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EBRD issues new strategy for Bosnia & Herzegovina
Some progress, but much remains to be done to strengthen economy
Bosnia and Herzegovina has made significant strides towards establishing a market economy, but a great deal remains to be done if its economic progress is to become more sustainable, the European Bank for Reconstruction and Development declares in a paper issued today on www.ebrd.com. The Bank’s latest strategy analyses the economic climate and outlines the EBRD's priorities in the country over the next two years.
Despite low inflation, improved fiscal discipline and annual economic growth averaging around 4 per cent, the Bosnian economy is still fragile, with GDP per capita about $1,400 and poverty and unemployment widespread. To help address these concerns, the EBRD intends to focus more on strengthening the country’s private enterprise sector – channelling finance to small and medium-sized enterprises (SMEs) and working to lure foreign strategic investors – as well as promoting new investment in infrastructure.
The new strategy also calls on the two entities making up Bosnia and Herzegovina (BiH) – the Federation of BiH and the Republika Srpska – to deepen their common approach to economic development and improve the free flow of trade and investments in the wider region. Specifically, Olivier Descamps, Business Group Director for Southern and Eastern Europe at the EBRD, said that while BiH has made some progress in small-scale banking and telecoms privatisations, large-scale privatisation lags and the rule of law is weak. Corruption and organised crime remain serious problems. These factors are hampering the country’s ability to attract much-needed investment, whether foreign or domestic.
The EBRD is one of the largest investors in Bosnia and Herzegovina, having invested around €230 million in 30 projects. Going forward, Mr Descamps said, the Bank will continue to support the country’s economic reforms and will work with the new governments to help create a stronger investment climate. A priority will be to strengthen and develop the private sector, to work with the authorities to boost large-scale privatisation and provide financial support to strong domestic and foreign enterprises. In the financial sector, the EBRD’s activities will focus on bank consolidation, improving access to finance for micro enterprises and SMEs, especially through credit lines with local banks, and on introducing new products, such as mortgages and leasing.
The Bank will also step up its focus on infrastructure projects, particularly those that create regional linkages with neighbouring countries, as well as on local projects with municipalities. For example, the Bank will explore, with other international financial institutions, the possibility of financing a new road project with components both in the Federation of BiH and Republika Sprska, improving links to the region. Another example is the Bank’s intention to work with local water and wastewater utilities to improve the standards of service to the population. The strategy also reiterates the Bank’s plan to implement existing projects, including the Electric Power Reconstruction project, to which the Bank provided €50 million in 2000; the Thermal Power Upgrade project, a €20 million loan to raise environmental standards at four thermal power plants; and a €30 million pre-privatisation loan to Telecom Srpske signed late last year.
After years of conflict and economic malaise, the citizens of Bosnia and Herzegovina have become impatient with the pace of reforms. Mr Descamps urged the authorities to urgently address issues affecting the country’s economic growth, and said the EBRD is committed to providing support to help speed up reforms, tackle corruption, improve legislation and speed up privatisations, all of which will benefit the local population.
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