Economic Policy of B&H Federation
Announcement of Accelerated Development
AIM Sarajevo, 12 February, 1998
It seems that for the first time since the Federation exists, its government will succeed in adopting measures of economic policy for the current year. Busy with other, one should say, more important matters after the end of the war in B&H, on three occasions the government did not manage to adopt the basic document of economic policy which governments of developed countries usually have already at the end of the previous year for the one that follows. Instead, it solved problems with partial solutions, for each individual case, but even such measures proved to be efficient, especially in 1997, when a significant economic growth was registered. It is true that slow inflow of foreign capital, especially in the first quarter, substantially spoiled the plans for the entrepreneurs, although even in such circumstances (globally) good results were achieved, in view of the fact that it was one of the difficult post-war years in B&H. That is the reason why entrepreneurs, planners and politicians evaluate last year's growth of industrial production of 25 per cent as successful, especially because it ranged within the planned proportions. Where was this growth the greatest? With no doubt in power generation industry, agricultural and food, but also in textile industries.
Among the positive trends, movements in the sphere of prices also deserves to be mentioned, especially retail ones, because in 1997 they did not exceed the growth of 10 per cent, so that inflation is at its minimum. In this sense - with a limited quantity of money in circulation - we have reached the inflation indicator characteristic for successful economies. The dinar has maintained the same value (in relation to the German mark) it had the year before last.
Commenting on these positive trends in the economy of the B&H Federation, prime minister Edhem Bicakcic, in a poll of Sarajevo Poslovne novine, in the assessment of last year and forecasts for 1998, underlines that these results were achieved because the government in 1997 created foundations for starting up manufacturing from the standstill. Among these measures are the significant reduction of taxes and contributions paid for salaries (from 140 to the present 80 per cent), limitation of export of raw materials (tree trunks, raw hides and similar) and introduction of levies, which enabled growth of production in food industries. These and other measures of the government contributed to revitalisation of economic activities, but for a more comprehensive setting of economic systems in motion, the railroad is a limiting factor. Its continued non-operation even prevents or slows down the inflow of foreign capital. This was recently stressed by representatives of German Volkswagen at the talks about investments into the Sarajevo car factory (TAS). It is impossible to bring technology to B&H and later export goods without the railroad.
The painful point of B&H economy are foreign economic relations, especially export. Trade imbalance with the world is marked by the prime minister as a catastrophe, especially concerning Slovenia and Croatia. That is why a different attitude towards foreign trade is announced for 1998. Import will not be limited but it will be conditioned by the obligation of the respective countries to accept goods from B&H. How useful this step will prove to be in practice, especially from the aspect of what B&H has to offer, will become clear in the next few months. But, the government is announcing that it will support exporters to states in which B&H enterprises had enjoyed a good reputation before the war.
A newly opened chapter in the work of the government of B&H Federation deserves special attention. The key factor of success of the economy in 1998 is - according to the opinion of the government - work of management in state and mixed enterprises. It is believed that management is another limiting factor in development of many enterprises. In enterprises in which there will be no visible results of progress in the forthcoming period, managers will be relieved of duty, and persons brought to their posts who will be able to offer solutions for a quicker growth of production, export, profitability and other. It is a completely different matter, of course, how many successful managers B&H has at the moment who are capable of foreseeing more efficient business operation in the existing environment.
Participating in the mentioned poll of Poslovne novine, most of about forty managers confirm evaluations about unfavourable conditions of operation, general illiquidity, large debts, lack of working capital, low utilisation of manufacturing capacities, strong (often unfair) competition in the market, impossibility of cooperation with enterprises in other parts of B&H, but also incomplete legislature and lack of system laws which would precisely regulate relations in the market. Nevertheless, even in such circumstances, many enterprises have restarted work, repaired manufacturing capacities, directed their production towards export, employed a part of their prewar workers and increased production in comparison with the previous year.
The head of Sarajevo Energoinvest, Edib Bukvic, speaking about the data on his enterprise, stresses that in 1997, its operation was worth 185 million German marks, 50 million of which were made from export. Believing that this was a significant accomplishment, he notes that the sales increased by 44 per cent in relation to 1996, and export even by 123 per cent. With a clear conception of development, Energoinvest has begun 1998, especially concerning improvement of organisation of work and finding new markets. The Electric Company of B&H also testifies that large economic systems in B&H are successfully being reconstructed and increasing production. Its manager, Meho Obradovic, with satisfaction stresses increase of electric power generation and export to Slovenia and Croatia of 20 million German marks worth, which is the greatest value of sales of a single product abroad.
Despite the fact that construction workers and civil engineers expected big business deals in postwar reconstruction of B&H, in 1997 their expectations were not met. The main reason for that, they believe, is in the slow inflow of foreign capital due to postponement of the donors' conference. That is why investments in B&H were slow. Nevertheless, the biggest construction enterprises - Hidrogradnja and Vranica (both from Sarajevo) - managed to enter into their books deals worth 40 million marks each, a part of which even abroad. Construction enterprises see their big opportunity in opening of public works in reconstruction of B&H in which they could employ most of their capacities.
Another opportunity of the economy of B&H is in reconstruction of wood-processing capacities. In order to accomplish that, it is necessary to invest domestic capital because the one arriving from foreign sources is insufficient for serious undertakings. In Sipad, in the past year they managed to repair and modernise three wood-processing factories (in Fojnica, Turbet and Konjic) and to start exporting. Unfortunately, the effects are minimum, because they are selling lumber and semi-finished products which do not bring large financial effects as export of furniture would.
One of the largest prewar trading companies in B&H - Feroelektro from Sarajevo - is trying to re-gain its old glory, and partly managed to do it in 1997, because its turnover amounted to 90 million marks. Its director general, Salko Selimovic, stresses that results would have been even better if laws regulating turnover of goods had been implemented in whole of B&H, if there had been more of its own working capital, and if they had not had to cope with old supplies of goods.
There was no significant changes in road transportation. although competition is strong. Due to the fact that railway does not operate, the main transportation of passengers and goods still goes down roads where the leading place is still firmly held by Sarajevo Centrotrans-Bus, both in domestic and international destinations. Marking 1997 asÈ h) 0*0*0*# # Èîone of the most difficult postwar years, its manager, Muhamed Saciragic, reminds that this company purchased 120 modern buses, without anybody's help and without longterm loans, but that this enabled it to keep up with modern trends in transportation.
While managers of state-owned enterprises do not like to talk much about difficulties they encounter in their work, nor to forecast results of work for 1998, the owners and managers of private enterprises lay the stress on problems and lack of stimulation for private entrepreneurship. Efficiency in work of private enterprises is not evident from the main indicators of business operation, but their accelerated development, opening of new capacities and establishment of close cooperation with foreign firms - are becoming obvious. The example of Niagara from Zenica is highly illustrative in many ways. Its owner and manager, Ramo Muratovic, mentions that last year, despite administrative tricks and complications, Niagara managed to open a factory of Turkish delight and to ensure a market for it, and in May this year it is planning to complete construction and open the factory of halvah and processing of forest fruit. His words perhaps best reflect the situation private entrepreneurship is in when he says that this form of entrepreneurship enjoys only declaratory support. That is why private businessmen have the impression that the intention is to keep the current situation in private entrepreneurship, and not to stimulate it by various privileges.
What can entrepreneurs expect in 1998 in respect to conditions of business operation? According to the draft measures of economic policy in this year considered by the government of the Federation, main indicators of economic development should continue to rise. The government suggests that social product increase by 30 per cent, employment by 10, average salary by 30 per cent, as well as the physical scale of production, prices by 10, and export by 87 per cent. Among the main goals in this year, the government put creation of economic and legal ambience for market economy, re-start of railway, road and other means of transportation in whole of the Federation. These and other measures would create conditions for restructuring and privatisation of enterprises, banks, and establishment of the integral market, and currency and turnover in the Federation, but whole of B&H as well.
Is not this too optimistic for the current position of the economy and the society in general? If the federal parliament adopts the proposed measures of economic policy for 1998, it would be the first good sign in the Federation that the economy was beginning to operate in a more stable ambience. And this would indeed be the announcement of possible higher accomplishments than last year's.
Raif CEHAJICÈ h) 0\0*0*# # ÈîÖ(AIM, Sarajevo)*