used natural log of total assets to measure of firm size. Abor and Biekpe (2009) and to Goel and Sharma (2015) used firm age in their researches as an independent variable. Firms in diversified sectors have different capital structures, different transactions, different products, different credit policies, different customers and different markets. The elements as a whole, affect working capital management. For this reason, it can be said that the type of industry influences the working capital management (Naser, Nuseibeh, & Al-Hadeya, 2013). Gill (2011) and Naser, Nuseibeh and Al-Hadeya (2013) used industry as an independent variable. The means by which the various variables adopted in this study are computed are as shown in Table 1. 229 �Table 1: Measurement of the Variables Variables Abbreviation Formulas Number of days of accounts receivable + Number of days of inventory – Number of days of accounts payable (Current Asset- Current Liability) / Total Assets CCC Working capital requirement WCR_T.A (Current Asset- Current Liability) / Expenses WCR_Exp (Current Asset- Current Liability) / Revenue WCR_Rev ROA Profitability Net income of the firm / total assets Net income of the firm / shareholder’s equity ROE GrsOpPr Leverage (Sales - COGS) / (Total Assets - Financial Assets) LEV Total Debt / Total Assets S.GR (This year’s sales – previous year’s sales)/previous year’s sales (This year’s GDP - previous year’s GDP)/ previous year’s GDP sales Growth GDP Firm Size SIZE Age AGE Industry INDS The natural log of total assets of firm Year under study - Year of incorporation manufacturing firms=1; non- manufacturing=0 Hypothesis There are six hypotheses developed based on previous studies. The following hypotheses and supported studies are detailed. Hypothesis H1 : There is a relationship between Profitability and Working Capital Requirement. (+/-) H2 : There is a relationship between Growth and Working Capital Requirement. (+/-) 230 Reference Literature Nazir and Afza (2009), Abbadi and Abbadi (2013), Palombini and Nakamura (2012) Gill (2011), Naser, Nuseibeh and Al-Hadeya (2013), Appuhami (2008), Nazir and Afza (2009), Saarani and Shahadan (2012) �H3 : There is a relationship between Leverage Nazir and Afza (2009), Abbadi and Abbadi (2013), Palombini and Nakamura (2012) and Working Capital Requirement. (+/-) H4 : There is a relationship between Size and Working Capital Requirement. (+/-) Uyar (2009), Gill (2011), Abbadi and Abbadi (2013) H5 : There is a relationship between Age and Goel and Sharma (2015) Working Capital Requirement. (+/-) H6 : There is a relationship between INDS and Naser, Nuseibeh and Al-Hadeya (2013) Working Capital Requirement. (+/-) Model GrOpPr, ROA, and ROE are the indicators used in the measurement model of profitability. GDP and S.GR are the indicators used in the outer model of Growth. CCC, WCR_T.A, WCR_Rev, and WCR_Exp are the indicators used in the measurement model of working capital requirement. Leverage, firm size, age, and industry have only one indicator in the measurement model. To test the hypothesis we implemented the partial least squares-structural equation modeling technique (PLS-SEM). The data analyzed using SmartPLS® software version 3.2.6. Structural Equation Model is used to test the causal relationships between latent variables and observed variables through models. The aim of the SEM is to determine whether the theoretical model is supported by the data or whether the model conforms to the data. SEM studies are generally based on theory (Doğan, 2015). Because of the frequent use of SEM analysis, measurement errors must be taken into account, unlike regression analysis; it is thought to give more accurate results than the regression analysis (Alkış, 2016). Titman and Wessels (1988), Maddala and Nimalendran (1995) and Saarani and Shahadan (2012) were applied SEM in corporate finance. 231 �Figure 1: PLS algorithm results (factors and items) Result and Discussion Analysis of measurement model reliability and validity In order for a measurement model to has satisfactory internal consistency reliability, each construct must exceed the composite reliability (CR) threshold of 0.7. Outer loadings looked to check indicator reliability and 0.70 or higher is preferred if it is an exploratory research, 0.4 or higher is acceptable (Hulland, 1999). The convergent validity of measurement model is evaluated by investigate its average variance extracted (AVE) value. Convergent validity is sufficient when there are at least 0.5 or more average variance (AVE) values in the constructs. 232 �Table 2: Results of Measurement Model- Convergent Validity Constructs Outer Loadings WCR 0.429 (CCC) 0.883 (WCR/EXP) 0.794 (WCR/T.A) 0.899 (WCR/REV) 0.876 (ROA) 0.414 (ROE) 0.747 (GOP) 0.651 (S.GR) 0.929 (GDP) 1.00 1.00 1.00 1.00 Profitability Growth Leverage Age FirmSize Industry Average Extracted Variance (AVE) Composite reliability (CR) 0.61 0.79 0.50 0.73 0.65 0.85 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Analysis of the Structural Model The coefficient of determination, R2, is 0.431 for the WCR endogenous latent variable. R2 means the amount of described endogenous latent variables variance in the structural model. The R2 value is normed between 0 and +1 and reflects the amount of described variance in the construct (Hair, Hult, Ringle, & Sarstedt, 2017). The value 0.431 in the Profitability, Leverage, Growth, Firm Size, Age, Industry rows and the WCR column is the standardized path coefficient of the relationship from those six variables to WCR. This means that the six latent variables (Profitability, Leverage, Growth, Firm Size, Age and Industry) moderately (Kwong & Wong, 2013) explain 43.1% of the variance in WCR. According to previous studies, the path coefficient must be at least 0.1 a certain effect accounts within the model (Hashim, 2012) (Hair, Hult, Ringle, & Sarstedt, 2017). In this case, by interpreting the graph, we can say that the leverage has a negative impact on WCR. Profitability also affects the WCR positively. 233 �Table 3: Results of Hypothesis Testing Hypotheses H1 Path Relationship Profitability and WCR Β- Coefficient 0.176 T-statistic 3.785 Supported Yes H2 Growth and WCR -0.059 0.909 No H3 Leverage and WCR -0.426 10.324 Yes H4 Firm size and WCR -0.005 0.125 No H5 Age and WCR -0.0064 1.992 No H6 Industry and WCR -0.426 0.521 No Based on the research findings, WCR identified as being influenced by profitability (β = 0.176, t = 3.785, p < 0.05). This finding is in line with previous studies (Nazir & Afza, 2009; Saarani & Shahadan, 2012; Abbadi & Abbadi, 2013). These results means that the more profitable companies are able to manage their working capital better. Besides, the better the company manages its working capital, the more profitable is the company. From the analysis, Working Capital Requirement is not influenced directly by Growth (β = 0.059, t = 0.909, not significant). These results are consistent with previous studies results (Nazir & Afza, 2009) (Saarani & Shahadan , 2012). Based on the research findings, WCR was identified as being influenced by Leverage (β = 0.462, t = 10.324, p < 0.05). This result is supported in other studies (Nazir & Afza, 2009; Onaolapo & Kajola, 2015; Saarani & Shahadan,2012). These results mean that by increasing the ratio of debt to total assets, companies should pay more attention to effective management of working capital in order to prevent excess capital in accounts receivable and inventories. This means that the financial manager can manage the working capital management by reducing the company’s debt level to prevent unnecessary tying up of capital in accounts receivable and stocks. As comprehensively discussed in the literature, this outcome is in accordance with the pecking order theory. From the analysis, working capital requirement is not influenced directly by Firm Size (β = 0.005, t = 0.125, not significant). This finding is in line with previous studies (Nazir & Afza, 2009; Saarani & Shahadan, 2012). Working capital requirement is influenced directly by Age (β = -0.064, t = 1.992, p < 0.05). These results are consistent with previous study results (Nazir and Afza, 2009; and Goel and Sharma, 2015) Working capital requirement is not influenced directly by Industry (β = -0.462, t = 0.521, not significant). These results are consistent with previous study results (Saarani & Shahadan, 2012). 234 �Conclusion The study finds that profitability, age and leverage factors, which are influencing the working capital requirements significantly. So, it can be concluded that the listed companies in BIST their working capital requirements based on the profitability, age and leverage. For age, results are in accordance with the earlier studies of Nazir and Afza (2009) and Goel and Sharma (2015). For profitability, results are in accordance with the earlier studies of Nazir and Afza (2009), Saarani and Shahadan (2012) and Abbadi and Abbadi (2013). For leverage, results are in accordance with the earlier studies of Nazir and Afza (2009), Saarani and Shahadan (2012), Onaolapo and Kajola (2015). In addition, if they manage these factors in a more efficient way, it may be the result that companies can improve their profitability. On the other hand, contrary to expectations, this study could not confirm statistically the importance of four factors- growth (Nazir and Afza, 2009; Saarani and Shahadan, 2012), age (Saarani and Shahadan, 2012), firm size (Nazir and Afza, 2009; Saarani and Shahadan, 2012) and industry (Saarani and Shahadan, 2012) as determinant factors of working capital requirements. These results are in accordance with the earlier studies. References Abbadi, S., & Abbadi, R. T. (2013). 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Scottish Journal of Arts, Social Sciences and Scientific Studies , 5 (2), 52-66. Sharma, A., & Kumar, S. (2011). Effect of Working Capital Management on Firm Profitability: Empirical Evidence from India . Global Business Review , 12 (1), 159-173. 238 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3661 Title A name given to the resource An Analysis of the Factors Determining the Working Capital Requirement for Non-Financial Companies (doi: 10.14706/icesos1724) Author Author Kadayifci, Seyda COSKUN, Ali Abstract A summary of the resource. The main purpose of this study is to investigate the factors determining the working capital requirement of firms. Companies require working capital to improve the capacity, expand the business volume, reduce the risk of failing to meet their financial obligations, and become profitable and efficient. An inadequacy of the working capital causes interruptions in the business operations. This study investigates the determining factors of the working capital requirements of non-financial companies. The research analysis was done on publicly traded firms, and the data was collected from BIST-100 in Turkey for the years between 2011 and 2016. In this study, working capital requirement was used as the dependent variable. Factors such as profitability, leverage, growth, firm size, age and industry were tested as determining factors. PLS-SEM technique is employed in the research. Results reveal that two explanatory variables- company's leverage, and profitability- are significant factors that determine the companies’ working capital requirements for the period under study. Key words: Working Capital Requirement, Profitability, Leverage, Growth, Size, Age, Industry Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/f8472b8b7b1881fbcbaea21b956f811e.pdf aae69327bc5a08977748904d45d4e79d PDF Text Text     Journal of Economic and Social Studies Financial Monitoring of Medication Consumption in Bosnia and Herzegovina Emira Kozarević, PhD Faculty of Economics, University of Tuzla Bosnia and Herzegovina emira.kozarevic@untz.ba Sabina Đonlagić Alibegović, PhD Faculty of Economics, University of Tuzla Bosnia and Herzegovina sabina.djonlagic@untz.ba   Tatjana Krdžalić, MA Institute for Public Health of Tuzla Canton Bosnia and Herzegovina tatjana.krdzalic@zjztk.ba   Abstract: Healthcare spending is nowadays one of the key issues of healthcare system practice as its share in GDP has constantly increased during past decades, which is now above 10% of GDP in developed countries. However, very often it is more of an issue related to the current political and socio-economic situation in a country rather than the one managed by experts. Although one might expect that the increase in healthcare spending contributes to better health of the population, relevant indicators show that high healthcare spending in Bosnia and Herzegovina (BiH) does not result in better health of its population. Due to this reason, special attention needs to be paid to the economic analysis of healthcare spending. Irrational use of medications is just one of many problems associated with an inefficient health system, but one that heavily impacts on the health economics. In situations where it may not be easy to change the existing financing models, we should explore how to be more effective in spending within the existing structure. Better control of medication consumption could be one of the actions that helps improve the effectiveness of the available budget. Therefore, the general aim of the paper is to determine the effect that financial monitoring of medication consumption has on the control of increase in healthcare spending, which in turn might help establishing a financially sustainable healthcare system. Bearing in mind that irrational usage of medications influences the access to healthcare services, destabilizes country’s budget, and endangers the margin of social sustainability (endurance), the constant financial monitoring of medication consumption is important as it can help us recognize those segments where consumption deviates from standard and where prevention activities are needed. All this can result in the limitation of further increase in medication consumption.   Volume 7 | Issue 1 | Keywords:  healthcare spending, healthcare spending control, (irrational) medication consumption, financial monitoring JEL Classification: I-11, I-15, I-18 Article History Submitted:  22.1.2018 Resubmitted: 12.2.2018 Accepted: 26.2.2018 http://dx.doi.org/10.14706/JE COSS17718 5 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   Introduction Health is an economic potential, a segment of human capital that increases productivity and reduces treatment costs. However, in no way is health a free resource and it cannot be maintained without incurring costs. High quality healthcare protection is the most cost effective investment into human capital. The need for healthcare is unpredictable, sudden and unexpected, and it is in society’s interest to recognize the real need for healthcare services. The characteristic of healthcare spending is that the consumer of healthcare goods, as a rule, is incapable of assessing their value. Unlike other goods, healthcare protection is specific, primarily due to the basic economic laws acting in the field of healthcare. The laws of demand and supply of healthcare services function in a specific market that includes several mutually related markets such as the market for various types of insurance (compulsory, additional) or different levels of treatment (outpatient clinics, polyclinics, hospitals), labor market for healthcare workers, market for medications, medical equipment, and so on. On the demand side, there are indicators of population health while on the supply side there are indicators of healthcare resources. When establishing the efficiency of healthcare market aimed at providing efficient healthcare protection for every citizen, the key role is given to the economic effects of deciding on the rational usage of ever limited financial resources. From the macroeconomic point of view, the healthcare system creates a significant burden on any economy – rich or poor, so limiting the increase in healthcare spending is very important for everyone. Growing costs, irrational behavior, and dissatisfaction in the healthcare system are self-evident, with the main reasons for increased spending being: increased share of the elderly persons in the entire population, increased number of patients with chronic diseases, introduction of new medications (which, as a rule, are more expensive), influence of the pharmaceutical industry, growing pressure exerted by patients, and easy access to medications. Establishing the financial sustainability of healthcare system is by no means an easy task, which is why the healthcare system needs to be perceived from the economic perspective (the so called health economics). On the one side, some authors believe that the financing of healthcare needs to be changed so that the system becomes sustainable in the long run, while others think that the reduction of healthcare costs is needed. When it comes to the efficient functioning of the healthcare system, the economic analysis is given prominence over other types of analysis specific for the market of healthcare services. 6 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     Health economics always starts with the assumption that healthcare services can be analyzed as any other market activity. However, the process often ends in the explanation why the market activity fails to lead to the efficient resource allocation in healthcare. Economic analyses of healthcare spending in BiH are poorly represented partly due to the lack of full scale data and their transparency and partly due to a relative lack of economic experts’ interest in the research on health economics. The increase of financial resources in the healthcare sector cannot be expected and the room for savings which will not negatively affect the quality of healthcare protection needs to be identified. The starting point of discussion in BiH is the aspiration that the access to healthcare is universal, just, equal for all, and basically “free”. However, healthcare costs are constantly on the increase and in the last ten years they have been growing at an unsustainable rate. For example, in 2003, the total per capita healthcare spending in BiH Federation was BAM 345 while the amount per an insured person was BAM 417.1 According to the latest available data, in 2012 the total per capita healthcare spending reached the level of BAM 714 while the amount per an insured person was BAM 825 (Health Insurance and Reinsurance Fund of BiH Federation, 2013). The average spending per an insured person in Republic of Srpska in 2012 was BAM 714 (Health Insurance Fund of Republika Srpska, 2013). The problem of monitoring healthcare spending in BiH is rather serious as there is no centralized system of monitoring spending on the state level. Monitoring is additionally complicated by the current administrative organization of the healthcare system. The data on healthcare are scarce and they are not systematized and unified. This is supported by the fact that BiH was first included in the European Health Consumer Index in 2014 and was positioned last due to an enormous lack of data on its healthcare protection, receiving 420 out of 1,000 points, less than Albania, Serbia, and Montenegro (Björnberg, 2015). Medications are one of important items in the total healthcare spending. With limited financial resources, increasing medication consumption directly influences the access to healthcare services, destabilizes country’s budget, and endangers the margin of social sustainability (endurance). Medication consumption in world’s total healthcare spending is placed third, with 17%. This paper brings the analysis of potential control of medication consumption and the financial aspect of medication consumption monitoring aimed at the reduction of healthcare spending. The main research hypothesis is postulated as follows: “Financial monitoring of medication consumption can contribute to the                                                                                                                         1 The International Banking Code for BiH currency is BAM. Volume 7 | Issue 1 | 7 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   rationalization of medication consumption, reduction of healthcare spending, and the efficiency of the entire healthcare system.” Although the paper focuses on the healthcare system in BiH, some results and recommendations can be generalized and are potentially universal, taking into consideration the recent global socio-economic events (increased share of the elderly persons in the entire population, increased number of patients with chronic diseases, increased public expenditure following the crisis in 2008, slow economic growth, and so on). Review of Previous Research on Health-Related Spending Medications are third most common cause of mortality in the USA and Europe, following heart diseases and cancer. Patients trust their physicians and physicians trust the pharmaceutical industry although these relations are not free from difficulties (medication testing is sometimes inadequately conducted, for example). It is expected that medication allocations are to increase in the comming years. The USA data indicate that direct costs of cardiovascular diseases would triple between 2010 and 2030, from USD 273 billion to 818 billion, while indirect costs would increase in the same period by 61%, from USD 172 billion to 276 billion (Vitezić, 2013, p. 246-251). The annual number of deaths in the European Union (EU) resulting from patients’ not taking medication correctly or not cooperating with their physicians was 194,500, which costs the EU the amount of EUR 125 billion a year (Pharmaceutical Group of the European Union, 2012). Decreased spending in healthcare requires the checks and controls of executed interventions and diagnostic and therapeutic services as well as the checks of whether they are really needed. That is why a unified system of expense list needs to be made that would include five important categories: hospitals, prescription-only medicines, diagnostic procedures, treatment costs, and home treatment costs (Ott et al., 2000). Polić-Vižintin, Tripković, Štrban-Štok, Štimac, and Čulig (2006) analyzed healthcare indicators and non-hospital medication consumption by using the data gathered from the vital statistics and healthcare-statistics research. They concluded that in order to rationalize medication consumption, treatment should be focused on primary healthcare protection, which is why constant education of family doctors needs to be made regarding proper therapy based on professional guidelines. As specified by the EU/WHO Working Group (2008), the primary healthcare protection, as a rule, should be able to solve at least 80% of all health problems. Gajski (2009), for example, stated that most medications prescribed for the treatment of cardiovascular diseases in Croatia are actually unnecessary and serve for the medicalization of the society and the profit of pharmaceutical company with 8 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     pharmaceutical therapy costs in Croatia amounting to some HRK 7 billion, which is a waste of money. Vlahović-Palčevski (2000) stated that the analysis of medication consumption gives us the data on the rationality of their use, indicates the segments where efforts should be made so as to improve the current situation, and tells us about therapy tradition, irrationalities, and abuse. Monitoring and analyzing medication consumption was the main reason for the development of the so called ATC (Anatomical, Therapeutic, and Chemical)/DDD (Defined Daily Dose) methodology. It was proved useful for the comparison of medication consumption at a national and international level as well as for long-term evaluation of consumption. A study conducted some 20 years ago by the Drug Utilization Research Group (DURG) showed the lack of universal methodology of medication consumption monitoring, which preceded the establishment of a unique Anatomical Therapeutic Chemical (ATC) classification system. This resulted in the introduction of defined daily dose as a statistical unit for medication consumption monitoring instead of packages, prescriptions, and financial units, which allowed for a detailed analysis of medication consumption (Čulig, 2004). Polypragmasy (i.e. parallel application of three or more medications) is recognized as an increasingly serious problem in the existing systems of healthcare protection. It can increase the complexity of healthcare protection and its costs. Apart from the elderly persons, some groups of patients have a higher risk of polypragmasy, such as psychiatric patients and patients who constantly take five or more types of medications, patients treated by several physicians, recently hospitalized patients, patients with concurrent comorbidity, patients with lower education, visually impaired patients or those with decreased physical activity and ability in daily activities. Polypragmasy is indicated as one of the main problems in modern world pharmacotherapy and its solutions require the education of both physicians and patients.2 Regular analysis of prescription issuance practice proved to be efficient in reducing unnecessary medications. A study in which the patients brought all the medications they use, with their physicians being given directions on polypragmasy, resulted in 42% of the patients being under the risk of polypragmasy, for 20% of them the medication use was suspended and for 30% of them the medication dose was changed. In addition, pharmacists sent the list of medications to the physicians whose patients use potentially harmful medications, which reduced the issuance of prescriptions by 12.5%. Furthermore, consulting a clinical pharmacologist reduced                                                                                                                         2 http://www.genera.hr/hr/36/propisivanje-lijekova/#.VbN3Z8vsZdg Volume 7 | Issue 1 | 9 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   polypragmasy and the number of medications from 7.9 to 4.1/1000 cases (Kašuba Lazić, 2015). Monitoring and control of medication consumption is also important from the aspect of environment protection as medication residues are often found in the environment in small concentrations. During the procedure of authorization of a medication, most regulatory agencies specify the assessment of potential risk that a medication can make on the environment (Čogelja Čajo et al., 2010). The amount pharmaceutical companies spend on physicians is still not precisely known. However, according to the financial reports of nine leading US medication manufacturers, this amount is estimated to be dozens of billions of US dollars a year. This actually means that the pharmaceutical industry strictly regulates the ways their medications are prescribed and this includes not only physicians but also university professors that affect research results, medical practices, and even disease definition (Angell, 2009). The research conducted by Consumers International, the international organization for consumer protection, showed that pharmaceutical companies spend twice as much on persuading physicians to prescribe their medications than on researching new medications (Republic of Serbia AntiCorruption Agency, 2012). In 2011, with the assistance of the World Bank (WB), aimed at increasing transparent prices of medications in BiH, a survey was made into the retail sale prices at pharmacies for 36 frequently used medications. The selected medications included essential medications used for frequent diseases (cardiovascular diseases, nerve diseases, diabetes, and respiratory diseases). The data were collected from 82 pharmacies randomly selected in eight cantons/regions in the entire BiH. It became evident that brand name medications are not common in BiH as they were registered in only 27% of the cases, which is why the data refer primarily to generic medications (WB, 2012). Good practice in creating and managing sustainable healthcare system is evidenced by Singapore with excellent results in high quality of its healthcare system and in control of healthcare protection costs. The per capita cost of healthcare protection in that country or the cost of healthcare protection presented as the GDP percentage is lower than in all high income countries in the world. There are three crucial reasons for achieving available excellence − first of all, long-term political unity, then the ability to recognize and establish national priorities, and finally constant aspiration for collective welfare and social harmony in the country (Haseltine, 2013). 10 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     The importance of reliable data and information is confirmed by Benković (2009), who aimed at checking whether the results of the research conducted by the Croatian Health Interview Survey (CHIS) were used in planning the resources at the level of country’s public health institutes. The usage of reliable data and information that serve as the basis for making fiscal and strategic decisions is the main support in healthcare management. It is also the key to strategic management that uses necessary information needed for setting the focus, selecting priorities, and establishing good “macro policy at the micro level”. The results showed that only 32% of the subjects used the results of the CHIS in their plans, which led to the conclusion that such a percentage would make efficient local level planning and planned budget savings difficult to achieve. Recognizing the importance of using data such as those collected by the CHIS is an extremely important factor in local and national healthcare planning and the factor that enables significant budget savings in healthcare. Ott, Kesner-Škreb, Bajo, Bejaković, and Bubaš (2000) underlined that even though healthcare and health insurance reform is not easy to implement, potential changes aimed at the improvement of health and healthcare are multiple while costs would be significantly lower than potential savings. The reform of the existing health insurance system directed towards higher reliance on private insurance and strengthening market elements is required for the long-term sustainability of the system. Consequently, it might reduce the excessive role of the state, limit its paternal behavior, and create the conditions for income increase. Theoretical Framework of Medication Consumption Monitoring and its Financial Aspect, with the Focus on Bosnia and Herzegovina Healthcare is one of the most complex systems in every country and it is a sub system of the entire socio-economic system. Its organization functionally consists of (Salihbašić, 2009): • Primary healthcare that includes outpatient clinics; • Polyclinics, general and specialized hospitals, specialized institutes, medical centers; • Other institutions including public health institutes, emergency rescue teams, and pharmacies. The main problem in this field is financing. Several models of financing are used in the world, the most known being (Salihbašić, 2009): • The Bismarck model, which functions on the principle of solidarity and reciprocity, as is the case with BiH; Volume 7 | Issue 1 | 11 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   • The Beveridge model by which healthcare is financed through taxes paid by citizens (for example, Great Britain, Norway, Sweden, Ireland); • The Semaškov model emerged in the Soviet Union and was provided for the entire population. Insurance is financed from the central state budget whereby the government is responsible for making decision on the rights and obligations of the insured persons. As a rule, this means that healthcare protection is free although there is the problem of users having excessive expectations without additional payments. Nowadays, this model is present is some Asian countries (China, Mongolia, North Korea, Vietnam) and in Cuba; • Private financing that includes the basic insurance with the payment of additional insurance according to individual needs and purchasing power. The cost assocated with the healthcare sector is significant from the macroeconomic point of view, so the limitation of increase in healthcare spending is particularly important as the increasing healthcare spending is a burden to both developing and developed countries. Growing costs, irrational behaviour, and dissatisfaction within the healthcare system are self-evident and the main reasons for increased spending are: increased share of the elderly persons in the entire population, increased number of patients with chronic diseases, introduction of new medications (which, as a rule, are more expensive), influence of the pharmaceutical industry, growing pressure exerted by patients and easy access to medications. It is important to note that, while medication consumption is one of the main generators of healthcare spending, it is also the item that could be more easily controlled and rationalized. The increase in pharmaceutical costs raises the issue of possibile need for financing healthcare systems in the future. Every country should be be interested in protecting itself against uncontrolled increase of medication spending, aiming to reduce it and make it more rational. Providing the population with high quality, safe, and efficient medications that would be rationally used is only one of the basic goals of every healthcare system. Hence, one of the measures for rational spending on medications is a systematic (national) policy of medication consumption monitoring as well as creation of a unique information system that would integrate all the data relevant for medication consumption, from both hospitals and non-hospital institutions, including the data on individual medication consumption. However, BiH has a fragmented internal organization with centralized Republic of Srpska (RS), decentralized BiH Federation (F BiH), and Brčko District, which further complicates successful conduct of fiscal policy. This leads to an unsatisfactory level of efficiency in improving country’s economic growth. As reported by the WB 12 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     (2014), the potentials of BiH economy for mid-term growth are limited by poor business environment that still requires essential reforms and prevents investment and growth, with the fiscal policy still focused on the distribution of revenue rather than growth. Healthcare and health insurance system in F BiH is, pursuant to the Constitution and legal regulations, based on the principles of shared competence between the federal and cantonal authorities. Pursuant to the provisions of Law on Healthcare3, Law on Health Insurance 4 , and other acts based on these laws, the federal government is in charge of creating the policy and adopting laws while the cantonal government implements laws and establishes and adapts cantonal healthcare policy with the policy at the level of F BiH. Cantonal public health institutes function with difficulties, healthcare spending increases while the structure of the insured persons is unfavorable. Similar to other South East European countries, BiH has the model of social insurance with employees and employers paying contributions to the public health funds which finance the majority of healthcare services. That is why healthcare financing heavily relies on salary taxation and the capacities of tax authorities to collect payments5. The existing model of healthcare financing in BiH is based on the past times as the remnants of the Bismarck model. Healthcare insurance contributions were never a part of the state budget but were directly paid to health insurance funds. The contributions for compulsory health insurance are based on the taxation of the amounts registered in the pay sheet rather than by health insurance premium or general taxation. The healthcare sector in BiH does not function on economic prices but on the solidarity system that implies that the rich show their solidarity with the poor, the young with the old, the healthy with the sick, and individuals with the family. This is what makes the total income of the Health Insurance and Reinsurance Funds which stand for the main source of funding for healthcare protection in both BiH entities. What is evident in the healthcare system is a rather non-transparent flow of resources between different non-budget funds that are supposed to pay contributions on behalf of their users (pensioners, registered unemployed persons) and the limited government contributions on behalf of some users exempt from paying contributions. Consequently, the state invests, or is supposed to invest, extreme efforts to provide as efficient healthcare protection as possible for its users with the                                                                                                                         3 Official Gazette of BiH Federation No. 46/10 Official Gazette of BiH Federation No. 30/97, 07/02, and 70/08 5 http://www.fmoh.gov.ba/index.php/projekt-jacanja-zdravstvenog-sektora 4 Volume 7 | Issue 1 | 13 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   available resources. Even though it sounds easy, it is very difficult to implement this in practice. Looking at the data on some financial indicators in BiH, one can notice a very high share of healthcare spending in GDP when observed in the context of the economic development of the state. Healthcare-related public spending is constantly on the increase; in 2002 it was 62.5% while in 2012 it was 71.1% of the total healthcare spending. On the other hand, social health insurance has a downward trend while private health insurance, present since 2009, has a very low percentage of 0.8% to 1% of the total health insurance. The very fact that some ten years ago, per capita spending was USD 122 and that the number increased to USD 447 in 2012 indicates that healthcare system becomes more expensive year after year. From the traditional aspect of efficiency, safety, and quality as well as from the aspect of financial cost effectiveness, medication consumption monitoring in developed countries started 40 years ago, mainly due to the fact that the funds for these purposes are always limited and the needs are increasingly higher. A constant lack in financial resources is registered in all spheres of life and in the healthcare protection system in particular. New medications, development of medical technology, new methods of treatment, constant education and training of healthcare workers, introduction of information systems, and so on, all require additional resources that are almost always limited. The country is given a serious task – to provide additional resources when the current ones are insufficient even for the present costs of healthcare protection. In addition, increased number of patients suffering from various diseases of modern times (such as cardiovascular diseases, cancer, diabetes) results in increased need for medications. Medication consumption has been rapidly growing for years, which is a problem threatening sustainable and stable financing of the healthcare system. A systemic approach to this problem is not evident in practice since mentioning finances in the context of health and treatment is considered inappropriate and unethical. Besides, the issue of pharmacotherapy has escalated recently, when it reached the level the society cannot bear. Moreover, medication manufacturers that are highly influential in the medical science, education, politics along with the media have no interest in putting this topic in the discussion focus (Gajski, 2009). Prescribed medications cover 10% to 20% of the total healthcare costs and are the fastest growing segment of the total spending, which raises concerns over medication consumption. In order to resolve this issue, we must first discuss the potential causes of the increase in medication consumption. 14 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     One of the reasons of increased medication consumption is definitely medication abuse which can cause various side effects, resulting in the need for additional treatment and reflecting on the increase in healthcare spending. According to the World Health Organization (WHO, 2008), in some countries the costs of medication side effects, including hospitalization, surgeries, and lost productivity, are higher than medication costs. Also, the studies conducted on the territory of the EU showed that some 200,000 people die every year due to nonadherence (not taking the prescribed therapy or taking it inappropriately). Annual nonadherence costs in the EU amount to EUR 125 billion and they include the treatment of chronic disease complications as a consequence of not taking medications. Low adherence for the patients suffering from hypertension correlates to the increased risk of vascular diseases, hospitalization, and increased costs of healthcare protection, while a higher level of adherence for the patients suffering from hypertension results in better health of individuals and net economic profit (Dragomir, 2010). Adherence reduces the total annual healthcare spending for the patients with chronic vascular diseases by the lower number of hospital days and lower hospital costs. The effects of adherence are more evident for the patients over the age of 65 (Roebuck et al., 2011). Very often, influenced by marketing activities of the pharmaceutical industry, patients purchase medications on their own and increasingly use alternative medicine. Consequently, medication becomes a merchandise article and medication prescription becomes a routine activity made in silence with very little written or oral information provided (Stević et al., 2011). Besides, inappropriate package of certain medications can result in increased financial spending, mainly due to the package content which does not correlate with the length of treatment. This could be easily overcome if physicians prescribed the exact quantity needed for therapy treatment and if pharmacies would supply medications per piece. One of the specific features of BiH medication market is related to the conditions under which pharmacies function. The legal regulations, among other things, cover pharmacy margins – maximum up to 8% for wholesale and up to 25% in retail sale6. Very often, retail sale margins go above the highest limit and are as much as 30%. It seems that this is still not enough for pharmacists as they mainly dealt with this issue at the meeting held at the beginning of 2016. One of the suggestions was that the margin increases to the record high 40%, which is not in accordance to the legal regulations.                                                                                                                         6 Rulebook on Medication Wholesale and Retail Sale Margin, Official Gazette of BiH Federation No. 40/02, 50/02, 15/06, and 9/08 Volume 7 | Issue 1 | 15 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   The Rulebook on Price Monitoring, Calculating Medication Prices and Reporting on Medication Prices in BiH 7 would be an excellent instrument for monitoring medications in BiH, which seems to be inoperative in practice. As recommended by the WB, the new rulebook on regulating medication prices is under preparation, which, if strictly followed, could lead to significant savings. Medications are cheaper in RS than in F BiH, mainly due to the centralized system of medication procurement, which allows for lower prices. Although the F BiH Government is under pressure to reduce medication costs, pharmacists are of the opinion that the government should “cut the costs” in other segments, such as waiving the valueadded tax (VAT) on medications instead of reducing pharmacy margins. It was stated that some reductions would amount from 25% to 30%, which, as claimed by the pharmaceutical chambers, pharmacies would not be able to bear. Major dissatisfaction was expressed as the representatives of professional associations were not given the opportunity to comment the proposed wording of the rulebook. They clearly rejected to support the proposal that Serbia be the reference country for establishing the prices of pharmaceutical services as the prices in that country are specified through administrative procedures. The representatives of professional pharmaceutical associations agree that the medication market needs to be regulated but not by replicating the experiences of other countries without taking into consideration the specific characteristics of the medication market in BiH.8 Many European countries introduced a series of measures to combat the growth of pharmaceutical spending. Some of these measures include reduction of prices of pharmaceutical products, which can be achieved through negotiations with pharmaceutical manufacturers, reduction of pharmaceutical margins, introduction of quotation price, application of obligatory discount, reduction of VAT on pharmaceutical products, centralized public procurement of pharmaceutical products, promotion of usage of generic medications, increase of obligatory contribution for households, and so on. For example, as of 2010 Spain has introduced a general discount applicable to all the medications prescribed, after which it introduced the mandate for the reduction of generic medication prices, which is certainly one of the factors that explains the increase in the consumption of generic medications in that country. In Germany, the obligatory discounts for manufacturers were raised in 2011 and the prices were frozen until 2013. As of 2011, pharmaceutical companies are obliged to negotiate with health insurance                                                                                                                         7 Official Gazette of BiH No. 82/11 The minutes of the meeting of the presidents of cantonal pharmaceutical chambers, the Pharmaceutical Association in BiH Federation, and general managers of larger pharmaceutical healthcare institutions in BiH Federation. Retrieved from http://www.farmaceutisarajevo.ba/index.php/25-obavijesti/89-sastanak-farmaceuta-usarajevu dan posjete 8 16 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     funds about innovative medications, which ended the former free pricing regime. The reduction of consumption in Italy can be attributed to a rather reduced budget for pharmaceutical products per Italian regions as well as to the reduced pharmaceutical wholesale margins and lower prices of generic medications based on quotation prices. The introduction of new obligatory public offer procedures for medication procurement in Hungary resulted in reduced costs, while in Denmark, as in many other countries, the negative trend can be explained partly due to the expiration of patents for large scale protected medications and very expensive medications (OECD & the European Commission, 2014). Methodology of the Empirical Research: The Case of Tuzla Canton, Bosnia and Herzegovina The sources used for this paper include the publications and statistical data of the relevant international and domestic organizations (WHO, WB, EUROSTAT, OECD, Agency for Medicinal Products and Medical Devices of BiH, Agency for Statistics of BiH, Health Insurance and Reinsurance Fund of F BiH, Health Insurance Fund of RS, Health Insurance Fund of Brčko District, Institute for Public Health of F BiH, Institute for Public Health of RS, and Health Insurance Fund of Tuzla Canton). Based on these sources, the paper presents selective and relevant macroeconomic and healthcare indicators for BiH as well as the basic indicators of healthcare financing and healthcare spending in BiH. More specifically, the focus is made on the elaboration of detailed parameters of medication related spending in the most populated BiH canton – Tuzla Canton – so as to obtain a clear view of medication consumption and its potentially influential factors. In order to achieve this, we opted for using the ten year period data (2004-2013), which allowed for the summary of the data and their comparison with the previous periods. Results and Discussion The medication market in BiH is worth over BAM 500 million, out of which 18% belongs to domestic medication manufacturers. The data on the leading medications in the total turnover cannot be regarded as relevant as it is known that medication consumption in BiH is not monitored by the standardized ATC/DDD methodology. Since medication prices vary and are rather different when compared to the neighboring countries, we do not have the appropriate data on the actual consumption of medications but rather the amount specified in the budget. Medication consumption in RS is monitored by the ATC/DDD methodology, which is not the case in F BiH. For example, “Pantoprazol” is the leading medication in the total turnover in BiH (some BAM 11 million) and its price in F BiH is Volume 7 | Issue 1 | 17 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   around BAM 15 while at the same time its price in the neighboring Serbia is BAM 3.5. The similar situation is with the frequently prescribed medications such as those for the treatment of cardiovascular diseases. The WB (2014) also pointed to the unbalanced prices of medications in BiH in comparison to the neighboring countries, which is particularly evident for the medications for frequent diseases (see Table 1). For example, the medications for cardiovascular diseases are up to 200% more expensive than in Croatia and even more than in Serbia. The main reasons for such situation are the inefficient system of pricing and purchasing medications, a non-transparent system of pricing for individual medications as well as rather fragmented system of medication procurement which results in different prices in cantons. As stated in the report, the Ministry of Health of F BiH is not able to force the cantons to follow the regulations when they create the positive lists of medications.   Table 1. Prices of Sampled Medications in FBiH and Serbia in 2016 Price in BAM Ordinal number Medication Manufacturer Package 1 Vesicare - symptomatic treatment of immediate incontinence Astelles Pharma Europe B.V Holland 2 Nimulid – painkiller 3 Letrox -thyroid hormone 4 5 6 7 8 9 10 Atoris -cholesterol lowering medicine Pantoprazol - gastric distress treatment Tritace - ACE inhibitor Lorista – hypertension treatment Roswera - cholesterol lowering medicine Truspot eye drops - ocular hypertension treatment Plavix – prevention of atherothrombotic events 9 10 Price higher by % Serbia F BiH 5 g (30 pills) 59 79 33.90 100 mg (20 pcs) 3.3 7 112.12 100 mg (100 pcs) 5.2 8.5 63.46 20 mg (30 pills) 8.5 14.6 71.76 40 mg (28 pcs) 3.6 15.5 330.56 5 mg (28 pills) 3.4 10.5 208.82 KRKA dd Slovenia 50 mg (28 pills) 5 11 120.00 KRKA dd Slovenia 40 mg (28 pills) 16 35 118,75 2% (5 ml) 12 20 66.67 75 mg (28 pills) 10.5 32.5 209.52 PANACEA BIOTEC LTD. India BERLIN-CHEMIE AG Germany KRKA dd Slovenia Hemofarm doo Banjaluka Sanofi-Aventis S.p.A. Italy Laboratories Merck Sharp&Dohme-France Sanofi Winthrop Industrie France                                                                                                                         9 Prices as indicated in the price list of the pharmacy “Zdravlje 2ˮ, Mali Zvornik, Serbia, May 15-June 15, 2016 Prices as indicated in the price list of the pharmacy “Ibn Sinaˮ, Tuzla, on June 16, 2016 10 18 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     11 Trimetakor –prevention of angina pectoris attacks Cipla Limited India 35 mg (60 pcs) 4.5 19.8 340.00 12 Byol – hypertension treatment Lek dd Slovenia 5 mg (30 pills) 3.5 13.2 277.14 Source: Authors' research based on selected BiH and Serbian pharmacies price lists There is no unique, state-level system of medication consumption monitoring (including commercial medications as well as those prescribed in the compulsory health insurance), except for the health spending data created by the national health accounts methodology. It is known that in 2013, the costs of medicinal devices for non-hospital patients (including medications) were BAM 711,221 million, of which public expenses amount to 43.2% and private expenses amount to 56.68%, which indicates rather high payments made by citizens for this type of medicinal devices. Analytically speaking, it is not known how much of this amount is spent on medications charged to health insurance, be they commercial or those given on prescription. Healthcare spending of F BiH makes 10.2% of GDP, out of which a quarter, somewhat over BAM 416 million, is used for medications. Over BAM 182 million was spent on medications charged to health insurance, which makes around 11% of the total healthcare spending. On average, a citizen of F BiH spends around BAM 178, while the insured person spends BAM 90 on prescribed medications, somewhat less than in RS where an insured person spends BAM 99. The average consumption of prescribed medications per cantons in F BiH in 2013 ranged from BAM 46 in Posavina Canton to BAM 167 in Sarajevo Canton, which implies huge cantonal differences in the rights of insured persons to prescribed medications. The average consumption of prescribed medications is a relative indicator for F BiH as it is highly influenced by a huge average consumption in Sarajevo and Tuzla Cantons. Although the prices of most prescribed medications show a downward trend, the increased consumption of prescribed medications is partly caused by the facts that cantonal medication lists are harmonized with the federal essential list of medications and that some cantons have more medications on their lists than on the one made by F BiH. Although Sarajevo Canton has by 78% higher consumption of medications per insured person than Tuzla Canton, when the total healthcare spending per cantons is observed, consumption of medications as a part of healthcare spending is the highest in Tuzla Canton as it is the most populated one. The leading cause of death in Tuzla Canton is essential hypertension (86/100,000 people). Stroke, cardiomyopathy, acute myocardial infarction, essential hypertension, cardiac arrest, and chronic heart ischemic disease make 71% of the ten leading causes of death in Tuzla Canton. In total, the population in 2013 suffered Volume 7 | Issue 1 | 19 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   from acute infections of upper respiratory tract, hypertension, acute bronchitis and bronchiolitis, diabetes, and spinal diseases. Diseases in the primary healthcare follow hospital treatment data in Tuzla Canton, where five leading diseases make for 56.79% of the total number of hospital days. Some of the most often prescribed medications by the ATC classification are those for cardiovascular diseases, digestive tract and metabolism, nervous system, and medications for the treatment of system infections and respiratory system, which indicates that cardiovascular diseases, metabolic disorders, and respiratory diseases are the major health problems in Tuzla Canton. In the last ten years, there has been an increase in the number of patients suffering from circulatory system diseases, diabetes, cancer, and mental disorders (Table 2). This increased number of patients causes higher healthcare costs and consequently increased medication consumption. The treatment of these diseases, except for cardiovascular diseases, requires the medications that belong to a group of more expensive medications, which is why the growth of financial spending does not come as a surprise. Table 2. Types of Diseases and Number of Patients in Tuzla Canton Year Number of patients in Tuzla Canton since Increase in % 2004 2013 Circulatory system diseases 47,705 75,234 57.7 Diabetes 7,488 16,952 126.4 Malignant neoplasms 1,947 4,194 115.4 Mental disorders 11,552 19,207 66.3 Source: Authors' research based on Institute for Public Health of Tuzla Canton database Generally speaking, medication consumption increases year after year, including both commercial as well as prescribed medications charged to health insurance. The increased costs of commercial medications point to the fact that citizens invest more of their personal resources to purchase medications, even though essential lists of medications for cantons have been expanded. Medication consumption monitoring in Tuzla Canton is administered by the Health Insurance Fund and it includes the data basis that includes the information on insured person (national ID number), medication, authorized physician, outpatient clinic where the prescription was issued, prescription, contracting pharmacy where medication was taken, date of prescription issuance and individual invoice for 20 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     medication/prescription issued by the number and date of invoice,11 but not the ATC/DDD methodology, as recommended by the WHO. In the period 2004-2013, health insurance expenditures constantly increased. By analogy, expenditures grew in all segments of healthcare protection, especially for the program of medications charged to the Health Insurance Fund of Tuzla Canton (HIF TC), as it is shown in Table 3. The total health insurance expenditures grew over the period of ten years by 85.55%, from BAM 244 to BAM 439 per insured person. Table 3. Review of Financial Expenditures for the Program of Medications in Compulsory Health Insurance in the Period 2004-2013 Year Total expenditures of HIF TC Number of prescriptions Expenditures for the Program of medications charged to the HIF TC Expenditures for the Program of other medications 12 Expenditures for the Program of prescribed medications (positive list+other medications) Total medication expenditures (including those paid by citizens) 2004 105,790,488 1,731,657 13,393,726 355,890 13,749,616 16,664,912 2005 112,669,255 1,852,401 15,095,216 309,165 15,404,381 18,924,608 2006 126,318,607 2,328,082 22,212,764 476,627 22,689,391 28,292,882 2007 148,000,043 2,389,473 24,524,035 789,677 25,313,712 31,712,336 2008 174,941,709 2,521,478 28,227,413 955,415 29,182,828 36,078,863 2009 178,171,804 2,226,677 32,888,217 1,339,930 34,228,146 35,663,778 2010 184,048,334 2,363,402 32,881,082 1,219,381 34,100,463 37,650,112 2011 192,099,520 2,556,079 37,137,026 633,554 37,770,580 44,845,199 2012 195,954,753 2,359,443 37,863,086 869,901 38,732,987 42,403,147 2013 196,299,420 2,377,010 38,768,888 1,109,749 39,878,637 40,150,397 Source: Authors’ research based on HIF TC database Over the ten year period observed, it is evident that the largest financial expenditures refer to the medications for cardiovascular diseases (35%), digestive tract and metabolism medications (26%), and medications affecting the nervous system (16%). As specified by the second level of the ATC classification, almost 84% of the                                                                                                                         11 Report on the Realization of Medication Program for the period January-June 2015 (p. 4), Health Insurance Fund of Tuzla Canton 12 Program of other medications includes: medications applied within or under the control of hospital, ampoule medications, special food for children, and priority medication program for pain relief therapy. Volume 7 | Issue 1 | 21 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   total expenditures on medications cover the ten leading groups of medications (Table 4), including those for the treatment of hypertension, diabetes, asthma, and so on. Table 4. Financial Costs for Medications in the 10 Leading Groups by ATC Classification in 2013 Year 2013 ATC Group of medications C09 A10 R03 N06 A02 Agents acting on the rennin-angiotensin system Drugs used in diabetes Drugs for obstructive airway diseases Psychoanaleptics Drugs for acid related disorders J01 C07 N05 C08 N03 Antibacterial drugs Beta blocking agents Psycholeptics Calcium channel blockers Antiepileptics Ten leading groups of medications in total Year total Amount in BAM % 8,766,544 7,328,994 3,407,972 3,051,384 2,209,906 22.61 18.90 8.79 7.87 5.70 2,178,272 2,091,092 1,326,363 1,118,142 1,053,397 32,532,066 38,768,888 5.62 5.39 3.42 2.88 2.72 83.91 100.00 Source: Authors' research based on HIF TC database The ten leading medications in terms of the resources charged to HIF TC make 42% of the total value and 27% of the total number of prescriptions. The most frequent medication prescribed by family doctors in Tuzla Canton is “Enalapril” for hypertension treatment with the average value per prescription of BAM 18 (Table 5). Out of ten leading medications in terms of financial expenditure, the most expensive is “Insulin glargin” (BAM 126 per prescription), which is prescribed for all types of diabetes. Within all the medications in the positive list, the medication with the highest financial value per prescription is “Ciklosporin”, prescribed to patients for the prevention of transplant rejection (BAM 283 per prescription on average). These facts depend primarily on medication prices which is why the real consumption cannot be specified.             22 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     Table 5. Ten Leading Medications in 2013 Per Their Total Value Charged to HIF TC Group C09 C10 R03 Medication Enalaprilhidrohlortiazid Lizinoprilhidrohlortiazid Salmeterol+flutika zon Disease BAM charged to HIF TC % Number of prescriptions % BAM /prescription Hypertension 2,574,774 6.64 140,153 5.90 18 Hypertension 2,076,581 5.36 112,219 4.72 19 1,842,592 4.75 21,715 0.91 85 1,822,633 4.70 18,286 0.77 100 1,402,931 3.62 60,428 2.54 23 1,382,965 3.57 11,011 0.46 126 Obstructive airway diseases All types of diabetes Gastric and duodenal ulcers All types of diabetes A10 Inzulin aspart A02 Pantoprazol A10 Inzulin glargin N06 Paroksetin Depression 1,346,954 3.47 46,563 1.96 29 C07 Karvedilol Hypertension 1,295,488 3.34 100,546 4.23 13 A10 Inzulin humani All types of diabetes 1,214,310 3.13 18,606 0.78 65 A10 Metformin Diabetes 1,176,392 3.03 119,034 5.01 10 16,135,618 41.62 648,561 27.28 25 38,768,888 100.00 2,377,010 100.00 16 Ten leading medications TOTAL Source: Authors' research based on HIF TC database In 2013, the medications for the cardiovascular system made somewhat less than a half (46.81%) of all the prescriptions issued during that year and they cost almost BAM 14 million. The increased consumption is further confirmed by the fact that the expenditures for these medications in 2013 were by BAM 400,000 higher that the expenditures for the entire program of medications charged to HIF TC ten years ago. Among the ten most often prescribed medications there are seven of them for the treatment of hypertension. Some 40% of all the prescriptions realized in 2013 were for these medications, which makes 34% of the total value charged to HIF TC. Medications for the treatment of diabetes are also an important segment of the financial consumption of medications charged to HIF TC. This is confirmed by the fact that the value of these medications grew on average by 15.5% in the period 2004-2013. These medications make 10% of the total amount charged to HIF TC and 19% of the total number of prescriptions realized in 2013. On average, every patient uses 15 prescriptions a year, with the average value of BAM 470 per patient, which is significantly higher than in 2004 when this amount was BAM 267 per patient. On the whole, medication consumption matches the morbidity data for the territory of Tuzla Canton. Volume 7 | Issue 1 | 23 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   Concluding Remarks Besides a number of problems evident in the inefficient healthcare system and public spending control, irrational use of medications that directly reflects on the financial burden of healthcare system economy is one of the burning issues if not the most important one. When health spending reaches a certain level, it is difficult to return it to the previous values as it increases year after year. It is difficult to reduce health spending but it can be constantly monitored and gradually controlled. The analysis of the data presented in the paper leads to the conclusion that the key problem of the healthcare sector in BiH is its sustainable financing which is primarily evident in the lack of appropriate system of collection of financial resources and in the lack of a transparent system for monitoring health spending. The core of the problem might be found in the way BiH is organized as a state and in its fragmentation to centralized RS, decentralized F BiH, and Brčko District, with various legal regulations that complicate successful conduct of fiscal policy. The situation is even more complicated by the fact that every entity has its own health insurance fund that operates with difficulties due to the finance-related problems but also due to accumulated arrears. In addition, serious problems of BiH healthcare system are certain inequalities in terms of exercising the right to healthcare. In the long term, the healthcare system organized in this way shall not survive; the collected resources are almost always limited while the demand for healthcare services surpasses the available funds. There are no new sources of financing and the collection of regular revenue is problematic, which means that the time has come to implement whole scale reforms aimed at improving the conditions under which the healthcare system functions. It is not yet known when these changes might happen but something can be done regardless of the fact that there is no political will at the moment for any changes. In the situations when we cannot change the existing financing models, we can start with a better control of the ways in which the collected resources are spent and medication consumption is precisely the segment of health spending which can be controlled and rationalized in a simple way. The rational consumption of medications means giving a patient the appropriate medication in the dosage defined by the clinical and individual needs so that the patient and the society as a whole pay the lowest possible price. It is not known to what extent these principles are followed in terms of dosage specification based on patient’s clinical and individual needs but the research results indicate that in BiH both the society and the patients pay medications at a too high price. Sometimes, the state itself contributes to over consumption of medications through its inactive and bad decisions in legislation and executive power. Instead of serving solely to limit the 24 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     unnecessary consumption, the laws regulating manufacture, trade and price of medications, their additions on health insurance lists, sales regime, patients’ participation in the price, and marketing often stimulate consumption. The pharmaceutical industry might be seen as one of the main drives of medication consumption and its constant growth. The role of pharmaceutical industry has changed over history − while in the past the cure was sought for as many diseases as possible, it seems as if today the goal is to find as many diseases as possible for the cure. Primary healthcare is also the segment where increased medication consumption emerges. Although the concept of primary healthcare is as a rule devised so as to unburden secondary healthcare, this seems not to be the case. Physicians in primary healthcare face crowd at their practices, work under pressure, and so on. Also, consulting clinical pharmacologists reduces over issuance of medication prescription, which consequently results in reduced expenditure for medications. Drug abuse seems to be one of the reasons for the increased medication consumption. Nowadays every home obviously has certain medications in stock, which are used at one’s own opinion. Increased financial expenditure on medication is affected by medication selling prices. While some of the surrounding countries have zero VAT rate on medications, with 17% VAT rate BiH is one of the most expensive countries in terms of medication prices. This is caused by a small market, many levies, rigid law on medicinal products and medical devices, and high pharmacy margins which directly affect patients’ budgets. The Rulebook on Price Monitoring, Calculating Medication Prices and Reporting on Medication Prices in BiH would be an excellent instrument of medication control in BiH. The VAT rate is not the only reason for expensive medications in the country as medication prices generally vary in the entities, which is probably caused by the decentralized system of medication procurement. However, some medications are as much as 400% more expensive than in the neighboring Serbia, where many BiH citizens buy medications, which confirms the allocation of financial resources outside BiH borders and the potential grey market (medication smuggling). What is equally important is the need for the establishment of the unique system of medication consumption monitoring on a state level based on the ATC/DDD methodology, with the aim of gaining the real insight into medication consumption so as to identify the causes and consequences of irrational consumption. Also, constant education in the field of health economics is needed as raising awareness of the budget limitations in the healthcare system is an extremely long and difficult process for both patients and healthcare workers. This can only be Volume 7 | Issue 1 | 25 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   done by appropriate education of the general public, healthcare workers, creators of healthcare policies, and so on. The presented theoretical elaboration of the problem as well as the empirical research conducted in BiH and Tuzla Canton, as the most populated BiH canton, indicate that the central research hypothesis is accepted. Future research interest might focus of monitoring medication consumption within hospital capacities, since it is not monitored analytically, in order to establish the real consumption and define potential causes of (non)increase in the use of medications charged to health insurance. Besides, it would be interesting to conduct a research into the usage of medications from the aspect of physician habits related to medication prescription, with a particular emphasis on the problems they face in their practice. One might find useful to investigate the perception and habits of the patients as those who consume medications, in order to detect important factors that influence increased demand for medications and establish the actual financial burden imposed on citizens by healthcare costs, and so on. References Agencija za borbu protiv korupcije Republike Srbije. (2012). Izveštaj o oblicima, uzrocima i rizicima korupcije u sistemu zdravstva. Retrieved from http://www.pravonazdravlje.com/documents/dokumenta/Izvestaj_o_zdravstvu.pdf Angell, M. (2009). Drug Companies & Doctors: A Story of Corruption. New York Review of Books. Retrieved from http://www.nybooks.com/articles/2009/01/15/drug-companies-doctorsa-story-ofcorruption/ Benković, V. (2009). Informiranost prestavnika lokalne vlasti o instrumentima kvalitetnog upravljanja javnim zdravstvom i socijalnom skrbi. Soc. ekol. Zagreb, 18(2), 157-168 Björnberg, A. (2015). Euro Health Consumer Index 2015. Report, Health Consumer Powerhouse. Retrieved from http://www.healthpowerhouse.com/files/EHCI_2015/EHCI_2015_report.pdf Čogelja Čajo, G., Osrečki, V. & Tomić, S. (2010). Uticaj lijekova na okoliš. Kem. Ind., 59(7-8), 351-354 Čulig, J. (2004). Racionalna farmakoterapija. Medix, 53, 126-128 26 Journal of Economic and Social Studies �Financial Monitoring of Medication Consumption in Bosnia and Herzegovina     Dragomir, A., Côté, R., Roy, L., Blais, L., Lalonde, L., Bérard, A. & Perreault, S. (2010). Impact of adherence to antihypertensive agents on clinical outcomes and hospitalization costs. Med Care, 48(5), 418-425. DOI: 10.1097/MLR.0b013e3181d567bd Farmaceutska grupacija Evropske unije. 2012. Europsko javno ljekarništvo: Strategija za optimizaciju zdravstvenih ishoda svakog pacijenta i povećanje vrijednosti zdravstvenih sustava diljem Europe. Retrieved from http://www.hljk.hr/Portals/0/BLUEPRINT-HR-final-10-07-2013.pdf Gajski, L. (2009). Lijekovi ili priča o obmani. Zagreb: Pergamena Haseltine, W. A. (2013). Affordable Excellence: The Singapore Healthcare Story. Washington, D. C: Brookings Institution Press Kašuba Lazić, Đ. (2015). Polifarmacija u obiteljskoj medicini – rastući problem u 21. Stoljeću. XXII Kongres obiteljske medicine „Metabolički sindrom polipragmazija“, zbornik radova, 28-46 OECD & the European Commission. 2014. Health at Glance: Europe 2014. OECD Publishing. DOI: 101787/health_glance_eur-2014-en Ott, K., Kesner-Škreb, M., Bajo, A., Bejaković, Z., & Bubaš, Z. (2000). Ekonomika javnog sektora: stanje, problemi i moguća rješenja. Newsletter: povremeno glasilo Instituta za javne financije, 4, 1-35 Polić-Vižintin, M., Tripković, I. Štrban-Štok, Z., Štimac, D., & Čulig, J. (2006). Analiza indikatora morbiditeta, mortaliteta i potrošnje lijekova u Zagrebu. Med Jad, 36(1-2), 31-40 Radna grupa projekta EU/WHO. 2008. Podrška reformi zdravstvene zaštite u Bosni i Hercegovini 2004-2006. Strategija primarne zdravstvene zaštite. Banja Luka: Ministarstvo zdravlja i socijalne zaštite Republike Srpske Roebuck, M. C., Liberman, J. N., Gemmill-Toyama, M., & Brennan, T. A. (2011). Medication adherence leads to lower health care use and costs despite increased drug spending. Health Affairs, 30(1), 91-99. DOI: 10.1377/hlthaff.2009.1087 Salihbašić, Š. (2009). Sistem finansiranja zdravstvene zaštite. Gračanica: Grin Volume 7 | Issue 1 | 27 �Emira Kozarević, Tatjana Krdžalić and Sabina Đonlagić Alibegović   Stević, E., Jatić, Z., Salihefendić, E., & Kadić, A. (2011). Dobra praksa propisivanja i izdavanja lijekova. Terapijski vodič, Sarajevo: Ministarstvo zdravstva Kantona Sarajevo. Retrieved from http://www.kzzosa.ba/files/pages/Dobra%20praksa%20propisivanja%20i%20izdava nja%20lijekova.pdf Vitezić, D. (2013). Važnost smjernica i farmakoekonomike u liječenju arterijske hipertenzije. Medix, 104/105, 246-251 Vlahović-Palčevski, V. (2000). Važnost praćenja potrošnje antimikrobnih lijekova. Medicus, 9(2), 155-159 World Bank (WB). (2012). Bosna i Hercegovina: Izazovi i preporuke za reforme. Pregled javnih rashoda i institucija. Izvještaj br. 66253-BA. Retrieved from http://www.skolegijum.ba/static/biblioteka/5460fd899193e_03Pregledjavnihrashoda ,izazoviipreporukezareforme.pdf World Bank (WB). (2014). Bosna i Hercegovina: Ocjena javnih rashoda i finansijske odgovornosti. Izvještaj br. 82646-BA. Retrieved from http://documents.worldbank.org/curated/en/909191468013742908/pdf/826460W P0P13180Report0Sept020140eng.pdf World Health Organization (WHO). 2008. Medicines: safety of medicines – adverse drug reactions. Fact sheet No. 293. Retrieved from: http://www.wiredhealthresources.net/resources/NA/WHOFS_MedicinesSafetyAdverseReactions.pdf   28 Journal of Economic and Social Studies � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3725 Title A name given to the resource Financial Monitoring of Medication Consumption in Bosnia and Herzegovina Author Author KOZAREVIĆ, Emira Đonlagić Alibegović, Sabina Krdzalic, Tatjana Abstract A summary of the resource. healthcare system practice as its share in GDP has constantly increased during past decades, which is now above 10% of GDP in developed countries. However, very often it is more of an issue related to the current political and socio-economic situation in a country rather than the one managed by experts. Although one might expect that the increase in healthcare spending contributes to better health of the population, relevant indicators show that high healthcare spending in Bosnia and Herzegovina (BiH) does not result in better health of its population. Due to this reason, special attention needs to be paid to the economic analysis of healthcare spending. Irrational use of medications is just one of many problems associated with an inefficient health system, but one that heavily impacts on the health economics. In situations where it may not be easy to change the existing financing models, we should explore how to be more effective in spending within the existing structure. Better control of medication consumption could be one of the actions that helps improve the effectiveness of the available budget. Therefore, the general aim of the paper is to determine the effect that financial monitoring of medication consumption has on the control of increase in healthcare spending, which in turn might help establishing a financially sustainable healthcare system. Bearing in mind that irrational usage of medications influences the access to healthcare services, destabilizes country’s budget, and endangers the margin of social sustainability (endurance), the constant financial monitoring of medication consumption is important as it can help us recognize those segments where consumption deviates from standard and where prevention activities are needed. All this can result in the limitation of further increase in medication consumption. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Article PeerReviewed HB Economic Theory https://omeka.ibu.edu.ba/files/original/1f86f0803bbe457a4e1d0b59edf09155.pdf 3611f073d92ccda0698ee930ce1baa16 PDF Text Text Impact of Agricultural Policies on Rural Development and Increase of Competitiveness of Agriculture of Bosnia and Herzegovina with a Special Emphasis on Achievement of Reform Goals Sanja Kavaz Hukic Bosnia and Herzegovina sanja_kavaz@bih.net.ba Abstarct: For the Balkan countries, the agricultural sector and rural development are of great importance, primarily because they are ensuring food security of the population, and then, also, because they have effects on employment, the creation of total gross value as well as on the foreign trade. Having in mind open processes of joining the European Union in these countries, with a special focus on Bosnia and Herzegovina, the implementation of the EU policies and practices will represent both a challenge and an opportunity for the development of the state and the improvement of its position in the single European market. Bosnia and Herzegovina is a country with a distinct rural character, with over 50% of the rural population, where every third household acquires some kind of income from agriculture, and which is currently facing a number of problems when rural development is concerned (from insufficient investments, uncompetitive production, inefficient administration, abandonment of rural areas, failure to use EU funds, etc.). Nevertheless, with adequate policies and dynamic approach to the agricultural sector, and strategy for increasing competitiveness and attracting investment, the potential of Bosnia and Herzegovina's agriculture could be used and exploited, and the country could go towards progress and success. Therefore, this paper explores and analyzes the European Union's common policies, as well as the ways and means of their implementation in the Balkan region countries, especially in Bosnia and Herzegovina. Then, the paper points the importance and necessity of investing in rural development (infrastructure, mechanization, marketing, agro-environmental measures, etc.), and provides guidelines on how to modernize and reconstruct the agricultural sector, in order to increase the country's competitiveness and reduce the long-standing trade deficit in this area, and, at last, how to effectively approach to the European Union with harmonization of legislation and the use of development plan. The agricultural sector and the overall modernization of rural communities, with a clear vision, and with increasing employment, economic growth and competitiveness, can become the cornerstone of the development of Bosnia and Herzegovina and a key factor of its inclusion in the European and the world trends. Keywords: EU common agricultural policy, agriculture, rural development, competitiveness. JEL Classification: Q17, Q18, O13, 018 Introduction The Common Agricultural Policy (further: CAP) is one of the oldest polices of the European Union (further: EU) and represents set of measures and programs for subsidizing agriculture in the European Union. It was created in 1962, so the application of common agricultural policy 111 �began in early 1960s. Until then, countries have greatly intervened in their agricultures, particularly in the choice of what to produce, under which conditions, and what will be the price of agricultural products. Such individual interventions jeopardized the free exchange of goods within the Community. Since some countries, France in particular, advocated the continuation of strong intervention, the only solution was to transfer intervention measures at the level of the Community and to harmonize them. The Rome Treaty stipulated the general framework of the CAP10, the principles of CAP were defined at a Conference in Stresi (Italy) in 1958, and CAP came into force in 1962s, after it was accepted by all six of the founders of the Community. In late 1950s societies and states in Europe were damaged by Second World War, and in that conditions agriculture had been crippled, there were no rural development and food supplies could not be guaranteed. Since then, common agricultural policy had been changed adapting the policy to a changing world. Major reforms shaped the CAP in 1992, 2003 and 2013, the main goals evolved from securing enough food and agricultural products, securing free movement of agricultural product and removal of the trade barriers in 60s, 70s, etc., to today's main objectives which are providing a stable, sustainably produced supply of safe food at affordable prices for all Europeans, while also ensuring a decent standard of living for farmers and agricultural workers. Other objectives are sustainable management of natural resources, the preservation of rural economies, the redistribution of aid between countries and between farmers, and the climate change. As an oldest EU policy, in general, it is a partnership between Europe and its farmers, agriculture and society. The CAP is based on three fundamental principles: single market, advantage of the Union and financial solidarity. The single market has two meanings, first the application (on agricultural products) of the rules on free movement of goods between Member States, and determining common prices and assistance, regardless of headquarter of an economic entity. Correct application of this principle requires common price regulation, aid payments and competition rules, harmonization of health insurance regulations and administrative procedures as well as common foreign trade policy. The advantage of the Union provides two levels of activity, giving preference to agricultural products from the Union before importing products and internal market protection against disturbances caused by the uncontrolled import of low-priced agricultural products as well as from disturbances in the world market. In the end financial solidarity means that costs resulting from the application of the CAP must be shared among all Member States (further: MS), regardless of their national interest.11 Agriculture is a key sector for sustainable economic development, so from the early beginning until today the common agricultural policy is managed and funded from the resources of the EU 10 The objectives of the CAP were defined under Article 39, and those were: (a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour; (b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; (c) to stabilise markets; (d) to assure the availability of supplies; (e) to ensure that supplies reach consumers at reasonable prices. Treaty of Rome, 25 March 1957, Agriculture, p. 16 11 Kesner-Škreb, M., Common Agricultural Policy of the European Union, Financial theory and practice, 2008., 32 (4), p. 543-545 112 �annual budget, and it consumes almost half of the budget of the Union. Common Agriculture is a sector that is supported almost exclusively at the European level, unlike most other sectors of the economies which are the responsibility of their national governments. It is important to have a public policy for a sector responsible for ensuring food security and sector which plays a key role in the use of natural resources and the economic development of rural areas. The recent enlargements of the EU have almost doubled the labor force and the cultivable area, and the internal market added more than 100 million consumers. The new Member States can immediately start using the mechanism of subsidizing the prices of agricultural products, while the direct subsidies to farmers are arranged for a period of ten years. However, the member states must fulfill many conditions regarding restructuration and modernization of the agricultural sector. All Member States agreed that by 2013 there will be no real growth of the agricultural budget, the subsidies to the "old" Member States will be reduced in order to finance aid to new members. Today, farmers provide a stable food supply, produced in a sustainable way at affordable prices for more than 500 million Europeans. The European Union's farm policy ensures a decent standard of living for farmers, at the same time as setting requirements for animal health and welfare, environmental protection and food safety. Sustainable rural development completes the picture of the EU's common agricultural policy. There is one big European market for agricultural products, in which a common approach towards supporting agriculture ensures fair conditions for farmers competing in the internal European market and globally.12 For Western Balkan countries13 accession to the European Union is undoubtedly a political goal, process of great importance both for countries and their population, in which the adaptation and the modernization of agriculture play important role. They are directed by national decisionmakers, who use pre-accession instruments, changes in legislation, institution-building and agricultural policy reform to promote the development of the agricultural sector and of rural areas. So, if policy is to serve as a means to achieve certain goals, reforms must be planned, steered and executed according to the principles of evidence-based policymaking. This means that a modern government must produce policies that are based on hard facts, not on ideology, that are proactive rather than reactive, and address causes rather than symptoms. All Western Balkan countries have made significant progress in the last few years in aligning their long-term programming documents and administrative infrastructures with EU requirements. Between 2013 and 2015, new strategic documents for agriculture and rural development were adopted, which mainly cover the period to 2020, up to 2019 for the Federation of Bosnia and Herzegovina and up to 2024 for Serbia. The medium- and long-term agricultural policy 12 22 million farmers and agricultural workers are at heart of one of the biggest economic sectors in the European Union, the agri-food sector. Around 44 million jobs in food processing, food retail and food services depend on agriculture. The EU is also a net exporter of food and drink, exporting goods for more than €130 billion per year. More data on EU agri-food in "Monitoring EU Agri-Food Trade" which provides monthly data on EU agri-food exports and imports, available on https://ec.europa.eu/agriculture/trade-analysis/monitoring-agri-foodtrade_en 13 In this sense the term „Western Balkan countries“ encompasses countries of the region such as Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia. 113 �objectives and priorities set out in these documents vary slightly by country, but all address to enhancing farm viability and the competitiveness of the agro-food sector; to sustainable management of natural resources and mitigation of the effects of climate change; and improving the quality of life and balanced territorial and economic development of rural areas. In most countries, the main strategic document has been supplemented by a multi-annual implementation programs. In parallel, the Instrument for Pre-Accession Assistance for Rural Development (further: IPARD) programs were also prepared to provide key documents regarding EU preaccession support in the field of agriculture, mostly aimed at institution-building and improvement of the agricultural sector.14 In Bosnia and Herzegovina (further: BH), having in mind that country has a rural character, with over 50% of the rural population, agriculture is both an economically and politically important sector. This sector is characterized by underused natural resources and production potentials, low productivity, poor technical and technological capacities of farms, underdeveloped agricultural and food chain value, low competitiveness and considerable dependence on foreign trade. Added to that, the growing socio-economic marginalization of rural areas, which is accompanied by depopulation, makes it is apparent that the agricultural policy of Bosnia and Herzegovina faces numerous challenges that must be tackled to address these problems in the agricultural sector and rural areas. With the entry into force of the Stabilization and Association Agreement between Bosnia and Herzegovina and the European Union15, with 135 clearly defined articles of the agreement, in particular chapter II, which regulates relations in agriculture and fisheries, an opportunity is created for an adequately economically and legally regulated country to enter the market competition in European union and to achieve significant results. But, at the moment, since Bosnia and Herzegovina does not have organized and planned agricultural and food production, a functional production and system based on quantity - continuity - quality, established international systems and standards for food safety, cooperative system of redemption stations, common agricultural policy, laws and Ministry on a state level, agriculture and rural 14 In some countries, key priorities also include farmer income stabilisation (Bosnia and Herzegovina, Kosovo and Serbia), food chain organisation (FYR Macedonia and Kosovo), promotion of food quality and safety standards (FYR Macedonia) and investment in human capital, transfer of knowledge and innovation (Albania, FYR Macedonia and Kosovo). The basic goals of agricultural policy thus match those of the EU CAP for the same period. Monitoring of agricultural policy developments in the Western Balkans countries, European Commission, Luxembourg: Publications Office of the European Union, European Union, 2017. p. 14. 15 The agreement expressly refers to the possibility of BH to become a candidate country for membership of the EU. The agreement is to open political dialogue with BH and for enhanced regional cooperation, including provisions on free trade areas between the countries of the region, the free trade area for within 5 years of entry into force of the agreement. BH is committed to approximate its legislation to that of the EC, notably in the key areas of the internal market. The agreement is an important step in the establishment of a stable order based on cooperation within the framework of the EU’s stabilization and association process with the countries of south-eastern Europe, as well as within that of the stability pact for south-eastern Europe. The Stabilization and Association Agreement between the European Communities and their Member States, of the one part, and Bosnia and Herzegovina, on the other part. 114 �development can easily become a stumbling rock of the development of whole country, of course if country does not, in near future, implement necessary reforms and improvements. The Common Agricultural Policy – modernization and reform in European Union Introduced in 1962, Common Agricultural Policy, had undergone several waves of reforms, with the latest reform decided in 2013. and implemented in 2015. Since then, the context in which that reform was forged has shifted significantly. Agricultural prices have fallen substantially and market uncertainty has increased, due amongst others to macroeconomic factors, geopolitical tensions, inhibiting a clear long-term planning of the sector. Also, the emphasis of trade negotiations has moved more visibly from multilateral to bilateral deals, requiring a careful balancing of offensive and defensive interests, with due attention paid to certain sensitive sectors. The EU has signed up to new international commitments, especially those concerning climate change and broad aspects of sustainable development (through the UN's Sustainable Development Goals – SDGs), and is also exposed to other geopolitical developments such as new large-scale migration.16 So in these circumstances CAP continues to be adapted to respond the challenges of its time. The main aims of the policy nowadays are to improve agricultural productivity so that consumers have a stable supply of affordable food, and to ensure that EU farmers can make a reasonable living. Now, more than fifty years after the introduction of the CAP, with more than 500 million consumers needing a reliable source of affordable, healthy and nutritious food, the EU has had to address a number of current and future challenges, which include global competition, economic and financial crises, climate change and sustainable management of the natural resources, food security, rising costs such as fuel and fertilizer. Significant reforms have been made in recent years, to modernize the sector and make it more market oriented. Most notably, in 2013, after three years of intensive discussion and negotiations, the policy was reshaped to meet the challenges of the future, 2014-2020.17 The new 16 The above prompted a vigorous public debate about whether the 2013 reform went far enough to meet broader challenges related to the balance of support, the economic prospects for agriculture and rural areas, care for the environment (e.g. greening), action over climate change, sustainable and safe food production. Emerging opportunities in the areas of health, trade, the bioeconomy, the circular economy and the digital economy also need to be further considered. Against this background, as part of its working programme for 2017, the Commission will take forward work and consult widely on simplification and modernisation of the CAP to maximise its contribution to the Commission's ten priorities and to the Sustainable Development Goals (SDGs). This will focus on specific policy priorities for the future, taking into account the opinion of the REFIT Platform and without prejudice to the next Multiannual Financial Framework. The starting point must be will be a well-founded assessment of the performance of the current policy. More about Consultation on modernising and simplifying the common agricultural policy, European Commission, Directorate-General for Agriculture and Rural Development on https://ec.europa.eu/agriculture/consultations/cap-modernising/2017_en, 10.06.2017. 17 After an elaborate process, a decision on the CAP for the 2014-2020 period was reached in 2013. The process involved the main European institutions: the European Commission (Commission), the Council of the European Union (Council), the European Council and the European Parliament (EP). It involved consultations with European citizens and „stakeholders“ and intense lobbying activities on the part of various interest groups. The process started 115 �CAP is designed to ensure direct support will become fairer and greener, strengthen the position of the farmers in the food chain and the policy as a whole will become more efficient and more transparent. For majority of Europeans, agriculture and rural areas are important for the future. They consider the main responsibilities of farmers to be supplying the population with a diversity of quality products and ensuring the welfare of farmed animals. For them agriculture and rural development policy should be ensuring agricultural products are of good quality, healthy and safe, and ensuring reasonable food prices for consumers.18 In Western Balkan countries, particularly in Bosnia and Herzegovina, both the population and the government still do not understand the significance of agricultural policy and the importance of improvement of rural areas. The CAP is a complex policy involving many different components and issues. The new CAP design and the next steps All past reforms have led to step changes in the CAP and this, the latest one, is no exception. It represents another milestone in the CAP's history placing the joint provision of public and private goods at the core of policy. Farmers should be rewarded for the services they deliver to the wider public, such as landscapes, farmland biodiversity, climate stability even though they have no market value. Therefore, a new policy instrument of the first pillar (greening) is directed to the provision of environmental public goods, which constitutes a major change in the policy framework. The new CAP design is also more efficient, targeted and coherent. It is based on a more holistic approach to policy support through the maintenance of the existing two pillar structure but in a more targeted, integrated and complementary way. Both pillars of the CAP are aimed at meeting all three CAP objectives more effectively, with better targeted instruments of the first pillar complemented by regionally tailor-made and voluntary measures of the second pillar. There is new flexibility for Member States in the budgeting and implementation of first Pillar instruments, acknowledging the wide diversity of agriculture, agronomic production potential and climatic, environmental as well as socio-economic conditions and needs across the EU. This flexibility will however be framed by well-defined regulatory and budgetary limits in order to ensure a level-playing field at European level and that common objectives are met. In informally as early as 2008 and more formally in April 2010, when the Commission launched a public debate on the CAP’s future. In June 2013, a political agreement was reached between the Commission, the EP and the Council under the Irish Presidency. In the last months of 2013, the regulations were formally adopted by the Council and the EP. Delegated Acts to clarify technical implementation details were approved in April 2014. Afterwards member states went to work on how they would implement various policy areas where they had flexibility in implementing the regulations. The length and complexity of the process are not indicative of the reform outcome. More about CAP in book Swinnen, J., The Political Economy of the 2014-2020 Common Agricultural Policy An Imperfect Storm, Centre for European Policy Studies, Brussels, 2015., p. 1-3. 18 The majority of Europeans consider all of the listed priorities of the CAP to be important, with two priorities mentioned more often as being “very important”: investing in rural areas to stimulate economic growth and job creation (47%), and strengthening the farmer’s role in the food chain (45%). More statistical data about the CAP and Europeans in Europeans, Agriculture and the CAP, Report, European Commission, EU, 2016., p. 5-6 116 �this area Member States share the responsibility to strike the right balance between possible benefits and the burdens of red tape for producers as well as for administration and controls.19 There is one more important thing when it comes to the reforms of the CAP, and also reason why the those reforms of the CAP were so needed, and that is increasement of competitiveness of the EU agriculture. Europe needed to retain and enhance competitiveness in the world characterized by increasing globalization and rising price volatility. The growing world population and expansion of the global markets means this is a time of opportunity of EU farmers, but also a challenges, not least the need to be competitive on a global level while managing the increasing costs of inputs, such as oil, fertilizers and water. Not only in the EU, but also in other countries, especially those with rural character such as countries of Western Balkans, it is necessary to build up and to have more innovative, self-reliant, profitable agriculture and farming industry with the ability to mitigate or withstand shocks and to recover quickly from them. So for Bosnia and Herzegovina finding ways to increase competitiveness and viability of agriculture will be the obligation of great priority and importance for the government, in order to provide better future for whole country, successful coping with competitive pressure in the EU market and to provide prosperity for all the inhabitants. The objective of past reforms to enhance the market orientation of EU agriculture is continued by adapting the policy instruments to further encourage farmers to base their production decisions on market signals. Competitiveness is addressed directly by changes to market mechanisms, particularly the removal of production constraints. All of the existing restrictions on production volumes for sugar, dairy and the wine sector will end, allowing farmers to respond to growing world demand.20 Some outdated commodity aid schemes will also be abolished, and other schemes modernized. Measures to facilitate producer cooperation under both pillars of the CAP should also boost the competitiveness of farming by reducing costs, improving access to credit and adding value to the primary sector. The reinforced legal framework for Producer Organizations is backed by financial incentives under the second pillar.21 Together all these instruments are expected to encourage producer cooperation and to improve the functioning of the food chain. Product differentiation, quality programs, promotion and onfarm processing should also add value. Other instruments under the second pillar which enhance competiveness at farm level include restructuring and modernization measures as well as startup aid for young farmers. Furthermore, there is a focus on bridging the gap between science and practice via the Farm Advisory System, as well as training and innovation program. These instruments are aimed at helping the farm sector to adapt to new trends and technologies, thus 19 More about CAP reforms in Overview of CAP Reform 2014-2020, European Commission, 2013., p. 5. 20 It was already decided in the Health Check that dairy quotas will expire in 2015 and the 2007 reform of the wine sector laid down the end to the planting rights system for 2018 at the latest. Sugar quotas will be abolished in 2017. 21 The Common Agricultural Policy after 2013, House of Commons, Environment, Food and Rural Affairs Commitee, Fifth Report of the Sesion 2010-11, Volume 1, 2011., p. 61. 117 �becoming more resource efficient, cost effective and capable of adapting to emerging challenges. At the same time the new CAP also offers more responsive safety net measures and strengthens the EU's capacity for crisis management. This will be achieved by more efficient market measures to deal with potential threats of market disturbances and more flexible exceptional measures. A new crisis reserve (of EUR 400 million per year in 2011 prices) is established to secure the financial resources needed in case of crisis, through deductions from direct payments, with unused amounts reimbursed to farmers in the consecutive budget years. In addition, the second pillar offers a new risk-management toolkit including insurance schemes for crops, animals and plants, as well as mutual funds and an income stabilization tool.22 Implementation in Western Balkan Countries The political economy of agricultural and food policies remains a fascinating and important topic. This holds in general with many poor countries in the world taxing their farmers while many rich countries subsidies agriculture. It also holds for the European Union. Since the start of the CAP, the EU has spent a large share of its budget on supporting European agriculture. In 2013, it was decided to spend more than €400 billion over the remainder of the decade on the CAP. The 2013 decision ended years of discussion and negotiations on the future of the EU’s agricultural policies. It not only had major implications for the EU’s budget and farmers’ incomes, but also for Europe’s environment, its contribution to global climate change and to food security in the EU and elsewhere in the world. The theoretical principles of modern agricultural policy state that evidence-based policy is founded on rigorously established objective evidence, good data, the use and development of empirical tools, policy analysis, benchmarking and impact assessments. Thus, the Western Balkans (further: WB) countries’ governments are not only working towards harmonizing their agriculture in view of their potential EU membership, but are also cooperating to build the foundations of a modern, efficient agricultural policy. The WB countries are at different stages of forming this kind of policymaking. While the development and quality of policy monitoring is only at an initial stage in some countries, others already make regular annual reports regarding the status of the agricultural sector. However, the reporting of budgetary transfers to agriculture is mostly less transparent, while policy impact assessments and evaluations are practically nonexistent, resulting in low-quality policy planning and decision-making that is not evidence based. The previous research shown that the new regional agriculture-related strategic documents adopted by WB countries are relatively modern and are oriented towards EU integration. The question remains whether or not these documents have brought about real changes in the WB countries’ policies in the first years of their implementation. Also, the central analytical issue is the assessment of direct production support, which is the main agricultural policy instrument in most WB countries (as well as the CAP). For the first time, the types of support, their associated eligibility criteria and the amounts involved are presented in a transparent fashion. All the countries have adopted key medium-term agricultural policy 22 Overview of CAP Reform 2014-2020, op.cit. p. 5-6. 118 �programming documents and these documents are solidly written and have a strong strategic logic. They describe positive changes in the policy framework and a more extensive orientation towards the EU, which are reflected in the definitions of goals and specific policy measures, especially regarding rural development. However, most countries lack a clear intent to reform their direct support policy in accordance with the EU CAP and this also applies to agroenvironmental measures and support. There is also a lack of resolution to establish evidencebased policy in the sense of introducing mandatory monitoring and other elements to achieve efficient policy reform. The more modern and well-conceived programming documents that have been drawn up are not yet leading to any marked changes in the scope and structure of policy instruments and measures, especially in their adaptation to CAP-like support systems. The size of the agricultural policy budgets fluctuate significantly from year to year and has increased since 2010 only in Kosovo and Albania, the two countries that started with the lowest relative amounts of the agricultural support. Kosovo also benefits from significant donor funds, helping it to achieve the largest relative budget size in 2015. Certain countries, in contrast, have reduced their agricultural budgets as a result of the economic crisis (e.g. Bosnia and Herzegovina since 2010 and Serbia in 2015). The structure of the total support for agriculture varies significantly. The proportions of funding for various groups of measures in the total agricultural budget cannot be compared without taking account of the size of the total budget itself. The proportion of direct producer support is high in Bosnia and Herzegovina, FYR Macedonia and Serbia (over 70 % on average). The funds for structural and rural development measures are mainly intended to improve competitiveness and have the highest proportions in Albania, Kosovo and Montenegro. However, these funds are limited and their real impact on the development of agriculture is therefore not to be overestimated. Support for agricultural public goods (agro-environmental measures and support) and quality of life in rural areas is almost negligible in all WB countries. Rural development policy is not really taking root in the region, despite the occasional adoption of beneficial projects or programs. This is a problem not only of modest levels of funding, but also of the programming of measures: they have a narrow orientation towards farm investment. The low absorption of IPARD pre-accession support funds is a significant problem. The causes vary, ranging from human capacity deficiencies in administration and political priorities at the country level to the lack of adaptation of support to real conditions. Similarly, levels of funding for general services are low in absolute terms and fall short of satisfying the countries’ developmental needs, especially in the sense of achieving efficient creation and transfer of knowledge.23 When evaluating the outcome of cross-comparative analysis of WB countries, it must be taken into account the fact that a clearer picture of agriculture and agricultural policy in this region require a lot of data and information, which are not yet available, or they are not 100% reliable. In all these countries, except Croatia, which is already a member of the EU, the process of improvement and harmonization of agricultural statistics with EU requirements is still ongoing. In this context, in all WB countries, one of the basic questions and priorities on which states 23 Monitoring of agricultural policy developments in the Western Balkan countries, Group of authors, Publications Office of the European Union, Luxembourg, 2017., p.14-33. 119 �need to focus is attention to improve agricultural statistics and database on policy implementation. Reliable and harmonized data are a prerequisite for a strong agriculture, and analysis and monitoring of agricultural policy, as well as for the successful programming and implementation of the agricultural policy. The biggest challenges of agricultural development in Western Balkan countries Agriculture is still among the most important sectors of the national economy in the WB countries, and provides a significant contribution to economic and social stability. However, its role is not so large in economic development, as it represents a social amortization during the economic crisis which exists in the region. Factor productivity in the region is considerably lower than the EU average, mainly due to slow process of consolidating agriculture and inefficient use agricultural resources. Depopulation in certain regions and acceptance of surplus labor from the agricultural sector in other sectors is the biggest problem in the development of agriculture and rural areas in most WB countries. Agricultural-food chain faces problems in creation of market institutions, establishment of marketing and distribution chains, and fulfillment of EU Standards in quality, veterinary, health and hygiene, and also phytosanitary standards. In general, it can be said that in the last few years in the WB counties, some progress has been made in the development of agriculture. However, much more still needs to be done to prepare the agricultural sector for the pressures of the competition of the modern global economy and also, to prepare these countries to join the EU. Main challenges for development of agriculture are, first of all, the resources, especially natural limitations and unused land potential, restrictions on human and capital factors, fragmentation of land and bimodal structure of agricultural holdings. Then, those are also production and productivity, particularly low productivity and technological gaps, low concentration and specialization of production and relatively weak production effect. The third are related to agricultural-food supply chain, specifically poor agro-business and low horizontal and vertical integration. At the end we have prices and trade, especially low prices and quality competitiveness and extreme trade dependency, as well as the last one related to the rural and regional characteristics which is depopulation, poor social situation and the presence of rural poverty. All this indicates that the agricultural sector and rural areas of the WB countries have significant developmental needs. Modernization and development of agriculture, and related with that the development of economic activities in rural areas, have the potential to significantly improve the prospects of these areas, and they must become the core of all strategic plans for the development of agriculture and rural areas in the region. Therefore, the key goals of the future policy of agriculture and rural development in all Western Balkan countries should be the improvement of the general legal and institutional framework, reform of land management, enhancement and stabilization of incomes, innovation and efficient transfer of knowledge, modernization of agriculture and agri-food sectors, better horizontal and vertical integration of 120 �manufacturers and processors, more efficient use and protection of natural resources, Elimination of rural poverty and the problems of small farmers, and territorial balanced approach.24 Agricultural policy in Bosnia and Herzegovina Agriculture in Bosnia and Herzegovina is an economically and politically important sector. The significance of the agricultural sector in B&H is reflected in the share of total gross domestic product (GDP), employment of the population and food security, as well as in a foreign trade. Although Bosnia and Herzegovina is aiming for European integration and harmonization of its agricultural policy with the EU CAP, the slow progress of the EU integration process is caused by numerous factors, especially the on-going economic crisis and the lack of political will to implement the necessary reforms. This is reinforced by the fact that Bosnia and Herzegovina has not made progress in establishing the necessary institutional structures, so the state ministry for agriculture, at the state level, does not exist (by the Constitution of Bosnia and Herzegovina, all levels of government have certain powers to govern agricultural policy), and also at the state level there is only the Law on Agriculture, Nutrition and Rural Development which has been in force since 2008., with the aim of structuring sectoral policies and helping in harmonization with the EU agricultural policies. Because the lack of adequate institutional and legal framework, BH is losing considerable financial resources that could contribute to institutional building and agricultural sector improvement in Bosnia and Herzegovina. Agricultural policy in Bosnia and Herzegovina shows large inconsistencies with its outlined objectives and it has changed frequently over time without being guided by clearly defined development objectives and the elements of modern public policymaking, and also as a result of the lack of a clear established funding mechanism for agricultural policy, annual budgetary transfers depend largely on the governing political structures and lobbying of various interest groups. New frameworks for medium-term policy action in the agricultural sector and rural areas have been established in two Bosnia and Herzegovina administrative units. Both strategic documents emphasize their determination for European integration and the concepts of modern public policymaking. However, the preliminary evidence regarding their implementation in these two administrative units reveals no significant changes in the process of policymaking and shows limited application of a modern approach to addressing the development needs of the agricultural sector and rural areas. BD did not adopt a similar framework to those of the other two administrative units and relies on short-term (annual) planning of agricultural policy (i.e. annual rulebooks). Regarding rural development, it is important to note that the FBH still does not have a valid legally adopted programming document that would allow a detailed implementation of the rural development measures. The proposal for the rural development program for 2015-2020 (FBH 2014b) has still not been approved by parliament. The proposal 24 More about this topic in Volk, T., Erjavec, E, Mortesen, K., Agricultural policy and European integration in Southeastern Europe, Food and Agriculture Organization of the United Nations, Budapest, 2015., p. 46-52. 121 �considers six areas of support: competitiveness of agricultural production; agro-environment; climate change mitigation and organic production; diversification of farm activities and entrepreneurship development; LEADER method of local development strategies and technical assistance and measures in the field of forestry (FBH 2014b). The Republic of Srpska (RS) adopted a new strategic plan for the development of agriculture and rural areas in 2015 for 20162020 (RS 2015a) before the expiry of the previous two strategic documents (i.e. the strategic document for 2010-2015 and the strategic document for 2010-2015). Unlike the previous two strategies, the new strategic document simultaneously covers both the agricultural sector and rural development. Overall, the new strategy contains six strategic goals and 16 specific goals that are proposed to be implemented using 52 different measures. As for BD, the current agricultural policy is implemented on the basis of a general strategic document that addresses the overall economy of this administrative unit. However, the development strategy for the agricultural sector that was in place until 2013 was without a legal basis. It is important to note that regular monitoring and evaluation of agricultural policy as part of a modern public policy cycle is not carried out in Bosnia and Herzegovina.25 Mid-term Strategy of Agricultural Sector Development in the Federation of Bosnia and Herzegovina for the period 2015 – 2019 Although there are many stories about the importance of the agricultural sector, its true significance for the quality of economic development, political stability and the development of the whole society, poverty reduction and improvement of quality of life, security a wide range of "public services" (preserving the uniqueness of the landscape, biodiversity, quality and accessibility water and soil, etc..), and for the preservation of cultural and gastronomic identity of the country (entities) is not sufficiently recognized. Having in mind vitality of this sector, the two worrying fact are the slight downturn of available ornamental surface area (3%, period 2003-2011), and also the fact that only about 50% of the surface area is used. The agricultural sector has not yet capitalized its potential and all significant opportunities for its further development. However, in the other hand, development of this sector is limited by the natural characteristics of land in the FBH (40% of the land is shallower then 30 cm, 84% of the territory is with a gradient higher than 13%, and there are dominant precipitation area, around 61.2%) which means that the sector has relatively small 25 For example, the parliament of the FBH receives an annual green report with a detailed description of the agro-food sector and the implemented agricultural policy. An important deficiency of these reports is their insufficient level of objectivity, as it does not provide a serious evaluation and analysis of the agricultural sector or of the effectiveness of the agricultural policies. The reports are prepared by the administration of the responsible ministry for agriculture without the involvement of the academic community or relevant research institutions. In the case of the RSR, there is neither an available annual report on the situation in agriculture nor an evaluation of the effectiveness of the implemented policy measures. Instead, the responsible ministry produces some information for the government and parliament. The academic community also makes some occasional analyses of the effects of agricultural and rural policy in Bosnia and Herzegovina, but this is mostly for academic purposes. More in Bajramović, S., Vaško, Ž., Ognjenović, D., Butković, J, Bosnia and Herzegovina: agricultural policy development and assessment, Monitoring of agricultural policy developments in the Western Balkan countries, Publications Office of the European Union, Luxembourg, 2017., p. 47.-50. 122 �available areas of high quality land. Also, the processes of integration and memberships of BH in different kind of organizations, such as the WTO, the EU and CEFTA allow BH access to international and new and very attractive markets as Russia, Turkey, Arab countries etc. At the same time, these processes lead to stronger competition which makes business more difficult, and also what is important is the negative economic trend in other countries which have significant influence on the export performance of the sector. Long-term drought, increased demand for products of animal origin (China and India), food price instability, increase of land price (due to breeding crops for energy production), energy and other inputs, and food-related scandals again raised all these issues and questions high on a scale of global political agenda. In Bosnia and Herzegovina, in period of 2015-2019., the solid foundation will be built for a faster and more efficient development, especially in the sense of establishing a modern, productive, technologically advanced and environmentally and socially sensitive economic sector, ready to respond to global socio-economic and climate changes and challenges, and capable of being “ready” for an adequate and prosperous position, above all in the region, and then on an international scene. This implies a strong strengthening of the capabilities of all business and administrative subjects to improve product recognition, by exploiting opportunities offered by a rich cultural heritage as well as the diversity of agro ecological conditions. Therefore, the focus of development will be on strengthening communication, co-operation, horizontal and vertical connection of all sector entities, as well as building efficient business alliances that will enable effective and efficient exchange of information, innovative ideas, but above all strengthen all forms of technology transfer and good business practices. Also, research and scientific institutions must become recognized by the all actors. On this way, the competitive, market-adjusted sector, will be built, and it will be the foundation for improving the quality of life of all citizens, especially residents in rural areas. This vision will be realized through the realization of the following strategic goals: development of agriculture and related sectors by raising technical-technological level, more efficiently use of available resources, and appreciation of requires of modern markets. Also, by providing the conditions for a more stable income within the agricultural sector and improving the quality of life in rural environments. Sustainable management of natural resources and adaptation of agriculture to climate change is one more strategic goal, and adjustment of the institutional and legislative framework and FBH agricultural policy, with the EU CAP, acknowledging the level of development of the FBH agricultural sector.26 26 More about agricultural sector in FBH and its development strategy in Mid-term Strategy of Agricultural Sector Development in the Federation of Bosnia and Herzegovina for the period 2015 – 2019, Federation of Bosnia and Herzegovina, Federal Ministry of Agriculture, Water supply and Forestry, Sarajevo, 2015. 123 �Therefore, in Federation of Bosnia and Herzegovina, this new strategic document emphasizes the need to adopt new technologies and innovation in the agricultural sector, more effective utilization of available resources and the improvement of quality of life in rural areas. Regarding European integration, this document clearly states the need to harmonize the institutional and legal framework of the FBH with the EU legislation and the CAP acquis. In the context of institution-building, this means putting in place a modern system of information, administrative management and monitoring of agricultural policies. The new strategic document outlines the need for a gradual alignment of the policy instruments of the FBH agricultural policy with those implemented within the EU CAP. Furthermore, the new strategic document envisages, for the first time, the application of the principles and elements of modern public policymaking in designing, adopting and implementing the agricultural policy, including detailed baseline analysis, definition of objectives, establishment of policy programming, definition of a clear financial framework (i.e. budgetary transfers based on the principles of consistency, transparency and traceability) and a system of monitoring and evaluation. The new strategy envisages the implementation of 37 measures distributed within the three pillars of the agricultural policy: 10 measures in the first pillar related to market intervention and direct producer support, 17 measures in the second pillar related to sector restructuring and rural development and 10 measures in the third pillar related to general services support. The most important changes introduced by the new strategy cover direct producer support (i.e. direct payments). The reduction of several pre-existing direct payments coupled to production (e.g. output subsidies) is proposed, while it is proposed that area and animal payments are increased. The equalization of area payments for most crops is envisaged as the first step towards the decoupling of direct payments, in line with the EU CAP. Conclusion This paper analyses the development of Common agricultural policy in European Union and also agricultural policy in Bosnia and Herzegovina in 2010-2015. The EU recognizes the importance of rural areas and places great emphasis on rural development, and in this direction BH should also go and exploit potential in its full capacity. For now, the results presented in this paper reveal that agricultural policy in Bosnia and Herzegovina shows a high level of instability and is inconsistent with the medium-term policy objectives outlined. This unstable policy development generates an uncertain policy environment for the agents operating in the agricultural sector, which may have adverse implications for its future growth and development. Bosnia and Herzegovina implements a very heterogeneous agricultural policy across its three administrative units (FBH, RS and BD) because they have the authority to design, adopt and implement their own policy measures. The agricultural policies differ between the units in terms of type of measures implemented and sectors supported. The priority on a state level is organisation of a Ministry for agriculture on a state level, and then to improve other aspects of institutional and legal frame work of agriculture and rural development in Bosnia and Herzegovina. Both the FBH and the RS have adopted new strategic frameworks for future 124 �actions in the agricultural sector and rural areas, but the first years of the implementation of the adopted strategic documents have shown that the governing political structures in the FBH and the RS have not shown sufficient determination and readiness for major reforms to put into practice the priorities outlined in the strategic documents. So, when it comes to implementation, the agricultural policy reforms have failed to put into practice the proposals that were adopted in the strategic documents, at least for now. Bosnia and Herzegovina needs a dynamic reconstruction and modernization in agricultural sector and rural development, with an effective approach to EU integration and the CAP by harmonizing legislation. With adequate policies and the dynamic access to the agricultural sector, the agriculture can become the cornerstone for the development of all other activities such as rural development, rural tourism, ecotourism, connecting producers and processors, etc., and the entire economy also, and not to be a stumbling rock on its own development path. Literature: Agriculture and the CAP, Report, European Commission, EU, 2016., Bajramović, S., Vaško, Ž., Ognjenović, D., Butković, J, Bosnia and Herzegovina: agricultural policy development and assessment, Monitoring of agricultural policy developments in the Western Balkan countries, Publications Office of the European Union, Luxembourg, 2017., Consultation on modernising and simplifying the common agricultural policy, European Commission, Directorate-General for Agriculture and Rural Development, https://ec.europa.eu/agriculture/consultations/cap-modernising/2017_en, 10.06.2017. Kesner-Škreb, M., Common Agricultural Policy of the European Union, Financial theory and practice, 2008., 32 (4), Mid-term Strategy of Agricultural Sector Development in the Federation of Bosnia and Herzegovina for the period 2015 – 2019, Federation of Bosnia and Herzegovina, Federal Ministry of Agriculture, Water supply and Forestry, Sarajevo, 2015., Monitoring of agricultural policy developments in the Western Balkans countries, Group of authors, Luxembourg: Publications Office of the European Union, Luxembourg, 2017., Overview of CAP Reform 2014-2020, European Commission, 2013., Swinnen, J., The Political Economy of the 2014-2020 Common Agricultural Policy An Imperfect Storm, Centre for European Policy Studies, Brussels, 2015., The Common Agricultural Policy after 2013, House of Commons, Environment, Food and Rural Affairs Commitee, Fifth Report of the Sesion 2010-11, Volume 1, 2011., The Stabilization and Association Agreement between the European Communities and their Member States, of the one part, and Bosnia and Herzegovina, on the other part, Treaty of Rome, 25 March 1957, Agriculture, Volk, T., Erjavec, E, Mortesen, K., Agricultural policy and European integration in Southeastern Europe, Food and Agriculture Organization of the United Nations, Budapest, 2015. 125 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3659 Title A name given to the resource Impact of Agricultural Policies on Rural Development and Increase of Competitiveness of Agriculture of Bosnia and Herzegovina with a Special Emphasis on Achievement of Reform Goals (doi: 10.14706/icesos1722) Author Author KAVAZ HUKIĆ, Sanja Abstract A summary of the resource. Abstarct: For the Balkan countries, the agricultural sector and rural development are of great importance, primarily because they are ensuring food security of the population, and then, also, because they have effects on employment, the creation of total gross value as well as on the foreign trade. Having in mind open processes of joining the European Union in these countries, with a special focus on Bosnia and Herzegovina, the implementation of the EU policies and practices will represent both a challenge and an opportunity for the development of the state and the improvement of its position in the single European market. Bosnia and Herzegovina is a country with a distinct rural character, with over 50% of the rural population, where every third household acquires some kind of income from agriculture, and which is currently facing a number of problems when rural development is concerned (from insufficient investments, uncompetitive production, inefficient administration, abandonment of rural areas, failure to use EU funds, etc.). Nevertheless, with adequate policies and dynamic approach to the agricultural sector, and strategy for increasing competitiveness and attracting investment, the potential of Bosnia and Herzegovina's agriculture could be used and exploited, and the country could go towards progress and success. Therefore, this paper explores and analyzes the European Union's common policies, as well as the ways and means of their implementation in the Balkan region countries, especially in Bosnia and Herzegovina. Then, the paper points the importance and necessity of investing in rural development (infrastructure, mechanization, marketing, agro-environmental measures, etc.), and provides guidelines on how to modernize and reconstruct the agricultural sector, in order to increase the country's competitiveness and reduce the long-standing trade deficit in this area, and, at last, how to effectively approach to the European Union with harmonization of legislation and the use of development plan. The agricultural sector and the overall modernization of rural communities, with a clear vision, and with increasing employment, economic growth and competitiveness, can become the cornerstone of the development of Bosnia and Herzegovina and a key factor of its inclusion in the European and the world trends. Keywords: EU common agricultural policy, agriculture, rural development, competitiveness. JEL Classification: Q17, Q18, O13, 018 Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/daa29dfe95f0aae7036b21a7e540bbd4.pdf e84d390c46b9570c80d1af57ce5c4bca PDF Text Text Effects of Reward System on Motivation of Employees in Small and Medium Enterprises (sme) in Federation of Bosnia and Herzegovina Adna Idrizović International Burch University Faculty of Bosnia and Herzegovina adnaid@gmail.com Abstract: In this project, we will research impact of rewards on motivation of employees. Outcome of the organization is profoundly dependable on the achievement of their workers. Aim of this paper is to show how rewards impact motivation keeping in mind the goal to improve the general performance of the organization. It is crucial for the organization to comprehend what drive the employees and how to expand their employment fulfillment. It may however be hard for an organization to discover what motivates employees, particularly on the grounds that distinctive individuals are motivated by various things. Well composed and useful reward system is an effective approach to build employee work motivation. This paper embarks to investigate obviously what factors exist in ascribing the right reward structure to an individual representative or group. Reward management is both perplexing and involved and exceptionally exposed to outside impacts, for example, financial situations, culture and individual worker inclinations and recognition. Keywords: motivation, employee motivation, reward system, employee satisfaction. JEL Classification: M5, J28. Introduction In this project, we will research impact of rewards on motivation of employees. Outcome of the organization is profoundly dependable on the achievement of their workers. Aim of this paper is to show how rewards impact motivation keeping in mind the goal to improve the general performance of the organization. There are many ways in which job satisfaction is defined. This is complex topic, and many theorists and authors gave their contribution to further develop and broad this area. To research this topic, we need to adequately explore all influencing factors which are related to the job satisfaction. Those include environmental factors psychological factors and individual factors. It is crucial for the organization to comprehend what drive the employees and how to expand their employment fulfillment. It may however be hard for an organization to discover what motivates employees, particularly on the grounds that distinctive individuals are motivated by various things. Well composed and useful reward system is an effective approach to build employee work motivation. This paper embarks to investigate obviously what factors exist in ascribing the right 138 �reward structure to an individual representative or group. Reward management is both perplexing and involved and exceptionally exposed to outside impacts, for example, financial situations, culture and individual worker inclinations and recognition. Motivating the workforce of a company to work all the more viably towards the company's objectives is maybe the most crucial assignment of management. Companies persuade their workforce to perform adequately by offering those rewards for agreeable execution and maybe rebuffing them for unacceptable work. Over the past hundred years there has been a development in the perspective of what the expression "rewards" really implies in an authoritative setting. Literature review In this study, we will present different ideas about job satisfaction and motivation techniques. Job satisfaction is one of the most researched topic regarding job environment and among the most broadly investigated subjects in Industrial/Organizational Psychology (Judge & Church, 2000). Intrinsic and extrinsic sorts of motivation have been generally contemplated, and the qualification between them has revealed vital insight into both formative and instructive practices. Extrinsic motivation is a build that relates at whatever point a movement is done keeping in mind the end goal to achieve some detachable result. Extrinsic motivation consequently diverges from intrinsic motivation, which alludes to doing an activity basically for the happiness regarding the action itself, instead of its instrumental esteem (Ryan & Deci, 2000). Managers can motivate employees through strategies, for example, pay, advancement and acclaim. Employees can likewise rouse themselves by looking for work where singular objectives, needs furthermore will be achieved. Intrinsic motivation alludes to the motivation that originates from inside a person. The motivation is created trough fulfillment or satisfaction that one gets in finishing or notwithstanding at an errand. Extrinsic motivation is something that is done for individuals to persuade them. It emerges from elements outside an individual, for example, cash, evaluations, feedback or disciplines (Armstrong and Taylor, 2014). Job satisfaction is a perspective achieved from employees' impression of their job or environment in which they work and alludes to the degree to which an employee likes the actual job (Arokiasamy & Abdullah, 2013). Payment systems are effective but they cannot ultimately achieve satisfaction of employees. Managers needs to weigh up the most favorable circumstances and disservices of every reward 139 �systems and choose which system to put the priority on and give it the most attention (Torrington, Hall, Taylor & Atkinson, 2009). Armstrong and Taylor (2014) insists that there are also other types of incentives such as reward by the result. Incentive by Result is one of the most broadly utilized motivating force, which compensate representatives as per the quantity of things or units they deliver or the time they take to deliver them. This plan has been condemned because of its inclination to reward amount of yield as opposed to quality which can prompt diminished nature of the item or administration. There is an awesome need to alter and assess the adequacy of this plan in the event that it is to hold the effect of profitability (Daley, 2012). The subjects presented to the associates who made positive remarks evaluated the employment errands as more charming than the subjects presented to the negative remarks by the associates. This further approves social data handling hypothesis (Aamodt, 2009). Medina (2012) highlights that job fulfillment was firmly contrarily connected with turnover expectation and this relationship was intervened by fulfillment in work environment culture. The review gives prove that ought to be additionally investigated to help in the comprehension of worker turnover and occupation fulfillment; especially in how job fulfillment and representative turnover identify with work environment culture. Decker (2010) insists that motivation is a persons' inward inclination to be worried with and approach constructive impetuses and keep away from adverse stimulation. To further this, a motivator is the expected reward or unpleasant occasion accessible in the environment. Reward is the benefit achieved for performing expected assignment. It is a positive boost or motivating force that can be displayed during the time spent fortifying conduct. As per Decenzo and Robbins (2002), today's specialists expect something other than a time-based compensation or pay from their boss; they need extra contemplation that will advance their lives. This contemplation in a business setting is called employee benefits. Benefits are the program a business uses to supplement money compensation that employee gets (Pinder, 2014). Methodology In the theoretical part of this study, we will present different ideas from various researchers and present collected literature. In the beginning, we will introduce reward systems and motivation and describe it thoroughly. Different systems of the motivation will be explored and presented. Speaking of instruments for data collection in this study, we will use quantitative research survey. We decided to use survey because of costs and structured technique with large number of samples. This survey will be constructed in order to get feedback from employees from 140 �different Small and Medium Enterprises in Federation of Bosnia and Herzegovina. We will analyze different reward systems and methods used to motivate the employees. Statistical data will be analyzed using IBM SPSS software. In the end of the questionnaire we would make one question open where respondents of this survey can express their own opinion and say in own words, what would they do to improve satisfaction of employees and how to motivate them properly. For purpose of hypothesis testing, linear regression method will be used. Other important conclusions will be generated after descriptive statistics analysis. Figure 1 Research model Data & Results For every organization, it is important to keep their employees satisfied, because the result is dependent on their performance. Therefore, we plan to find results what drives motivation of employees. What positively influence their performance and what negatively reduce their performance. Primary data would be collected from the survey distributed online via e-mail to the respondents. A typical hypothesis inside the exploration has been that, to a degree, the emotional condition of an individual is influenced by associations with their workplace. Individuals distinguish themselves by their calling, for example, a specialist, legal counselor, or instructor. Consequently, an individual's close to home prosperity at work is a critical part of research (Judge & Klinger, 2007). We want to find which areas of motivation of employees function well and which areas needs to be improved. With collected data and personal opinions of employees from different organizations and companies, we want to build a solid study. Feedback of employees will give 141 �us necessary data which will be analyzed and commented in this study. Positive linear relationship is expected to be gathered for all hypotheses. This thesis was directed in order to contribute to the examination of the attitudes of the employees towards the reward systems of the organization. Particularly, it will help the organizations to explore which of the reward systems is most favored and what different benefits motivate the employees. Figure 2 Age of respondents In this figure, we can see the age of respondents. The biggest number of respondents belongs to the first category variable. That means those employees have age range 18-24 years. The next biggest proportion is the range group with the employees having age 35-54 years. Than we have a group of employees having 25-34 years. In the end, we have employees with the 55 years and more. Those are seniors, managers and owners of the respected companies taken into consideration for this survey. Figure 3 Gender In this figure, we have taken into account gender of the respondents. In this survey 59,2 % of women are respondents, and 40,8% of men are respondents. This is interesting for the country of Bosnia and Herzegovina, since the majority of the working forces are male. 142 �Figure 4 Marital status In this figure, we can see marital status of the respondents. We asked this question since it is important for this research to evaluate what impact marriage have on the motivation of the respondents and what effects can it cause. Figure 5 Area of profession In this question, we asked respondents what is there area of profession. We have found out that the most of respondents have Economical and Administrative background or 34,4% of them. Other areas of profession are covered respectively as shown on the figure. 143 �Figure 6 Education level In this figure, we analyzed education level of the respondents since it is very important for the motivation of employees. We can see that the biggest number of respondents have a faculty degree or bachelor with the number of 39,8% of overall. Figure 7 Reward system In this question number 7 in our questionnaire we wanted to analyze does current reward system in the respected companies motivates their employees. The given options were from 1 strongly disagree to 5 strongly agree. According to our respondents, we can see that more than half of them, precisely 50,5% thinks that reward system is motivating in their companies. 144 �Figure 8 Wages In the figure 8. We have analyzed whether if wages are connected with the motivation of employees. The given options were from 1 strongly disagree to 5 strongly agree. The biggest number of respondents 47,3% of them thinks that wages are positively related with the motivation of employees. Figure 9 Responsibilities In the figure 9 we can see how employees have answered on our question whether responsibilities are positively related with the motivation of employees. We can see that the 43,1% of the respondents thinks that responsibilities are positively related with the motivation of employees. Conclusion Employees want to be recognized for their work and they want to be appreciated. It usually doesn’t take an extra effort to achieve satisfied employees. This study tried to emphasize the importance of the individual needs of the employees. 145 �There are many ways in which job satisfaction is defined. This is complex topic, and many theorists and authors gave their contribution to further develop and broad this area. To research this topic, we need to adequately explore all influencing factors which are related to the job satisfaction. Those include environmental factors psychological factors and individual factors. This paper was directed in order to contribute to the examination of the attitudes of the employees towards the reward systems of the organization. Particularly, it will help the organizations to explore which of the reward systems is most favored and what different benefits motivate the employees. Well composed and useful reward system is an effective approach to build employee work motivation. This paper embarks to investigate obviously what factors exist in ascribing the right reward structure to an individual representative or group. Reward management is both perplexing and involved and exceptionally exposed to outside impacts, for example, financial situations, culture and individual worker inclinations and recognition. Further researches would include developing new model which will include analyzing of motivation regarding the sociographical and demographical environments. Also, what should be considered in the future are cultural differences and its impact on the motivation of employees. References Aamodt, M. (2009). Industrial/Organizational Psychology. Belmont, CA. Cengage Learning. Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers. Arokiasamy, A. R. A., Tat, H. H., & Abdullah, A. (2013). The Effects of Reward System and Motivation on Job Satisfaction: Evidence from the Education Industry in Malaysia. World Applied Sciences Journal, 24(12), 1597-1604. Ayyagari, M., Beck, T., & Demirgüç-Kunt, A. (2003). Small and Medium Enterprises Across the Globe: A New Database. World Bank Policy Research Working Paper 3127. Daley, D. M. (2012). Strategic human resource management. Public Personnel Management, 120-125. DeCenzo, D. A., & Robbins, S. P. (2002). Human resource management (John Wiley & Sons, Inc., New York. Deckers, L. (2010). Motivation; Biological, Psychological and Environmental. 3rd ed. MA: Pearson, Boston. 2-3. Dyson, K. (2005). Small and medium sized enterprises. Routledge. Fisher D. (2000). Mood and emotions while working: missing pieces of job satisfaction? Journal of Organizational Behavior 21, 185-202. Gupta, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM research. Human Resource Management Review, 24(1), 1-4. 146 �Judge, T. A., & Church, A. H. (2000). Job satisfaction: Research and practice. In C. L. Cooper & E. A. Locke (Eds.), Industrial and organizational psychology: Linking theory with practice (pp. 166-198). Oxford, UK: Blackwell. Judge, T. A., & Klinger, R. (2007) Job satisfaction: Subjective well-being at work. In M. Eid,& R. Larsen (Eds.), The science of subjective well-being (pp. 393-413). New York, NY: Guilford Publications. Lau, C. M., & Roopnarain, K. (2014). The effects of nonfinancial and financial measures on employee motivation to participate in target setting. The British Accounting Review, 46(3), 228- 247. Medina, E. (2012). Job satisfaction and employee turnover intention: what does organizational culture have to do with it?. Columbia University. Pinder, C. C. (2014). Work motivation in organizational behavior. Psychology Press. Presslee, A., Vance, T. W., & Webb, R. A. (2013). The effects of reward type on employee goal setting, goal commitment, and performance. The Accounting Review, 88(5), 1805-1831. Ryan, R. M., & Deci, E. L. (2000). Intrinsic and extrinsic motivations: Classic definitions and new directions. Contemporary educational psychology, 25(1), 54-67. Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press. Torrington, D. Hall, Laura. Taylor, Stephen & Atkinson Carol (2009). Fundamentals of Human Resource Management, 1. Zhou, J., & George, J. (2001). When job dissatisfaction leads to creativity: Encouraging the expression of voice. The Academy of Management Journal, 44(4), 682. 147 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3639 Title A name given to the resource Effects of Reward System on Motivation of Employees in Small and Medium Enterprises (sme) in Federation of Bosnia and Herzegovina (doi: 10.14706/icesos172) Author Author Idrizovic, Adna Abstract A summary of the resource. Abstract: In this project, we will research impact of rewards on motivation of employees. Outcome of the organization is profoundly dependable on the achievement of their workers. Aim of this paper is to show how rewards impact motivation keeping in mind the goal to improve the general performance of the organization. It is crucial for the organization to comprehend what drive the employees and how to expand their employment fulfillment. It may however be hard for an organization to discover what motivates employees, particularly on the grounds that distinctive individuals are motivated by various things. Well composed and useful reward system is an effective approach to build employee work motivation. This paper embarks to investigate obviously what factors exist in ascribing the right reward structure to an individual representative or group. Reward management is both perplexing and involved and exceptionally exposed to outside impacts, for example, financial situations, culture and individual worker inclinations and recognition. Keywords: motivation, employee motivation, reward system, employee satisfaction. JEL Classification: M5, J28. Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/3676db198cd7c6f6abcc2e8ddf6945a0.pdf c8d4d7ea4b97723907371e6b047a9b1c PDF Text Text Ethical Climate, Job Satisfaction, and Affective Commitment relationship in the Shoes Manufacturing Sector Mehmet Gencoglu International Burch University Department of Management Bosnia and Herzegovina M. Sait Dinc International Burch University Department of Management Bosnia and Herzegovina Abstract: Recent studies have demonstrated that retaining qualified employees is crucial for organizations. As labor-intensive sector, shoes manufacturing sector is highly dependent on qualified employees. Based on the literature in this field, affective commitment of employees to their organizations has a significant importance for retaining them. The main purpose of this study is to examine ethical climate, job satisfaction, and affective commitment relationship in the shoes manufacturing sector. A survey with four sections is conducted in 10 companies and 3 cities in Turkey with 161 respondents in overall. Descriptive and Pearson correlation analyses were made. The study results showed that statistically significant relationships exist among ethical climate, job satisfaction, and affective commitment. In specific, Law and Code type of ethical climate has a crucial statistically significant relationship with affective commitment. Keywords: Ethical Climate, Job Satisfaction, Affective Commitment, Shoes Manufacturing Sector, Turkey Introduction Business ethics has been a relatively new area of research in terms of investigation of its consequences on employee behavior and eventually on business itself. Specifically, ethical climate has been a concept which is directly related to employee attitudes and behaviors. Ethical climate is a shared perception among the employees with regard to the meaning of ethical behavior in the organization and it is important in shaping employee behaviors (Victor and Cullen, 1988). Employees who have learned how to behave in an ethical way in such an atmosphere are likely to be more satisfied with their jobs and more committed to their organization (Dinc and Aydemir, 2014). However, ethical climate and its consequences could significantly differ among different countries and different sectors. 192 �Shoes manufacturing is a highly labor-intensive sector due to its nature. Therefore, employees are crucial part of this business. Most of the processes need skillful workers who are very hard to replace. Thus, retaining employees is very important for the organizations in this sector. The purpose of this study is to examine ethical climate and job satisfaction as variables which affect commitment of employees in shoes manufacturing sector. Despite the fact that numerous studies have explored the relationship among these variables, it is apparent that those studies have been conducted mostly in developed countries, whereas research regarding developing countries is limited. As one of the developing countries, Turkey has a very dynamic and growing economy. Along with the economy, number of studies have been increasing in number as well. However, in the business ethics field studies are still very limited. Specifically, in manufacturing industry, the literature is very scarce. Therefore, shoes manufacturing sector in Turkey as a research context is intentionally chosen in this study. Although the official numbers show that there are around 65,000 employees working in 6,800 companies in shoes manufacturing sector in Turkey, the actual numbers are dramatically higher than the official ones, due to a very high level of the off-the-record production. It is estimated that there are approximately 300,000 employees currently working in the sector in unregistered companies. All these numbers show that the main issue of large shoes manufacturing companies is difficulty to retain talented employees. The purpose of this study is to explore relationship between job satisfaction and affective commitment of employees and ethical climate of shoes manufacturing companies in Turkey. This relationship is illustrated in Figure 1 as a proposed model of the study. Figure 1 Proposed Model 193 �Literature Review Ethical Climate Ethical Climate is a type of work climate. It has been studied since 1950s. Ethical climate is “a perceptual lens through which workers diagnose and assess situations” (Cullen, Parboteeah, Victor, 2003). Essentially, it represents the perception of employees of what is right or wrong in responding to an ethical dilemma. Several studies claim that ethical climate affects decisions and behaviors within the organization (Victor and Cullen, 1988, 1990). Moreover, it shapes ethical understanding and behavior of employees. According to Victor and Cullen (1988), there are 5 types of ethical climate, such as Instrumental, Caring, Independence, Rules, Law and Code. In an organization which has a caring climate, employees have a concern for others and care for each other’s well-being. In an independent climate, employees act according to their own personal moral beliefs. Law and Code climate refers to the climate in which employees adhere to the codes and regulations of their profession or another authority. In this type of climate, employees should make decisions based on some external system such as law or professional codes of conduct. If the employees’ behaviors comply with the accepted rules of conduct determined by the organization, then that organization has a Rules climate. The Instrumental climate is the least favorable type which suggests individuals’ self-interest within the organization (Victor and Cullen 1987, 1988). Job Satisfaction Job satisfaction is an employee’s self-assessment about his/her job or job situation. It is defined by Locke (1976) as “a pleasurable or positive emotional state resulting from the appraisal of one's job or job experiences.” On the other hand, it is also defined as the emotional status which originated from the selfassessment of the employee and that stimulates the job performance and achievements of the employee. Job satisfaction entails the general behavior of the employee against his/her current job, that is to say, an employee who has high satisfaction levels behaves positively while an employee who has low satisfaction levels has a negative behavior. There are three fundamental relationships which affect job satisfaction. Namely, employee-organization relationship, employee-manager relationship, and employee-colleague relationship. Organizational commitment is one of the most studied concepts with Job Satisfaction. Several studies exhibited that Job Satisfaction is significantly related to employees’ organizational commitment (Mathieu and Zajac,1990; Testa, 2001; Tett and Meyer, 1993). 194 �Affective Commitment Affective commitment is a type of organizational commitment (Meyer and Allen, 1991) which represents the tendency of a worker to stay with a company. This tendency is based on an emotional attachment. The importance of organizational commitment is generated from its relationship with employee turnover, absenteeism, and tardiness (Çakır, 2001; Seymen, 2008). Many studies have showed that employees who are most committed to their organization are least likely to quit their job (Meyer and Allen, 1991). According to previous studies there are three types of organizational commitment, such as affective commitment, continuous commitment, and normative commitment. Organizational commitment has several consequences, such as not quitting the job, productive behavior, and welfare of the employee in terms of physical health, psychological health, etc. Personal qualifications, job’s characteristics, job experiences, and structural attributes can be a source of affective commitment. (Meyer and Allen, 1997). According to the review of the literature presented in the previous part, following hypotheses can be posited: Hypothesis 1: “Caring”, “independent,” and “law and code,” as EC types, have a significant positive relationship with overall JS. Hypothesis 2: “Instrumental” as the EC type has a significant negative relationship with overall JS. Hypothesis 3: “Caring,” “independent,” “law and code,” as EC types, have a significant positive relationship with AC. Hypothesis 4: “Instrumental” as the EC type, has a significant negative relationship with AC. Hypothesis 5: Overall JS has a significant positive relationship with AC. Methodology Sampling, Procedures, and Measurement In order to have a better coverage, the questionnaires were delivered to several companies in Istanbul, Gaziantep, and Izmir. Questionnaires were send via email to the owners or general managers of the companies. Recipients were familiarized with the purpose of the study and the importance of the anonymity of the respondents. They were asked to conduct the survey on a 195 �voluntary basis and under a confidentiality which would not leave employees with an impression that their jobs are at stake. The questionnaire consisted of 3 pages and 4 sections. First section was about Ethical climate and it consisted of 14 questions. Second section referred to Affective commitment with 6 questions. Job satisfaction was the topic of third section and had 3 questions. Lastly, demographic questions were asked at the fourth section including gender, age, education level, tenure in the company and total tenure, managerial position, and the dimension of the company. Ethical climate questions were 14 items developed by Huang et al., but originally adapted from Victor and Cullen. Meyer and Allen’s (1997) Job satisfaction was measured by 3-item scale of Fu and Deshpande (2013), whereas 6-item scale was used for measuring Affective commitment. After collecting surveys, data were analyzed through SPSS. Exploratory factor analyses were used to find the initial structure of the scales. The relationship between all types of ethical climate in the literature, affective commitment, and employee’s job satisfaction were examined through Pearson Correlation analysis. Descriptive statistics were also conducted to show detailed information about the sample of this study. Table 1 Sample Characteristics Variable Gender Age Organization Dimension Job Experience (Company) Job Experience (Total) Demographics Number Valid Percent Male 136 91.3 Female 13 8.7 less than 20 14 9.3 20-25 27 17.9 26-30 13 8.6 31-35 37 24.5 36-40 32 21.2 More than 40 28 18.5 10-50 113 70.6 51-100 18 11.3 More than 500 29 18.1 Under 5 years 91 59.9 5-10 years 27 17.8 10-15 years 15 9.9 Over 15 years 19 12.5 Under 5 years 30 19.74 196 �Education Level 5-10 years 42 27.63 10-15 years 31 20.39 Over 15 years 48 31.58 Illiterate 11 7.3 Primary-Secondary 88 58.7 High school 38 25.3 Community College 2 1.3 Undergraduate 10 6.7 Graduate or more 1 0.7 Results Initial Results After a two-step process of factor analysis, four items from ethical climate scale, and three items from affective commitment scale were extracted due to weak loadings and overloading. Descriptive statistics and Correlations for the variables are presented in the Table 2. Table 2 Descriptive statistics and Correlations for the variables Variables Mean SD 1 2 3 4 5 (1) Law and Code 3,98 1,079 1 (2) Instrumental 2,68 1,115 -0,152 1 (3) Independent 3,28 1,344 0,130 0,154 1 (4) Caring 4,11 1,083 .431** -0,062 0,142 1 (5) Affective 3,83 1,058 .527** 0,020 .187* .352** 1 (6) Job Satisfaction 3,76 1,012 .421** -0,006 .211** .335** .525** 6 1 *P< 0.05; **P <0.01 Discussion and Conclusion Law and Code type of climate has a significant positive relationship with affective commitment and job satisfaction. The reason for such finding may be because of the present conditions of the country and the sector. Due to the unofficial production in bad conditions, employees might feel more satisfied and feel more committed to the organization which obeys the laws and codes. 197 �Independent type of climate has also a significant positive relationship with affective commitment and job satisfaction. This result is parallel with the findings presented in the literature (Tsai and Huang, 2008). Caring type of climate has a significant positive relationship with affective commitment and job satisfaction. This result complies with the findings of the literature (Tsai and Huang, 2008; Dinc and Huric, 2016). Caring climate is expected to be higher than law and code climate. However, it seems that finding a better company, which obeys laws and codes and offers better physical conditions is more important for employees in shoes manufacturing sector. They may still find caring climates in unofficial companies, nevertheless, insurance, regular payment, and safety cannot be found in this kind of companies, which represents one of the greater problems in Turkey. Job satisfaction has a significant positive relationship with affective commitment. This result is similar to the findings of the literature (Allen and Meyer, 1990). An employee who is satisfied with his/her job shows more affective commitment to his/her organization. Unlike the literature, this study did not find any relationship between instrumental ethical type of climate and job satisfaction or affective commitment. The reason for such finding may be because of the absence of this kind of ethical type of climate in the shoes manufacturing sector in Turkey. The mean value of instrumental ethical climate questions is only 2.68 which implies that employees do not feel any instrumental climate in their organization. Therefore, any relationship could not be found. This might be the case due to several reasons:  Shoes manufacturing requires team-work, therefore, after working for some time in this sector, employees might have developed unselfish behaviors.  According to the culture of the country, people perceive selfish behaviors negatively. In overall, this study suggests that shoes manufacturing sector can increase retaining employee rate and decrease turnover through supplying law and code, caring, and independent ethical types of climate within the organizations. Sector companies can enjoy affective commitment and satisfaction of the employees by supplying them with insurance, regular payment, and by ensuring their safety. Limitations This study may have some limitations. Number of respondents may have been increased and data may have been gathered from more companies from several other cities which might have more diverse cultural backgrounds. 198 �Recommendations for Future Studies Although the literature suggests that affective commitment is the most favorable type of Organizational Commitment, other types such as Continuous Commitment, Normative Commitment can be included in the future studies. Also, more variables can be included in the research, such as Leadership and Cultural dimensions. Furthermore, same study can be conducted in different countries that employ millions of shoes manufacturing personnel, such as China, India, etc. References Allen, N. J. and Meyer, J. P. (1990). The measurement and antecedents of affective, continuance and normative commitment to the organization. Journal of Occupational Psychology, 63, 1–18. Çakır, Ö. (2001). İşe bağlılık olgusu ve etkileyen faktörler. Seçkin Yayıncılık. Cullen, J. B., Parboteeah, K. P., & Victor, B. (2003). The effects of ethical climates on organizational commitment: A two-study analysis. Journal of Business Ethics, 46(2), 127-141. Dinc, M. S., & Aydemir, M. (2014). Ethical leadership and employee behaviors: an empirical study of mediating factors. International Journal of Business Governance and Ethics, 9(3), 293-312. Dinc, M. S., & Huric, A. (2016). The impacts of ethical climate types on nurses’ behaviors in Bosnia and Herzegovina. Nursing ethics, 0969733016638143. Locke, E. A., Sirota, D., & Wolfson, A. D. (1976). An experimental case study of the successes and failures of job enrichment in a government agency. Journal of Applied Psychology, 61(6), 701. Mathieu, J. E., & Zajac, D. M. (1990). A review and meta-analysis of the antecedents, correlates, and consequences of organizational commitment. Psychological bulletin, 108(2), 171. Meyer, J. P., & Allen, N. J. (1991). A three-component conceptualization of organizational commitment. Human resource management review, 1(1), 61-89. Meyer, J. P., Allen, N. J., & Allen, N. J. (1997). Commitment in the workplace. Sage Publications. Seymen, O. A. (2008). Örgütsel bağlılığı etkileyen örgüt kültürü tipleri üzerine bir araştırma. Ankara: Detay Yayıncılık, 135. Testa, M. R. (2001). Organizational commitment, job satisfaction, and effort in the service environment. The Journal of Psychology, 135(2), 226-236. Tett, R. P., & Meyer, J. P. (1993). Job satisfaction, organizational commitment, turnover intention, and turnover: path analyses based on meta‐analytic findings. Personnel psychology, 46(2), 259-293. 199 �Tsai, M. and Huang, C. (2008). The relationships among ethical climate types, facets of job satisfaction, and the three components of organizational commitment: a study of nurses in Taiwan. Journal of Business Ethics 80, 565–581. Victor, B., & Cullen, J. B. (1988). The organizational bases of ethical work climates. Administrative science quarterly, 101-125. Victor, B., & Cullen, J. B. (1987). A theory and measure of ethical climate in organizations. Research in corporate social performance and policy, 9(1), 51-71. 200 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3651 Title A name given to the resource Ethical Climate, Job Satisfaction, and Effective Commitment relationship in the Shoes Manufacturing Sector (doi: 10.14706/icesos1714) Author Author Gencoglu, Mehmet DINÇ, Muhammet Sait Abstract A summary of the resource. Abstract: Recent studies have demonstrated that retaining qualified employees is crucial for organizations. As labor-intensive sector, shoes manufacturing sector is highly dependent on qualified employees. Based on the literature in this field, affective commitment of employees to their organizations has a significant importance for retaining them. The main purpose of this study is to examine ethical climate, job satisfaction, and affective commitment relationship in the shoes manufacturing sector. A survey with four sections is conducted in 10 companies and 3 cities in Turkey with 161 respondents in overall. Descriptive and Pearson correlation analyses were made. The study results showed that statistically significant relationships exist among ethical climate, job satisfaction, and affective commitment. In specific, Law and Code type of ethical climate has a crucial statistically significant relationship with affective commitment. Keywords: Ethical Climate, Job Satisfaction, Affective Commitment, Shoes Manufacturing Sector, Turkey Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/bc337c83e6e845e63c414e628db4c646.pdf e8d576ead16ac7bedbce74aac350f819 PDF Text Text Human Intervention in the Case of Syria Modern World War Rea Gegaj Epoka University Tirana, Albania Sara Dedej Epoka University Tirana, Albania Speranca Reka Epoka University Tirana, Albania Abstract: The world is having a crisis on international relations because of the Civil War in Syria, which soon enough turned into a Modern World War (MWW). This conflict complexes the whole world and questions the life of limitless innocent people. Drawing the conflict visually, this paper attempts to explain the use of humanitarian intervention in the case of Syria and surveys the main influential countries included in the war and their reasons for doing so. This review explains the exact event - of 15 students killed by the government - that led to the Civil War and precisely how its size became getting bigger day by day. Besides doing research and explaining the reasons of the conflict, it also focuses on possible and realistic solutions to end the war and support the Syrian refugees, on which the whole burden of the war falls. The review incorporates various methods including data collection and their analysis. Keywords: Civil War in Syria, Modern World War, conflict, international relations, explaining, support, solution. Introduction I have chosen humanitarian intervention as a controversial topic in the light of globalization, growing international cooperation and interdependence amongst states. I argue that, if justified, humanitarian intervention is a moral obligation that falls upon all able international actors, including individual states as well as intergovernmental or supranational organizations. Initially, I will introduce the topic of humanitarian intervention by giving a broad definition and further analyzing it according to the philosopher Michael Walzer. I will, then, compare the analysis and the intervention guidelines with the real life situation in Syria from 2011 to today, arguing that intervention is not only justifiable, but also necessary. I want to underscore that I believe humanitarian intervention is justified or required only in specific cases and based on certain norms and I will further elaborate them accordingly. 74 �Definition of Humanitarian Intervention According to Two Different Philosophers Adam Roberts defines humanitarian intervention as follows: “Coercive action by one or more states involving the use of armed force in another state without the consent of its authorities, and with the purpose of preventing of widespread suffering or death among the inhabitants”. On the other hand, Michael Walzer discusses humanitarian intervention in four regards. Firstly, he does so by examining the nature of its occasions. Secondly, he discusses the preferred agents of interference, further explaining the ways in which intervention should be applied. Lastly how and when a humanitarian intervention should end. (1)Walzer clearly defines the cases in which humanitarian intervention is permissible and required. He says that the occasions in which humanitarian intervention is required should be extreme and at a large scale. Only cases such as genocide, extreme brutality and oppression targeted towards a large population can justify an international response. It has to be clear that it does not seem possible or practical to wait for a local response (Rashid, 2012). (2) When dealing with the question: “Who should be the actor interfering?” Walzer states that interference should come from any actor that has the appropriate means to carry out the humanitarian aid. Simply put: “Who can, should!”Considering the immediacy of the situation, Walzer firmly believes that unilateral action, most commonly coming from neighboring countries, but not only, is the most effective(Walzer, 2002). (3)Proceeding to the means of pursuing a humanitarian intervention, Walzer says that the use of force is necessary. Controversially to the popular opinion that the use of force should come only after exhausting all other possible ways, and as a last resort, he argues that in such occasions of slaughters the end never comes. (4)Answering the question of when should the intervention end is trickier than one would expect. Extending stay too much may start looking like an occupation. The intervening state can prove their pure humanitarian motives by moving in and out as quickly as possible. Therefore, the intervening forces, to avoid the risk of resembling an occupation, should retreat as soon as the danger has ceased to exist. Comparison and Analysis of the Intervention Guidelines with the Real Life Situation in Syria Syria War Frameworks In less than four years the war in Syria escalated to the dire situation we have today. I argue that intervention is not only required, but also that it should have already happened. The war in Syria started in March 2011 in a city in southern Syria, where children were arrested and tortured for anti-government propaganda. This act sparked anti-government demonstrations that later developed into an army against Assad called the “Free Syrian Army”. The rebels planned to 75 �overthrow the oppressive government but were ineffective; however, their numbers and supporters grew as the country moved towards civil war. Arguably, civil war would not be a fair justification for intervention as it remains an internal issue, but as President al-Assad’s regime grew more oppressive, other external forces came into play later during the same year. There are many factors that attributed to the start of this civil war, including economic hardship that came from the drought of 2007-2010, to the ongoing religious conflicts between Sunni Muslims and Alawites. However, it was the harsh response of president al-Assad to the initially peaceful protests that actually escalated the situation and divided the country. Adding to the conflict and taking advantage of the chaotic situation, the self-proclaimed Islamic State or the group better known as ISIS, started invading Syria around 2012. Claiming to follow the religion of Islam, they respond with brutal violence against anyone who doesn’t obey. But many Muslims claim that their religion has nothing to do with hatred and violence. Since early 2014, IS has grown quickly attracting recruiter from all over the world using the Internet and social media. They have managed to conquer the majority of Syria and neighboring Iraq, thus leading the region as their own state and punishing anyone who doesn’t obey to them. Crisscrossing of Foreign Actors Another significant factor to consider is the crisscrossing of foreign intervention and support. The national split has also affected the international split amongst different actors, such as the majority of Shia Iran and Iraq, Lebanon-based Hezbollah, and Sunni-majority states including Qatar, Saudi Arabia, Turkey and others. An international actor is the US, which since 2014 has been bomb-attacking the Islamic State of Iraq and Levant, ISIL, also known as ISIS. About a year later, on September 2015, Russia targeted a bombing campaign towards rebel groups in Syria supported by western states and groups referred to as terrorists, such as ISIL. Russia has also allocated military advisors to support Assad’s defenses. Numerous Arab States, and Turkey, have supplied rebel groups in Syria with weapons. But the cause of the critical situations there is caused by the armed forces coming from outside Syria or that has nothing to do with the initiation of the conflict. For example, ISIL –having only territorial aims- is responsible for approximately 27,000 to 30,000 recruiters from around the world that have joined the fight (Group, reserved, Site, & Media, 2013). Lebanese members of Hezbollah are supporting Assad, as are Iranian and Afghan fighters. Whereas the US, even if it has claimed to oppose Assad’s regime, has hesitated to become an active participant of the conflict. Even when Assad’s government allegedly threw chemical weapons targeting Syria in 2013, former president of the US, Barack Obama, stated that in case of bombing, the US would rapidly intervene. However, in October 2015, the US dropped out of the most debatable Syrian training program stating that the training of only 60 fighters cost them $500m. As President Assad is receiving support from Russia, and the rebel groups are receiving support from Saudi Arabia and the US, each for different agendas, the war has inadvertently grown to a larger scale (Zorthian, 2015). In 2013, there was usage of chemical weapons possibly by the 76 �government during the attack of a rebel base in Damascus. This specific attack ended up killing about 300 Syrians, the majority of which were confirmed to be simply civilians. I would like to argue that at this point in history humanitarian intervention was necessary and undoubtedly justified. The usage of chemical weapons has been considered inhumane even towards militia, let alone towards standing civilians. It is clear that the situation has escalated beyond what would be considered an internal issue, and it is in fact affecting the entire international community. I believe that at this point it would have been the most effective time to intervene by any UN state that could. The lack of intervention from the UN was justified by the international arena by bringing up Russia’s unwillingness to act due to Putin’s ties with President Assad. However, the US together with Saudi Arabia, tried a mild intervention in 2013. The peacekeeping attempts failed as neither terrorist groups nor the government stopped the violence, as it was expected. The attacks went on for the two years to come and the situation is still unresolved. Possible Solutions The population has been and still is an imminent danger from its own government and from outside attacks, such as the Islamic State. The response should have come in 2013 from willing states in this way: Firstly, a diplomatic effort is needed to secure the removal of President Assad and help the reestablishment of a newly elected government that better represents the diversity of Syria. This would have only been possible with troops on Syrian ground that directly attacked the oppressive government and not only served as peacekeepers. Secondly, there would be need of a coordinated humanitarian response from the international community in providing aid for the civilians to rebuild their lives and safely return to their home country. Thirdly, even though ISIS would still be a considerable danger, with a stronger new government and military aid from neighboring countries, it would be possible to minimize said danger or even abolish it completely (depending on the level of cooperation amongst states). As the danger would have been minimized, the UN would restart their programmer of nonmilitary aid in order to restore the infrastructure of the country and help with the aftermath of war. Conclusion I believe that I have fully explained how humanitarian intervention is justified in the case of Syria, and furthermore, is of immediate necessity. So far, the consequences of this war have been terrible, and it still remains in our hands to help ending it. The Syrian government and ISIS are definitely the oppressors and there is more than one state which is able to help. I believe 77 �against holding sovereignty as the main priority, and instead support maintaining international peace and security when deciding that intervention is of absolute international importance. References Group, T. S., reserved, A. rights, Site, & Media, G. (2013). Foreign fighters in Syria, Iraq have doubled since Anti-ISIL intervention. Retrieved January 18, 2017, from http://soufangroup.com/tsg-report-quoted-on-al-jazeera-america-foreign-fighters-in-syriairaq-have-doubled-since-anti-isil-intervention/ Jazeera, A. (2016). Syria’s civil war explained. Retrieved January 18, 2017, from http://www.aljazeera.com/news/2016/05/syria-civil-war-explained-160505084119966.htm Rashid, A. K. (2012, March 13). Is humanitarian intervention ever morally justified? Retrieved January 18, 2017, from http://www.e-ir.info/2012/03/13/is-humanitarian-intervention-evermorally-justified/ Simma, B. (1999). NATO, the UN and the use of force: Legal Aspects. European Journal of International Law, 10(1), 1-22. Taylor, P., Curtis, D. (2008). The United Nations.In Baylis, J, Smith, S. & Owens, P. (Eds), Globalization of World Politics.Oxford University Press. Vincent, R. J. (1974). Non-intervention and International Order. Princeton, NJ: Princeton University Press. 7. Walzer, M. (2002). The Argument about Humanitarian Intervention. Dissent, Winter, 2937. Zorthian, J. (2015, October 7). Who’s fighting who in Syria. Retrieved January 18, 2017, from http://time.com/4059856/syria-civil-war-explainer/ 78 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3657 Title A name given to the resource Human Intervention in the Case of Syria (doi:10.14706/icesos1720) Author Author Gegaj, Rea Dedej, Sara Reka, Speranca Abstract A summary of the resource. Abstract: The world is having a crisis on international relations because of the Civil War in Syria, which soon enough turned into a Modern World War (MWW). This conflict complexes the whole world and questions the life of limitless innocent people. Drawing the conflict visually, this paper attempts to explain the use of humanitarian intervention in the case of Syria and surveys the main influential countries included in the war and their reasons for doing so. This review explains the exact event - of 15 students killed by the government - that led to the Civil War and precisely how its size became getting bigger day by day. Besides doing research and explaining the reasons of the conflict, it also focuses on possible and realistic solutions to end the war and support the Syrian refugees, on which the whole burden of the war falls. The review incorporates various methods including data collection and their analysis. Keywords: Civil War in Syria, Modern World War, conflict, international relations, explaining, support, solution. Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/9dfcb49251890b4b2e57b897d00a7e60.pdf a438dcfb296868fae45d1b992d86a476 PDF Text Text How Marketing Made One of the Unhealthiest Beverages a Top Demanded One the Power of Great Marketing Rea Gegaj Epoka University Tirana, Albania Sara Dedej Epoka University Tirana, Albania Speranca Reka Epoka University Tirana, Albania Abstract: Marketing has taken a leading role regarding the success of any business because nowadays with the opportunity to improve product/service quality - through technology development and information availability- any organization can achieve desired results in terms of what they have to offer. This leaves more room for functions like marketing to be fully applied in accordance to organizational goals. Therefore this paper aims to explain how powerful marketing can be through the example of the giant Coca-Cola Company, which has been producing and selling unhealthy products since 1886 and yet leads the beverage industry to this day. The paper also analyses some facts and data that help better understand how because of strong marketing strategies and worldwide brand recognition people will even buy and massively consume these kinds of harmful products. Key words: marketing, organization, Coca-Cola, unhealthy, buy, consume. Why is Coca-Cola considered an unhealthy product? In a can of cola there are 10 teaspoons of added sugar, while World Health Organization recommends using no more than 6 teaspoons of added sugar on a daily basis. This means drinking only a can per day takes you above these guidelines. This kind of amount of sugar is surely associated with other health conditions such as obesity and especially diabetes if you consume 1-2 cans per day. On 2015 Medical News Today reported that 184,000 global deaths each year are caused by large amounts of sugary drink consumption. 79 �Coca-Cola has a very high sugar content that should immediately make us vomit when it enters our body but the phosphoric acid this beverage contains dulls the sweetness, allowing us to keep the drink down. According to British pharmacist NirajNaik a 330 ml can of cola can cause these damages to our body in only one hour: -Increased blood sugar level (first 20 minutes) -Burst of insulin -The liver turns the big amount of sugar into body fat -Increased blood pressure and dilation of pupils because of the caffeine cola contains (40 minutes) -Adenosine receptors get blocked from caffeine shot, preventing fatigue -The production of dopamine ( a neurotransmitter that helps control the pleasure and reward centers of the brain) increases -The increased level of dopamine stimulates these centers making us crave for more (just like heroin does). This means it has addictive ingredients which can make the consumer addicted just like other illegal drugs and this is a very serious problem regarding this products quality. Coca cola has even been scrutinized by the environment and human rights department for inducing bad and unhealthy food products. What makes Coca-Cola a top demanded product? As mentioned in the abstract marketing plays a very big influential role regarding the customer’s positive stand towards a product or the whole company itself. Coca-Cola owners and managers seem to have understood the importance of good marketing since 3.1% of all beverages consumed around the world are their products. The company has a responsible marketing policy which is based on principles like Choice ( a large range of beverages to support consumer’s diets and lifestyles) ; Honesty ( ensure transparency in all marketing activities) and so on. Brand recognition is a powerful aspect that cola completely owns. According to Business Insider 94% of the world’s population recognizes the red and white logo. Apple and Microsoft combined spend less money on advertising than Coca-Cola. They serve on a daily average to 1.9 billion people all around the world. To achieve the results mentioned above as a company Coca-Cola has brilliantly used strong marketing strategies (some of which will be explained in the next paragraphs) through which it has become as successful as it is today. First thing that makes cola so irresistible is the unique, market-tested formula. John Pemberton the creator of Coca-Cola first wanted to develop a version of the cocoa wines but the prohibition laws that forced producers to produce non-alcoholic beverages at that time obliged him to 80 �remove the alcohol from the formula. He then sent his test sodas to a pharmacy for people to try and from the feedback he received created a recipe that was unique and tailored to customer’s tastes. There have been minor adjustments through time but the recipe has largely remained unchanged. Because of this the company didn’t spend time trying to tailor the taste to regional markets throughout the world and since its creation cola has been one of the most preferred beverages by many people. Second thing that makes coke so familiar and preferred is its logo. has used the same logo for 100 years and it has become a part of anyone’s life without doubt. Another “trick” the company used was keeping the consumer price fixed for 70 years (1886-1959). With this kind of approach cola scaled across the US and throughout the world. From 1887-1920 Cola gave away 10% of all products in order to build brand awareness. It also provided posters, calendars, decorations etc. for costumers. Coke was as much a drink as it was a consumable brand, an idea consumers could feel good about identifying with. Promotion and ways to reach the customers Still a part of marketing campaigns and brand awareness are top line promotions and below the line promotions. Top line promotions include: promotional activities intended towards mass consumers using mass media; TV ads; design of banners; sponsorship initiatives like the world cup etc. On the other hand below the line promotion include: promotion schemes and publicity materials; sales promotion etc. Other methods used: creating Santa Claus; association with McDonalds; endorsing through top celebrities; building high brand visibility; packaging in an attractive and economical way. The advertisements are national. A big success was the vending machine ‘Happiness machine around the world’. Once associated with a positive atmosphere every intended idea can easily get to people’s emotions and that’s what Coca-Cola does. New advertisements or even new marketing campaigns begin at specific periods like summer time or Christmas. These large networks of interaction with customers is very beneficial to the company because any feedback is immediately received and through all these costing marketing means cola makes sure most of the feedback remains positive. They reach the people in a unique way that even if you are not a consumer you might become one. I believe this achieved good relationship with the costumers is based on the company’s mission and vision. Mission – “Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. 81 �   To refresh the world. To inspire moments of optimism and happiness. To create value and make a difference.” Vision– “Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth. Conclusion Based on everything that has been discussed above it is apparent that marketing’s power is without doubt a key factor of success in business no matter how healthy or unhealthy what you are promoting might be. According to Peter Drucker the purpose of a business is to create a customer and the two main functions of a business are innovation and marketing. Therefore seen from a business perspective Coca-Cola is on the right track and will probably control most of the market shares of beverage industry for the upcoming years. However, we must not neglect the importance of the health issues mentioned above because at some point they might become a key factor in the bankruptcy and fall of this giant. References Contributor, &Swaim, R. W. (2016). BPM, Lean Six Sigma & continuous process improvement. Retrieved February 9, 2017, from http://www.processexcellencenetwork.com/innovation/columns/peter-drucker-on-sales-andmarketing N. (2014, February 25). Healthy drinks. Retrieved February 9, 2017, from http://www.healthydrinks.net/6-harmful-effects-of-drinking-coca-cola-coke-or-pepsi/ Company, T. C.-C. (2013, January 31). Who we are. Retrieved February 9, 2017, from http://www.coca-colacompany.com/careers/who-we-are-infographic Whiteman, H. (2015, August 15). How coca-cola affects your body when you drink it. . Retrieved from http://www.medicalnewstoday.com/articles/297600.php Bhasin, K. (2011, June 9). 15 facts about coca-cola that will blow your mind. Retrieved February 9, 2017, from Business Insider, http://www.businessinsider.com/facts-about-cocacola-2011-6#coca-cola-spends-more-money-on-advertising-than-microsoft-and-applecombined-11 Moye, J., & Staff, J. (2013, October 29). Label-less coca-cola cans tackle prejudice during Ramadan. Retrieved February 9, 2017, from https://www.cocacolacompany.com/stories/marketing-to-millennials-5-ways-coca-cola-is-embracingcreativity-and-innovation 82 �Bhasin, H., Isaac, hassan, bisma, &gendy, ibrahim. (2016, December 2). Marketing strategy of brands. Retrieved February 9, 2017, from STRATEGIC MARKETING, http://www.marketing91.com/marketing-strategy-of-coca-cola/ Staff, J. (2015, May 1). Related stories. Retrieved February 9, 2017, from http://www.cocacola.co.uk/about-us/responsible-marketing Company, T. C.-C. (2016). Coca-cola global: Soft drinks& beverage products. 83 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3656 Title A name given to the resource How Marketing Made One of the Unhealthiest Beverages a Top Demanded One the Power of Great Marketing (doi: 10.14706/icesos1719) Author Author Gegaj, Rea Dedej, Sara Reka, Speranca Abstract A summary of the resource. Abstract: Marketing has taken a leading role regarding the success of any business because nowadays with the opportunity to improve product/service quality - through technology development and information availability- any organization can achieve desired results in terms of what they have to offer. This leaves more room for functions like marketing to be fully applied in accordance to organizational goals. Therefore this paper aims to explain how powerful marketing can be through the example of the giant Coca-Cola Company, which has been producing and selling unhealthy products since 1886 and yet leads the beverage industry to this day. The paper also analyses some facts and data that help better understand how because of strong marketing strategies and worldwide brand recognition people will even buy and massively consume these kinds of harmful products. Key words: marketing, organization, Coca-Cola, unhealthy, buy, consume. Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/ba17c788b2c620bec538038042760b32.pdf c749efd14559006233de037b80a8b5f6 PDF Text Text Effective Team Communication Role in Project Implementation Success Ionela Gavrilă-Paven ”1 Decembrie 1918” University of Alba Iulia, Faculty of Economic Sciences Romania ionelapaven@yahoo.com Mălina Cordoș ”1 Decembrie 1918” University of Alba Iulia, Faculty of Economic Sciences Romania malina_cordos@yahoo.com Abstract: In project implementation communication efficiency is very important and also difficult to measure. The research team tried to analyze the communication process at the level of project teams, underlining issues related to the communication between team members and communication team and the other departments/organization/representatives. Communication efficiency in project implementation depends strongly on the communication between team members and on the method used, but also it has to be considered the importance of communication at group level. Key words: team communication, project implementation Introduction Communication represents the starting point in any activity, so efforts should be made for the communication to take place under optimum conditions, to avoid interference that may arise, and the teams working communication is to be effective and to facilitate achievement goals. The team is a small group which is the basic unit of any organization in which activities and interpersonal relationships generated by the organization are initiated and conducted or a subjective fact which can be studied from the outside. According to M. Serif (1969) team is defined as "a social unit consisting of a number of individuals who find each other in the role and status relationships established over a period of time and has a set of values or rules governing mutual behavior, at least in matters concerning the team". A very important aspect that should be noted is that inside the small groups such as teams, relations are "face to face". The binder of the group is the interrelations - specifically their density - and common goal, 63 �resulting in collective cohesion. In short, the group is not a phenomenon purely additive, an aggregate of persons only in physical proximity relationships. This could be the beginning of formation of a group that already means a minimal organization, differentiation of roles in relation to the activity (A. Neculau, 1974). Within the common goals appear helpful goals, segmentation, resulting in an overall alignment and harmonization. Amid functional relations arising from common activities - develop relations of influence and mutual attraction, which is not a simple continuation of the first, but neither are formed independently of them. Psychosocial group reality manifests its pressure and influence on members, reward and penalty system works perimeter formal or informal group that selects or repress individual behaviors. As a result the element of the consensus appears. Mutual relationships are established, based on both emotional as well as functional. The Group offers the satisfaction of achieving goals and validation by consensus of attitudes and values. A 2012 report by PwC shows that organizations with effective and efficient communication methods are more likely to stay within scope, meet quality standards and deliver intended business benefits8. True communication is rare—much of which comes down to a fundamental difficulty in communicating with the appropriate clarity and detail. Research metodology This study was conducted by a team of researchers from the Department of Economics and Business Administration from the Faculty of Economic Sciences, from "1 Decembrie1918" University of Alba Iulia supported by the Agency for Regional Development. Aim of the study was to identify communication problems faced teams from the organizations implementing EU-funded projects. In this sense was developed a questionnaire aimed at communication issues within the team, relationships with colleagues and line manager, means of communication within the team, as well as issues related to the atmosphere created within the team. For the questionnaire the research team requested the assistance of the Agency for Regional Development. We asked for the support of this institution because it was used a database made up of representatives of various organizations that have implemented or implemented in the moment when the survey was done, some EU-funded projects. Moreover, with the assistance of the Agency for Regional Development, the questionnaire was uploaded on the institution’s website and when someone access the site will be able to participate in this study. The study was carried out between 2012-2016, during which the questionnaire was posted on the homepage of the Agency for Regional Development so that all those who access the site were 8 Insights and Trends: Current Portfolio, Programme, and Project Management Practices, PwC, 2012 64 �able to complete the questionnaire. During this period, namely the early and mid-term, they were sent emails which was presented the study and link to it can be completed. The questionnaire was accessed by 269 people, of which actually responded to questions 76 and 10 incomplete questionnaires remained. The response rate was 31.97%. Within these teams mainly male members were identified, in proportion of 57.9%, the average age was 37 years (the youngest team member is 22 years old and the oldest 58 years old). The questionnaire was completed by persons who are experienced in management, 39.4% has between 1 and 5 years experience and 36.4% between 5 to 10 years experience. To the study chose to participate in general people who have experience in management (86.4% of all respondents) and that shows that aspects of communication within the team is very important and is one of the most important you taken into consideration when setting up teams. This is doubled by the fact that 95.6% of respondents have higher education (30.9% are college graduates, 50.0% have master's degree and 14.7% have doctorate degrees). Preliminary conclusions of the study The economic reality of our country, which is reflected in the Central Region where THE the questionnaire of the study was conducted, points out that SMEs prevail, situation which shows that at the organizational level prevails communication within a small group. Thus, 55.3% of respondents are working in groups up to 10 persons, 15.8% operate in groups consisting of 10 to 20 people and 22.4% working in groups with over 20 people. Regarding the composition of the teams, 50.0% of respondents said that in the strctureof the teams they operate in, females prevail, in 32.0% allocation of members is fair, and 17.3% operate in teams in the frame of which prevails male members. During these team members is diverse in age ratio of 76.0%, while only 24.0% of respondents operate in teams where members have the same age. In the team, 56.2% of the respondents estimated,in 42.5%, the regularly use of verbal and written communication. In over 47% of cases, the atmosphere within the team is good ; in 25% of cases, the atmospere is very good, and in 24.3% of cases, quite pleasant. Only 65 �1.3% of respondents felt that the atmosphere within the teams that are deployed or operate in is unpleasant, highlighting the close relationship that forms between team members and that the affinity of the people who are chosen to work the same team is very important for the manager who form the team. This is the foundation of relations taking place within these teams, which are cooperative relations, in proportion of 87.5%. Such relationships which create a friendly atmosphere within the team and its manager are indicated by 70.4% of respondents. The team is characterized by the degree of cohesion, which is the overall result of internal relations and of the common success, the effect of mutual understanding, the good understanting of the goals, of the group rules by members, namely the viability of the group, performance on tasks and satisfaction of members. In this regard, 56.3% of respondents believe that their work is positively influenced by peers and 35.2% believe that they are not influenced in any activity. The average length of discussion during a day's work for respondents in a proportion of 45.2% is between 30 and 60 minutes, and in the case of 23.3%of the respondents, between 10 and 30 minutes. This time is used in a proportion of 57.7% to chat with other team members and in proportion of 23.9% to communicate with members from collaborating departments. Analyzing interaction with senior line managers, we observed based on the responses, that 83.1% of direct interactions occur spontaneously, due to concrete situations that arise in everyday work of the team or organization, and 16.9% had a planned character. In the reports of communication with superiors, 81.1% of respondents felt that their contribution in the communication processes is over 50%. In assessing the effectiveness of the processes of communication with superiors, 73.6% of the respondents believe that the effectiveness is high. In strengthening relations with team members, 68.9% of respondents spend their spare time with colleagues, and 65.8% of them consider it very important to communicate with colleagues regarding the individual and team objectives. 66 �A particularly important role in ensuring the efficiency of communication within the team have the means and methods of communication used. Among these, over 74% of respondents felt they management systems projects are very important, over 59% of respondents consider as important agendas and working documents prepared by the teams and over 75% attaches great importance to the GANTT chart or planning activities and integrating them in the initial planning and resources needed to implement project activities and over 83% of respondents considered vitally important the board of priorities, in order to ensure an efficient management of projects. Regarding use of modern methods of communication within the team over 95% of respondents attaches great importance to group electronic communication and transmission of working documents, over 80% give significant importance specialized sites that can be updated by the team members, but also offers the possibility of obtaining udated information on project activities, over 55% of respondents attaches great importance and possibility of carrying out online conferences as needed (particularly useful for projects to be implemented several locations scattered throughout the country. Technical means most often used for the communication within the team are the mobile phones (38.4%) and electronic mail (57.5%). Among the comments made on this question: „within the team are used all type of means of communication, depending on the situation and the time required for obtaining the answers, some media are effective only if people have virtual communication skills, the most effective and expeditious means of communication are mail and mobile phones”. As part of the communication barriers that meet the current work teams, there are language, environmental, concept barriersor barriers arising from positions of the interlocutors. Within these, over 44% of respondents felt that the most common barriers to effective communication are the concept, namely those relating to suspicions, assumptions or conclusions of the interlocutor, over 31% of respondents felt that barriers to interlocutors positions are important because they relate to erroneous perceptions on the subject of the 67 �communication to the communication situation, and over 22% believe that there are language barriers on misconceptions, difficulties of speech or confused ideas. In terms of satisfaction of respondents on the efficiency of communication within the organization operating it appreciates at a rate of over 81% that they were satisfied about the awareness of the results achieved within the team, over 87 % are satisfied with the opportunity to express their ideas within the team which includes over 76% are satisfied with the opportunity to express ideas to management senior, over 81% of respondents said they were satisfied with the possibility of transmitting ideas to the departments collaborating and over 62% of respondents said they were satisfied with the awareness of the organization's management. The teamusually is a group of small, less numerous by its composition. Employees in permanent communication, its members are in direct line of communication, face to face, which facilitates mutual knowledge, appearance affective relationships, rules and group processes. All these issues directly influence the efficiency and the productivity of the team. Final conclusions Communication is an important issue in the context of a team. Even though the "word" is essential, there are some barriers, such as competition between the members of the team or some conflictual situations Communication involvement seems to be the key to ensure the efficiency of the working team, this meaning that giving a certain time every day to team communication with the direct manager ensures a better implication towards team objectives. Using some specialized communication instruments we can ensure a better planning and a very good support for organizing activities References Neculau, A., Introducere în dinamica grupurilor, Iaşi, 1974 Chelcea, S., Psihologie socială, Iași, 2001 Opran (coord.), C., Stan, S., Năstasă, S., Abaza, B., Managementul proiectelor, Editura Comunicare.ro, Bucureşti, 2002 Look, D., Project Management (sixt edition), A Gover, University Press, Cambridge, Great Britain, 1996 Balogh, M., Negrea, N., Managementul proiectelor europene, Ed. Accent, Cluj – Napoca, 2005 Weiss, J., Wysocki, R., 5 Phase project management, Addison Wesley – Publishing Company, 1994 ***Insights and Trends: Current Portfolio, Programme, and Project Management Practices, PwC, 2012 68 �***Ghid de bune practici în management de proiecte, 2015, Material elaborat in cadrul proiectului: „Dezvoltarea capacității de planificare strategică la nivelul autorităților administrației publice locale ale orașelor din România”, cofinanţat prin Fondul Social European, Programul Operaţional Dezvoltarea Capacităţii Administrative2007-2013 Project Management Institute, A GUIDE TO THE PROJECT. MANAGEMENT BODY OF KNOWLEDGE (PMBOK® Guide), Fourth Edition, USA; 2008 69 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3649 Title A name given to the resource Effective Team Communication Role in Project Implementation Success (doi: 10.14706/icesos1712) Author Author Gavrilă-Paven, Ionela Cordoș, Mălina Abstract A summary of the resource. Abstract: In project implementation communication efficiency is very important and also difficult to measure. The research team tried to analyze the communication process at the level of project teams, underlining issues related to the communication between team members and communication team and the other departments/organization/representatives. Communication efficiency in project implementation depends strongly on the communication between team members and on the method used, but also it has to be considered the importance of communication at group level. Key words: team communication, project implementation Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/b517074fc67bb3020f8948a813d7d94c.pdf abd5717455636ebe05b7f587f92f5d4c Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3669 Title A name given to the resource Studije o betonu 2015-2016 Author Author Džidić, Sanin Okugić, Husein Bajramović, Emir Abstract A summary of the resource. Pred Vama se nalazi knjiga “Studije o betonu 2015-2016”. U sebi sadrži tri studije iz oblasti betona i betonskih konstrukcija iz naznačenog perioda. Namjera je da ovo bude samo prva knjiga iz serije studija o betonu i betonskim konstrukcijama, koje predstavljaju istraživanja koja se trenutno rade ili će se raditi u vremenu ispred nas iz ove naučne oblasti. Prva studija nosi naslov „Šta je to beton, pojam, vrste, historija, prednosti i nedostaci i klasifikacija prema evropskim standardima“. Od koristi je prvenstveno studentima građevinskih i arhitektonskih fakulteta u objašnjavanju osnovnih pojmova iz oblasti betona, tehnologije betona i betonskih konstrukcija. Dozvolite da naglasimo, da praktično u našoj izdavačkoj praksi ne postoji ovako sveobuhvatno predstavljena historija betona i betonskih konstrukcija, kao što je to slučaj u ovoj studiji. Takođe su u studiji date najnovije evropske klasifikacije betona shodno najnovijem Evropskom standardu EN 206:2013, koji je preuzet i u Bosni i Hercegovini kao BAS EN 206:2014, pa u tom smislu je studija od koristi i inženjerima u praksi, koji uglavnom nisu upoznati sa najnovijim evropskim klasifikacijama betona, posebno što praktično vrlo malo materijala ima iz ove oblasti na jezicima naroda u Bosni Hercegovini. U studiji se daje i pregled najnovijih eveopskih standarda koji tretiraju beton kao materijal i projektovanje betonskih i drugih nosivih konstrukcija sa naznačenim međuzavisnostima između ovih standarda. Druga studija u ovoj knjizi je „Optimalizacija projektnih rješenja prednapregnutih betonskih montažnih hala sa aspekta upotrebljivosti i trajnosti“. Naime, pitanja upotrebljivosti i trajnosti betonskih konstrukcija općenito se i praktično proračunski razmatraju u istoj ravni sa graničnim stanjem nosivosti tek sa pojavom eurokodova, odnosno Eurokoda 2, koji tretira projektovanje betonskih konstrukcija. Analiza prezentirana u ovoj studiji je dovela do validnih zaključaka kada su u pitanju glavni prednapregnuti vezači montažnih betonskih hala. Izbor adekvatnih glavnih nosača, pitanja njihove upotrebljivosti i trajnosti sa proračunskim postupcima su sveobuhvatno tretirani u ovoj studiji. Studija će naći svoju čitalačku publiku kod inženjera projektanata prednapregnutih konstrukcija, inženjera zaposlenih u industriji prefabriciranih montažnih elemenata i studenata na predmetima iz oblasti betonskih prednapregnutih konstrukcija i montažnih konstrukcija Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Book PeerReviewed L Education (General) https://omeka.ibu.edu.ba/files/original/2a51560d7b7d3fd4d267565b42201314.pdf 3279fe689dfbbff139ac026b6e098cc6 PDF Text Text     Journal of Economic and Social Studies Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015. Joel I. Deichmann Bentley University Massachusetts, USA jdeichmann@bentley.edu Danyang Liu Bentley University Massachusetts, USA liu_dany@bentley.edu Abstract:   This paper examines origin-effects of tourist flows into Croatia from 1993-2015, a time period that features several important events: the fragmentation of Yugoslavia, the European recession, and Croatia’s accession to the European Union. Applying the seemingly unrelated regression (SUR) approach to a large panel data set with the number of annual arrivals from each origin country as the dependent variable, we identify and analyze the determinants of tourism flows to Croatia. A series of augmented gravity model specifications reveals that inflows can be explained by geographic proximity, GDP per capita, origin country population, and openness. The role of the real exchange rate variable is inconclusive, and in fact problematic for years 1993-95 when hyperinflation plagued the region in the wake of Yugoslavia’s dissolution. The results confirm the validity of the models, both for the subset of origin countries and for the subset of non-origin countries for which otherwise complete data are available. Given the importance of tourism to Croatia’s national accounts position, implications for tourism policy are discussed, as are suggestions for future research. Volume 7 | Issue 1 | Keywords:  Tourism OriginEffects, Gravity Model, Croatia JEL Classification: C33, O52, Z3 Article History Submitted: 21 November, 2016 Resubmitted: 27 March 2017 Accepted: 29 May 2017 http://dx.doi.org/10.14706/JECO SS17711 5 �Joel I. Deichmann, Danyang Liu   Introduction International tourism is a mainstay of Croatia’s economy, currently representing 12.5% of the country’s GDP (WTTC, 2015). Such a heavy reliance on this single industry leaves the country susceptible during times of recession in other European Union economies, which collectively comprise about three quarters of Croatia’s tourism exports (Škuflić and Štoković, 2011; WTTC, 2015). Given the importance of tourism revenues for Croatia’s balance of payments, it is essential that policymakers understand the drivers of demand for international tourism and hospitality (Baldigara, 2013; Tica and Kožić, 2015). This paper assesses origineffects of tourist flows into Croatia from 1993-2015, a time period during which several events have impacted Croatia, the Balkan region, and the broader European Union. These include the aftermath of Croatia’s independence from Yugoslavia, regional political instability throughout the 1990s, the European recession (from 2007 onward), and Croatia’s 2013 accession to the European Union. Tourism is hailed as one of the world’s most important economic sectors, with the value of international tourism ranking as the third largest category of exports after fuels and chemicals (UNWTOa, 2016; 2). Officially, the World Tourism Organization defines tourism as “the activity of visitors taking a trip to a main destination outside their usual environment for less than a year, for leisure, business or other personal purpose other than to be employed by a resident entity in the place visited.” As such, the industry is expansive, and global international tourism alone resulted in receipts of $1.5 trillion in 2015 (UNWTOa, 2016). For some small countries like Croatia, the industry is even more important as an economic sector and as a means of obtaining foreign revenue that ultimately raises GDP (Pavlic, Svilokos, and Tolic, 2015). Thanks in large part to deliberate and successful policy efforts, Croatia ranks thirty-third globally in the World Economic Forum’s (2015) Travel and Tourism Competitiveness Index. Croatia’s Ministry of Tourism (2013) provides a thorough analysis of the industry from a policy perspective, and sets forth goals to be targeted for the year 2020, including a toptwenty competitiveness ranking. A cursory examination of Figure 1 yields the observation that several events have impacted the otherwise steady acceleration of international arrivals to Croatia. See, for example, the falloffs in arrivals approximating 1995, 1999, and additional general languishing from 2007-2010. In an effort to capture the most important facilitators of tourism during this time period, the present research requires the assembly and 6 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     assessment of a large data set from sources including the World Bank and Croatia’s Ministry of Tourism. Figure 1: International Arrivals from Leading Origins (in thousands) Data Source: Ministry of Tourism (2016) This project employs regression modeling of a panel set of new data through 2015 to advance the existing body of research on international tourism in Croatia. In so doing, it builds upon an array of variables identified by other scholars. For example, Mervar and Payne (2007) note that during the first decade after Croatia’s independence, tourism was highly elastic with respect to income fluctuations of origin countries, and that political conflict in the region impacted the industry severely, although at that time they found no evidence of a significant role for exchange rates and transportation costs. As another example, Škuflić and Štoković (2011) discover that income, marketing, quantity, price, and age of hotels are significant drivers for explaining the length of stay nights. It is plausible that the scene depicted in Figure 1 can be explained in part by the differential effects of the European recession (note the increase in German and Austrian arrivals, and decline in those from Italy). Based upon overnights, Galičić (2015, 93) points out that overall, Croatia’s tourism sector was protected from the recession, unlike other industries. This may be attributable to the wealthier characteristics of northern European tourists who tend to travel to Croatia, combined with worse economic conditions in other southern European destinations such as Portugal, Italy, Greece, and Spain. Volume 7 | Issue 1 | 7 �Joel I. Deichmann, Danyang Liu   The present paper examines variables such as these by employing data beginning in 1993, during Yugoslavia’s war of dissolution, and extending through the global economic crisis as called for by Panagiotou (2010), and Croatia’s 2013 accession to the European Union. The results should enlighten scholars and policymakers and enable them to better prepare for and respond to such events in the future. These findings will also have considerable relevance for other tourism-dependent countries. It is quite straightforward to conceptualize this research approach in terms of the gravity model, borrowed from Newton’s Law of Gravity, and pioneered in economics by Tinbergen (1962). Since then, the approach has been widely used to explain flows of migrants (Lewer and Van den Berg, 2008), trade (Ok, 2010), and foreign direct investment (Deichmann, 2013), as well as international tourism (Khadaroo and Seetanah, 2008; Eryiğit, Kotil, and Eryiğit, 2010; Keum, 2010), setting the groundwork for the present research. The basic gravity model can be presented as follows: Arrivalsij= α (MiMj/Dij) Where: Arrivals= number of international tourists from each country (in thousands) α = constant M = mass (GDP or population) D = resistance (geographical or cultural distance) Quite simply, with trans-national interactions being defined as “tourist arrivals,” ceteris paribus, we would expect more interaction between large countries and less between smaller ones. Similarly, countries that are near to each other (either geographically or culturally) would be more likely to experience greater flows of tourists than those that are farther away. In order to contribute to a more robust understanding of contemporary demand issues by stakeholders, the simple model above can be augmented with other variables that have emerged in the scholarly literature, including income at origin (Eilat and Einav, 2005), visa-requirements (Cole and Hall, 2005), transportation costs (Mervar and Payne, 2007), and exchange rates (Tica and Kožić, 2015), all of which have been shown to play a role in explaining “origin-effects”, or flows of tourists from different origins. 8 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     Literature Review A large literature focuses upon the international tourism industry in Croatia, highlighting the national economic importance of the industry as well as the necessity of effective forecasting models (Baldigara, 2013; Tica and Kožić, 2015). Research on the topic is expansive due to the commanding and increasing presence of Croatia’s tourism industry, especially in coastal areas (Ballinger, 2003). The portion of literature that relates to the war’s crippling results of physical destruction and hyperinflation is descriptive (Currie, Skare, and Loncar, 2004; Schőnfelder 2005, Ateljevic and Čorak, 2006), but nevertheless provides an essential backdrop for more recent scholarship on international tourism. Radnić and Ivandić (1999) embrace Maslow’s hierarchy of needs as a starting point to explain the deterioration of overnights and total beds used by foreign tourists during the war years of 1990-1995, focusing specifically on human safety needs as being fundamentally more important than those of self-actualization. The authors employ a combination of quantitative and qualitative data from Croatia’s Institute for Tourism to provide an excellent summary of the impacts of conflict, and a very slow recovery in Croatia, comparing a lagging perceived value for money vis-à-vis other destinations in Italy, Spain, and Greece; one that was comparable to Turkey at the time of data collection (1997). They conclude with a series of insightful principles highlighting the need to understand crisis and its impacts on tourism, among other considerations that might inform future crisis-management measures. Similarly, Hall (2002) calls for brand development and re-imaging throughout former Yugoslavia as a means of helping the region’s post-war tourism industry recover. He compares and addresses issues in several countries in the region, and identifies examples of national tourism “straplines” for marketing purposes. In the case of Croatia, the strapline he identifies is “small country for a great holiday” (p. 327). In order for Croatia to both bring back tourists from traditional markets and attract high-income-generating groups, Hall argues that marketing programs should differentiate Croatia as “not Balkan”, and reassure tourists that its attractions’ traditional quality and value have been restored to pre-war levels. McKercher and Lew (2003) identify what they designate as an Effective Tourism Exclusion Zone (ETEZ) based upon telephone survey of 952 Hong Kong residents conducted in the year 2000. They argue that this type of zone exists for every tourist market, although it varies according to the nature and size of the voids that exist near the source market. ETEZs might be oceans, unpopulated areas, or product voids. For example, Switzerland has many competing land neighbors, while New Zealand’s Volume 7 | Issue 1 | 9 �Joel I. Deichmann, Danyang Liu   nearest destination is between 2000 and 3000km away, representing the latter country’s expansive ETEZ. Currie et al. (2004) examine the effects of Yugoslavia’s war of dissolution that took place from 1991-1995 paying special attention to international tourism. They underscore the country’s dependence upon tourism with official state statistics showing 5.4% annual growth in arrivals, with a 19.1% yearly acceleration of spending. The authors use ordinary least squares regression to compare models of the Croatian economy during the war with two peaceful time periods: 1960-1990 and 1996-2000. Their model estimates a cumulative economic loss of $5.139 billion in tourism revenues during the war (approximately five percent of national revenue), and they note that tourism actually started to increase toward the end of the war, drawing on earlier work by Weaver (2000) that suggests that conflict can eventually have a positive impact on international arrivals as battle sites are transformed into attractions. Subsequently, the body of literature on “dark tourism” has been extensively and critically reviewed by Stone (2013). Eilat and Einav (2004) employ a three-dimensional panel data set to survey the determinants of international tourism. They examine flows between all pairs of countries in the years 1985 and 1998. Defining their dependent variable as flows relative to population of the origin country, they find evidence that political risk is a major inhibitor of tourism, while exchange rates are important especially for tourism to developed countries, which exhibit exchange rate elasticity of approximately one. Schőnfelder (2005) focuses more theoretically and broadly on the war’s economic impacts related to run-away inflation, arguing that “the most obvious economic victim of the war was tourism” (page 10). The Croatian dinar was introduced in December 1991, and experienced monthly inflation rates between 21.5% and 31.2% for more than a year. In response, in 1994 the dinar was replaced by the kuna, which was redenominated with the removal of three zeros. Among the comprehensive historical overviews of the industry is a descriptive chapter by Ateljevic and Čorak (2006) that highlights the evolution of tourism in the region. The authors trace tourism’s growth over the past century, during which, as part of Yugoslavia, the Adriatic coast represented a tourist magnet of continental magnitude. Yugoslavia was particularly accessible to travelers because visas were not required for visitors from Western or Eastern Europe. The authors focus upon the social, cultural, and psychological conditions of tourism in the country, which they argue tend to be overshadowed in the regional transition literature by political and 10 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     economic considerations. As part of this discussion, the chapter highlights the endurance of gender division in tourism occupations over time. Jordan (2006) examines the impact of EU Enlargement on tourism in Central Europe, including Croatia. His assertion that 2004 is merely a symbolic date for the gradual integration of much of Central Europe can be extended to Croatia in 2013, when the new republic formally joined the EU. Effectively, the expansion of the EU is a gradual socio-economic process that has occurred over the past quarter century, and one that will continue to unfold as time passes. The author maps and explains tourist flows between the Central European states for 1910, 1937, and 2003, then highlights the major types of tourism that characterize the region. He concludes by speculating on the outlook for the industry in Central Europe, arguing that it depends largely upon improvement in accommodations, infrastructure, and marketing, particularly with regard to negative images of the political and security environment of competing countries. The legacy of war is a consideration particularly relevant to Croatia and its Balkan neighbors. Colonial ties are explored as a facilitator of tourism flows by McKercher and Decosta (2007). The authors note that lingering effects of colonization can remain strong, especially in the case of French and Dutch tourists. Colonial legacies appear even more important where multiple colonizers had been present, for example in Namibia, where South Africa, Germany, and the UK remain the most important origins of tourists. Moreover, they find evidence that an absence of colonial ties represents an equally strong inhibitor to travel. Although this study is largely descriptive, the authors conduct some rudimentary correlations, and discover that the ties they identify tend to deteriorate with time after destinations become independent. Moreover, markets that are large and diversified tend to rely less on their colonial ties. Building upon McKercher and Lew’s (2003) work on distance decay and ETEZs, the impact of distance on tourism movements is further examined by McKercher, Chan, and Lam (2008). Reporting on 2002 data from 41 source markets to 146 destinations, they find that a classic decay curve is most typical for origin markets, whereby demand peaks at adjacent land neighbors, and declines rapidly as distance to destinations increases. They acknowledge that other variables such as pairwise relationship characteristics might also be at work. The authors note that 80% of all international tourism takes place within 1000km of the origin, whereas negligible tourism takes place between extremely distant countries. Volume 7 | Issue 1 | 11 �Joel I. Deichmann, Danyang Liu   Khadaroo and Seetanah (2008) examine bilateral tourism flows between 28 countries from 1990-2000 using a GMM panel analysis, arguing that transportation infrastructure is a significant determinant of international tourism that is sensitive to other characteristics of origins and destinations. The authors measure several aspects of infrastructure, including roads, ports, airports, and distance itself in a global gravity model. In conclusion, based on their findings, Khadaroo and Seetanah (2008) make the case that governments should refrain from spending cuts that lead to the neglect of infrastructure. Moreover, countries should take advantage of developmental loans and private investment alike to improve accessibility that will lead to greater tourism flows. Keum (2008) argues that economists have come to value the gravity model not just as an empirical tool but also as a theoretical one. Using a panel data set with tourist flows to Korea, he confirms the gravity model’s robustness when applied to international tourism as a form of trade, citing an array of mainstream international trade theories. Highlighting evidence of the importance of geographical distance and GDP measures, he concludes that the gravity model is “indispensable for analyzing the flows of spatial interactions” (2008, 545). Eryiğit et al. (2010) specify an eight-factor model for explaining the number of tourists to Turkey from the time period 1995-2005. Their expanded gravity model reveals that the most important explanatory variables for Turkey include geographic distance and tourism climate index. In addition, the authors report that GDP per capita, population of the origin country, earthquakes, adjacency, and the September 11th attacks have impacted the magnitude of inflows. Notably, they find no evidence that safety concerns surrounding the nearby Iraq War deterred tourists away from Turkey. Baldigara (2013) compares five time-series forecasting methods to determine their relative accuracy for predicting international tourism demand in Croatia. Her investigation is based upon the number of tourist nights from five European countries between 2009 and 2012. She concludes that although all of the methods are useful, her double moving average (3x3) method is superior because it yields the smallest mean absolute percentage error. She concludes by calling for additional quantitative analysis of determinants of Croatia’s tourism demand. Employing an expansive list of variables, Tica and Kožić (2015) evaluate drivers of inbound tourism demand in Croatia. The authors find that Polish real GDP and Czech wages are the most important determinants of international tourism overnight stays, and that their impact is realized in a lead time of one year. Some evidence is 12 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     also found that favorable exchange rates attract tourists to stay longer at a destination. Finally, Pavlic et al. (2015) examine the impact of tourism on GDP using a set of mainstream variables, including the independent variable of international arrivals in an interesting twist. They also confirm the importance of an economy’s openness (imports plus exports) and real effective exchange rate as drivers of Croatian GDP from 1996-2013. Although their dependent variable is different from the present study, this work by Pavlic et al. (2015) is relevant here because of its examination of causality between variables and the resulting evidence underscoring the role of tourism in the host economy. Table 1: Summary of Variables in the Literature for Explaining Tourism Flows Variable Author(s) Valence Sign Population of origin Eryiğit et al. (2010) + Income at origin Eilat and Einav (2005), Mervar and + Payne (2007), Keum (2008), Khaderoo and Seetanah (2008), Škuflić and Štoković (2011), Tica and Kožić (2015) Historical Rule McKercher and DeCosta (2007) + Geographical distance McKercher and Lew (2003), Eilat and Einav (2005), Keum (2008), McKercher, Chan, and Lam (2008), Eryiğit et al. (2010) Transportation Khaderoo and Seetanah (2008) + infrastructure European Union Coles and Hall (2005) + membership Political Instability or Hall (2002), Currie et al. (2004), Terrorism Schőnfelder (2005), Mervar and Payne (2007), Eryiğit et al. (2010) Price index or exchange rates Eryiğit et al. (2010), Tica and Kožić + of origin to destination (2015) Visa Requirements McKercher, Chan, and Lam (2008), Deichmann and Frempong (2016) Taken together, these mainstream variables can provide an elaborate explanation of tourism flows. It is important to remember that these and other variables can have differential impact over time. During the twenty-three years under investigation here, the region has been impacted by war (Hall, 2002), economic recession (Panagiotou, 2010), and most recently the European Union accession process (Coles and Hall, 2005). In the present study, due to data constraints and in an effort to Volume 7 | Issue 1 | 13 �Joel I. Deichmann, Danyang Liu   specify a parsimonious explanation of tourism flows, it is prudent to limit the number of variables included in the models. Data and Methodology This section discusses our data set, imputation technique, and methodology. Following supplications from Eilat and Einav (2004), we seek rigorous results by using a large and carefully constructed panel data set. Our data cover 142 countries spanning the years 1993-2015, with a one year lag for the response variable and employing a missing value treatment as explained below. We analyze the results with the approach of seemingly unrelated regression (SUR). The data set has been constructed and employed to assess the impact of an array of origin country determinants collected from an extensive literature review. The variables include population (POP), gross national product per capita (GDPC), geographic proximity to Zagreb in kilometers (DIST), real exchange rates (EXR), and a binary variable for whether an origin is visa-free (OPEN) i . Because the relationship between the independent variables and the response variable is nonlinear, a logarithmic transformation is applied to the dependent variable to correct skewness in its distribution. Population (POP), income (GDPC), and geographical distance (DIST) are scaled in order to standardize their weights in the models. The variables are assembled in an enhanced gravity framework as follows: ln(Tourists)= α + β1POPi + β2GDPCi - β2DISTij- β4EXRi + β5 OPENij With the following notations: α = constant for fitting the equation β1- β5 = coefficients for each independent variable explained above The dependent variable “Tourists” is defined here as the number of tourist arrivals (in thousands) from each origin country each year between 1993 and 2015, reported by Croatia’s Ministry of Tourism (2016). As a global authority on the industry, the World Tourism Organization (“UNWTO”) defines tourism as “the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year” (UNWTO 2016b). Although the dependent variable of tourist arrivals tends to dominate the mainstream literature reviewed above, it is true that the intensity of tourism flows can alternatively be measured using overnight stays (Radnić and Ivandić (1999), Škuflić and Štoković (2011), 14 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     Galičić (2015), and Tica and Kožić (2015). In the present gravity approach, arrivals represent the preferred measure because we seek to answer to the question “why did you go to Croatia?” rather than “why did you stay as long as you did?” Moreover, it is possible to work with a more complete dataset for arrivals than for overnight stays; even with arrival data, entries for some origins and years could only be acquired through direct correspondence with Croatia’s Ministry of Tourism. The rationale for the specific timeframe examined here is to perform an analysis that is as thorough as possible, covering inflows of tourists throughout the entire history of the Republic of Croatia. The dataset includes arrivals by most modes of transportation. According to the Croatian Bureau of Statistics (2016) in 2014, the approximate breakdown is road (64.5 million), air (2.84 million), sea (1.33 million), rail (392 thousand) and river (33 thousand). It should be acknowledged that some “arrivals”, especially at surface border crossings, were made by individuals such as regular commuters who are not formally counted as tourists according to the UNWTO’s (2016b) aforementioned definition. The sample under investigation includes 142 country observations. There are 62 countries with complete data for the independent variables that are origins of tourists to Croatia. In addition, 80 additional countries with independent variable data that are otherwise complete had no reported visitors to Croatia. Admittedly, the fact that many countries with missing data throughout the years in question tend to be poor and/or unstable (Afghanistan and Iraq, for example) can introduce a bias into the models. Notwithstanding this concession, models will be generated using both sets of data (“origins only” and “full data”) in order to capture insights that are as complete as possible. In other words, while we are interested in factors explaining what attracts tourists from each origin to Croatia, we are also concerned with originspecific factors that inhibit tourism. The independent variables used here relate to the origin countries alone, and most of them are available from the World Bank’s World Development Indicators. As pointed out by Eilat and Einav (2004), exchange rates are an excellent proxy for tourism prices, distances capture transportation costs, and income is considered a plausible enabler because tourism is a luxury good rather than a necessity. Other variables found elsewhere in the literature (such as transportation connectivity as per Khaderoo and Seetanah [2008]) are excluded from the analysis in order to reduce redundancies and or prevent data problemsii. Volume 7 | Issue 1 | 15 �Joel I. Deichmann, Danyang Liu   Table 2: List of Variables Selected for the Models Variable Unit of Measure Expected Valence Tourists Number of arrivals (dependent) (thousands) POP GDPC DIST EXR OPEN Population (persons) Gross Domestic Product per Capita (in 2005 US$) Air distance between capitals (km) Real exchange rate index (2010= 100) Visa-free? (1= yes 0=no) Data Source(s) + + Ministry of Tourism (2016), Croatian Bureau of Statistics (2016) World Bank (2016) World Bank (2016) - www.worldatlas.com + World Bank (2016), European Union (2016). www.justlanded.com + The data set required considerable cleaning, and several observations are complicated by changing borders during the time period under consideration. For example, the country that had been Yugoslavia at the beginning of the time period under investigation has gradually devolved into seven distinct political entities: Slovenia, Croatia, Bosnia-Herzegovina, Serbia, Macedonia, Montenegro, and Kosovo. These and other events introduce a great deal of complexity into the construction of a useful database, and dealing with the issues will itself require examining work by other scholars. Countries converted to the Euro at different dates, so it was useful to consult the European Commission’s web site for specific conversion rates (European Union, 2016). There were considerable missing values for both EXR and GDPC in 1992 and 1993, and this resulted in the omission of several country observations. Missing data treatment is particularly necessary for the years of the Yugoslav civil war (through 1995). The empty cells are missing at random (MAR), and the pattern is monotone (vis-à-vis arbitrary). Specifically, missing cell values for GDP and exchange rate are consistent for certain countries during the years 1993, 1994, and in some cases 1995. Based on this condition, it is appropriate to use multiple imputation where only a few values are missing. Some exchange rates in the Balkan region- including those of Croatia itself- remained extremely unstable through 1995. The research plan is therefore to run alternate models comparing the complete time period with the period beginning in 1995, when currencies generally regained stability. In all, the data set includes 22 years, with 62 countries as tourist origins, and another 80 with complete data but without touristsiii. 16 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     The Lagrange multiplier (LM) test, developed by Breusch and Pagan (1980) should be used before applying a panel regression model (Keum, 2008). Using the LM test, this data set shows a high level of cross-sectional dependence as indicated by a pvalue of <2.2e-16. As a result, the present methodology employs seemingly unrelated regression (“SUR”). This approach was pioneered by Zellner (1962) for data that are characterized by cross-sectional dependence, and it is used widely in econometric modeling (Egger and Pfaffermayr, 2001). In the present panel data set the number of years under consideration (“T”= 23) is significantly larger than the number of variables (5), and therefore SUR is an appropriate method. The models are run using the R languageiv. Our analysis covers five models as follows: Model 1: all years since 1993, only those countries with tourists traveling to Croatia. Model 2: 1996-2015 only those countries with tourists traveling to Croatia. Model 3: all years since 1993, all countries with independent variable availability. Model 4: 1996-2015, all countries with independent variable availability. Model 5: all years since 1993, all countries with independent variables except EXR. Models 1 and 2 consider only those countries listed as origins (n=62). These models could have a bias because they leave out the countries from which few tourists originate. As a result, we run Models 3 and 4 for all countries with complete data (n= 107). In an effort to assess the impact of missing values for EXR during the period 1993- 1995, we remove these years in Models 2 and 4. Model 5 includes all years but without the exchange rate, the variable that turns out to be the least effective in explaining arrivals. Analysis and Results In this section we discuss the results of the models and compare them to one another, as well as previous findings. Five models are specified in order to make the best use of our large database using seemingly unrelated regression (SUR). The results are summarized in Table 3, with R2 values ranging from .346-.565. In each case, the conventional gravity variables of population and distance are significant, with the expected valence signs. The results confirm that the larger the population of the origin country is, the greater its tourist flows to Croatia. Conversely, the farther an origin country is from Croatia, the fewer the number of arrivals from that origin. The gravity variables confirm and extend previous findings by Eryiğit et al. (2010) on the importance of population size and the role of geographical distance as highlighted by McKercher and Lew (2003), Eilat and Einav (2005), Keum (2008), Eryiğit et al. (2010). Volume 7 | Issue 1 | 17 �Joel I. Deichmann, Danyang Liu   Table 3: Results from the Five Models Intercept scale (POP) scale (GDPC) scale (DIST) scale (EXR) OPEN R2 DF Model 1 Only Origins 1993-2015 2.59843*** .53768*** .26178* Model 2 Only Origins 1996-2015 2.85299*** .58473*** .10129 Model 3 Full Data 1993-2015 1.046e+00*** 5.8914e+01*** 7.1928e+01*** Model 4 Full Data, 1996-2015 1.086e+00*** 6.327e-01*** 6.935e-01*** Model 5 Full w/o EXR 1993-2015 1.04581*** .58917*** .71942*** -1.45916*** -.07320** 5.94032*** .346 1420 -1.40637*** -.14795* 6.15694*** .336 1234 -1.6616e+00*** -2.7936e-08 4.7300e+00 .552 3237 -1.71e+00*** -7.35883e-05 4.97e+00*** .565 2814 -1.66155*** 4.73067*** .552 3238 Significance levels: ***=.001, **=.01, *=.05 Table 3 summarizes the results of all five models. The goal of the changing model specifications is to improve the R2 values through increasingly parsimonious specifications. Moreover, as discussed earlier, the fact that the “non-participant” countries are omitted from Models 1 and 2 subjects the results not only to a sampling bias, but also relatively low R2 indicators. Because the significance results are similar across most models, it makes sense to discuss each variable generally rather than model-by-model. Geographical distance, a standard gravity variable, is significant (p=.001) in each generated model, moreover with the expected negative valence sign, reinforcing the notion of distance representing a barrier to spatial interaction. This outcome is in agreement with findings by McKercher and Lew (2003), Eilat and Einav (2005), McKercher, Chan, and Lam (2008), and Eryiğit et al. (2010). The observation that geographic distance inhibits tourism as a form of spatial interaction confirms Keum’s (2008) assertion that the gravity model characterizes a robust approach in tourism studies. As an explanatory variable, geographical distance is arguably superior to transportation costs, which Mervar and Payne (2007) argue to be less than significant determinants in Croatia. Origin country population size, another conventional gravity variable, is positive and significant at the .001 level in all five models, supporting previous findings on this standard gravity variable (Tinbergen, 1962; Eryiğit et al., 2010; Ok, 2010). Intuitively, larger populations are more likely to interact more than smaller ones. Many of the world’s largest populations (China, India, Indonesia, Brazil, Pakistan, and Bangladesh) do not rank among the leaders of tourists to Croatia. However, the relatively large European countries such as Germany, Italy, France, and the UK, as well as other large countries such as the USA and Russia that are relatively important 18 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     sources of inflows, undoubtedly impact the regression line favorably. The performance of geographical distance and population together provides abundant evidence that the gravity approach is applicable here, even though it is more commonly invoked as framework for understanding trade (Tinbergen, 1962) or foreign direct investment (Deichmann, 2013). Openness (or lack of visa requirements) is a third significant variable in Models 1, 2, 4 and 5 (p=.001) that has a positive impact on tourism flows to Croatia. Research elsewhere has also unveiled the importance of a liberal visa regime toward origins in facilitating tourism from those countries (McKercher, Chan, and Lam, 2008; Deichmann and Frempong, 2016). One explanation for the lack of significance in Model 3 is that this time period included the years of war within the Balkans, and Model 3 features all 122 countries in the full dataset. In other words, a lack of visa requirements during the war years was not enough to make tourists forget about the dangers of that conflict. In this study, GDP is divided by population in order to capture the relative wealth of travelers from origin countries. This income level, measured by GDP per capita, is an indication of the ability to afford luxury goods such as international travel. It is therefore unsurprising that the variable appears as a positive and significant determinant in three of the five models. Notably, the variable is only significant at the .05 level in Model 1, which examines only origin countries (not the full data set) from 1993-95, and in Model 2 it lacks significance during the time period starting in 1996. This means that income is less of a determinant for the countries that do provide tourists, especially since Yugoslavia’s war of dissolution ended and conditions returned to normal. This distinction also underscores the importance of using the full data set to support conclusions. A cursory examination of the dataset yields the observation that many of the countries that do not supply tourists to Croatia tend to be lower income (as measured by per capita GDP). This lack of personal resources is evidently a deterrent to travel, an activity that Eilat and Einay (2005) rightly consider to be a luxury good. The importance of income mimics results of earlier research by Khaderoo and Seetanah (2008), Škuflić and Štoković (2011), and Tica and Kožic (2015). The effect of the exchange rate variable is inconclusive based upon evidence found here. Although unexpected, this finding is in harmony with earlier work by Mervar and Payne (2007). In search of a plausible explanation, this result leads to the following observation with regard to real exchange rates (EXR): tourism to Croatia has increased dramatically over the time period under investigation, while the strength of origin currencies has remained stable or increased only moderately. This Volume 7 | Issue 1 | 19 �Joel I. Deichmann, Danyang Liu   absence of a statistically significant relationship does not dismiss observations by Eryiğit et al. (2010) in the context of Turkey, and in Croatia by Tica and Kožic (2015), that exchange rates can be influential at specific times and in certain contexts. However, given the methodology applied here and the strength of other variables, their importance is impossible to confirm. When we use the full data set of 142 countries, the R2 improves dramatically, with or without EXR. Model 5 is generated as in an effort to obtain a parsimonious explanation of tourism flows to Croatia without the problematic variable of EXR. We are aware from previous research (Currie et al., 2004; Schőnfelder, 2005; Ateljevic and Čorak, 2006) that hyperinflation during the war clearly distorted the impact of exchange rates. We also note that Eryiğit et al. (2010) removed Belgium and Bulgaria from their 1994-2005 origins analysis due to “chaotic” exchange rate movements. In the present case of Croatia, we believe that the impact of this variable requires further consideration. Conclusions The findings of this research on origins of international tourist flows to Croatia are based upon an unprecedented depth and breadth of study. The data base features 16,330 cells, including 142 countries over 23 years, assembled to scrutinize the role of five independent variables. In an SUR application of the gravity model, we find that international tourism is facilitated by geographic proximity and origin country population size, as well as visa openness and income level of the origin country. Our examination of exchange rates is inconclusive. The findings can be useful for scholars and policymakers alike. Scholars may wish to extend this broad-based research into more specific directions such as exchange rates, or replicate the study in other contexts. Policy makers may wish to reconsider a heavy dependency upon this single sometimes-volatile industry. They may also want to consider introducing more liberal visa regimes toward targeted tourist markets, and safeguard against the dubious role of exchange rates as a determinant of holidays in Croatia. Recognizing the factors that govern flows by origin countries should help stakeholders forecast demand based upon changes in other variables. Moreover, the results reported here are certainly relevant for other countries that are similarly tourism-dependent. The limitations of this study should be also acknowledged. First, the necessity to omit countries with incomplete or problematic data introduces a bias because the excluded observations tend to be poor and/or unstable countries. Arguably, length of stay (rather than tourist arrivals) represents another valid way to capture the appeal of Croatia to tourists. In the present study, however, length of stay data would 20 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     prevent construction of a data set as large as the one used here because reported values for that variable are less complete. In addition, the inclusion of Croatia within multi-destination trips would be worthwhile to investigate, but as acknowledged by Eilat and Einav (2005), such complexity would be impossible to track with this sort of quantitative approach. The study plan set out to capture the role of EU membership in tourism flows, but because Croatia joined the EU only in 2013, and unrestricted cross-border movement is not yet permitted, this question remains unanswered. Arguably, the visa requirement variable does capture the role of free movement, but it is not parallel to EU membership. Finally, the direction of causality between transportation infrastructure and tourism remains to be fully understood, and despite infrastructure’s existence in the literature (Khaderoo and Seetanah, 2008), we were unable to interrogate it here due to lack of arrival data by origin that are also specific to each mode of transportation. Many of these questions could be better addressed with a qualitative approach to complement the present findings, perhaps by surveying travelers across origin countries about the rationale underlying their complete travel programs and how Croatia fits into the picture in as a destination. Notwithstanding the contributions enumerated above, the conclusion of this research points to several additional questions. Most of these items can be addressed only as new data become available, following supplications by Baldigara and Mamula (2012), and Galičić (2015). First, this study could be replicated with sub-samples based on the purpose of visit. The World Bank offers such data at http://wdi.worldbank.org/table/6.14, but at the time of writing these are not available for the time period and multitude of countries examined in the present research. It would also be worthwhile to focus upon the impact of cultural linkages between Croatia and its neighbors (as historical provinces of the Austro-Hungarian Empire, Yugoslavia, etc.). This research would certainly benefit from a more regionally-focused approach with greater historical depth. A better understanding of the impact of Croatia’s 2013 EU accession will also be possible to glean in the nottoo-distant future, given the near-certainty of the country entering the Schengen zone after the year 2018 v . In the near future, it will also be possible to reflect critically upon the Ministry of Tourism’s (2013) Development Strategy for 2020, and whether Croatia was successful at achieving its goal of a top 20 global ranking. Finally, lest this paper end on the negative note of its finite scope and work that remains to be done, it is worth reiterating the contributions presented herein. This analysis of international tourism origin effects is unprecedented in the combination of time duration under investigation and the large number of 142 countries included, and the extensive degrees of freedom underscore the validity of the Volume 7 | Issue 1 | 21 �Joel I. Deichmann, Danyang Liu   findings. The result is a comprehensive model based upon the past two-plus decades, revealing that the origins of tourism in Croatia are governed by traditional gravity variables of distance and population, as well as Croatia’s generally liberal visa regime and income in origin countries. According to the results generated in this paper, the role of exchange rate fluctuations varies with each model specification, but falls short of statistical significance in the context of Croatia. References Ateljevic, I., and Čorak, S. (2006). Croatia in the New Europe: Culture Versus Conformity. In Hall, Derek. Melanie Smith, and Barbara Marciszweska. Tourism in the New Europe: The Challenges and Opportunities of EU Enlargement. Wallingford: CABI, 288-301. Baldigara, T. (2013). Forecasting Tourism Demand in Croatia: a Comparison of Different Extrapolative Methods. Journal of Business Administration Research. 2 (1), 84-92. Baldigara, T., and Mamula, M. (2012). Tourism Statistics in Croatia: Present Status and Future Challenges. Procedia- Social and Behavioral Sciences. 44, 53-61. Ballinger, P. (2003). Selling Croatia or Selling Out Croatia? Tourism, Privatization, and Coastal Development Issues in a “New” Democracy. National Council for Eurasian and East European Research. Unpublished report available at: https://www.ucis.pitt.edu/nceeer/2003-817-01f-Ballinger.pdf. Accessed 6 June 2016. Bechev, D. (2012). The Periphery of the Periphery: The Western Balkans and the Euro Crisis. European Council on Foreign Relations Paper. http://ecfr.eu/page//ECFR60_WESTERN_BALKANS_BRIEF_AW.pdf, accessed 13 November 2015. Breusch, S. and Pagan, A. (1980). The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics. Review of Economic Studies. 7(1), 239-253. Coles, T., and Hall, D. (2005). Tourism and European Union enlargement: Plus ça Change? International Journal of Tourism Research. 7, 51-61. Croatian Bureau of Statistics. (2016). http://www.dzs.hr/Eng/Publication/subjects.htm. Statistical Yearbook of Croatia. 2015. Tourism Reports. 22 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     Croissant, Y. and Millo, G. (2008). Panel Data Econometrics in R: The plm Package. Journal of Statistical Software. 27 (2), 1-48. https://www.jstatsoft.org/article/view/v027i02. Accessed 12 August 2016. Currie, D., Skare, M., and Loncar, J. (2004). The Impact of War on Tourism: the Case of Croatia. Unpublished article presented at the Conference on Tourism Economics. Palma de Mallorca, Spain. 28-29 May. Cviić, C. and Sanfey, P. (2010). In Search of the Balkan Recovery: The Political and Economic Reemergence of South-Eastern Europe. New York: Columbia University Press. Deichmann, J. I. (2013). Origins of Foreign Direct Investment in Croatia: Application of an Expanded Gravity Model. Chapter 1 in Karasavvoglou, A. and Persefoni Polychronidou (eds.) Balkan and Eastern European Countries in the Midst of the Global Economic Crisis. Heidelberg: Springer, 3-21. Deichmann, J. I., and Frempong, F. (2016). International Tourism in Ghana: A Survey Analysis of Traveller Motivations and Perceptions. Journal of Tourism and Hospitality Management. 29, 176-183. DOI 10.1016/j.jhtm.2016.08.002. Egger, P., and Pfaffermayr, M. (2004). Distance, Trade, and FDI: A HausmanTaylor SUR Approach. Journal of Applied Econometrics. 19 (2), 227-246. Eilat, Y., and Einav, L. (2004). Determinants of International Tourism: a ThreeDimensional Panel Data Analysis. Applied Economics. 36, 1315-1327. European Union. (2016). European Commission: Converting to the Euro. http://ec.ouropa.eu/economy_finance/euro/adoption/conversion/index_en.html. Accessed 10 July 2016. Eryiğit, M., Kotil, E., & Eryiğit, R. (2010). Factors affecting international tourism flows to Turkey: a gravity model approach. Tourism Economics, 16(3), 585-595. Galičić, V. (2015). Tourism in Croatia: Truths and Misconceptions. Infomatol. 48 (1-2), 78-94. Hall, D. (2002). Brand Development, Tourism and National Identity: The ReImaging of Former Yugoslavia. Brand Management. 9 (4), 323-334. Volume 7 | Issue 1 | 23 �Joel I. Deichmann, Danyang Liu   Jordan, P., (2006). Tourism and EU Enlargement: A Central European Perspective. In Hall, Derek, Melanie Smith, and Barbara Marciszewska (eds): Tourism in the New Europe: The Challenges and Opportunities of EU Enlargement. Oxfordshire: CABI, 65-80. Keum, K. (2010). Tourism Flows and Trade Theory: a Panel Data Analysis with the Gravity Model. Annals of Regional Science. 44. 541-557. Khaderoo, J., and Seetanah, B. (2008). The role of transport infrastructure in international tourism development: a gravity model approach. Tourism Management. 29, 831-840. Lewer, J,, and Van den Berg, H. (2008). A gravity model of immigration. Economics Letters. 99 (1), 164-167. McKercher, B., and Lew, A. (2003). Distance Decay and the Impact of Effective Tourism Exclusion Zones on International Travel Flows. Journal of Travel Research. 42. 159-165. McKercher, B., and Chan, A. and Lam, C. (2008). The Impact of Distance on International Travel Movements. Journal of Travel Research. 47, 208-224. McKercher, B, and Decosta, P. (2007). Research Report: the Lingering Effects of Colonialism on Tourism Movements. Tourism Economics. 13 (3) 453-474. Mervar, A., and Payne, J. E., (2007). An Analysis of Foreign Tourism Demand for Croatian Destinations: Long-Run Elasticity Estimates. EIZ Working Paper 0701. Available at: http://hrcak.srce.hr/index.php?show=clanak&id_clanak_jezik=106590. Accessed 20 December 2015. Ministry of Tourism. (2013). Tourism Development Strategy for the Republic of Croatia until 2020. Available at: http://www.mint.hr/UserDocsImages/Tourism_development_strategy_2020.pdf. Accessed 6 June 2016. Ministry of Tourism. (2016). Statistics and Data. Available at: http://www.mint.hr/default.aspx?id=363. Accessed 10 May 2016. Ok, S. T. (2010). What Determines Intra-EU Trade? The Gravity Model Revisited. International Research Journal of Finance and Economics. 39. 244-250. . 24 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.     Panagiotou, R. (2010). Effects of the Global Economic Crisis on South-East Europe. Journal of Balkan and Near Eastern Studies 12 (2), 187-194. Pavlic, I., Svilokos, T. and Tolic, M. S. (2015). Tourism, Real Effective Exchange Rate and Economic Growth: Empirical Evidence for Croatia. International Journal of Tourism Research. 17, 282-291. DOI: 10.1002/jtr.1986 Radnić, A., and Ivandić, N. (1999). War and Tourism in Croatia- Consequences and the Road to Recovery. Turizam. 47 (1), 43-54. Rupnik, J. (ed.) (2011). The Western Balkans and the EU: ‘The Hour of Europe’. European Union Institute for Security Studies. Chaillot Papers. June. Available at http://www.iss.europa.eu/publications/detail/article/the-western-balkans-and-the-euthe-hour-of-europe/ Accessed 10 December 2015. Schőnfelder, B. (2005). The Impact of the War 1991-1995 on the Croatian Economy – A Contribution to the Analysis of War Economies. Freiberg Working Papers #14. Available at http://tu-freiberg.de/sites/default/files/media/fakultaet-63307/fileadmin/Arbeitspapiere/2005/schoenfelder_14_2005.pdf. Accessed 20 June 2016. Škuflić, L. and Štoković, I. (2011). Demand Function for Croatian Tourist Product: A Panel Data Approach. Modern Economy 2 (1): 48-52. Statista. (2016). http://www.statista.com/statistics/412794/euro-to-u-s-dollarannual-average-exchange-rate/. Accessed 15 June 2016. Stone, P. (2013). Dark Tourism Scholarship: A Critical Review. International Journal of Culture, Tourism, and Hospitality Research. 3 (7), 307-318. Tica, J., and Kožič, I. (2015). Forecasting Croatian Inbound Tourism Demand. Economic Research- Ekonomska Istraživanja. 28 (1), 1046-1062. Tinbergen, J. (1962). Shaping the World Economy: Suggestions for an International Economic Policy. New York: Twentieth Century Fund. UNWTO (United Nations World Tourism Organization) (2016a). World Tourism Highlights 2016. http://www.e-unwto.org/doi/pdf/10.18111/9789284418145 Accessed 15 August 2016. Volume 7 | Issue 1 | 25 �Joel I. Deichmann, Danyang Liu   UNWTO. (2016b). Concepts, Definitions, and Classifications for Tourism Statistics. Technical Manual No. 1 (English version) http://www.eunwto.org/doi/pdf/10.18111/ 9789284401031. Accessed 1 September 2016. Weaver, D. B. (2000). The Exploratory War-distorted Destination Life Cycle. International Journal of Tourism Research. 2(3), 151-161. World Economic Forum. (2015). Travel and Tourism Competitiveness Report. Index Results. Available at: http://reports.weforum.org/travel-and-tourismcompetitiveness-report-2015/. Accessed 22 June 2016. WTTC (World Travel and Tourism Council). (2015). Economic Impact 2015: Croatia. https://www.wttc.org/media/files/reports/economic%20impact%20research/countri es%202015/croatia2015.pdf. Accessed 28 December. Zellner, A. (1962). An Efficient Method of Estimating Seemingly Unrelated Regressions, and Tests for Aggregation Bias. Journal of the American Statistical Association. 57. 348-368.                                                                                                                         i Although it was anticipated that variables for proximity to Croatia (DIST) and visa requirements (OPEN) would be overly similar, the simple correlation of .025 allays any concerns. ii Direct flights to Croatia are intuitively an enabler of inbound tourism flows, but the direction of causality is spurious (i.e., do people travel because direct flights exists, or are flights scheduled in order to meet travel demand?). In addition, long distance travelers normally connect in another (non-Croatian) European city. Overall, during 2013-14, less than five percent of passenger border crossings to Croatia were by plane (Croatian Bureau of Statistics 2016, 43). iii In order to complete the data set, several cell entries were imputed, and this was particularly challenging in the case of the exchange rate variable (EXR). Euro exchange rates were first available in the year 1999, three years before the currency emerged in physical form. Prior to 2002, exchange rates were based upon individual currencies and their fixed conversion rates to the euro. Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain joined the euro zone in 1999, followed by Greece (2001), Slovenia (2007), Cyprus and Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014), and Lithuania (2015). Additionally, Montenegro used the German mark (DM) from 1996 until 2002, and then adopted the euro. Similarly although not a Eurozone member, Kosovo adopted the euro in 2002, abandoning Serbia’s dinar. Figures for Montenegro and Kosovo were obtained for years 1992-95 by imputation using the Serbian dinar. Belarus and Ukraine used the Russian ruble until 1997. Russia redenominated its ruble in 1997. Liechtenstein 26 Journal of Economic and Social Studies �Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015.                                                                                                                                                                                                                                                                                                             used to use the Swiss Franc. For further explanation of how missing values were calculated, please contact the authors. iv The R language is a well-established environment for statistical computing, and is widely used among statisticians and data miners for developing statistical software and data analysis. R has been publicly available for over 20 years, and most of its developers are senior academics with expertise in statistical computing. v http://www.schengenvisainfo.com/croatia-could-join-schengen-area-after-2018/ Volume 7 | Issue 1 | 27 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 3663 Title A name given to the resource Determinants of International Tourism Flows to the Republic of Croatia: An SUR Analysis of Panel Data from 1993-2015 Author Author Deichman, Joel Danyang, Liu Abstract A summary of the resource. Abstract: This paper examines origin-effects of tourist flows into Croatia from 1993-2015, a time period that features several important events: the fragmentation of Yugoslavia, the European recession, and Croatia’s accession to the European Union. Applying the seemingly unrelated regression (SUR) approach to a large panel data set with the number of annual arrivals from each origin country as the dependent variable, we identify and analyze the determinants of tourism flows to Croatia. A series of augmented gravity model specifications reveals that inflows can be explained by geographic proximity, GDP per capita, origin country population, and openness. The role of the real exchange rate variable is inconclusive, and in fact problematic for years 1993-95 when hyperinflation plagued the region in the wake of Yugoslavia’s dissolution. The results confirm the validity of the models, both for the subset of origin countries and for the subset of non-origin countries for which otherwise complete data are available. Given the importance of tourism to Croatia’s national accounts position, implications for tourism policy are discussed, as are suggestions for future research. Keywords: Tourism Origin-Effects, Gravity Model, Croatia JEL Classification: C33, O52, Z3 Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2017 Keywords Keywords. Article PeerReviewed H Social Sciences (General)