Bosnia’s Vast Foreign Financial Assistance Re-examined: Statistics and Results

26.6.2011 by CrniLabudovi.

 Bosnia’s Vast Foreign Financial Assistance Re-examined: Statistics and Results

June 21, 2011

By Lana Pasic*

The 1990s war in Bosnia & Hercegovina left the country in economic ruins. The destruction costs in Sarajevo alone amounted to 14 billion euros, according to a World Bank study entitled Bosnia and Herzegovina: From Reconstruction to European Integration published in 2009. Everything in the country, from water supply to power and telecommunications had to be reconstructed.

Staggering Sums

People’s lives also needed reconstruction. After the signing of the Dayton Peace Agreement, the international community sent enormous financial and logistical support to Bosnia. In the aftermath of war, the foreign assistance in Bosnia was focused on reconstruction and then, from 2000, attention turned to the issues of governance, institutions and financial sector.

It has been calculated that BiH has received more per capita aid than any European country under the Marshall Plan. Since 1996, the World Bank has committed over $1.1 billion, while other World Bank agencies had sent $500 million by 2010. From 1996 to 1999, $3.7 billion were allocated by 48 countries and 14 international organizations, according to a 2005 IMF report (.PDF). From 1996 to 2002, Bosnia’s annual aid amounted to $730 million, or, $1,400 per person, according to another 2010 analysis.

Up through 2005, the US provided over $1.345 billion. And from 1991-2006, the European Union sent 2.6 billion euros for the reconstruction and refugee return, noted the above-cited National Interest report. The EU is still actively involved in assistance to Bosnia, in the hopes that it will eventually join the Union, through the CARDS program and pre-accession IPA funds, as the World Bank 2007 Country Partnership Strategy for Bosnia and Herzegovina for the period FY08-FY11 notes. All in all, the 2009 IPA allocation to BiH amounted to 89.1 million euros, reported the Commission of the European Communities (.PDF).

Some Results

Despite this overall foreign largesse, since 2000 international aid to Bosnia has slowly been decreasing as the years pass. With Bosnia fractious but at peace, and hoping to make more determined steps towards EU membership in the next year, it is the time to evaluate what the results of the assistance have been and whether Bosnia is on the right track, in socio-economic and development terms.

World Bank 2010 World Development Indicators suggest that Bosnia can see a boost, with a 6% growth of the GDP, reforms towards the free market and financial and economic liberalization. Business regulations have been changed and improved.

Also, the time required for dealing with bureaucratic issues, such as permits and registrations, has decreased, though this process still remains relatively time-consuming for regular citizens and foreign investors, and thus does not encourage investments, notes the Commission of the European Communities 2009 report (.PDF). But this is a problem widely shared by other regional states too.

Bosnia’s other notable improvements are in the areas of tax harmonization and the privatization of the banks, noted the IMF in 2005 (.PDF). In the last 15 years, FDI has been steadily growing, reaching 425 million euros in 2009, the state agency FIPA has noted.

Other Indicators: Unemployment, Emigration, and Corruption

However, on the other hand Bosnian FDI remains the lowest, not only in the region, but among all the countries in transition. Privatization has been below expectations too, stated a report from Transparency International in 2009.

Further, there are many socio-economic issues which need to be addressed- issues for which the improvements are not easy to find. In 2007, for example, youth unemployment was 58%, four times greater than the EU average, attested a UNDP 2008 report. And the 2009 unemployment statistics show a high 42%, according to a report from the Labour and Employment Agency of Bosnia and Herzegovina in 2010 (.PDF).

Another indicator clearly related to these unemployment trends is the number of Bosnian citizens wishing to leave the country. This figure is increasing, and a 2008 UNDP study found that 62% of Bosnian youth wanted to leave their country.

In 2004, almost 20% of the population lived below the poverty line, while another 30% were close to the poverty line, reported the IMF in 2005 (.PDF). According to the UNDP’s Human Development Report 2009, Bosnia & Herzegovina ranked 76th worldwide, and slight improvements can be traced since 2005. (Earlier data is not available).

Another concern, and one also shared on a regional level, is that Bosnia & Herzegovina is still suffering from high levels of corruption. According to Transparency International’s Corruption Perceptions Index 2009, Bosnia and Herzegovina ranked 99 out of 190 countries, with the score of 3.0 (on the scale 1-9, 1 being the lowest), lagging behind all of its neighbors. In 2006, Germany’s Spiegel reported that more than 2 billion euros have been lost in Bosnia, with the use and destiny of these funds not known.

On paper, the state administration takes about 50% of the budget, noted Transparency International. These funds might instead be directed for development programmes, but there are no state level employment policies and no strategies.

Diminishing Returns

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http://www.balkanalysis.com/bosnia/2011/06/21/

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