BETWEEN POLICY AND ECONOMY

How Far B&H is from Prewar Standard of Living

AIM Sarajevo, 12 january, 1998

    How much time and money will be needed for B&H to

reach 1991? Although the question itself may appear to be somewhat funny when less than two years are separating us from the beginning of the third millenium, this is an exceptionally serious matter for the citizens of B&H, or more precisely it is the matter of their everyday survival. If everything proceeds according to the ideal plan (which it is not), citizens of Bosnia & Herzegovina might celebrate the eve of 1991 approximately at the same time when the rest of the world will be celebrating the beginning of 2003.

The role of the "carrot" in the Dayton peace package was given to the sum of 5.1 billion dollars for reconstruction of the war devastated B&H and its economy. The optimistic scenario of experts of the World Bank at the time anticipated that seven years will be necessary to reach the prewar standard of living and other economic parametres, if a series of conditions are met, from the fundamental reform in all sectors of economic and political life to keeping of the promise that money will be provided by international donors.

After first two years in peace, the economic situation and the standard of living of citizens in B&H is still far from the prewar one. In the Republic of Srpska, the price for obstruction the implementation of the obligations from the Dayton accords by the ruling SDS is paid by the entire population, because the donors are waiting to see some concrete steps before they "loosen the purse-strings."

    Although in comparison with the "neighbours" in RS,

citizens of the Federation have, at least statistically, four times higher average salaries and pensions, the overall economic situation, employment rate, usability of industrial capacities and export, are not at all optimistic.

Delay of the beginning of privatisation resulted in the lack of necessary fresh money for setting industrial production on the territory of the B&H Federation in motion, because foreign donors allocated the available money mostly for reconstruction of the infrastructiure and partly for the still fragile private sector. Without setting production in motion, however, there will be no new jobs, and without the newly employed workers there can be no significant inflow of capital in the half-empty pension and other public funds.

Caught in the gap between socialism which everybody renounced but the heritage of which in the form of the legal and economic system is still predominating, and capitalism which everybody is swearing by but at the same time hesistating to accept fully the capitalist rules of the game, the year which has just begun will be remembered in the economy of the Federation of B&H only by the expected beginning of privatization.

The transfer into private hands of the domestic economy is a revolutionary event, but without fundamental reform of all segments of the economic life of citizens, it will be of little use to the economy but also to the state.

And while the federal officials, referring to statistics which is founded on the comparison with 1995 and 1996, point out to significant succes in economic reconstruction without failing to stress their own merits in it, among the domestic economists and entrepreneurs it is possible to hear somewhat different opinions.

    The recent meeting of the federal prime minister Edhem

Bicakcic and his ministers with the representatives of the Chamber of the Economy of B&H, whre the main topic was a discussion about the proposal of measures of economic policy in 1998, reconfirmed that the authorities are still wandering about the narrow space left to them by the international community.

As known from before, the World Bank, the IMF, as well as the experts of the American Government are the ones who mostly creating the macro-economic framework in the Federation of B&H. Exposed to this pressure on the one hand and effort to preserve the "status quo" for as long as possible on the other, the current authorities in the Federation are trying to balance these two opposed extremes by making various compromises.

Demands of entrepreneurs for reduction of the existing taxes levied on the pay of the employees from the present 85 to about 70 per cent can hardly be met, as well as the main demand for provision of fresh capital for start up of production in enterprises which are still state-owned.

    "Enterprises which will work for export, in two or

three shifts, will be stimulated. We have provided resources for this stimulation from a number of protective measures and they will in the beginning be limited to stimulation of enterprises in food industries and agriculture", said federal prime minister Edhem Bicakcic to the entrepreneurs.

The intention of the federal government to continue to apply administrative measures for protection of domestic manufacturers in this year can hardly be said to be a contribution to creation of a small open ecomony with liberal foreign trade which is considered to be a prospect for B&H.

"If we introduce interventions of the state into the economy in order to help big state enterprises, small and medium-size enterprises will be ruined", Dr Ante Domazet believes, warning that the private sector in B&H nowadays employs one third of the total number of the employed.

Spreading of "grey economy" on the territory of the Federation, about the proportions of which there are no precise data, could annul in the long run everything achieved and everything that should be done in the course of this year concerning introduction of tax and fiscal policy without which there will be no money for the pensioners, health services and all the other social programs.

The intention of the federal government to prevent, by amending the existing law on enterprises, registration of enterprises without at least a single permanently employed worker is aimed at least partly reducing the proportions of illegal labour, but it is difficult to believe that this will be enough.

    Nevertheless, the greatest problem is in the obvious

fact that all the wishes and projections end at the point of reaching the standard of 1991. Pessimists and optimists among experts compete only concerning the question whether we will need three, five or seven years for achieving this goal. What seems to be ignored is that in the meantime, while war was raging on the territory of former Yugoslavia, the world has not stopped going round.

    The way of thinking characteristic for war according

to which all plans of the future end with the next day, and "the day after tomorrow" never comes seems to continue to prevail.

If international experts have already offered us a ready-made recipe (however bad it may be) for reaching the prewar level of development and standard, the answer to the question what and how after that "1991" we will have to find for ourselves and in good time. To wait for things to happen spontaneously would be equal to economic suicide, and timely defining of objectives and manners for achieving them is the only way to really reach the set goals.

    After all, there is an American saying which says that

"the one who dreams about a million dollars might have them some day. But the one who dreams about a hundred thousand dollars will never have a million". Are we going to dream about a hundred thousand or about a million is the matter of our choice, but if we wait too long, we might even be left without a cent, least of all a dollar.

Drazen SIMIC

(AIM Sarajevo)