Croatia Economically Colonising FB&H

Way to Economic Independence

AIM Sarajevo, 16 December, 1997

It seems that re-examination of the global relations between Croatia and B&H, or more precisely between Croatia and B&H Federation, is heaving into view. Due partly to objectiive and partly to subjective reasons, from the moment it was internationally recognized to this day, relations of B&H to its western neighbour could easily be characterised as the relationship between two partners one of which, B&H, has always been subordinated.

The latest public appearances of the federal leaders have announced a profound re-examination of the existing global relations between the two neighbouriong states.

The current situation in the economic field is the best evidence for allegations on inferior position of B&H in relation to Croatia. The ratio of foreign trade exchange between B&H Federation and Croatia at this moment is six to one in favour of Croatia, while with Slovenia this ratio is even more crushing and amounts to one to seven.

Thanks to the existing agreement on economic cooperation with Croatia, on the territory of the Federation, commodities from the neighbouring state are practically treated as domestic, because they are exempt from customs dues, except of the symbolic one per cent of compensation for customs recording. Theoretically such a privilege should refer only to commodities of Croatian origin, while for the goods from third countries, regardless of the fact that they are arriving from Croatia, customs duty should be paid, as well as other dues like in case of import from any other state.

In practice, of course, everything looks slightly different, so Croatian traders have not missed the opportunity to make an extra profit by becoming engaged in classic smuggling, or mildly speaking, re-export, by putting commodities from third countries into boxes labelled "Made in Croatia" and selling them to buyers in B&H Federation.

By the way, it is highly indicative that contrary to the rest of the world with which Croatian foreign trade exchange is in the red, only with B&H it achieves an enviable result, a few times larger export than import.

    Awareness that it has gone beyond a joke and that

something must be done seems to have reached the federal government. That is why, in view of the public appearances in public which preceded it, the recent visit of the federal prime minister Edhem Bicakcic could be an announcement of a new federal policy towards Croatia.

"All the efforts of the federal government to significantly achieve reduction of the existing foreign trade deficit in exchange with Croatia and Slovenia have not yielded major results. Hungarian products, primarily food, have always been present on the market of B&H Federation, but as Croatian products, which is an abuse of the customs law and a significant loss of budgetary income", said federal prime minister Bicakcic before he went to Hungary.

    To expect that domestic industries with facilities

which have either been destroyed by the war or at best at a standstill due to a lack of capital, could completely satisfy the domestic needs and even get established in the world market, certainly is not realistic, but according to the assessment of federal officials, the essential problem is that the few domestic products such as electric power, coal, salt and timber, cannot find buyers in Croatia and Slovenia.

That is how the "special status" of Croatian economy on the federal market is turning into a classical colonial relation, with consumer goods, everything from soup to nuts, often of dubious quality, travelling one way only, from Croatia to B&H, and only German marks, dollars and other convertivle currency travelling in the opposite direction.

The current federal authorities bear a part of responsibility for such a situation, because by introducing additional taxes, levies, import of certain food products, tried to make money necessary for startup of domestic production and opening new jobs. The result of this is that all imported products from this group have become more expansive than before, all except those which are bought through Croatian merchants. Having awarded so generously more than a privileged status to Croatian economy, better still to Croatian merchants, the Federation was on the way to turn into a Croatian economic protectorate, with everything that maximum economic dependence implies.

Soon after the rejection of Croatian proposal of special relations between Croatia and B&H Federation by one third of the Presidency of B&H, its chairman Alija Izetbegovic, who received support of the international community for this move, hints have increased that "the existing customs agreement between Croatia and B&H would be reconsidered and re-examiined".

    Obviously the SDA, as one of the two federal partners,

has decided "to show its horns" to Croatia, having chosen the economy to be its "battlefield".

It is quite a different question what are the chances to radically amend or abolish the customs agreement with Croatia. Chances for something like that are in fact small, because there is no doubt that such a serious attempt would be proclaimed by the HDZ "an issue of vital national interest", with everything that is implied by this in domestic political practice, meaning that such a decision simply would not get a blessing of the federal parliament.

That is why the objective - reduction of the enormous deficit with Croatia and therefrom removal of the threat of complete dependence of B&H Federation on its western neighbour

• will most probably be tackled in a "roundabout way", by increasing trade with third countries. Apart from food which is undoubtedly essential and at the same time a strategic commodity, greatest battles will be fought concerning oil.

At this moment, Croatian INA (oil company) has absolute monopoly on the federal market. Although there are 20 authorized oil importers in B&H Federation at the moment, 17 of which are on the territory of the (non)existing Herceg Bosna, they all have the same supplier - INA. The offer to come out on the federal market was addressed via prime minister Bicakcic to the Hungarian MOL, and will probably be sent to other large oil companies, too. Should these offers be accepted Croatia would lose one of its strongest trump cards, but also one of its biggest customers.

It is an established fact that Croatia has its own sources of oil but not nearly enough to meet even its own demands, which does not prevent it from proclaiming imported oil its own and use benefits of the customs agreement with B&H Federation to sell oil as its own product at this market with attractive extra profit.

In the Federation they are aware that there is no way to force somebody in Croatia to buy goods from B&H Federation regardless of conveniences. The intention to balance foreign trade of B&H Federation with Croatia is nevertheless facing an insurmountable barrier - the existing privileged status of Croatian economy on the federal market.

It is hard to believe that the interested partners from third countries will be able to cross all the customs barriers even if they wanted to, so that everything is starting to resemble an attempt to square a circle. The only solution is satisfying the greater part of the federal market needs with domestic products which would at the same time increase the export offer.

That there is no political independence without economic is no news so that full and true political independence of B&H will be achieved only when it manages to neighbouring states.

Drazen SIMIC

(AIM, Sarajevo)