Bosnia and Herzegovina after  Five Years of Reconstruction by Josef Pöschl WIIW Current Analyses and Country Profiles, No. 15,  April 2001 (54 pp. including 7 Tables) Price: ATS 600.00 / EUR 43.60; free copy for WIIW Members (subscribers to the WIIW Service Package) Contents

Summary

The issue of kick-starting economic recovery in the Balkans remains very much an item on the agenda. Over the next few years, the experience gained in Bosnia and Herzegovina (BiH) should benefit the region as a whole. A report just published by The Vienna Institute for International Economic Studies (WIIW), 'Bosnia and Herzegovina after five years of reconstruction', discusses these experiences and draws conclusions for the future.

By the end of 1995, the BiH economy was in a disastrous state. Enormous damage, if not complete destruction, had been inflicted on residential buildings, workshops, factories, railways, roads, bridges, telephone and electricity lines, water mains and means of transport. The country had split into small bailiwicks under the tutelage of different ethnic groups. Today, some five years on, the picture has changed. The (violent) crime rate is low by international standards. People are engaged in economic activities once more. Many houses have undergone at least partial repair. Intercourse between people of different ethnic backgrounds is becoming more frequent. These ties include mutual trading and joint production projects. Throughout the country people use the local currency, fly the country’s flag and their cars bear BiH number plates. They can travel all over the country. Traffic jams have become a common feature in larger towns and on main roads. For the most part, the infrastructure has been rebuilt and public utilities are in supply once more. All this has become reality thanks to the support and guidance provided by international organizations and foreign powers.

Politically, BiH creates a mixed impression. It remains formally divided into the Serb-dominated Republika Srpska (RS) and the Federation of Bosnia-Herzegovina (FBiH), the latter being de facto split into Croat and ‘Bosniac’ (Moslem) controlled cantons. Croat-dominated regions are in fact an entity per se, maintaining their own institutions and pursuing their own policies. Ethnocentric Croat politicians want to lend formal status to the current situation. As they enjoy the support of the overwhelming majority of BiH Croats, the most serious problem emanates from the Croat side. A split of the FBiH in two, a Bosniac and Croat entity, would violate the Washington and the Dayton Agreement and fortify ethnic division. This conflict threatens to spoil various attempts to increase confidence of potential foreign investors.

Economically, the country will probably remain on the track that it is already running down. A miracle in terms of GDP, income and employment growth is unlikely, given that no change in the handling of economic matters is in sight. It would be misguided to hope that recent developments such as the abolition of the former accounting system and the ongoing deregulation of companies will yield swift gains. On the contrary, both programmes will lead to disruptions in the short term, and the achievement of positive results will take a number of years.

After the elections in November 2000 pro-Dayton parties formed non-nationalistic governments on the state level as well as on lower levels. The pro-Dayton block will be under immense pressure to yield swift results – otherwise the population will soon start to feel disappointed: additional pressure that could easily stifle co-operation between the pro-Dayton parties. The population will measure the governments’ success primarily in economic terms, using indicators that may differ fundamentally from those that international analysts usually focus on. This can be seen in neighbouring countries. In Croatia, after a mere twelve months of sluggish economic success, the population is already starting to show signs of disillusionment. The same thing could soon happen in Serbia as well. Once again, whether quick economic success is achievable will depend on the international community.