Tue, 07 Nov 2000

Democratic changes needed to help Bosnia's recovery

By Sabina Arslanagic

SARAJEVO (AFP): Bosnia's economic crisis can only be solved if the upcoming general election ushers in a new non-nationalist leadership ready to implement political and social reforms, diplomats and experts agree.

"Another nationalist win in Bosnia and Herzegovina would only see this potentially rich country isolated politically and economically," Wolfgang Petritsch, the country's top international mediator told the "Circle 99" association of Bosnian intellectuals last week.

Petritsch, the international High Representative in Bosnia, recently accused the ruling nationalist parties of being out of touch with voters, saying the country needed fresh leaders to move it forward.

If elected at the polls on Nov. 11, moderate opposition parties -- focusing on social issues rather than the interests of their various ethnic groups; Serbs, Muslims or Croats, -- could encourage foreign investment, the only cure for the collapsing economy, economist Bozidar Matic told AFP.

Echoing recent statements from fellow experts, Matic, a researcher on Bosnia for the World Economics Forum, cited the high rate of corruption as a major barrier to foreign investors.

Direct foreign investments are still being "chased away" by the nationalist rulers who need a lack of transparency to enrich themselves, Matic said.

"Their goal is not to have a developed economy. They want ethnic divisions. But, if the economy is developed people of all nationalities would be satisfied," said Matic, who is also president of Bosnia's Academy of Arts and Sciences.

Although Bosnia's devastating 1992-1995 war was the main reason for the economic decline, the present disastrous situation -- with unemployment at over 40 percent and 60 percent of the population living in poverty -- is blamed on the absence of a development strategy.

Despite US$5.1 billion of foreign aid received for reconstruction over the past five years, Bosnia has failed to achieve a self-sustainable economy.

The pre-war gross domestic product (GDP) of over $10 billion has been reduced to just over four billion.

Trade remains the real headache, with preliminary data showing that only 25 percent of Bosnia's imports are covered by exports.

Pensions and salaries are often paid out several months late, triggering waves of strikes while the grey economy is booming due to an unreasonably high tax burden, weak financial controls and porous borders.

Matic believes that a market-oriented and transparent management of the economy would also help prevent the increasing brain drain of the population of 3.5 million.

Bosnia does enjoy some key advantages, not least its geographical position, which enables the country to act as a conduit between the East and the West. It also has a well- educated, skilled workforce.