HOW TO "PRODUCE" BUYERS

Bosnian Postwar Economy

AIM Sarajevo, July 26, 1996

Experts of the World Bank are suggesting to B&H authorities that humanitarian aid in food from now on should not be distributed to the population free of charge, but sold! At first sight this paradoxical suggestion is explained by economic reasons of an efficient revival of domestic agricultural production. In other words, it is an attempt to create the demand, and in this specific case, to find a model of "producing" buyers.

Free aid in food is destimulating for the local agricultural production and food processing industries which employs one third of the 230 thousand lucky ones in B&H who are employed. "Unloyal competition" of gratis foodstuffs could soon appear as a serious obstacle to economic recovery, especially in the domain of employment. Humanitarian aid is in fact stifling demand of goods whose production last year reached the level which meets half the needs, and this year, an even larger percentage is expected. It is certainly quite clear that B&H can hardly count that it will ever be able to completely meet all its needs in food both in quantity and in structure of products, primarily due to its climate, but it is also certain that it might even make a surplus for export of certain foodstuffs, especially those based on livestock breeding. That is why expansion and increase of food production is believed to be one of the branches of economic activity which offers an opportunity for quick reactivation of potentials and reemployment of the population. Before the war, about 40 per cent of working age population was employed in this branch.

On the other hand, in the course of this year, about 300 million dollars worth of humanitarian aid, mostly food, is expected to arrive in B&H. Assessments show that about 60 per cent of the population is still existentially dependent on this aid, simply because they are neither employed nor have any source of income. Just as it meant survival during the war, and this is something that cannot be forgotten, humanitarian aid is still welcome. But, peace brings about new and different angles of vision. Solutions are sought which would bring more than just mere survaval. That is the source of suggestions that donors, whenever possible, should buy at least a part of the aid in food from local producers, implying their reasonable competitiveness. Demand would increase, and therefrom prospects for reactivating of the still not exploited capacities. This would also be a serious source of so badly needed foreign currency.

The next step would be sale, instead of free distribution of humanitarian aid. Of course, the issue here is sale to whom and for what kind of money, if the mentioned percentage of the population is on the verge of starvation. The idea leads in the direction of introduction of a new structure: a network of social welfare should be established which would be given in money, and everyone would then buy food. For the beginning, i.e. the initial assets should be provided by the state. According to a simplified calculation, this means between 25 and 30 million dollars.

The arrangement would include numerous trading firms, which would again mean new jobs, effective demand would increase, as well as indirectly interest for investment and production, the budget would also obtain a new source of income. In the long run, the state would get back the initial capital invested for the beginning of the sale of humanitarian aid. At this moment, the issue at stake is whether it has the necessary amount of money, but in view of the fact that the already allocated economic assistance is still unused on different bank accounts in the country and abroad, the problem can be solved, especially with the help of the World Bank.

Practically, the model is generally known. It can be brought down to "monetarization" of humanitarian aid. In the beginning there should be auctions of donated food for wholesale dealers, and the money made in this way would be allocated to state agencies on different levels, and then into social welfare funds. Experts of the World Bank claim that a similar recipe was applied and successfully implemented in Albania in the period between 1993 and 1995.

So far, the authorities in B&H have not reacted to this proposal. At least not publicly and officially. This is probably the result of caution and awareness that it is necessary to provide the approval of donors. The fact that by purchasing and sending humanitarian aid, the donors were also resolving some of their own problems, in their respective countries, is also not forgotten.

IBRAHIM POLIMAC