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When we met last year, in June, the situation in Bosnia and Herzegovina was still very tense. Political obstruction against the implementation of the Dayton Paris Agreement was preventing any major improvement. Even the donor's conference had to be postponed several times due to the lack of positive economic changes. Almost one year has passed and we are today in a far more favorable position. A new political approach has emerged from the elections in Republika Srpska bringing along almost all political leaders in the country to the conclusion that we have been stating for now more than two years: the direct and unconditioned implementation of Dayton is the only way ahead. The Ministerial conference held in Bonn in December 1997 gave me further authority to unblock situations where political struggles are still prevailing. Many times concrete actions have replaced previous threatening talks. The result is that tremendous progress has been achieved and the future is open for peace and prosperity. But I urge all authorities of Bosnia and Herzegovina to achieve more by themselves and avoid the comfortable and dangerous "dependency syndrome". Allow me to share with you some of the results achieved recently. Bosnia and Herzegovina has now a flag, passports, license plates, and new legislation in many fields. Common institutions have started to operate but not yet in a satisfactory manner. Return of Displaced Persons and Refugees has started in several municipalities, though it is far from our expectations. Incidents which occurred recently in Derventa and Drvar could make some of you from Bosnia and Herzegovina or even from the International community think that the pace is too quick and additional time is needed for peace to hold and normalcy to return. Let me stress here that I intend to pursue the implementation of Dayton with steadfast perseverance. I will not tolerate any obstruction. A minority of extremists, a few wrongly manipulated or guided individuals will not steal a peaceful future to the large majority of Bosnians and Herzegovinians. What is true for politics is also true for the economy. Many constructive results have been achieved since the conference last year. The Konvertible Marka will circulate in a month, new legislation on customs, privatization, foreign investment, budgets have been passed. Conditions set out by the IMF for future financial support have been met. Quality of life is indeed improving as people can now benefit from public services that are on a path to becoming reliable. Postal exchanges between Entities have resumed; the number of telecommunication lines has increased; and railway traffic can now operate. These are tangible signs of progress. Normalization of the Republika Srpska has started. Your support to pay the salaries of the public sector employees until the financial situation recovered sufficiently was a welcome help. The Government is making sure that revenue flows are on track to fulfill its financial obligations. As a consequence of the new political atmosphere, freedom of movement has increased between the two entities. This, in turn has meant more opportunities for trade and businesses. In short, the daily life of thousands of people, young and old, has improved. Let us see what the next steps are. We have clearly moved away from a humanitarian and basic reconstruction approach. In my view, the priorities for the next months is to create a unified and modern economic space in Bosnia and Herzegovina. This is necessary for both political and economic reasons. It should be unified to respect the integrity of Bosnia and Herzegovina and the peace agreements. It should be modern in that it should embrace the economic principles of Western economies. To build such an economic space more progress should be achieved to make Bosnia and Herzegovina, become one country on the international scene. This means a single policy on customs defined by the Common Institutions; no preferential economic bilateral agreements at the Entity level. Those existing between Croatia and the Federation and the RS and the Federal Republic of Yugoslavia, must be repealed. This also means a degree of harmonization of taxation policies between Entities in order to make them compatible. I know that both Prime Ministers Dodik and Bicakcic are aware that the current situation benefits the smugglers and are willing to take quick and joint action. For the single economic space to function in an efficient fashion, modern and integrated payment facilities are needed, which is not the case presently. Finally one economic space means organized and efficient public services. It is now time to restructure, as foreseen in Dayton, the energy, post and telecomunication sectors, as it has been done for railways. I will work hard this year in ensuring that the State is indeed functioning. In that respect, I am deeply disappointed that contributions from Entities to the State budget have not been transferred and urge Prime Ministers Bicakcic and Dodik to take immediate action before I feel obliged to apply conditionality. It is also my intention to fight corruption and misuse of public funds. I cannot allow the new institutions of Bosnia and Herzegovina to be built up on corrupted foundations. The second economic priority for this year is to continue, at a quicker pace, the economic transition towards a market oriented economy. Many actions need to be fulfilled but let me stress the importance of privatization. It is the keystone of a viable market economy. Privatization will open the door for private and foreign investment. It will lead to creation of jobs and prepare the economic structure of the country for competition. It is absolutely necessary that the Privatization be carried out in an appropriate legal framework and does not discriminate any category of citizens, in particular Displaced Persons and refugees. A State law will be finalized within the next two weeks. I urge the Council of Ministers to agree by themselves on a text. The process of privatization will start during the summer in both Entities. I will closely monitor the implementation to make sure that all basic principles are respected. I have no doubt that this conference will be a success and that donors will be generous as they have been in the past. I am pleased to see that a major part of our effort is dedicated to the need for a better and increased return of Displaced Persons and Refugees. As you all know, significant progress must be achieved in 1998. Some municipalities have already shown the way to go, mainly in Croat and Bosniak majority areas. I will continue to apply a strong conditionality to cut short financial support in obstructing spots but I will also increase our help in co-operative places. We cannot and will not tolerate incidents as we had recently. Leaders and manipulators of such demonstrations must be aware of my determination. Return of Displaced Persons and Refugees will take place. We will address this important issue this afternoon, my deputy Andy Bearpark will come back on our approach. I wish to emphasize the need for an increased effort towards the Republika Srpska, both Eastern and Western parts in parallel with an increased effort by the new Government on return of Displaced Persons and Refugees. I am of the opinion that citizens who have elected Prime Minister Dodik's Government should not be blamed for mistakes of their previous political leaders. Republika Srpska has benefited so far from only 15 percent of the international aid. A significant effort beyond the usual one third share must be undertaken to make up for the past. Then naturally the population of the RS will reward at the next elections, their political leaders who are supportive of Dayton agreement. Similarly a particular effort should be dedicated to Brcko as stated in the last award. The future of this region cannot be open for peace and normal life without an increased commitment to reconstruction and economic revitalization. I kindly ask you to keep Brcko high on your priority list. Economic reform, the return of refugees and a free and fair election cannot take place if we neglect my media strategy. The nationalist voices which so perniciously used the media to sustain the war for over 4 years must no longer be allowed exclusive control. You have all endorsed our efforts on the 3 main elements of this policy area, namely reform of the regulatory environment, a public information campaign to counter nationalistic propaganda, and developing the independent OBN TV channel. But we are still short of almost 5 million dollars in guaranteeing our strategy for the rest of this year. I urgently appeal to you to join the meeting which will be organized tomorrow on the margins of this conference to try to resolve this. The remaining sum is minor in comparison to the overall contributions under discussion here today, but much of the success of my objectives for the year ahead hinges on this. The fact that the political situation has improved does not mean that conditionality should not apply any more. On the contrary, conditionality, both positive and negative, should apply everywhere, even more now than in the past. But it must be considered at a project level and avoid dangerous and misleading generalizations. I will continue to decide and apply conditionality based on political behavior, implementation of budgets and functioning of common institutions, human rights, acceptance of return of displaced persons and refugees, or economic considerations through the Economic Task Force. Finally I would like to request donors to keep some flexibility in their actions. Our experience is that while well prepared budgets are necessary for heavy infrastructure projects, limited funds which can be mobilized and allocated quickly, are also very helpful. To be efficient, the financial effort from the international community has to adapt itself permanently to the local situation. Time has changed. People and leaders who do not want to see that Bosnia and Herzegovina is now entering a new phase will have no place in the future of the country. I am confident that the upcoming elections will confirm the will of all citizens to move towards a better future based on the strict implementation of Dayton Agreement. A future made of peace and prosperity where leaders do not base all their policies on ethnicity. Based on this assumption, I invite all authorities in Bosnia and Herzegovina and the International Community to keep working together and pursue my policy. I thank you for your attention.
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