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Abstract
Focusing on conflict legacy, this article contributes to the study of domestic mediating conditions as an explanation of “shallow Europeanisation” in the Western Balkans, defined as a disconnect between European rules and local practices. It critiques the prevalent neo-Weberian understanding of state capacity, which highlights rule-enforcement capability of state institutions, but reduces conflict legacy to a question of resources. The article argues that a relational approach to state capacity which attributes its strength to enduring ties among state and non-state actors better captures the challenge to European Union (EU)-driven domestic transformation in a post-conflict context. A case study of the Hercegovina Holding is used to unravel a Bosnian Croat network originating during the 1992–1995 Bosnian war. The empirical evidence of the network's operation illustrates how key EU benchmarks for private sector development can be undermined, making a case for a more rigorous conceptualisation of conflict legacy as a domestic constraint on the EU's leverage.
Notes
The Western Balkans denotes countries of former Yugoslavia without Slovenia but including Albania. The argument in this article does not apply to Albania given that the country was not part of Yugoslavia's violent dissolution in the 1990s.
We respect the request for absolute anonymity from some interviewees by referencing them as “a local source”.
Competition among economic actors is inherently conflictive and requires rules and regulations in order to counteract ensuing instability and provide foundations for market consolidation (Fligstein Citation2001, 19).
SAP Annual Reports explicitly say: “Progress is measured on the basis of decisions taken, legislation adopted and measures implemented” (cf. Bosnia and Herzegovina Citation2012 Progress Report 2012, 4).
For the most recent assessment see Bosnia and Herzegovina Citation2012 Progress Report 2012, 4–5.
Author interview with a local journalist, 22 July 2009, Sarajevo.
There were other investigations into the Bank before it came in administration such as by the Anticorruption Team of the Office of the High Representative, Federation of Bosnia–Herzegovina Financial Police, OSCE, and Federation Ministry of Interior.
Detailed personal biographies of the accused were published in a Dani article on October 14, 2005.
Dragan Covic, the Federation finance minister at the time, remains at the helm of the HDZBiH to this day, and has held a range of high-profile public offices since the Hercegovacka Banka case was opened.
Author interview with a local source 30 October 2010, Sarajevo.
Shares in other selected companies were obtained using the same method (Dani, January 30, 2004; Slobodna Bosna, January 29, 2004; Slobodna Bosna, November 25, 2004; Ante Jelavic Court Verdict Citation2005; Miroslav Prce Court Verdict Citation2004).
According to Tony Robinson, the Bank's international administrator, the Bank accounted for 40% of total payment transactions in Bosnia–Herzegovina and accrued net monthly profit from that activity of around KM1 million (Slobodna Bosna, July 1, 2004). The USAID (Citation2003, 14) report remarked that the Bank “[…] hid its wrongdoing under a veil of outward progress and success”.
Author interview with a local source, 18 September 2010, Mostar.
Author interview with a local source, 11 June 2009, Mostar.
Author interview with an NGO activist, 25 January 2011, Sarajevo.
Before the Bank was put into administration, it owned a 60% stake in Hercegovina Osiguranje. The company was the Bank's most profitable subsidiary, operating through 26 branches throughout the Bosnian Croat majority areas (Slobodna Bosna, January 29, 2004).
The USAID report (Citation1999) analyses the role Payment Bureaus played in facilitating political control over the financial flows in post-war Bosnia–Herzegovina. The Holding network included the Mostar-based Payment Bureau, controlled by the Bosnian Croats.
KM stands for Convertible Mark, the Bosnian currency.
Author interview at the Federation of Bosnia and Herzegovina Financial Police, 31 March 2010, Sarajevo.
Author interview at the Federation of Bosnia and Herzegovina Financial Police, 31 March 2010, Sarajevo; Author interview at Bosnia and Herzegovina Transparency International, 25 May 2012, Sarajevo; Author interview with a local academic, 25 January 2011, Sarajevo.
Prozor, a small town in North West Herzegovina, was a stronghold of Bosnian Croat extreme nationalists and an important strategic outpost during the 1992–1995 war.
Author interview at Bosnia and Herzegovina Transparency International, 2 April 2010, Sarajevo.
Author interview with a local source, 18 September 2010, Sarajevo; Author interview with a local journalist, 25 May 2012, Sarajevo; Author interview with an international official, 12 June 2009, Sarajevo.
Author interview at the Federation of Bosnia and Herzegovina Financial Police, 24 May 2012, Sarajevo; Author interview with a local source, 11 June 2009, Mostar.
Author interview with a local academic, 25 January 2011, Sarajevo.
Author interview with a local journalist, 10 June 2010, Sarajevo; Author interview with an international official, 24 May 2012, Sarajevo.
The EC's latest progress report points at the state's continuing influence on the economy through state-owned monopolies (Bosnia and Herzegovina Citation2012 Progress Report 2012, 28).
