US toughens aid for boot-strapping Bosnia

United States diplomats are toughening their approach to the slow pace of postwar recovery in Bosnia-Herzegovina ahead of a crucial aid donors' meeting in Madrid.

Three years after the Dayton agreement ended the Bosnian war, 32,000 foreign troops enforce peace in the country, while the Office of the High Representative, an internationally mandated quasi-governmental body with a staff of more than 500, oversees postwar reconstruction and supervises domestic politics. The country has made only fitful political and economic progress, however, and corruption is widespread.

A four-year, $5.1 billion international aid effort coordinated by the World Bank has failed to jump-start the economy. The program will have run its course by the end of next year, by which time the Bosnian economy is supposed to be ready to go it alone.

Selling off state-backed firms, though, has been stymied by a lack of public accountability, particularly among banks, and elements of the prewar, centrally planned socialist economy remain in place.

High Representative Carlos Westendorp, the Western official who effectively runs Bosnia, has begun to make more use of the powers granted him by the Dayton accord. Mr. Westendorp has introduced a new currency, new flag, and new vehicle license plates, in each case ignoring reservations from national leaders and winning approval from the population at large.

But efforts to convert economic clout into political leverage have been hamstrung by the remarkably diverse sourcing of international aid. "Projects have a life of their own. Freezing the money is like stopping a train or a supertanker," says Colin Soloway, a political analyst at the Sarajevo office of the International Crisis Group, a policy think tank.

The very presence of so many international operatives in Bosnia is cited as a hindrance to real economic reform and an inducement to corruption. By one estimate, the 10,000 to 15,000 international personnel assigned to Sarajevo are pumping $35 million monthly into the city's economy.

The multibillion-dollar international aid program has been a cash bonanza. "Everyone was hanging out plenty of loot without checking where it was going," Mr. Soloway notes. "It's like leaving a bag of money in the street. Most people won't grab the bag and run, but a certain percentage will."

Still, aid projects carefully tailored to local communities have been productive, says Milica Kotovic, project representative in Bosnia for the British charity Oxfam, adding, "There's a need for aid that focuses not just on reconstruction but on providing the environment which will make it safe for people to return [to their former homes]."

Most observers believe the treatment of the Serb Republic, one of Bosnia's two entities, has shown how economic clout can be turned into political leverage. Controlled by opponents of the Dayton accord, the Serb Republic was largely excluded from aid disbursements until the beginning of this year, when the entity's president at that time, Biljana Plavsic, had a public change of heart and embraced Dayton, appointing a young Western-oriented businessman as prime minister. Since then, despite a setback for the pro-Dayton camp in September's election, money has poured into the entity.

Westendorp, US diplomat Jacques Klein, and other senior diplomats will give an account of their stewardship to Bosnia's Peace Implementation Council - made up of Dayton guarantors, major donors, and other interested governments - in Madrid on Dec. 15 and 16. The meeting will assess progress to date and review the high representative's plans for 1999.

"From Madrid I think the message is going to be that aid programs have to be applied with sophistication," says a Western economist based in Sarajevo.

"It's not a case of one big sledgehammer, but of lots of little sledgehammers," she continues. "You have to be delicate, and you have to give people something they can comply with."

"The situation can only be changed by restructuring the political and economic system here," observes James Lyon, a Sarajevo-based US businessman.

In Madrid, Mr. Lyon predicts, the US will insist on a more robust approach to economic reform. "Washington will be driving the train, and the Europeans and the donors and the World Bank are all on board."

The problem, according to some observers, is that US Bosnia policy remains unfocused. "I don't see a clear US strategy about what they want to do here," says Soloway.

"What you see are small battles," he says. "There's no long-term strategic vision on the part of the international community on what this place might look like in five years."