Power to the Alliance, Money to the New Opposition

The key levers of economic power in Bosnia and Herzegovina are still controlled by nationalist parties. Almost three months after the Alliance for Change took over executive power, the most profitable public and other state companies are still controlled by boards appointed by the former authorities.

AIM Sarajevo, May 14, 2001

So far the power of national parties in Bosnia and Herzegovina has rested on two pillars -- on preserving the atmosphere of mistrust and fear of "the others, who are out to get us," and on sovereign control of financial transactions in "their" respective domains. In addition to official budgets, top nationalist party leaders have formed unofficial financial systems through which circulated money coming in from public companies such as the PTT company, the Elektroprivreda power utility and other highly profitable firms such as tobacco factories, state lotteries, oil distributors etc., to which the state granted a monopolistic position on the market. To this should be added a portion of public revenue, taxes and other fees which the companies in question, bypassing regulations, paid instead of to the budget to various "special" accounts, on verbal instructions from high-ranking officials.

In such circumstances it was no wonder that the line separating the state and party treasuries was quite flexible, and that funds often "mixed." This, in practice, meant that money from these parallel sources was used partly to pay benefits to disabled veterans, especially prior to elections when favorable conditions needed to be ensured, and for "loans" to mostly private companies close to the national party leaderships, and to provide funding for the parties.

At the end of the war in Bosnia, in December 1995, there were three power companies, three PTT companies, and three railway companies, each operating in their respective "territories." Five years later the situation had changed little, and each of these public companies in the Muslim-Croat Federation headquartered in Sarajevo had its twin sister in Mostar, and at the level of Bosnia-Herzegovina, another one in Banjaluka. The greatest "achievement" in the Muslim-Croat Federation was when the federation government began to appoint managing boards. This, of course, was only formal, because officials appointed in Sarajevo were hand-picked by Izetbegovic's Party of Democratic Action, while in case of those located in Mostar the Croatian Democratic Union had the final say. Thus the companies' top executives were solely responsible to "their" parties, whose orders they carried out without question, and in doing so no one bothered with "trifles" such as the law. Not by coincidence some board members happened, in fact, to be senior party officials, whose loyalty to the party was additionally strengthened by the fees they were paid. Here and there a person not belonging to these circles could be found, but company managers followed all the orders issued by the party leaderships. Although these were public companies, the Federation's Parliament was never presented with detailed financial reports. Obviously the fact that such information was available to the innermost party circles should have sufficed.

The fact that politicians were in full control of public companies resulted in many examples of financial ingenuity: funds belonging to the Elektroprivreda B-H power company were used to purchase new aircraft for Air Bosnia in which the state was the majority owner. The price was next to nothing -- a mere DM80 million. Simultaneously, the company has been losing tens of millions of marks for years. What electricity and aircraft have in common, that is, why a deeply indebted public company needed Airbus planes remains a mystery to international representatives in Bosnia, who never managed to obtain a reasonable answer to this question. Yet another such incredible example is a decision by the former government to finance the construction of a highway through Bosnia. There would have been nothing wrong with the idea if budget funding had been earmarked for the project, which in turn, would have required the prior support of the federal parliament. The government, instead, decided that the about DM40 million needed for the job ought to be secured by the PTT, which, in their view, the company could easily make up given its hundred or so marks in annual profits.

What is most important is that the money in question belonged to the taxpayers, who, because of the companies' monopolies, are forced to pay phone and electricity bills higher than the world average, with salaries far below the European average.

The former Party of Democratic Action-Croatian Democratic Union government, shortly before the formal transfer of power, during its so-called "technical term of office" appointed board members in over one hundred companies, and the vast majority were "meritorious" members of the two parties.

The Alliance for Change, composed of formerly opposition parties, having nominally taken over, has found itself in a paradoxical position: it is cut off from the main levers of financial power. The pending appointment of new company boards, after the former "Bosniak" and "Croatian" accounts in all federal ministries were closed, should be the most important step towards the complete dismantling of the dual financial system in the Muslim-Croat Federation, the main generator of corruption and plunder of the devastated economy.

Still, the process is rather slow, because although the official stand is that politics will once and for all be separated from the economy, control over highly profitable state companies is too big a temptation for the new authorities. This is why behind the scenes there is an ongoing struggle to ensure as many seats on the boards as possible, which, it appears, will once more be distributed based on "partisan factors," this time to members of the Alliance for Change. These seats are an essential part of post-election developments. There has been a change of government in the federation; however, the school of though is the same: he who won the elections has the "natural right" to take full control of state property. It appears that for the time being the only cure for this "disease" is privatization, which is continuously being postponed in public companies precisely because they provide a tangible form of power. Fortunately, time for privatization is running out, primarily because of pressure from the international community, which desires to free domestic politicians from the "burden" of "caring" for the ownership of profitable public companies.

If the state is no longer their owner, these companies will no longer have a monopoly on the market, which should be beneficial for the common folk, whose pockets have so easily been accessible whenever the personal and collective needs of "the protectors of national interests" were at stake.

Drazen Simic

(AIM)