Private sector revitalizes business climate
A LOW-COST, HIGHLY-TRAINED LABOR FORCE, COMBINED WITH A LOCATION IN THE HEART OF EUROPE ARE THE MAJOR INCENTIVES FOR INVESTORS KEEN TO TAKE ADVANTAGE OF POTENTIALLY LUCRATIVE OPPORTUNITIES

RESAD ZUTIC Director of the Agency for Privatization of the Federation of Bosnia and Herzegovina

Privatization is a key element in the economic development of both the Muslim-Croat Federation and Serb Republic of Srpska, though so far it has not been fully developed in either region. “There simply haven’t been enough investments as far as business and economy are concerned,” says Resad Zutic, Director of the Agency for Privatization of the Federation.
“We are now at a critical stage,” he continues. “We have the legal framework for this procedure and the register of all the companies that are going to be sold.” In spite of national party influences, power today is in the hands of liberal moderate politicians. “The governments on both state and entity level now support reforms,” he says.
Mr. Zutic would like an international partner and advises U.S. investors to focus on his country’s positive assets: its low cost, highly capable work force and potentially productive sectors , such as gas, mining, water and public utilities. Main pre-investment support so far has come from USAID which has donated and installed whole information systems, provided advisors and experts, and established a consultancy agency for an electric power company. GPZ from Germany has also given assistance and credit has been received from the World Bank to help privatize 27 companies. The EU (which has already invested around $1.75 billion since 1991) is being approached for further support.

GORAN SKRIBIC General Manager of the Republic of Srpska Directorate for Privatization

Goran Skribic, general manager of the Republic of Srpska Directorate for Privatization is collaborating with the Federation. “We belong together in this country and cooperate on every level that is naturally expected,” he says, citing the freedom of choice given to post-war RS (Srpska) refugees to use either vouchers in the RS or certificates in the Federation to invest in private investment funds or buy a share of a company. “Out of 49 million vouchers, citizens invested 28 million of them in privatization investment funds,” he says. The two entities have worked together to draft laws such as the Privatizing of State Capital in Enterprises, and collaborated with USAID in preparing 1,100 companies for privatization.
He attributes the U.S. delay in following up its World Bank and IMF consultancy aid with private sector funding to indifference, and highlights water, forests and agriculture as being the great ignored natural potentials. “These are important for the post-privatization period when the structure of ownership will be transparent and foreign investors will bring in fresh capital,” he says.

MELTING POT Key industries, such as gas, mining and public utilities, are attracting substantial investor interest.

As many state-run companies were inefficent, ownership transfer is now a primary goal. “This will endow investors with new partners who are better managers than the state.” Some 830 companies have been offered in mass privatization and vouchers successfully invested in all of them. The majority, according to RS law, announced an assembly of shareholders. The state in turn is concentrating on law reform and creating the environment for the free market economy.
Website information, CD-ROM publications and 10,000 pre-tender messages have all been prepared in an attempt to make the U.S. and international community aware of these changes. Presentations have taken place in various European countries, and private company purchases have included the Belgian Interbrew’s acquisition of a Banja Luka brewery. “We have something interesting for every international buyer,” claims Mr. Skribic.

The priority for FBiH Chamber of Economy president Mahir Hadziahmetovic is to push forward the legal procedure for establishing the foreign trade chamber. In his opinion political divisiveness in his small country is deterring progress in the private sector and the region needs to be seen as a whole. He also believes businessmen are taking more positive steps than politicians and sees SMEs and the energy sector as the two most potentially profitable areas.
“The economy is the key factor for political stability,” he says, and would like to see Bosnia and Herzegovina make better use of funds and integrate into the EU. “I believe this is a good moment to back up the political support of the U.S. with concrete strategic and economic actions to create a better business climate.”