World Report

very sector of the economy of Bosnia and Herzegovina is being opened up to foreign investment.
Mirza Hajric, director of the Foreign Investment Promotion Agency (Fipa) in Sarajevo, readily acknowledges the crucial role that foreign companies can play in economic reconstruction and development.
“There are all these negative trends, which we can only change if we really put foreign investment at the heart of the operation,” says Mr Hajric.

Hajric
‘People often forget that we are in a double transition’

“We are in the middle of creating a new Bosnia and Herzegovina, and that can only be done with money, which we don’t have. That is why we have to ask those who do have it to come and invest here.”
At the same time, he says, the Western governments and international aid donors helping Bosnia and Herzegovina need to show patience as the country revives its economy.
“People often forget that this country is in a double transition, from communism to democracy and from war to peace,” he says.

Mahir Hadziahmetovic, president of the Chamber of Economy of Bosnia Sarajevo, says: “No restrictions are imposed on foreign investors. They are free to invest any amount in any sectors. We do not have internal capitalisation, we are heavily dependent on foreign investments just to bring us to where we were 10 years ago, before the war.”
Bosnia and Herzegovina has received large sums of aid under a $5.1 billion package agreed by Western donors for 1996-2001, but progress has been disappointing in securing the business investment needed to bolster economic recovery.
According to World Bank executive director Pieter Stek, the country has the lowest rate of foreign investment in the region, even less than neighbouring Albania.

Bosnia and Herzegovina’s average of $4.7 million a year in foreign investment from 1996 to 1999 compares unfavourably with $43 million in Macedonia and $56 million in Albania.
The economy is by no means in a position to go it alone without overseas funding. The need to open the door wider to foreign investment is becoming all the more urgent because the flow of aid, which sustained the country in the immediate post-war period, began to slow two years ago.
The approaching financial crunch merely adds to the pressure on the authorities to adopt policies that might persuade foreign investors to come forward with funds.
The hope is that the new government will respond to the needs of investors, as it is committed to press ahead with free market reform and speed up privatisation – in contrast to the nationalism of its predecessor.
Statements by officials have encourag-ed economists to expect the government to follow up these promises with action. But for all the changes in the official attitude towards economic reform, it remains unclear whether overseas investors and creditors will be persuaded.

Hand
‘A better government came along last year – it is a big change’

Graham Hand, until recently British ambassador in Sarajevo, says there needs to be “a massive effort” to attract foreign companies. “If foreign direct investment does not start to come to this country to compensate for aid, there will be serious problems.”
He expresses the impatience, widely felt by the donor nations, at the lack of progress made since the war ended. “You do not yet have a functioning judiciary, the taxation system is not stable and the customs administration is still under reconstruction.”
But he says the situation is changing. “A better government came along last year, but many elements within the international community have not yet realised that this has been a big change.”