Crooks, fools and optimists

Discussions of Bosnia tend to rehash a relatively few themes:  how the Dayton agreements are flawed, whether the High Representative is still needed, how Bosnians should be preparing the country for European Union membership, what threats of violence and war remain.

Those issues came up at yesterday’s discussion of the Bosnian economy at SAIS’s Center for Transatlantic Relations) with the State Department’s Jennifer Brush, Sarajevo beer magnate Mujo Selimović, the World Bank’s Marco Mantovanelli, former Republika Srpska Finance Minister Svetlana Cenić and Bosnian diaspora entrepreneur Edin Saračević. But the discussion, chaired by Mike Haltzel, focused mainly on the economy and how to fix it.

The bad news.  The panel agreed that international funding of the public sector in Bosnia suffers large losses to government corruption.  Bosnia is not a good place to start a business, or stay in one. There is a real, even if small, risk of serious violence that would disrupt the economy (including repayment of loans, which some debtors would welcome) and partition the country.

The good news.  But the country has a good pre-war business history, when several Bosnian companies became world-class competitors.  And there are ample opportunities in post-war Bosnia to get a good return on investment:  hydro power, organic food production, information technology. The labor force learns quickly and thoroughly.  The well-educated, successful diaspora can be helpful–some may return, others may help with international marketing of Bosnian good and services.  Few of them care much about ethnic divisions.

Foreign investors are looking for stability, which NATO membership would certify, and improved local institutions, in particular for rule of law.  Political divisiveness and lack of a unified economic space are drags on the economy.

What Bosnia needs is to shift from an economic model based on internationally financed domestic consumption to one based on investment and private sector exports. International budget support to the various levels of Bosnian government is no longer appropriate, unless there is a serious risk of systemic failure.  The international financial institutions (IFIs) should be shifting to private sector loans, leaving the governments to obtain financing from taxpayers and focusing IFI efforts on export-oriented entrepreneurs. They in turn will mobilize ordinary Bosnians, who are tired of the “techno-beat” of ethnic identity (Serb, Croat, Muslim, Serb, Croat, Muslim) and interested in pursuing jobs and improved living conditions.

It was suggested that Bosnia divides people among crooks, fools and optimists.  I don’t count myself a crook and I am certainly not an optimist, so I guess I must be a fool.  But if I were in charge I would shut off the tap of money flowing from the internationals to Bosnian governments and get it moving in the private sector direction.  Let the governments get their money from taxes, and suffer the accountability that follows from that.