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Abstract
The article discusses the efforts to undertake economic reconstruction in Bosnia following the end of the war. It argues that, despite certain successes such as the rehabilitation of infrastructure and the privatization of the banking sector, overall progress has been below expectations. The study, accordingly, attempts to analyse the reasons behind the reconstruction failure by grouping Bosnia's problems into four different challenges for analytical purposes: the post-Dayton institutional deficiency; overcoming political fragmentation; creating appropriate conditions for economic revival; and graduating from dependency on foreign economic aid. In this respect, it is concluded that the intersection between the economic and political dimensions of post-conflict reconstruction has generated a paradox: while huge amounts of economic assistance have intended to facilitate political reconciliation, the nature of the administrative (political) structure that was established in the post-war period has in turn hindered economic recovery and the creation of a unified economic space. Moreover, political fragmentation and slow progress in economic reconstruction have been in a mutually constitutive relationship in which the existence of the one has contributed to the sustenance of the other.
Acknowledgements
The authors would like to thank the two anonymous referees of the Journal for their comments and suggestions on a previous version of the paper. Nikolaos Tzifakis would also like to acknowledge that his research for this article was conducted with the support of a post-doctoral scholarship provided by the Hellenic Scholarships Foundation (IKY).
Notes
1. Hereafter Bosnia.
2. Acording to Sherrill Stroschein, Dayton itself should be perceived as a process, precisely, a set of institutions in a state of flux that are best viewed through a dynamic lens. (Stroschein, Citation2005, p. 59).
3. Republika Srpska has been less successful in fighting corruption than the Bosniac–Croat Federation. According to a World Bank report, no official has been dismissed, nor has the Bosnian Serb entity brought any major corruption case to court (Broadman et al., Citation2004, p. 77).
4. Inter-entity trade, according to Stojanov, is very important for Bosnia for at least two reasons. First, for economic reasons, because its expansion can contribute to the growth of the economy and the more effective functioning of the market, and second, politically, because it can stimulate cooperation between citizens of both entities and act as an integrating factor of the Bosnian political area (Stojanov, Citation2001, p. 47).
5. The High Representative tried to redress the problem by establishing the so-called ‘Bulldozer Committee’ three years ago. This project encompassed the idea of improving the country's business environment and boosting job creation through the enactment within 150 days of 50 concrete legislative changes. For the record of this committee, see inter alia Omanovic (Citation2005, p. 6) and Herzberg Citation(2004).
6. For the financial sector reform see also Tesche Citation(2000).
7. Republika Srpska even distributed vouchers to children (Bojicic-Dželilovic et al., Citation2004, p. 14).
8. The state-level Law on Foreign Investment—by which the entities were called to adjust their legislative procedures—was adopted in March 1998. This established the policy standards of promoting foreign investment and protecting foreign investors' rights.
9. Suffice it to recall that local authorities have needed to get the approval of international financial institutions for such measures as increasing pensions or changing tax policy (Omanovic, Citation2005, p. 2).