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Bosnia: World Bank Says Ethnic Cooperation Essential To Reconstruction

Washington, 3 January 1997 (RFE/RL) - The internationally-financed start on the reconstruction of Bosnia and Herzegovina achieved "significant progress" in 1996, according to the World Bank, but a "prerequisite" for this year is cooperation between the different ethnic groups and governmental entities in Bosnia if there is to be any hope of success.

In a three-volume report prepared for donor nations meeting next Thursday and Friday in Brussels, the bank says Bosnia's external financing needs for 1997 top $1.4 billion.

In 1996, 47 donor countries and 11 organizations pledged $1.9 billion to begin the four-year plan of reconstruction, although the bank says everyone underestimated the time required to convert pledges to commitments and actual disbursements. A copy of the report was made available in advance to our economics correspondent in Washington.

The bank's report, prepared in cooperation with the Commission of the European Union (EU), emphasizes that outside financial support will do little good if Bosnia's ethnic groups and governing entities don't start cooperating and working together.

It says that while "some progress" in building economic institutions, such as customs, tax administration, and the Central Bank has been made, there has been "little cooperation between and sometimes within" these still-separate governments and groups in critical sectors like electric power, gas, roads, railways and telecommunications.

In fact, it notes, reconstruction of the telecommunications system has stopped because of the stalemate between the different state and entity governments over a national policy and law.

The report does not single out any particular ethnic group or governing entity within the Bosnian population of Moslems, Croats or Serbs for blame, but says the lack of cooperation has also hampered one of the most basic needs of the country, the clearing of landmines.

Removing the mines is "critical" for ensuring freedom of movement and for the entire reconstruction program, says the bank's report. It says progress has "been much slower than expected due to disagreements between the State and the Entities" and disagreements between Bosnia and several donors on "management and taxation issues."

The bank's report says in other areas where multi-ethnic communities were reluctant to cooperate, such as water supply, pressure from donors helped bring the parties together in their own interest. That is essential, the bank warns, or donor nations and institutions will reduce or end the amount of financial aid they are willing to commit to Bosnia.

In an effort to encourage more inter-ethnic cooperation in the country, the bank says it will propose at next week's donors' conference the creation of a special $20 million "quick impact regional fund" to be used to finance small scale projects of "cross-entity character or to support mixed communities."

As a part of this effort to encourage more cooperation, the bank says international assistance this year should include a "major effort" to allow Republika Srpska to "catch-up" with the rest of the country. In 1996, less than two percent of the emergency repair money went into the Serbian area, primarily because of the refusal by Bosnian Serb leaders to cooperate.

World Bank officials acknowledge privately, however, that plans to greatly increase the number of reconstruction projects in the Serbian area will come to little if Bosnian Serb officials continue to refuse to participate in the new national government.

Bosnia faces a triple challenge, says the bank's report, of building a new governance structure while undertaking basic economic reforms and implementing a reconstruction program on a coordinated, country-wide basis. "It is not an easy task," acknowledges the bank. But it says policies can be effectively formulated if there is a "proper assessment of reality as well as a clear vision for the future of the country."

That vision has to include a belief in personal freedom and prosperity for all Bosnians as well as support for the idea of a market economy complemented by a small but effective government.

To implement this vision requires country-wide institutions, the absence of which makes it "impossible to conduct efficiently macroeconomic management on a country-wide basis," says the bank. Included in that, the report adds, is acknowledgement that intergovernmental arrangements and structures "will be different in Republika Srpska and the Federation," with the federation adopting a "canton" structure with greater local control, and Republika Srpska adopting a "more centralized approach."

For all areas of Bosnia, says the bank, the underpinning must be a free and mostly privatized economy and that requires major changes in structures and laws to achieve, especially in Republika Srpska.

The bank plans to tell donor nations next week that progress in 1996 was impressive. "Improvements in living conditions have been noticeable throughout the country," says the bank's report, "roads, railways and airports have been reopened, energy supply has become more regular, running water has reappeared in many municipalities and housing reconstruction activities flourish in most areas."

Still, it says, estimates of the war's damage range as high as $40 billion and that expecting to see quick results on a large scale "will lead to disappointment."

The bank says it will "refocus" the programs in Bosnia in 1997 toward what it calls "greater sustainability." It notes that "urgent repairs were mostly financed through donations (in 1996) and little attention was paid to the conditions under which restored infrastructure would be operated or to the financing mechanisms that would ensure sustainability over the medium-term."

It says the three- to four-year $5.1 billion reconstruction program "remains valid as an overall framework," but adds that much greater attention must be paid to getting underlying structures in place, both as an objective -- or even a prerequisite for -- further donor financing.