 THINGS TO ACHIEVE |
Yet, all this is still far from what Bosnia aspires and where it should be. It is on the good tracks towards a developed market economy and a stable production growth. The unemployment rate is around 40%, and although the post-war Bosnian economy is improving it still produces only 30% in terms of value to what it used to produce before the war.
 Recovering from war damages |
War has not only destroyed the factories, highways and housing of this country but also a young middle corporate management who had just started to emerge before the conflicts started in early nineties. Hundreds among the best businessmen of this country decided to leave their homeland and seek happiness and wealth in more stable countries.
Local economic analysts assess that an inefficient judiciary system (which is now strongly being reformed) might be one of the key obstacles to more comprehensive investments in Bosnia. Although, there is enough money (even more than one might expected) in Bosnian banks, the interest rates in this country are still high which certainly discourages some potential investors. Business opportunities and foreign investments are often discouraged by high interest rates and translated into high risks. Bosnia needs thus to provide enough evidence that it is becoming more and more a secure environment for modern business. The reform of the judiciary system needs to boost confidence amid the business community; this one has to feel at ease and not in fear for its assets.
| Inefficient bureaucracy |
Another obstacle for modern and efficient business in this country was the old and highly corrupted bureaucratic oligarchy. According to the analysis of the International Crisis Group, the average time for registering business in Bosnia is three months. Just in comparison with the Czech Republic for the same purposes, one needs no more than three days. At every conceivable level, bureaucracy was making obstacle and incited to corruption and bribing. This of course further discouraged potential investors. However reforms again are seriously being made in this issue.
The adoption of the Euro currency has revealed a lack of confidence in the local banking system and raise some questions as far as the development of the local Bosnian market. The conversion has revealed that Bosnians had outside of the legal banking system more than four billion KM which they kept in their mattresses, socks or other places that they deem really secure. This huge sum does not only demonstrate lack of trust, but also shows that people are accustomed to "grey zones of economy".
Ilijas Bjelopoljak, GM of Whitefield Computers
As Ilijas Bjelopoljak, General Manager of Whitefield computers says, "Looking forward is my motto. However it is not still the one of everybody on the country. That is the reason why there are still not many foreign investors and why many projects failed. Still, our company is a good example that there are possibilities to implement international projects in BiH… There are good business opportunities in other fields too. As a member of the Economic Council I can help a lot, as I said that's why I accepted this position. As a rational person I can't stand that so many good projects fail because of administrative and reasons that have nothing to do with business. People lost their way after the war. But they want to work and they know how to work. They just need a good manager who will guide them, that means a good business partner who will know how to use our resources, cheap labor, good position, human resources."
| Grey economy |
This figure also shows how poorly developed was the Bosnian fiscal system. Official data in this regard are highly unreliable because of the existence of dispersed dark market. For example, according to official statistics, there are 620.000 employed people in Bosnia. Yet, at the same time there are around 700.000 registered private cars in this country. Jobless people have difficulties in financing to purchase cars, so this single information hints that the real number of employed people must be higher. These people probably work illegally and are only registered as unemployed to get their social and medical services.
A still relatively slow and inefficient tax system also contributed to a low and corrupted judiciary system. More than 50 years in Bosnia of fierce punishment existed for all sorts of crimes, for verbal political offences even, but sanctions for unpaid taxes were always symbolic. In this area very few things are changing.
| Porous borders |
There are still parts of the Bosnian borders that the Central government does not have under its control and which present a heaven for all sorts of smugglers. The Bosnian central government, supported by the international community present there, have strengthened customs services with an additional police force - the so-called State Border Service. The primary task of this service is to stop the organized crime and smuggling operations on Bosnian borders. Though successful, a lot remains to be done to secure and create a business-friendly environment within the borders of the country.
| | Slow Privatization |
Despite the successes achieved in privatization of the state-owned companies in Bosnia, analyses say that the privatization is still too slow. Resistance to the faster privatization comes primarily from the rest of the managerial structure who grew up, got their education and learned business practices in a former socialist period. That group does not have interest to privatize the company and sees many dangers in the transition from a planned economy into modern, unpredictable and free market-oriented businesses. These individuals, who happened to be influential in some parts of the country, conceal their fears of new economy with endangered national interests, with threatening economic forecasts etc. and all with one goal - not to surrender the power and privileges they once enjoyed. Some of the directors of state-owned companies try to postpone the privatization or do that by a method of internal registration of shares to the workers; this is the most troublesome model of privatization, it does not change anything and enables managerial structure to keep privileges attained. They want to get as much as possible through this process. The trick here is that the ownership is changed but the fresh money does not go to companies.
According to the Privatization law of 1997, the most current form of privatization was this model of internal registration of shares, during which workers were getting small parts of the ownership of the company on the basis of the working time and position in the company. This model gives workers illusion of ownership and it was very attractive at the beginning. Yet, it leaves big opportunities for directors to mislead the authorities as it makes companies look far cheaper than what they are. More important, this model does not bring fresh capital into the companies, which in most cases cannot survive without it. Later on under the strong pressure of public, NGO's and independent media, this law was changed and the list of so-called strategic companies was put up.
Resad Zutic, Director of Agency for Privatization
Those are the companies that can be privatized only via international tenders. These companies represent about 30% of the total value of the companies being privatized. Mr. Resad Zutic, Director of the Privatization agency for the Federation of Bosnia and Herzegovina www.apf.com.ba expects that by the end of 2003 the whole process of privatization would be completed.
"I believe that the most convenient companies within this privatization process are the medium to large enterprises which are employing a maximum of up to 500 employees because the organizational structure is not so complicated. We already privatized 143 of these mediums to large enterprises through the tender privatization process. Big scale companies have very complicated organizational structures and prior to the privatization process they have to be examined and prepared," Mr. Zutic said.
Privatization of big companies is not the only problem. In the process of privatization people could face all sorts of problems, hardly imaginable in well-developed countries.
"I think that we are not competitive in comparison to other countries. We are of the opinion that the government should urgently address this issue and develop better legal regulations, which will protect foreign investors. That is the biggest problem for me. I can give you one example to support this: let's say that you bought one part of a company during privatization process, and now you are owner of your share, you started production, in remaining parts of the company which are not yet sold; employees are on strike, they simply block the road to the company, although you don't have anything to do with that, you would like to work in your company, but the problem is that you cannot get in your company because of the strikes, police is not reacting, because mostly war veterans are involved, or maybe because they are refugees, etc.
Mr. Kemal Grebo, President of the Chamber of Commerce of SARAJEVO CANTON
It would be natural for the police to react, or at least to clear the road. Those issues are not legally covered. In every country we have some sorts of expressions of unhappiness, we can find such examples in any country in the world, but in many cases the owners of the companies are not affected by those actions. Usually the state secures conditions in which they can do business," says Mr. Kemal Grebo, Chairman of the Chamber of Commerce of Sarajevo canton ( web: www.pksa.com.ba) |
