SURVIVING THANKS TO DONATIONS
BiH, Federation:Bosnia & Herzegovina, B&H Federation:
By: Drazen Simic (Sarajevo)
Five years after the end of the war and almost five billion dollars spent on reconstruction, 1991 economic indicators are still beyond the reach of the economy of B&H. The postwar administrative organisation of B&H composed of two entities which are something between independent states and parts of a normal state, resulted in the actual existence of two separate economic systems. One of the consequences is the absence of fundamental economic indicators for the country as a whole. The best illustration of the general situation is the fact that nobody knows even how many people at this moment live in B&H and how many are somewhere abroad. It is estimated that at this moment in B&H Federation (B&H F) which takes up 51 per cent of the territory of B&H there are 2.5 million inhabitants.
Ten years ago B&H was the only republic of former Yugoslavia with a surplus in trade with the world of almost 500 million dollars a year, and nowadays it has a large foreign trade deficit. The value of the export from B&H in 1991 was 2.12 billion dollars and the value of imported goods was 1.6 billion dollars. In 1999, B&H Federation spent 2.4 billion dollars on import of all kinds of things, while it earned only 518 million dollars from export.
Economy at a Standstill
That B&H will need more time to get where it was ten years ago is evident from the gross national product which in 1991 amounted to 1,872 dollars per capita, while in 1999 in B&H F it was lower by one third - 1,126 dollars.
In October 2000, official statistics in B&H F registered that the average salary was 246 German marks and average pension was 177 marks. At the same time, for the consumer's basket it was necessary to have 438 German marks, but the actual monthly expenses are much higher, because the basket does not include overhead expenses, money needed for clothing, and everything else that is not just food.
In 1991, in the part of B&H which is nowadays B&H Federation, there were 631,020 employed workers. Nowadays, officially there are 412 thousand employed persons. The unemployment rate is 39 per cent, and the number of persons who are looking for jobs is 264 thousand.
Unlike majority of the newly created states on the territory of former Yugoslavia, apart from the pertinent burden of transition from the socialist into market economy, B&H is additionally oppressed by the consequences of the war and ravages of war. Damage directly caused by war, according to the estimate of the World Bank, amounts to between 15 and 20 billion dollars. At the end of the war in December 1995, B&H was a country with the economy at a standstill, and therefore with high expectations from the postwar reconstruction financed with five billion dollars of international aid. However, the achieved results can hardly be considered as satisfactory, because after five years of reconstruction just 38.7 per cent of 1991 industrial production has been reached. Industrial growth rate is declining, from 87.6 in 1996, 35.7 per cent in 1997, 23.8 per cent in 1998 to 10.6 per cent in 1999. All things considered, in 2000, industrial growth rate will not exceed 10 per cent in B&H Federation.
Infrastructure, roads, bridges, power transmission lines, thermo- and hydro-electric power stations, schools and hospitals, have mostly been reconstructed, but B&H still does not have a self-sustainable economy. And that is what makes the international community nervous. The period of donations has passed and the only true source of fresh money necessary for moving the economy from the standstill are foreign investments. In the past five years, however, only about 400 million dollars have entered B&H in this way.
The process of privatisation has begun in the end of October when half of the existing state enterprises in B&H Federation were offered for sale. The total value of state capital in B&H Federation was estimated to be worth about 17 billion German marks, and by the end of year 2001 most of this capital should pass into private hands. After the initial fraudulent dealings in the domain of privatisation, the international community reacted, and after it had insisted, a selection was made of 86 most promising enterprises for which buyers will be sought abroad through international call for tenders.
Privatisation in B&H Federation is used by the state to settle its debts to the citizens, either for the old foreign currency savings, or the unpaid soldiers' salaries during the war and pensions. Privatisation certificates were for this purpose distributed to the citizens in the total nominal amount of 15.6 billion marks, and these certificates were recognised as a valid means of payment equal to money in the process of privatisation of state enterprises and socially owned housing units. The citizens were enabled to buy shares in enterprises either directly, by their own choice, or to invest their certificates in privatisation investment funds.
Privatisation at its Beginning
Privatisation of state banks is still at the very beginning, although the initial deadlines have passed a long time ago. The entire state capital in banks should be privatised by July 1, 2001, but chances are small that this deadline set by law will be met because the state has so far got rid of its capital in just a few mostly private banks.
At this moment there is no organised financial market in B&H Federation. The Commission for Securities has been established, as well as the Register of Securities, and the stock exchange is just being established in Sarajevo.
The obstacle to more significant participation of foreign investors in the process of privatisation is the unresolved question of restitution, which means that in numerous cases the buyers of a state enterprise are faced with the possibility that subsequently it might be determined that what they had bought and paid for actually belongs to somebody else, and they could therefrom be deprived of a part of their newly acquired property. The attempts to pass a law on restitution in B&H Federation have lasted for almost three years now, but they have not gone far.
After years of ignoring corruption in B&H, and only after the international community had exerted pressure on it, the B&H administration has finally admitted that there is corruption in B&H. Wide-spread corruption has been one of the most serious cause of complaints of the possible foreign investors, but not the only one. It is estimated that the year 2001 could easily lead to total economic collapse or at best to continuation of mere mock existence of domestic economy. Estimates of experts speak of the growth of industrial production of 10 per cent at the most and of inevitable increase of unemployment.
Thanks primarily to the principle of "currency board" based on which the B&H Central Bank operates, in 2001 B&H Federation should be spared inflation shocks, and inflation should amount to 3 to 4 per cent.
Average salaries could at best remain on the present level, which cannot be said of the pensions which are expected to go down. The reason for that is the application of the principle that pension funds can use in payment of pensions only the money that is collected in the course of 30 days from paid contributions on salaries of the legally employed persons. In view of the widely spread illegal work and a small number of newly opened jobs, the existing inflow of money is already insufficient to keep the pensions on the current level.
The citizens of B&H obviously have not much reason to look forward to the beginning of the new millenium.