Failed Privatisation is to Blame for Bosnians’ Exodus

Looking back at the politics of economic transformation, and especially at the privatization of state-owned enterprises, the process was highly politicized and non-transparent. It was accompanied by corruption scandals, clientelism and ethnic-political struggles, characterised by the distribution of power according to the ethnic divisions in the country.

Such an economy has been unable to attract foreign investors and those who came often had political rather than economic goals.

Rapid privatisation was the wrong idea:

Illustration. Photo: Pixabay

The original causes of the unsuccessful privatisation of state-owned enterprises can be traced back to the reconstruction of Bosnia in the second half of the 1990s.

After the 1995 Dayton Peace Agreement, the neoliberal approach of the international community supposed that fast and transparent privatisation of state-owned property would stimulate a dying economy.

Based on the UN High Secretary for B&H's decision, the United States Agency for International Development, USAID, was chosen as the so-called "leading donor" for privatisation.

USAID supposed that privatisation would bring foreign investment, employment, efficiency, export and innovations.

But this approach suffered from an excessive belief in market mechanisms, and underestimated the fact that the privatization process took place in a post-war environment whose significant specifics shaped the outcome.

In hindsight, USAID and the international community insisted too much on the speed of privatisation, and put significant confidence into the invisible hand of the market.

Unfortunately, privatisation took place without an appropriate institutional and legislative framework, when the...