EU postpones Bosnia donors’ conference

Date: 13/02/1997

By Elizabeth Wise

SINCE early this year, the European Commission has been advertising an international donors' conference for Bosnia to be held two weeks from now.

During a preparatory meeting last month with its conference co-sponsor, the World Bank, it went further by announcing a date in early March for the third gathering in Brussels of some 50 countries and 30 international institutions.

But the invitations have not yet gone out and the Commission is now quietly retracting the announcement.

Officials finally admitted this week that the conference would have to be postponed until April, at the earliest, due to Bosnia's failure to comply with conditions placed on it during last April's conference and at the preparatory meeting last month.

On both occasions, it was made clear to the Bosnian authorities that in order to secure reconstruction funds, the Bosnian federation and the Republika Srpska must comply with the provisions in the 1995 Dayton Peace Agreement.

That means not only making democratic reforms at home and handing war criminals over to the international court at The Hague, but also introducing a series of macroeconomic reforms deemed essential to encourage investors and lenders.

Another key provision of the Dayton accord concerned the establishment of a central bank. EU and World Bank officials say the Bosnian authorities were left in no doubt last year - and again this January - that until they straightened out this newly-created institution (a governor and executive board have been appointed, but the bank has not yet taken up its duties), it could not receive funds.

“At the donors' information meeting in January, we told them that progress should be made on the central bank and on a common currency [for Bosnia and Republika Srpska]”, said a senior Commission official.

“Not a lot of progress has been made on that, so there would not be much point in having a donors' conference now.”

Describing the economic reforms as “the main issue at this point”, the official added that those problems would also hold up progress towards closer bilateral relations between the EU and Bosnia.

The Union has based its links with Bosnia on what it calls a “regional approach”, which includes trade and investment passing freely through all the new Balkan states which made up the former Yugoslavia.

Bosnians are aware of their obligations, says the Commission. “They know full well what is at stake,” said the official. “It was made very clear to them in January.”

Both the Commission and the World Bank have repeatedly stressed the need for Bosnia to create a market economy which allows trade and private sector growth. Banking, privatisation and budget efficiency are vital, they have insisted time and again, adding that the first step must be to get the central bank up and running.

“Success in private and financial sector development, more than any other area, requires a commitment of the new governments,” said Christina Wallach, the World Bank's director in Bosnia.

The Commission says that while EU support for Bosnia also depends on political reforms such as helping refugees to return home, freeing up the media and cooperating with the war crimes tribunal, the government in Sarajevo must immediately show itself willing to create the new institutions which were called for.

“The donor conference indicates our willingness to finance reconstruction efforts,” said the official. “That is the carrot, but we also have to have a stick.”

“We must put some pressure on them,” added an aide to Foreign Affairs Commissioner Hans van den Broek. “They cannot just sit back and wait for the money.”

The World Bank estimates Bosnia's needs for 1997 at some 1.1 billion ecu. The money is needed to support new institutions and fiscal reform, help create jobs in the private sector, rebuild infrastructure and social sectors, and repatriate refugees.

The job will be huge. The Open Society Institute estimates that of the 2.1 million people displaced by war in the former Yugoslavia, only 250,000 have returned home.

Reconstruction organisers face pressure from organisations such as Human Rights Watch, which is pushing donors to withhold any funding until Bosnia fulfils another Dayton requirement - to hand over alleged war criminals to international judges in The Hague.

But the Commission has already released 259.4 million ecu from the Union's 1997 budget for reconstruction, peace implementation and refugee repatriation.

Before other EU institutions can provide funding, however, the Union must agree a political line on its relations with Bosnia.

For instance, the European Investment Bank is ready to make loans to the federation - its officials have already visited project sites and mapped out costs - but cannot do so until the Union signs a cooperation accord with Sarajevo.

If and when the donors' conference is held, it will follow in the footsteps of fund-raisers in December 1995 and April 1996 which brought in 1.5 billion ecu of the 4 billion ecu experts estimated would be needed over a four-year rebuilding period.

Bosnia has pulled itself out of the absolutely dire conditions of 1995 and 1996, but the picture is still grim.

The International Monetary Fund reports 35&percent; economic growth in the Bosnian federation (compared with virtually none during the war), but industrial production is still under 15&percent; of the pre-war level. Wages have gone up and the number of jobless has fallen but that, too, is relative. Down from its post-war high of 90&percent;, unemployment now stands at 60&percent;.