IHT - Stop belittling the success of post-conflict assistance

Paris, Wednesday, December 22, 1999

By Rory O'Sullivan

BRUSSELS - As policymakers from around the world mobilize funds to rebuild Kosovo, it is imperative that we set the record straight on how the generosity of international donors offers real hope and opportunity to countries ravaged by conflict.

One country which has benefited greatly from this generosity and made significant strides in rebuilding after years of trauma is Bosnia. It is now enjoying peace and growing prosperity, but is unfairly portrayed as squandering its chances for economic recovery.

Having worked in the capital, Sarajevo, for nearly four years as the World Bank's resident representative, I worry that some media accounts of life in Bosnia convey an impression to the world that helping post-conflict countries recover their footing is doomed to failure.

This is not only unfair but dangerous. For millions of people who emerge from war and conflict dazed and bereft of hope, financial support from the international community is often their only chance to mend their lives and put their countries back together again.

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At about this time four years ago, the international community approved a $5.1 billion reconstruction package for Bosnia shortly after the Dayton peace accords were signed in Paris. The country then was economically at rock bottom. Roads, bridges, water supplies, power stations and other vital infrastructure had been ravaged by four years of conflict and lack of maintenance.

Factories and businesses were idle. Unemployment was close to 80 percent. Senior citizens and war victims struggled to get by on monthly pensions of $5, since the government could not afford more. When I arrived in Sarajevo in January 1996, the situation seemed hopeless.

Apart from the complex political reform agenda called for in the Dayton accords, the people of Bosnia faced an enormous economic challenge. Just rebuilding the past was clearly not enough. The past was mired in old-style Communist central planning. Bosnia needed to break away from this and introduce the pro-business reforms that other countries in the region had so successfully espoused. Poland and Hungary were good models to follow, and Slovenia had a lot to offer.

So reconstruction had to be accompanied by structural reforms that would revolutionize the way the economy operated. Widespread private ownership of old state-owned enterprises needed to be introduced. The chaotic banking system needed to be sorted out so that people regained confidence and were prepared to put their money into the banks. This in turn would fuel investment. And the way taxes were collected and spent needed to be modernized and made more transparent.

Reforms like these attack vested interests.

Finally a whole new set of institutions reflecting Dayton and the new market economy had to be created from nothing and staffed by people who had been taught for nearly four years to hate each other.

By any standard, the people of Bosnia were embarking on a monumental task. The international community gave them four years to achieve it.

The four years are just about up, and we have a good idea of the results. The task of rebuilding bridges, roads and other infrastructure damaged by bombing or shelling has been completed on schedule. Economic growth has been impressive, although reform along market lines is not over by any means.

By the start of the new millennium, the economy will have grown by some 250 percent since the end of the war, but the amount of economic production will still be less than half of prewar levels. The economy is expected to have oneof the highest growth rates in Europe in the year 2000, at a likely rate of 11 to 12 percent.

Roads and bridges are now generally working again, and that people and freight can move around the country without any special inconvenience. The World Bank alone rebuilt 18 bridges, including a key international bridge across the Sava River. The railway system is rolling again.

Power stations are back at full production. More people have telephones and running water than before the war. Sarajevo, which suffered many months of cold and darkness during the siege, is now a cityof light and warmth.

The laws and rules needed to allow Bosnia to operate as a modern Western economy are just about there. More than 40 laws have been passed by the various Parliaments upgrading the legal environment for banks and businesses to bring it more in line with European Union standards. But passing laws does not achieve the results. The laws have to be embraced by government and business and applied by the ''system.''

Here progress has been slower than many would like. If the slow but steady progress now being achieved in implementing these laws continues, the future of Bosnia's children will be assured. But if the delaying tactics often used by some special interest groups succeed, the future will be one of decline and poverty.

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Much to my dismay and that of my colleagues in the international donor community, the real achievements of the past four years seldom get the recognition they deserve.

Allegations of corruption have recently seized headlines, while the tangible day-to-day achievements that are gradually transforming the economy are ignored. Corruption is a problem in Bosnia and we must face it head-on and root it out where we find it. But the impression that some commentators give of international donors being systematically fleeced by corrupt officials is simply wrong.

Most donors use tough purchasing and auditing measures that keep their aid money safe. The World Bank spends most of its money on an ''ex-post'' basis - that is, we wait until we see a major piece of equipment, or a piece of concrete in place, in accordance with the terms of the supplier's contract, before we pay out any of our money.

Another common complaint from outside Bosnia is that international donors pay all the bills and local people pay nothing. Not true. People do pay taxes, which finance the bulkof the recurrent expenditures budgeted by the various levels of government. In 1999, the tax intake across the country will have risen to some 2 billion Deutsche marks, the equivalent of 35 percent of the country's GDP. An excellent performance by most standards.

As the wealth of the country increases, there will be more opportunities for illicit profits. Anti-corruption safeguards will need to stay on high alert.

The complex ethnic structure of the Bosnian population is cited as a source of permanent discord and another reason why Dayton will fail. It is true that much hatred persists after such a brutal war and the return of refugees to parts of Bosnia where they are a minority. But most local people can also cite countless cases of solidarity across ethnic divides, along the lines of that which existed before the war.

The nuts-and-bolts issues of reconstruction have brought Serbs, Muslims, Croats and others back together again.

The mailman who climbed puffing up nine flights of stairs in a broken-down Sarajevo apartment building to deliver a cash pension to a bed-ridden Serbian woman known to my wife and me was a Muslim. That monthly pension (up by now to some $200) came from tax revenues provided by Serbs, Croats and Muslims.

I take strenuous issue with those who portray the last four hopeful years as a disaster. That view imperils subsequent efforts by the international community, as in the case of Kosovo or East Timor, to help mend societies battered by war.

Let us instead take heart from the Bosnian experience and give these worldwide post-conflict campaigns the respect they so clearly deserve.

The writer is the World Bank's special representative for Southeast Europe, based in Brussels, and its former resident representative in Sarajevo. He contributed this comment to the International Herald Tribune.

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