World Report

A five-year development programme aims to kick-start the economy by focusing on small to medium-sized companies

estern economic experts are working with the privatisation agencies of the two regions of Bosnia and Herzegovina to assist in the process of selling off hundreds of state-owned companies.
They are helping to choose firms to be offered for sale through international tenders, including large enterprises like the power company Elektroprivreda, factories, timber mills, retailers and banks.
State-owned capital in 157 companies was offered for privatisation certificates and cash in a second round of public share offerings in the Bosniak-Croat Federation towards the end of last year. In the first round earlier in 2001, 125 companies were completely privatised and 412 partially privatised. The third round is scheduled to start in April.
Large companies selected for priority sale include Bosnia and Herzegovina’s sole aluminium smelter, Aluminij Mostar, and the telecommunications companies PTT BiH and HPT Mostar.

Western agencies involved in the process include the German government agency for technical cooperation (GTZ), the US Agency for International Development (Usaid), the EU’s appointed adviser, Pohl Consulting and Associates, and more recently the World Bank.
The International Finance Corporation (IFC), the investment arm of the World Bank, is managing a multi-donor initiative to encourage the growth of small to medium-sized companies in Bosnia and Herzegovina and other parts of the Balkans. The $33 million Southeast Europe Enterprise Development (Seed) programme was launched in September 2000 to run for five years.
Based in Sarajevo, it is funded by Austria, Canada, Greece, Norway, Slovenia, Sweden, the Netherlands, Switzerland and the UK. Client countries include Albania, Bosnia and Herzegovina, Macedonia, Kosovo and the Federal Republic of Yugoslavia.

Kurtz
‘There is a lot of opportunity to push this country forward’

Speaking of Bosnia and Herzegovina, the programme’s general manager Mariann Kurtz says: “There is a lot of opportunity to push this country forward with economic and democratic changes.” She adds, however, that there is much to be done before Bosnia and Herzegovina becomes a place where small companies can function properly.
“When the IFC conceived and developed this programme, it said that first of all we had to make some practical improvements in the business environment. Without them, the number of small and medium-sized companies that we can help finance will always be limited.”
The current business climate in the country poses some specific problems for aspiring entrepreneurs, says Ms Kurtz.
“It takes about 190 days and huge quantities of paperwork to create a business, and once you’ve managed to do that and started operating you will have all sorts of inspections, licences and permits from multiple levels of government.”

Even getting out of a business is not easy because the bankruptcy law has yet to be updated.
Improving the business environment is one of the primary goals, not only for Seed but the new government too. “They do recognise that there is a disadvantage for foreign and domestic investors. They understand that the business cycle is too long and too complicated. These things have to be changed and for the first time we have the private sector, the government and the donors working together on a variety of fronts,” says Ms Kurtz.
“Foreign investors can now find a serious partner in the government of Bosnia and Herzegovina. The government is not only willing but also able to negotiate with the investors and to make a positive change in the investment climate.”

Opportunities exist for new businesses to produce the goods that are currently imported into the country. Ms Kurtz’s message for potential foreign investors considering Bosnia and Herzegovina is simple: “patience and perseverance”.
A major obstacle to the development of private enterprise is the lack of adequate transport infrastructure in the country. Another is the lack of information on the situation of small enterprises. It is not clear just how many of them there are, what they do, or even if they are still in business.
“Overcoming these obstacles is a way of finding new opportunities for creating a network of localised businesses,” says Ms Kurtz. “Small to medium-sized firms are the answer for this economy.”