Abstract
This paper analyses the interaction of domestic political actors and the international community in Bosnia and Herzegovina (BiH) in implementing economic reforms based on trade liberalization, financial liberalization and privatization, and the impact of these changes on the competitiveness and sustainable growth of the BiH economy. It is hypothesized that the key barrier to sustainable economic growth in BiH, as a small open post-conflict economy, is the wrong-headed political economy of transition which gave effective management of economic policy to the sub-national entities, disrupting business clusters developed in the prewar period and undermining the country’s productivity, economic efficiency and therefore its competitiveness. The analysis suggests that sustainable economic strategy for BiH and its entities should be based on export-oriented investment and effective coordination mechanisms so as to attract FDI and stimulate domestic investors with significant export potential. Because of the extremely important role of neighbouring countries Croatia and Serbia for the political and economic future of BiH, and having in mind that all three countries have low competitiveness rankings, a redefinition of investment strategies and economic cooperation between companies in the three countries would be a very welcome move forward. Better cooperation supported by the EU, based on reciprocal foreign direct investment in the manufacturing with an export orientation towards other regions in the world, would be a win-win strategy.
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- 1.
According to the BiH constitution, BiH is comprised of two Entities, the Federation of Bosnia and Herzegovina (the FBiH) and the Republika Srpska (the RS).
- 2.
Michael Porter 2005.
- 3.
Ibid.
- 4.
The author’s calculation based on the World Bank data; http://data.worldbank.org/country/bosnia-and-herzegovina.
- 5.
Three of the five largest exporters in the former Yugoslavia were from BiH, and two of them took turns as best performers during the final 10 years of the country’s existence: Energoinvest Sarajevo (production of electrical equipment; engineering; oil refining and the production of petroleum derivatives, metallurgy, clay and aluminium) and Unis Sarajevo (the auto-industry, metallurgy, military industry). In the 1980s the largest car factory in the Balkans was located in Sarajevo (in 1990, annual production was 32,000 Golf cars) as a result of a joint venture by Volkswagen and Unis (TAS — The Sarajevo Car Factory). Between 1970 and 1991 the contribution of manufacturing, particularly metal processing, the car industry, electricity, wood processing, and chemicals to gross domestic product (GDP) in BiH increased markedly. The increasing role of middle and higher value-added products in GDP led to significant economic progress and an increase in the standard of living in BiH between 1970 and 1991. The Sarajevo Tobacco Company produced one of the best cigarettes in Europe, in cooperation with the American Philiph Morris Company (the well-known “Sarajevo Marlboro”).
- 6.
Total investment under the programme was approximately USD 5.1 billion.
- 7.
Carlos Westerndorp y Cabeza served as the High Representative from June, 1997 to August, 1999.
- 8.
The Quick Start Package, imposed by the High Representative against RS opposition in 1997, comprised five laws aimed at integrating the BiH economy: the Law on the Central Bank of Bosnia and Herzegovina, the Law on a Single Basis for Customs Policy of BiH, the Law on Foreign Trade Policy of BiH, the Law on Foreign Direct Investment Policy and the Law on Tariffs.
- 9.
Keefer writes: “The higher priority given to governance and the greater involvement in Bosnia’s postwar political affairs also reflect greater donor willingness to address the difficult issues of postconflict government accountability when they have committed military forces.”See Philip Keefer 2009.
- 10.
Served as High Representative from August, 1999 to September, 2002.
- 11.
See: Janez Kovac January 2001.
- 12.
See: Bosnia and Herzegovina, Ministry of Foreign Trade and Economic Relations 2013.
- 13.
The Raiffeisen Bank after more than 10 years of operations in BiH has become the market leader.
- 14.
It is important to note that the SDA is a strong advocate of strengthening central state and its institutions, hence the support for this particular reform.
- 15.
See: Global Finance Country Report..
- 16.
The total fiscal burden of labour is the sum of personal income tax, and contributions for pension, health and unemployment insurance.
- 17.
A detailed analysis of the techniques of privatisation in two entities (FBiH and RS) can be found in Bojicic-Dzelilovic et al. 2004, pp. 11–15, available at www.wiiw.ac.at/balkan/2ndphase.html.
- 18.
See Zupcevic and Causevic (2009, p. 13).
- 19.
For a detailed study of the impact of foreign trade policy and trade liberalisation in Bosnia and Herzegovina on the trade and current account balance see Causevic 2006.
- 20.
Based on data published by the Central Bank of Bosnia and Herzegovina (2011). (http://www.cbbh.ba/files/godisnji_izvjestaji/2010/GI_2010_en.pdf) and the Agency for Statistics of Bosnia and Herzegovina, 2011. (http://www.bhas.ba/tematskibilteni/ETS_2010_001_01-bh.pdf)
- 21.
Ibid.
- 22.
- 23.
The author’s calculations based on the Central Bank of Bosnia and Herzegovina data;http://www.cbbh.ba/index.php?id=33&lang=en&sub=mon&table=konsolidovani_bilans_komercijalnih_banaka_bihh
- 24.
Economist (2009, p. 32).
- 25.
The World Economic Forum (2011).
- 26.
Ibid.
- 27.
EBRD. 2008. Transition Report 2008 — Growth in Transition. London The first number in parentheses is for 2004; the second is for 2008.
- 28.
The IBRD/The World Bank (2009).
- 29.
The International Monetary Fund (2010).
- 30.
For more details about ownership in the utility sector see Causevic (2012). http://www.sant.ox.ac.uk/seesox/opinionpieces/Causevic-Economicperspectives.pdf
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Čaušević, F. (2015). The Political Economy of Economic Liberalisation and Competitiveness in Bosnia and Herzegovina. In: Thomas, M., Bojicic-Dzelilovic, V. (eds) Public Policy Making in the Western Balkans. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9346-9_5
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