OHRID, Macedonia (October 21,2008) - - There is considerable energy potential in Bosnia, but the resources are still not being used fully.Bosnia will encourage foreign investment in its energy sector and will continue to improve the environment for such investment,Chairman of the Bosnian State Presidency Nebojsa Radmanovic asserted at the fifth regional economic forum in Ohrid,Macedonia.
Here is his entire speech:
Ladies and Gentlemen,
It is my pleasure to greet you and to thank the organizer for inviting me to participate in this Forum. It is of a crucial importance for our European future and regional cooperation to exchange our views and experiences and encourage cooperation in all areas of importance to our peoples as well as mutually good relations trough these or similar gatherings.
Bosnia and Herzegovina achieved considerable recovery and economic prosperity in the past 13 years. Strong investment activity, financed by donations of the international community, has contributed to the high post-war GDP real growth rate. What encourages us is the fact that economic growth was also continued after the foreign help was reduced. In the period 2002 – 2007, the average economic growth was 5.2 % annually, which puts Bosnia and Herzegovina at the equal status with other states of the former Yugoslavia. In spite of this, Bosnia and Herzegovina is lagging behind its neighbors, concerning GDP per capita. The reasons for that greatly lie in the past war events, which left marks on its economy and population.
Bosnia and Herzegovina was successful in achieving macroeconomic stability. Domestic currency – Convertible Mark is stable, with the constant growth of foreign exchange reserves. The fiscal budget balance has been established, thanks to the successful tax reforms, and especially the introduction of value added tax. Fiscal discipline has been intensified due to establishment of the treasury business transactions and the public sector audit office. Bosnia and Herzegovina managed to establish a competitive banking sector with strong supervisory bodies.
Long lasting unemployment rate and high foreign trade deficit represent the main hindrance to the economic growth and development of Bosnia and Herzegovina. That is due to the low rankings in competitiveness of Bosnia and Herzegovina’s economy. We are aware that the competitive economy cannot be accomplished only by creating the stable macroeconomic environment. It is necessary to build the efficient institutions, mastering the contemporary technologies, developing corporative management, investing into research and development, together with the appropriate level of economic freedom and entrepreneur capacities. Building competitive economy represents a difficult, lasting and complex process that requires constant and persistent work, which is confirmed by experiences of developed countries. We must use all our creative energy in fostering competitive economy for our better future and the well-being for the generations to come.
Bosnia and Herzegovina is significantly lagging behind in building necessary infrastructure for joining the European integration and global market. Therefore, we are not surprised by the huge efforts put in by the European Union in investing infrastructure in order to ensure relatively equal conditions for development of all regions. The road infrastructure of Bosnia and Herzegovina has become an impediment for a greater scope of foreign trade cooperation with the neighborhood and the world. That is why our entities’ governments put in efforts to fix the situation in that field using concessions and our own resources. I would like to use this opportunity to express our readiness to build major regional road routes, trough joint ventures that would contribute to the faster development of the entire region.
Looking towards the future, the key challenge for Bosnia and Herzegovina and its economic development is in utilization of the electric power potentials through building new power generating plants, in order to resolve the growing needs in power supply in the country, and increase the export scope within the regional market. Entities’ governments have been undertaking the numerous initiatives and steps on attracting and engaging foreign capital for modernization the existing ones, as well as in building new capacities. The encouraging fact is that there is a great interest of foreign investors for investing in the power sector. That also represents a challenge for the countries of our region to start building more electric power capacities, through joint ventures. Bosnia and Herzegovina is open for that way of cooperation.
Ladies and gentlemen,
We are about to face the years of high uncertainty, caused by the world financial crisis. It is sure that the economic crisis will not avoid this region. There is no doubt that the international financial crisis will indirectly influence the countries of the whole region and reduce the prospects for continuation of high economic growth rates from the previous years. In regard with Bosnia and Herzegovina, it could be expected that the economic crisis will reflect to several key segments. First, banking credits will be more expensive which will reduce the scope of investments and liquidity in the economy, the scope of total demand for goods and services, and slow down the economic growth. Second, there is a justified fear of lowering direct foreign investments flow. Third, recession, which will probably take Europe and the Region, being our most important foreign trade partners, will have a detrimental effect on export, which is our crucial need. Fourth, it could be expected that the value of our diaspora remittances lowers, particularly due to the recession which may cause loosing the jobs for part of this population. Fifth, further privatization of the state capital in the companies will be slowed down, since this is not a very favorable time for their sale.
Bosnia and Herzegovina has the advantage of having the foreign debt, both public and private, relatively small, compared to the countries in the broader Region. Level of the bank credits is also moderate, and the credits are quite well secured. These are significant advantages for mitigation of the economic crisis consequences.
Council of Ministers of Bosnia and Herzegovina, entities’ respective governments and the Central bank have undertaken necessary measures for preservation of financial stability. However, the future time will certainly require undertaking numerous new measures. Before all, more attention and efforts should be put in the issues which contribute to improvement of competitive abilities of the economy, in order to increase export. It is necessary, as much as possible, to direct a part of public expenditures into production purposes, in order to mitigate negative effects of investment reduction. Economic crisis imposes the need for protection of socially vulnerable categories of the population which are the most sensitive to its consequences. In simple terms, it is necessary to realize a more productive production, lower spending, higher saving, and export more while importing less.
Global crisis should be resolved jointly with other players, to the extent possible, at the same time not neglecting our own interests. In times like these, great economic powers primarily preserve their own interests. In our reality, we must not allow ourselves to be a collateral damage of the world financial crisis.
Global financial crisis requires global responses. The time has shown that it is impossible to manage the 21st century economics with the 20th century instruments. Many rules of playing in the world financial market must be changed, in order to have the global financial system preserved from any imprudent moves.