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Shopping To Invest In The Balkans, Will Turkey Choose Bosnia?

Turkish Prime Minister Recep Tayyip Erdogan (right) holds talks with the Muslim member of Bosnia's tripartite presidency, Bakir Izetbegovic in Istanbul. (file photo)
Turkish Prime Minister Recep Tayyip Erdogan (right) holds talks with the Muslim member of Bosnia's tripartite presidency, Bakir Izetbegovic in Istanbul. (file photo)
Turkish Prime Minister Recep Tayyip Erdogan was in Bosnia-Herzegovina last week with some bullish talk about improving bilateral economic ties.

He urged Bosnian Council of Ministers Chairman Vjekoslav Bevanda to bring a business delegation to Ankara for a large-scale bilateral conference on investment and economic cooperation.

The small Balkans nation is still reeling from the global financial crisis -- which struck the country's already-weak economy largely by suppressing economic activity in partner countries like Italy, Croatia, and Greece. So one might expect that such encouragement from a regional economic powerhouse -- Turkey's economy grew 8.4 percent in 2011 -- would be universally welcomed.

But in Bosnia, everything is politicized, often to a paralyzing degree. The country is splintered by ethnic and religious fault lines and tensions, which all but guarantee that whatever one faction sees as a boon will be seen by others as a threat. And in the minds of many Bosnian Serbs and Croats, Turkey is closely associated with the country's Muslims.

Moreover, with the country split into a Serb Republic and Muslim-Croat Federation, reaching consensus is next to impossible.

Bosnia's Serbs, in particular, regard Turkey with caution and apprehension due to centuries of rule by the Ottoman Empire.

"I have seen no arguments that speak in favor of Turkey showing interest in the economy of Republika Srpska," says Dusanka Majkic, an ethnic-Serb deputy in parliament and a member of the working group on relations with Central and Eastern Europe. "Politically speaking, Turkey hasn't shown a readiness to understand the other two sides [Serbs and Croats]. Rather, it is exclusively supporting the Bosniaks [Bosnian Muslims]."

Political Paralysis

The political paralysis is costing Bosnia dearly.

Foreign investment has been hard for the country to come by, especially since the global financial crisis took hold in 2008. According to government figures, total foreign direct investment (FDI) in 2011 was just 313 million euros. Total FDI in the country from 1994 through 2010 was just 4.9 billion euros.

According to the Bosnian Central Bank, the leading foreign investor in Bosnia in 2011 was Russia (73 million euros), followed by Austria and Serbia.

Bosnia's divisions have hampered its political and economic development since before the ink had dried on the 1995 Dayton peace agreement, which ended the 1992-1995 war.

The government was granted a much-needed 405 million euro stand-by loan from the International Monetary Fund (IMF) on September 27, but securing the credit required months of budget revision and structural reforms in both of the country's two semi-autonomous entities. And those delays came after talks with the IMF were resumed last June, following a 16-month political crisis in which Bosnia was unable to form a central government.

Now that a government is in place, Sarajevo is scrambling to pull the country out of recession. At the same time, Ankara has been looking to boost its role as a regional powerhouse since Erdogan and his Justice and Development Party (AK) came to power in 2003.

Turkish Pragmatism

However, Turkey's rise in the region has been marked by pragmatism. Ankara has gone a long way toward mending relations with historical rival Russia, which is regarded as an ally by many Serbs throughout the Balkans.

The two countries jointly developed the Blue Stream natural-gas pipeline. When then-Russian President Dmitry Medvedev visited Ankara in 2010, the two countries signed 17 bilateral agreements and Medvedev said relations had reached the level of "multidimensional strategic partnership."

Former Bosnian Ambassador to Turkey Hajrudin Somun stresses that Ankara's goal is further economic development, not entanglement in Bosnia's internal conflicts.

"Although sometimes there are exaggerations, Turkey's politics are quite pragmatic, especially what Erdogan says when he comes to Bosnia," he explains. "Everything the Turkish government is doing under the leadership of the AK party has a goal -- to strengthen the economy of Turkey, which at the moment is a regional power and will soon become a global power."

Turkey has made some small forays into Bosnia in recent years. The firm Viyenats Kirectasi invested 3 million euros into the mining sector in 2011, while the foodstuffs firm Sisecam Soda invested about 4 million.

Bakira Izetbegovic, the Muslim member of Bosnia's tripartite presidency, says Bosnian Serbs are wrong to be so alarmed at Turkey's interest in their country. He maintains that Ankara has helped reduce tensions with Serbia.

"If [former Croatian President] Franjo Tudjman, whose army destroyed the bridge in Mostar, has had streets and bridges named after him and can be considered a leader, why should I not be able to say the same thing for Recep Tayyip Erdogan, the leader of modern Turkey," he says. "[He] reconstructed the same bridge and [he] helps in reconstructing relations among the peoples of the Balkans. They [Turkey] were mediators in achieving better relations between us and Belgrade."

Ambassador Somun agrees that Bosnia's real problem is not choosing from whom to accept investment, but fixing the political stalemates that make the country such an unattractive investment target.

According to Somun, if Sarajevo fails to do that, pragmatic Ankara will turn its attention elsewhere and may even look to Serbia.

"Due to political divisions, the economy of Bosnia-Herzegovina is not improving and that is the reason why foreign investors are afraid to invest there," he says. "It is the same case with Turkey. Because of this what may happen is that Serbia, Macedonia, and -- maybe -- Montenegro as well, will be able to get Turkey to invest in these countries before it does so in Bosnia."

RFE/RL correspondent Deana Kjuka contributed to this report from Prague

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