JADRANKO PRLIC ON REBUILDING AND

RECONSTRUCTING BOSNIA AND HERZEGOVINA

AIM, SARAJEVO, January 18, 1997

Foreign Affairs Minister of Bosnia and Herzegovina Jadranko Prlic thinks that much has been done in the course of last year on rebuilding and reconstructing Bosnia and Herzegovina, especially when the present situation is compared with that after the first Donors' Conference.

"An important investment cycle has been initiated, and it created additional employment. Tens of thousands of flats and houses have been repaired, and Bosnia and Herzegovina became a net exporter of electrical power", says Prlic.

At the first Donors' Conference for the rebuilding and reconstruction of the war-devastated country the donations reached the amount of USD 566 million, and at the second USD 1,2 billion. After these conferences additional 320 million was committed so that it turns out that in the first post-war year the overall donors' commitments amounted to two billion and seventy million American dollars.

"However, it remains to be seen how much of that amount will be realized. According to our estimates about one billion was realized in the the course of 1996, and according to international organizations that amount is 1,2 billion. Basically the full implementation can be expected only in the first half of 1997, and in that context we can be satisfied with what has bee accomplished. However, there might be objections as regards organization of the utilization of these funds", says Prlic.

He explains that his Ministry is in charge of ensuring the resources abroad, while concrete decisions as to the use of these funds are brought by the authorities of the Republic and/or Federation, i.e. the Republic of Srpska for joint projects.

In that respect the Foreign Affairs Ministry has ensured a comprehensive information support and we fully control the inflow of resources and projects into Bosnia and Herzegovina", says Prlic.

In the course of last year about sixty countries and international organizations have donated towards the rebuilding and reconstruction of Bosnia and Herzegovina. According to Prlic, the most important are donations of the European Union, the USA and the World Bank, which with its favourable credits significantly helped with the provision of overall project implementation infrastructure.

"Still, the overall programme for the reconstruction of Bosnia and Herzegovina is the work of European Union and the World Bank", thinks Prlic. "It refers to all segments: from education, power generation, industry, foreign debt repayment, agriculture, support of governmental institutions, to social care, housing, communications, transport, water supply, health and clearing of mines".

The main characteristic of the reconstruction and donations in 1997 will be somewhat lower participation of the World Bank, assesses Prlic. The master plan is to secure about USD 1,4 billion, which will be the objective of the donors' conference scheduled for the second half of February.

"The master plan for that conference has already been prepared. However, there are different opinions whether we should implement specific projects or pursue an overall project of reconstruction. We have not decided yet. We are waiting to hear the decision of the entities. We cannot bring concrete decisions at the level of Bosnia and Herzegovina, because that is not within our competences. Those in charge, i.e. those who will repay that money, in case of a loan, will be responsible for the realization", says Prlic.

This year the priority is the rehabilitation of the housing fund, creation of new jobs and clearing of mine fields. Prlic says that there is evident dissatisfaction with what has been done so far.

"The basic reason lies in the fact that some state institutions have approached this task from the commercial aspect, and not as a sine qua non of the overall reconstruction. Part of the international community and some state institutions regard mine clearing as a commercial deal. I am not opposed to making profit, including this project, but for me mine clearing is only important as a way of ensuring safety of movement and reconstruction of the country", says Prlic.

Prlic thinks that assistance in the rehabilitation of small and medium enterprises, as well as the establishment of revolving funds and credit lines should also be treated as a priority this year.

Namely, Prlic particularly insists (as an economist, as he says) on credits for the rebuilding and reconstruction: "Anything given free of charge is worthless".

According to him, revolving funds are most adequate for the reconstruction purposes, as they can be secured under more favourable terms, with lower interest rates, longer grace and repayment periods. With the repayment, such funds would, in time, be "replenished" thereby making capital available to other users. However, credits should be raised only for new production.

"For example, I do not agree with our concept of road reconstruction. We have to finance repair of roads from our current revenues, and not mend roads on credit. Only new roads can be built with loans, because only that is economically justified and rational. You see, last year alone we repaired the road leading to Mostar three times. And what is unfortunate, we did that with the funds, i.e. credits that have to be repaid. I also disagree with the crediting of final consumption. Credits should be raised only for something that can produce an added value, something new. What is the purpose of a credit with which we could raise pensions by DM 10? Or increase our salaries and then leave it to someone else to repay it", asks Prlic.

As far as foreign investments in Bosnia and Herzegovina are concerned, Prlic thinks that the existing economic structure is not in the least stimulating.

"We have incredibly high contribution rates. Contribution rates from gross personal incomes amount to 18 percent in the developed countries, in East European countries they are 30 percent at the maximum, and here they exceed 50 percent. Consequently, there can be no economy, nor can anything be achieved with such appropriations. Or, for example, we have a very high level of customs exemptions. We have to stimulate foreign investments. But, we are totally unattractive for investment, more than any European country. If we add to this the risk factor because of the recent war, with many foreign soldiers still in the country...

In other words, there remains much to be done. Basically, we have managed to create a state which is functioning. That is a fundamental issue, because if there is no state, there can be no economy. Consequently, we have a state in accordance with the Dayton Agreement - Bosnia and Herzegovina with its two entities which have to function accordingly", concludes Prlic.

Eldar DIZDAREVIC