Economy and society in Bosnia and Herzegovina
by Thierry Domin
First published in
SFOR Informer#128, December 12, 2001
The economic model - and its social counterpart
- is one of the main political decisions of the state, and
has a daily impact upon the citizen's life. The re-distribution
of the national wealth, the priorities between the various
ministries and the orientations chosen as far as it concerns
social policy determine the kind of economy: free market or
state interventionism, with all the shades between the two.
Before the war, as the name indicates, the Socialist
Federal Republic of Yugoslavia was a socialist state, nevertheless
with an interventionism less strong than in communist countries.
Of course, this was also so in Bosnia and Herzegovina. The
main indicators of this policy were the small number of privately-owned
firms, the high degree of social re-distribution and the predominance
of heavy industries, as in Zenica (BiH Steel) or in Mostar
(Aluminji). Furthermore, in his desire to strengthen the unity
of the whole country, Marshall Tito spread out the points
of fabrication of consumer goods among the whole of Yugoslavia.
Thus, to quote a "Zastava" car as an example, the
chassis was manufactured here, the engine there, and the tyres
in a third republic of the country.
Another specific point was the existence of the so-called
"payment bureaux," which collected all the bills
and taxes from the citizens and paid part of this revenue
directly to the Party.
But BiH remained a landlocked country, with no access to the
sea, no highways, few railway lines and only two ports on
the Sava River, Samac and Brcko.
The consequences of the war
The first consequence of the war was the heavy destruction
of the industries and the port facilities on the Sava River.
A lot of people became unemployed, as well as a great part
of the combatants when the General Framework Agreement for
Peace (GFAP) was signed in Paris, Dec. 14, 1995. Furthermore,
the move of the population from rural settlements to bigger
cities also contributed to the rise in the unemployment figures.
Small communities that used to live in self-sufficiency found
themselves back in the suburbs of Sarajevo, Banja Luka or
Mostar, without housing, jobs and schools for their children.
The first need was of course the reconstruction. For this
aim, the International Community gave in almost six years
more than 10 billion Konvertible Marks (5 billion €).
The voluntary return of Displaced Persons and Refugees (DPRE)
sped up the process, for a lot of returnees decided to re-build
their pre-war homes by themselves. But the needs are still
great, and United Nations High Commissioner for Refugees (UNHCR)
stated in June 2001 that there was still a gap of 22,400 between
the on-going reconstruction and the needs.
For its part, the World Bank launched a programme called the
Emergency Demobilisation and Reintegration Programme (EDRP)
to further the re-insertion of demobilised soldiers. Since
the Armed Forces in BiH continue to be downsized, this help
will be needed for the long-term.
Every three months, the Economic cell of the Office of the
High Representative (OHR) publishes an Economic Newsletter
where the main indicators are assessed (http://www.ohr.int/ohr-dept/econ/newsletter/).
The last spreadsheet appears in the attached box. It shows
the disparity between the two entities (Federation and Republika
Srpska) in the areas of salaries, unemployment, and inflation.
The only similar figures deal with deficit in foreign trade.
It partly explains why people are still reluctant to return
to RS, where the standard of living is considerably lower
than in Federation.
Moreover, one has to admit that the expenditures of the military
budgets for the two entities are largely too high in regard
to the actual threats. A readjustment of those budgets, associated
with a common defence policy, could allow for more money to
be spent in priority areas.
And finally, one of the biggest concerns in this country is
corruption. The free market economy is something quite unknown
in post-communist countries, and the tradition of the backhander
is still strong. That's why OHR set up an Anti Fraud Department
two years ago, dealing with all aspects of corruption, at
whatever the level it is practised.
The way ahead
Is that to say that economic and social situations are
frozen and that there is no chance of improvement? Certainly
not, for a lot of things have recently changed for the better.
Of course, it's always more difficult to go towards an unknown
system than to come back to a previously well known one. During
more than 50 years - about two generations -, citizens of
this country only experienced war and communism, and sometimes
both together. Such moves, however as normalisation of the
dismantling of payment bureaux, Air Space co-ordination, privatisation,
and the march for joining the Council of Europe are many examples
of the efforts of the common institutions to reach western
The HR himself adopted a new concept of "ownership,"
which means the progressive withdrawal of the international
community and more responsibilities for the state institutions.
Another positive point was the creation, in July 1999, of
the Stability Pact, which deals with all the countries of
the Balkans through a regional approach. There is virtual
unanimity, in South Eastern European countries, that the way
forward is integration into Europe.
On June 27, 2001, a very significant event took place in Brussels.
Ministers from Albania, BiH, Croatia, Former Yugoslav Republic
of Macedonia (FYROM), the FRY, Romania and Bulgaria - the
so-called beneficiary countries of the Stability Pact - signed
a Memorandum of Understanding (MoU) on Trade Liberalisation.
This MoU signals the commitment for these countries to liberalise
90 percent of mutual trade in value by the end of 2006. The
MoU covers both the agricultural and industrial sectors.
But as long as BiH doesn't speak with a single voice in economy
area, nationalistic points of view and entities' selfishness
will hamper any improvements. In this domain also, the way
ahead is the strengthening of the common institutions.