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Bosnia: Foreign Money Revives Sarajevo's Economy

Sarajevo, 9 September 1997 (RFE/RL) -- The old Turkish part of Sarajevo, Bascarsija, is alive with a babel of foreign languages -- English, French, Italian, Norwegian and German -- as soldiers from the NATO-led peace force move through the cafes and shops, drinking in the atmosphere and liberally spreading money around.

A visitor to Sarajevo cannot fail to notice how much foreign money is being spent in the city -- not only reconstruction aid, but salaries for foreign soldiers and local employees of international organizations, as well as money sent home by Sarajevans working abroad. The Bosnian capital, still showing the ravages of war, is turning into a boomtown.

Foreign donors last year pledged $1.8 billion for Bosnian reconstruction aid, of which $1.1 billion has already been spent. The World Bank, which is overseeing reconstruction efforts, says 67 percent of its planned projects are already underway, a phenomenal accomplishment for an organization that typically takes five to eight years to get a project going elsewhere in the world.

Nearly all the money is going into the Muslim-Croat Federation half of Bosnia-Herzegovina. The Bosnian Serbs, whom the World Bank reckons should get about 30 percent of all the reconstruction money poured into the country, are largely cut off because of their failure to live up to the Dayton Accords that ended the war.

In the Muslim-Croat Federation, reconstruction is underway -- and the first flickers of economic recovery are evident -- in places like Tuzla, Bihac and Gorazde. But the presence of foreign money is most visible in the capital, Sarajevo.

Aside from reconstruction aid, a considerable amount of money is pouring into local pockets from foreign employers who need staff and rented accommodations.

"It's important because it provides jobs," says Patrice Dufour, a senior advisor to the World Bank in Sarajevo. The salaries are not large by Western standards, but represent a huge improvement over dependency on humanitarian aid, as was the fate of the city's population during the war. Salaries and rents paid by foreign organizations "have a meaningful impact on people's lives," says Dufour.

Local employees of foreign organizations receive two to three times the average wage and are often supporting extended families on their salaries. The influx of foreign money is largely responsible for cutting the employment nearly in half, from its level of 90 percent at the beginning of 1996, just after the end of the war. The average wage in the Muslim-Croat Federation is estimated at around 350 German marks ($194) a month. (By stunning contrast, the average monthly wage in Republika Srpska, the Serb half of the country, is only $40 and is rarely paid on time. Unemployment there is still 80 percent.)

Kasim Omicevic, one of the governors of the newly created Bosnian central bank, says there is no doubt that the presence of foreigners in Bosnia "contributes to the progress of the country."

"We look upon each foreigner as a tourist. Tourists spend a lot and that's the best export we have," he said.

Canadian Ambassador Serge Marcoux is also certain that the foreign soldiers and other institutions -- by their very presence -- contribute to the economy. Canada, for example, has about 1,000 soldiers in Bosnia, most of them in the Velika Kladusa area in the northwest of the country. He says they not only rent headquarters, but also buy all their food locally.

"To feed 900 hungry men must be some quite substantial amount" going into the local economy. "It is certainly a significant amount," he said.

In addition, Bosnians who fled during the war and are now working outside the country last year sent home $424 million. Although this figure is expected to drop this year, it is still another significant boost to local spending power and to economic recovery.

The focus of World-Bank-directed recovery efforts last year was creating as many jobs as quickly as possible, through public works projects such as road maintenance and garbage collection.

Now, says Dufour at the World Bank, the country can no longer live off reconstruction aid.

"We are now turning to efforts to create conditions that will make the economy survive," he said.

This includes creating an atmosphere for foreign investment. Omicevic agrees that the government still has much to do to make Bosnia an attractive place to invest. But he says the government recognizes that "we must create conditions that Bosnia goes forward more quickly, so we don't rely only on economic aid and donations."

"We are at the very begnning and have to regain the confidence of foreign investors in our country," Omicevic continues.

But like most other questions in Bosnia, the full economic revival of the Muslim-Croat Federation depends on complete implementation of the Dayton Accords -- especially the provisions for free movement of people, goods and capital.

"Without such freedom, there is no going forward," said Omicevic

Overall, though, he is optimistic.

"In two or three years," he says, "our economic recovery will be well established."