REDUCING OBLIGATIONS, ESTABLISHING THE SYSTEM

B&H Economy and Economic Policy

AIM Sarajevo, 3 January, 1997

The economy of Bosnia & Herzegovina is awaiting governments on all levels - from the municipality to the state

• to adopt integral programs of measures of economic policy for 1997. Of course, it would have been normal if such documents had been adopted in time, i.e. before the end of the previous year and if they had been mutually coordinated, but according to the well-known slogan "better late than never", the economy will be satisfied if it will be done in a foreseeable future.

There is no doubt that it the interest of all participants in the economy at this moment is primarily accelerated revival and reconstruction of economic activities. According to general assessment, the year which has just begun is crucial for the future of B&H in this respect. Challenges are numerous, the political will for resolving the crisis variable, economic interests opposed between entities, contrary to fundamental logic.

The poll carried out on the territory of the Federation by the Chamber of Commerce of B&H in an attempt to get an insight into the views and proposals for programs of economic policy showed that globally reflections were turned towards four problems. In the first place is the need for economic reintegration of the territory of B&H in other words, union of the fragmentized market, interconnection of technical and technological systems which were separated, free circulation of commodities, people and capital, standardization of economic conditions...

Implementation of the reconstruction program is on the same level of significance, a precondition for effectuation of other ambitions. Although about 98 per cent of the economic aid which has come in to the Federation in the course of the past year, and due to the embargo in Republica Srpska just the symbolic remainder, expectations and wishes have not been fulfilled. In fact, an honest calculation shows that out of the promised 1.8 billion dollars, about one billion has been used so far in implementation of the program, and the whole announced sum could be realized only in mid this year. Therefore, implementation is falling behind schedule by 50 per cent, and in Republica Srpska revival and reconstruction has practically not even begun.

Ranking third and fourth on this list of priorities are development of a new administration structure and institutions for ownership management, in other words transition to market business operation, including privatization. Obviously, these formulations conceal necessity of economic reforms, definite farewell to the old system and building of a new one.

In forming the macroeconomic ambiance, the starting point is necessity to create joint institutions as well as to intensify consistency and harmonization of policies of the entities. The need for prompt initiation of operation of the central monetary institution on the level of the state (currency board) is also stressed, and also introduction of a single currency for the whole country, unification of the payment system.

Establishment of an efficient government and other institutions of the state of B&H which is uncertain even 100 days after September elections, according to expectations of the economy, should mark the beginning of implementation of a uniform monetary and customs policy, management of internal and foreign trade, formation of public corporations in the spirit of Dayton...

A specific demand refers to the current burden of taxation and contributions. Each dinar of a salary is burdened by 1.1 dinars of obligations to the state cash-box. Connoisseurs claim that similar is the case in Republica Srpska. Entrepreneurs demand that these burdens be reduced from 110 per cent to 70 per cent at the most, and they do not forget to insist on reduction of public expenditures to a viable level.

The next is the demand for defining and unification of the methodology of privatization of enterprises and banks, reform of labour market, creation of a program of accelerated employment and reforming of the financial sector.

In summing up proposals and suggestions, the Chamber of the Economy of B&H concludes that economic policy for this year should have to determine possible and real objectives. Expressed in figures, it is proposed that the projected growth of gross national product be at least 50 per cent, and that export be increased by percentages marked by three-figure numbers. At the same time, the number of employed persons should increase by 50 thousand, and the financial position of the economy improved.

To the uninformed, these figures might seem unrealistically high. But, it should be born in mind that the starting reference point is very low. For example, if the planned increase of the gross national product would be realized, it would mean reaching the level of just half of the pre-war level. Or, the export is just symbolic and its increase which would be measured by hundreds of per cent is not unattainable, but it is questionable whether even that would be sufficient to mitigate the enormously high foreign trade deficit. Finally, opening of 50 thousand new posts would have to be a political, economic and every other priority. Because, at this moment, according to assessments, there are about 800 thousand unemployed people in the two entities!

For realization of ambitions which will probably be contained in programs of measures of economic policy, considerable international assistance will be necessary. This implies high level of coordination inside Bosnia & Herzegovina, especially between entities. At this moment, it is the greatest and firmest obstacle to effectuation of the desired.

Ibrahim POLIMAC (AIM)