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Update No: 061 - (23/05/02)

Federation under pressure
The Bosnian republic is a federation bifurcated between the Serb Republic and the Moslem-Croat bifurcated entity. The Balkans have given to rise to many curious political entities in history and this is certainly one, a sort of mini - Yugoslavia. But has it a better chance of survival as a composite state?
The answer almost certainly lies in how far the international community is prepared to go to ensure its success. So far it has committed US$5bn in credit since the Dayton Agreement of 1995. Foreign investment has been deficient by contrast, the threat of a renewed outburst of ethnic tension frightening off potential investors.
There are 30,000 troops on the spot, a figure about to be radically reduced, only 3,500 from the US and the rest from Europe. They are especially needed in the light of pressures to reduce forces on the part of the West. For the various constituent republics have their own armed forces. The Moslem - Croat federation began reducing its 26,000 - strong army by 10,000 in early April, sending them home; the federation spends nearly a quarter of the budget on military maintenance. The Serb Republic, with 16,000 troops, spends almost 30% of its budget for the same purpose.
When one considers that the rate of unemployment in the Moslem-Croat Federation is 40% and not much less in the Serbian Republic it is clear why the military burdens on their budgets are being reduced to release funds for a more creative form of economic activity, stimulating jobs beyond the sector in question.

Volkswagen back in town
The first sign of a recovery in foreign interest is perhaps that Volkswagen is re-activating its 30-year commitment to the country. They have been resuming cooperation with Bosnian firms since early May. Production of the "Golf IV" model is slated to commence in Sarajevo on July 1st. 
It is meant to test the market, not just in Bosnia but the entire region, and explore possible interest in the follow - up model (Golf V), to be introduced in 2004. Production of earlier vehicles, such as the Beatle, was halted by the 1992 - 95 war in which much of Sarajevo was turned into rubble.
The post of International High Representative, based in Sarajevo and responsible for the entire country, is to change hands in the autumn, Wolfgang Petritsch' giving way to former UK Liberal - Democratic Party leader, Paddy Ashdown, a former commando and a member of the British House of Lords.

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AUTOMOBILES

VW eager to resume production in Sarajevo

The Bosnian foreign ministry have announced that German carmaker, Volkswagen (VW), will resume its cooperation with Bosnian firms and soon begin production of the Golf IV in a Sarajevo-based factory. Adviser to VW management, Udo Stolz, who met recently in the Bosnian capital with Bosnian Foreign Minister, Zlatko Lagumdzija, said that commencing production in Sarajevo should assist the company in expanding its market in southeastern Europe.
German VW, as a precondition for successful cooperation with its Bosnian partner, is expecting the final establishment of a customs system in Bosnia-Herzegovina, as well as the creation of various custom benefits.
Such a system was previously in place prior to the country's 1992-95 war, when VW was bringing out older models of the Golf in the Sarajevo-based TAS factory. Foreign Minister Lagumdzija said VW's return marked a positive indication of the country's economic recovery from the war. 

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BANKING

Troubled Mostar bank may reopen soon

The temporary manager of the Hercegovacka bank, Toby Robinson, said in Mostar on 26th April that there was a possibility the Hercegovacka bank could soon start operating again, HINA News Agency has reported.
The bank stopped operating in April last year, following an investigation into its transactions and the subsequent seizure of more than a million of its documents with the help of the international Stabilization Force (Sfor).
Robinson said that the results of the investigation into the bank's alleged illegal operations would be made public soon.
He also said that the bank could be reactivated by allowing the mobile operator Eronet, which is now active only in the Croat areas of the Federation of Bosnia-Hercegovina, to buy shares in the bank.
If the bank is not reactivated, there are two other possibilities, closure or sale, Robinson said, adding that she did not believe the bank would be either closed or sold.

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FOREIGN ECONOMIC RELATIONS

Bosnia and Macedonia sign free trade agreement

The Bosnia-Herzegovina Minister for Foreign Trade and Economic Relations, Azra Hadziahmetovic, and Macedonian Economy Minister, Fetai Besnik, have signed an agreement in Skopje on free trade between Bosnia and Macedonia, the Bosnia-Herzegovina public radio has reported. Bosnia has now signed free trade agreements with all states of former Yugoslavia, enabling its producers to export their products to these countries...

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FOREIGN LOANS & AID

Bosnian Presidency expects US$12.5m from Srebrenica donors' conference

It is expected that an anticipated US$12.5m will be pledged at the donors' conference, the chairman of the Bosnia-Hercegovina Presidency, Beriz Belkic, said at a press conference, Federation News Agency has reported. 
"The basic objective of the programme made by the UNDP [UN Development Programme] is to establish a self-sustainable multiethnic community in the region of Srebrenica, Bratunac and Milici. The programme is planned to last until 2004, and in my opinion it should be a symbolic start of the international community's care for this region against which serious mistakes were committed during the war by the very same international community," said Belkic who, together with the prime minister of the [Bosnian] Serb Republic, Mladen Ivanic, is to address participants of the donor's conference in New York.
Should enough funds be provided, the implementation of the Programme of Reconstruction of Srebrenica is to start on 1st June this year, Belkic said, adding he had no doubts that the anticipated funds would be raised.

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MINERALS & METALS

Bosnian Federation government discusses privatisation of aluminium plant

At recent a session, the Bosnia-Herzegovina Federation government analysed a report on international arbitration on Aluminij Mostar [Croat-controlled aluminium plant] by the World Bank, the government's public relations office said, the Federation News Agency has reported.
The Federation government has in this way continued the process of resolving contested issues regarding the company's privatisation. At the session, the government once again confirmed its commitment to protecting the state capital in all companies which are strategically vital to the Bosnia-Herzegovina Federation economy.
The World Bank, cooperating with the OHR [Office of the High Representative], welcomed the decision by the Federation government and the Aluminij Mostar management to find a fair solution for the company's privatisation, the World Bank's report on international arbitration on Aluminij said.

Croatia, Bosnia sign agreement on heavy vehicles transport

As of 8th May the maximum weight of heavy vehicles crossing bridges between Gunja in [eastern] Croatia and Brcko in [northern] Bosnia-Herzegovina will be 40 tonnes, Bosnia-Herzegovina Federation TV has reported. 
This will be subject to special regulations on the use of heavy vehicles, it was said in the agreement signed by representatives of Bosnia-Herzegovina, Croatia, Brcko District and the OHR in Brcko. The decision puts an end to the unilateral decision by the Croatian government which had set the maximum weight to six tonnes. The agreement does not regulate the transport of oil and oil products, which is an issue of particular importance for Brcko District.

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