ECONOMIC REFORM AND RECONSTRUCTION
- Reconstruction: Infrastructure issues related to promoting freedom of
movement continue to require the attention of my Office. Progress, though
slow, has been made in a number of areas including bus services, river
transport and reconstruction of international bridges.
- The instructions on the regulation of inter-Entity and international bus
traffic were signed by the Ministry of Civil Affairs and Communications.
Entity ministries have approved 45 inter-entity lines. The BiH Council of
Ministers adopted an agreement on the regulations for navigation on the Sava
River. Bridge reconstruction at Gradiska and Brod, funded by the EC and
USAID, is due to begin in early 1999. The World Bank-funded bridge at Orasje
was opened in December and provided a much-needed link between BiH and
Croatia. Reconstruction of the EC-funded Karuse bridge on the IEBL near
Doboj has also started.
- Reform of Public Utilities and Implementation of Annex 9: In the field
of energy, the working group created by the Commission on Public
Corporations agreed to establish a Joint Power Coordination Center for the
transmission of electric power. The three existing Elektoprivedas signed an
agreement to that effect on 3 November 1998 and reached agreement on the
successive implementation phases.
- Some progress was also made in the re-organisation of the railway sector
and a draft law is now being reviewed at the Federation level for the
establishment of Federation Railways. The Railway Corporation pursued its
organisational work but the solution of a number of legal problems was
delayed by the replacement of the Ministers of Justice in both the
Federation and in the Republika Srpska.
- Deterioration of inter-entity telephone links continued to impede
communications. On 9 December, thanks to the direct intervention by my
Office, 420 inter-entity telephone links were re-established. The
Telecommunications Working Group considered draft proposals for the
structure and regulations of the Telecommunications Regulatory Agency,
agreed on the substance of an international licence, arrived at a shared
position on tariff policy, and discussed the next steps towards a BiH
numbering system.
- My Office has been actively involved in the postal sector, which
urgently requires re-organisation and modernisation. The Government of the
Netherlands has agreed to provide an expert who will produce an initial
proposal for a State-level BiH postal law. The Italian Government donated
six vehicles for the delivery of inter-entity mail.
- Macro Economic Reform and Transition: The Economic Task Force (ETF)
continues to play a vital role, under my chairmanship, in co-ordinating
economic reform policies and international reconstruction assistance. As
confirmed in Madrid, my Office will continue to ensure that the ETF
Secretariat, operating in co-operation with the IMG, informs and guides the
donor community through monthly publication of an economic newsletter and
donor meetings as well as review and evaluation of progress. The ETF is also
responsible for exercising conditionality.
- Following the introduction of the Konvertible Marka notes last summer
and my decision on the design of the coin, 10, 20 and 50 Feninga coins,
minted by the United Kingdom's Royal Mint, the coins were put into
circulation in November. While the new currency has gained considerable
public confidence, my Office continues to monitor and promote the steps
necessary to increase its use in those parts of the country where it has
been slower to gain acceptance. My Office is deeply concerned at the
reluctance of key international organisations to use the currency as the
sole medium of payment.
- Entities have honoured their commitments to provide budgetary payments
to support the 1998 State budget. My Office continues to assure the
viability of Common Institutions. Both Entities have been preparing their
1999 budgets. The budget has been adopted as a draft proposal in the
Republika Srpska while the passage in the Federation is imminent. Reasonable
remuneration for the judiciary is a prerequisite to a well-governed civil
society; salaries of judges in the RS remain particularly low. My Office has
been working with the RS government to allocate adequate salaries for
judges.
- Substantial progress has been made on the closure of the National Bank
of Bosnia and Herzegovina (NBBH), a key issue for completion of the first
review under the IMF stand-by arrangement. My Office is following a plan
prepared by the Federation government, in consultation with the payment
bureau (ZPP) and the Central Bank of Bosnia and Herzegovina, whereby the
covered government deposits at the NBBH will be moved to commercial banks.
Uncovered deposits will be frozen in a NBBH account. The NBBH has stopped
all banking operations.
- My Office was extensively involved in a major investment agreement
signed between the European Investment Bank (EIB) and the BiH Ministry of
Foreign Trade and Economic Relations. The State has undertaken to settle a
pre-war credit (6 million ECU) extended to the former Elektroprivreda, a
public company. The EIB plans to invest nearly 100 million ECU in the
infrastructure sector over a two year period starting in 1999.
- On 28 October, the members of the Paris Club provided significant debt
relief to BiH by agreeing to write off external debt which the country owed
to foreign governments. The agreement accepted a write-off of 67 per cent of
the value of unpaid principle and interest due through to 30 April 1999.
Late interest payments for the period 1 July 1998 to 30 May 1999 will not,
however, be written off. The Paris Club agreed in principle to hold another
meeting to discuss repayment of this remaining debt provided that BiH
continues to have an appropriate agreement with the International Monetary
Fund, and that BiH and the creditor countries conclude bilateral agreements
by April 30, 1999. My Office played a key role in these negotiations.
- Civil Aviation: On 1 October 1998, the Council of Ministers accepted and
signed a letter by means of which COMSFOR delegated the authority and
responsibility for management of the upper airspace between FL 330 and FL
450 over Bosnia and Herzegovina to the Department of Civil Aviation (DCA).
The Letter of Delegation provided the DCA with the legal authority to enter
into agreements with airspace service providers Zagreb (ATSA) and Belgrade
(FATCA).
- On 17 November 1998, the draft Aviation Law was submitted for a second
time to the Council of Ministers urging them to forward it to the
Parliamentary Assembly as no action had been taken on the adoption of this
law by then. This unfortunately is still the case. The Madrid Declaration of
the PIC calls on the common institutions to adopt this important law by 28
February 1999.
- Without the agreements with FATCA and ATSA, the DCA, which desperately
needs funding, is still unable to instruct EUROCONTROL on how to distribute
the over-flight revenues, both those already collected and those which will
be collected in the next year.
- In December 1998, the BiH DCA, encouraged by my Office and SFOR,
accepted an ICAO project to help improve its organisation, management, and
ability to fulfil its obligations with regard to international civil
aviation. This is funded by the European Commission to the tune of
US$1.2million. The project includes the one year secondment to BiH of a
Civil Aviation Adviser/Project Co-ordinator; assistance in specific civil
aviation disciplines primarily related to safety; the review and update of
the Civil Aviation Master Plan; and a comprehensive proposal for the
organisation of common country-wide Air Traffic Control Services in BiH.
- On 31 December 1998, the BiH DCA let expire the tender validity for the
Emergency Transport Reconstruction Project - Air Navigation Component
(BP12). Cancellation of the tender means cancellation of the corresponding
loan from the European Bank for Reconstruction and Development(EBRD), worth
some US$3.2 million.
- At Sarajevo Airport, overnight parking permission was granted to Air
Bosna, Air Adria (Slovenia), and Croatia Airlines from October 1998. By the
end of the year, 10 airlines had scheduled air services operating in and out
of Sarajevo. Traffic, passenger, and air cargo services are increasing at a
rate which, if sustained, will mean that passenger numbers are likely to
reach pre-war levels during the course of 1999.
- The Tuzla Civil Airport was officially opened on 10 October 1998. The
airport is only capable of limited operations for the time being.
- In October 1998, a Letter of Exception granting overnight parking
facilities at Banja Luka airport was issued by SFOR. This enabled SATAIR,
the first airline of Republika Srpska, to start planning scheduled services,
initially to Belgrade and Duesseldorf.
- By the end of 1998, Croatian Airlines and Tyrolean Airways were running
scheduled air services to and from Mostar airport.
- Military Matters: As part of our efforts to improve the professionalism
of the Entity Armed Forces, and to reduce the involvement of the military in
the political process, the then Commander of SFOR, General Shinseki and I
issued a letter to the parties on 21 October 1998, instructing them that no
general officer may be appointed, promoted or removed without the approval
of the Commander of SFOR. The letter did not state, as some press reports
have claimed, that COMSFOR may appoint or promote general officers himself
against the will of the parties, although he has the right to remove them.
This right was invoked by the new Commander of SFOR, General Meigs, in order
to remove General Sopta for deploying HVO troops to intimidate voters in
Herzegovina in the September 1998 elections.
- Demining: Progress continues to be made in the sphere of demining in
Bosnia and Herzegovina, most notably with regard to the Slovenian Trust
Fund. The MOU between the Slovenian Trust Fund and the Council of Ministers
of Bosnia and Herzegovina, still awaiting signature at the time of the last
report, has now been signed. This sets out the arrangements for the funding
of demining for the future, via the Trust Fund. With several contributions
already made, momentum will increase and the Trust Fund should become the
major source of income for demining and victim assistance in the years
ahead. Donors are to be encouraged to contribute money through the Trust
Fund, in order to draw maximum benefit from the "double your money"
mechanism sponsored by the US Government.
- The PIC Steering Board finally clarified its intentions with regard to
the manufacture, storage and use of land mines by the Entity Armed Forces.
According to the Ottawa Treaty, which comes in to force in March 1999, and
to which Bosnia and Herzegovina is a signatory, only anti-tank mines may be
retained. Plans are being made to regulate the storage of such mines,
possibly as a State, rather than Entity, asset. Both Entities report that
they no longer manufacture mines of any sort. Plans are also being made to
destroy any excess stocks of anti-tank mines and all anti-personnel mines.
- The total area surveyed and cleared of mines in 1998 by 1 January 1999
was 4.4 million sq.m. Although the final figures may still change, this
represents a reduction from that of 1997, owing to a tightening of the rules
on certification of cleared areas. Sadly, 3 people were killed in October
1998, while conducting demining. The underlying trend, however, is that
demining incidents are decreasing. In November and December, there were no
recorded mine incidents. In addition, Demining Action Plans for 1999 have
been published by the BH and Entity Mine Action Centres (MACs). The BH MAC
has employed a PR planner to establish a PR strategy to encourage donors.
Appendix
DECLARATION OF THE PEACE IMPLEMENTATION COUNCIL, MADRID, 16 DECEMBER 1998
- We, the members of the Peace Implementation Council met in Madrid on
15/16 December, where we reviewed progress in implementing the Peace
Agreement in Bosnia and Herzegovina. We identified what still needed to be
done to make the peace self-sustaining, and agreed on a work programme to
achieve this. We approved the following Declaration, and an accompanying
detailed operational Annex.
- We note with satisfaction that Bosnia and Herzegovina has taken great
strides forward in the last year. The basic institutions of the State, both
political and economic, have been established. Key laws, including on
foreign investment, privatisation and property, are now in place. Freedom of
movement across the country has substantially improved. Fundamental reform
of the media is well underway, and is helping to create a more democratic
society. Elections have demonstrated a trend towards growing pluralism and
tolerance.
- This success is encouraging. A lasting peace within Bosnia and
Herzegovina is starting to take root. We re-affirm that the Peace Agreement
is the basis of freedom and democracy in Bosnia and Herzegovina and urge its
people to join hands with us in implementing it in full. We remain
determined to build a self-sustaining peace in Bosnia and Herzegovina
together on the basis of the Peace Agreement.
- But there is still much work to be done. Bosnia and Herzegovina's
structure remains fragile. Without the scaffolding of international support,
it would collapse. In order to create a self-sustaining state of BiH, action
is needed in particular on: inter-ethnic tolerance and reconciliation; the
development of effective common institutions with powers clearly delineated
from those of the Entities; and an open and pluralistic political life. The
growth of organised crime also represents a serious threat to BiH, and is
completely incompatible with BiH's integration into Europe.
- Following the end of the 'consolidation period', the next two years will
be vital in strengthening the peace process and building democratic and
market-oriented institutions, with the authorities in BiH increasingly
assuming greater responsibility for the functions now undertaken or
co-ordinated by the international community. We recognise the continued need
for an international presence in Bosnia and Herzegovina - both civil and
military - to help build the peace. We express our gratitude to the men and
women of SFOR for their service in the cause of peace. SFOR's presence
continues to remain essential - both to keep the peace and to provide the
secure environment needed for civilian implementation. The Council also
re-confirms its determination to apply conditionality to international
reconstruction assistance, both by applying positive incentives and
excluding non-compliant actors.
- We say to everyone in Bosnia and Herzegovina: yours is now one of the
most assisted countries in the world. International assistance is at its
height. It will inevitably begin to reduce in the near future. Bosnia and
Herzegovina must use the time that remains to prepare for life without total
reliance on foreign aid, and to face up to the challenge of transforming the
economy to generate jobs and a better standard of living. This means
abandoning the statist economic attitudes of the past, pressing ahead with
privatisation and creating an environment which encourages enterprise and
allows the economy to flourish, and in which the rule of law is respected.
This also requires a greater degree of commitment and co-operation and a
more responsible attitude from the authorities of BiH.
- We reaffirm our conviction that those indicted for war crimes must be
brought to justice. We welcome the transfer of indictees to The Hague, and
urge all authorities in Bosnia and Herzegovina and other relevant countries
to co-operate fully with the ICTY.
- We call on Croatia and the FRY to implement in full their commitments
under the Peace Agreement and to fully respect BiH's independence and
sovereignty.
- Bosnia and Herzegovina must become a modern democratic country, where all
citizens are equal before the law, destined to be an integral member of the
European family. It must also be a country in which historical, cultural,
linguistic and religious traditions are valued and respected, where
diversity is a source of strength not division.
- During the next crucial period we will continue to encourage the return
of refugees and displaced persons by fostering a political, economic and
security environment conducive to returns; strengthen Bosnia and Herzegovina
internally and externally; and support stronger ties between Bosnia and
Herzegovina and European institutions.
- We agreed to press ahead with refugee and displaced person returns. We
recall the too long denied right of refugees and displaced persons freely to
return to their homes of origin and to have restored to them property of
which they were deprived in war. We remain gravely concerned about the
frequency of violent incidents in parts of Bosnia and Herzegovina, related
to refugee return and to general criminality, and call on all concerned to
act in accordance with the law and the Peace Agreement. We call for a
re-doubling of efforts to create the conditions for a large number of
returns in 1999. In particular, we:
- recall the unfulfilled obligation of the Parties under Annex 7 of the
Peace Agreement to co-operate with UNHCR and to create suitable conditions
for return;
- insist that the parties establish the conditions necessary for aneffective
returns process;
- note that many tens of thousands of Bosnians have so far expressed a wish
to return home immediately to minority areas, and endorse the Reconstruction
and Return Task Force (RRTF) action plan for 1999, which sets out an
intensive programme to address the three key issues of space, security and
sustainability and includes specific sector plans such as a substantial
information campaign;
- undertake to provide the appropriate funding, commitment and resources
needed for that purpose;
- welcome the high degree of co-ordination ensured by the plan, as well as,
in particular, the intention of UNMIBH and SFOR to cooperate in its
implementation to the maximum extent possible within their mandates.
- Simultaneously, it is also necessary to create the right environment to
make returns sustainable, by strengthening the country both internally and
externally. A great deal of the physical infrastructure of the country has
been repaired. We agree to focus on inculcating the principles that underpin
a self-sustaining free market economy and which are vital to any free and
democratic society - the rule of law, above all, and the institutions to
uphold it. We are determined to see the inner core of BiH strengthened by
building the rule of law, reinforcing the common institutions, creating a
self-sustaining market economy and accelerating democratisation.
12.1 The Rule of Law: We consider the establishment of the rule of law, in
which all citizens have confidence, as a prerequisite for a lasting peace,
and for a self-sustaining economy capable of attracting and retaining
international and domestic investors. We resolve that a top priority for
1999 will be to build the rule of law in Bosnia and Herzegovina. We will
work to achieve this through a thorough programme of judicial reform,
including:
- the creation of an independent, impartial and multi-ethnic judiciary;
- the
establishment of judicial institutions at the state level in accordance with
the opinion of the Venice Commission, including an institution to deal with
criminal offences by BiH public officials in the course of their duties;
- strengthening prosecution of organised crime, return-related violence,
corruption and other serious criminality;
- faster police restructuring,
including the establishment of multi-ethnic, professional police forces;
- rationalising and reinforcing the institutions for human rights protection;
- strengthening the Constitutional Court;
- better public information about
the rights of citizens and legal assistance;
- developing and implementing an
equitable mechanism to enforce legal rulings.
12.2 Institutions: Strengthening the institutions, especially the common
institutions, is also a vital component of any effectively functioning
state. The main institutions now exist at the Bosnia and Herzegovina level.
But they do not yet work efficiently. Remedying this problem will be a
central plank of our work in the coming year, and will go hand in hand with
efforts to entrench the rule of law. It will be achieved by:
- ending 'parallel' institutions;
- immediate and decisive efforts by the
Council of Ministers to improve its structures;
- the creation of a
professional, apolitical civil service;
- the adoption, as soon as possible,
of further laws necessary for the establishment and functioning of existing
and other necessary institutions.
12.3 Self-sustaining economy: It is now essential to tackle, as a matter of
urgency, the task of transforming Bosnia and Herzegovina's economy in 1999
to make it capable of surviving and prospering with reduced foreign aid. We
agree a package of measures to:
- pursue stability-oriented macro-economic policies under the present
stand-by agreement with the IMF;
- accelerate the establishment of a market
economy; *develop Bosnia and Herzegovina economy as one single economic
space based on EU standards;
- install the legal and regulatory
infrastructure necessary for a newly emerging, free market society;
- privatise, in a transparent and apolitical manner, state-owned industries,
banks, as well as small businesses and public utilities;
- reform payments
systems;
- establish properly functioning capital markets and banking
institutions;
- fight against corruption, fraud and fiscal evasion;
- create
adequate and sustainable conditions for the development of small and medium
enterprises and stimulate foreign and domestic investments in the country.
12.4 Democratisation: Democracy is taking root in Bosnia and Herzegovina;
but it needs to be reinforced at every level. We pledge to work together to
achieve this - to give citizens real control over their own lives, with
decisions that affect them taken as close to the citizen as possible. We
pledge to work to create a culture of open debate in which different views
and traditions are respected, from the education system to the parliament
chamber. We aim to do this by:
- working with the people of BiH and their representatives to develop a new
electoral law which will promote a democratic and multi-ethnic political
process and make the elected officials accountable to the voter;
- increasing
transparency in relations between Entities and their administrative units,
including a clear delineation of their respective responsibilities;
- furthering media reform, to promote a free exchange of ideas and opinion,
including by the establishment of a joint inter-Entity Annex 9 Public
Broadcasting Corporation across the country which will respect the cultural
identities of the constituent peoples and others;
- placing a major emphasis
on education at all levels, to ensure that the children of Bosnia and
Herzegovina are given the best chance of a brighter future;
- following
judgements by the Constitutional Court on possible changes to the Entities'
constitutions to bring them in line with the Bosnia and Herzegovina
Constitution, to protect the rights of all the constituent peoples;
- promoting civil society and the growth of the voluntary sector in Bosnia
and Herzegovina.
- The outer ring - a more secure Bosnia and Herzegovina: We also intend to
strengthen the 'outer ring' of the country by:
- working, in co-operation with SFOR and the OSCE, with the armed forces and
Entity and State governments to maintain military stability, increase
co-operation and confidence between the Entity Armed Forces, nurture
stronger joint military institutions, reduce defence expenditure, increase
professionalism, and remove the military from inappropriate involvement in
the political process;
- taking steps together with the Presidency and the
Entities towards establishing a common security policy and a State dimension
for defence. As part of this, the Standing Committee on Military Matters
(SCMM) is to be strengthened with respect to the Constitution;
- working and
co-operating fully with the OSCE in Article II confidence-building measures
and working closely with relevant security institutions and organisations;
- establishing a Bosnia and Herzegovina Border Service at the state level
with the appropriate legal foundation to control the frontiers of the
country, as envisaged in the Peace Agreement. This force might in due course
also carry out other work, such as drug enforcement, diplomatic protection
and protection of state buildings, and investigation work as a partner to
Europol and Interpol;
- pressing for faster progress in establishing normal
and legitimate relations without preconditions with Bosnia and Herzegovina's
neighbours, with clearly demarcated borders and full respect for Bosnia and
Herzegovina's territorial sovereignty;
- working with the parties to
reinforce the progress made in CSBM and arms control and to conclude, as
quickly as possible, a further agreement enhancing regional security and
reduction of military resources, in line with Annex 1B of the Peace
Agreement.
- As well as strengthening Bosnia and Herzegovina internally and
externally, we agreed to work to strengthen ties between Bosnia and
Herzegovina and Europe. We all share the aspirations of the people of Bosnia
and Herzegovina for the country to integrate more closely with the European
family of nations and institutions. Europe is Bosnia and Herzegovina's
future. We welcome the European Union's intention to develop further its
relations with BiH in the political and economic fields, which will
contribute to the stability of the country and the co-operation of the
parties in BiH. We will also promote closer ties with Europe by working to
ensure that Bosnia and Herzegovina meets the standards for Council of Europe
membership in time for it to be in a position to join as soon as possible
and supporting the efforts of the EU/BiH Consultative Task Force to develop
BiH's administrative and legislative institutions.
- The role of the High Representative: We re-affirm our strong support for
the High Representative and his role, under the Peace Agreement, as the
final authority in theatre in interpreting the civilian aspects of the
Agreement, and, in particular, as the co-ordinator of the activities of the
civilian organisations and agencies in Bosnia and Herzegovina. We support
the High Representative's expansion of his consultation and co-ordination
through the PIC Steering Board with other co-ordinating bodies in his
capacity as the senior representative of the international community in BiH.
We fully endorse the broad and substantial powers given to the High
Representative at the Bonn Peace Implementation Council. Without the use of
that authority in the last twelve months, less progress would have been
achieved. We recognise the necessity to consolidate the High
Representative's ability to make rapid progress, especially in the field of
the economy, as well as his ability to fully enforce his decisions. In order
to enable the High Representative to carry out his agreed actions, we
acknowledge the need to ensure timely and adequate funding of his Office.
- We welcome the Parties' affirmation of their commitment fully to
implement the programme set out in this Declaration and Annex.*
* Not attached to this report but available separately from the OHR
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