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IDA at Work
Bosnia and Herzegovina: From Post-Conflict
Reconstruction to EU Integration
Bosnia and Herzegovina has achieved an impressive post-conflict
recovery. The challenge now is integration in Europe.
F ourteen years after the war in Bosnia and Herzegovina (BH),
infrastructure and basic services have been restored to prewar
levels, while the country and its people have made substantial
progress in their overall economic and social development and the
country is in the process of integrating into the European Union
(EU). The International Development Agency (IDA) played a very
significant role in this successful post-conflict reconstruction and is
still well positioned to continue to help BH to address the current
challenges.
Challenge
In spite of a very successful post-conflict recovery, BH remains a
young democracy with the memories of the recent past still affect-
ing the national policy dialogue and consequently hindering the
country’s reform agenda. The complex institutional and political
environment which emerged after the conflict continues to slow the
reform process and the development of an institutional infrastruc-
ture fully supportive of market economy and EU integration.
The global economic crisis spread quickly to BH from the end of
2008, reversing the effects of strong growth and putting at risk
macroeconomic stability and important economic reforms. The
crisis has also reversed the hard-won gains in poverty reduction of
the 2004-2007 period. As elsewhere in the hardest hit areas of the
Europe and Central Asia (ECA) region, the pace of recovery in BH
is expected to be slow. A protracted period recounted author Sebastian Mallaby in his
of vulnerability in BH is concerning given its 2004 book The World’s Banker. “It took the
incomplete transition to market institutions, Word Bank’s mediation to focus the Bosnians
poorly-targeted safety nets and, especially, on practical problems: Should there be a
its still-fragile and volatile post-conflict central bank? How to reconcile conflicting
political situation. tax and customs systems?”
For these reasons, the key challenges for A partner in EU accession. With BH now set
BH in the coming period will include: imple- on joining the EU, supporting the integration
menting a successful post-crisis recovery; process has become the overarching theme
completing the transition to a competitive of IDA’s country partnership strategy, along
market economy, while protecting the most with job creation and the improvement of
vulnerable categories of the population; and public services, particularly services for the
strengthening the capacity of domestic insti- most vulnerable segments of the population.
tutions to implement structural reforms and IDA has tailored its support to complement
accelerate the process of EU accession. European institutions’ efforts to build the
country’s capacity in the accession process.
Approach Recently, the World Bank quickly responded
to the request of the BH authorities to adjust
A leader in post-conflict reconstruction. the lending program to mitigate the impact
During the period of intensive post-conflict of the economic crisis and to contribute to
reconstruction (1996-2002), IDA supported 45 the objectives of the fiscal framework BH
projects and committed over US$ 1.02 billion agreed with the International Monetary Fund
to help the reconstruction and development (IMF), through support for the reform of social
of virtually every segment of the war-torn safety nets and a line of credit for small- and
country, including support for first generation medium-sized enterprises (SMEs).
reforms. Overall, this represented one of the
highest-ever allocations of IDA resources on Results
a per capita basis. A review carried out by
the Operations Evaluation Department (OED, Banking sector. An enterprise and bank
an independent unit within the World Bank) privatization credit helped shore-up BH’s
in 2004 found the BH reconstruction program banking system during the period 1999-2002.
to be an example of “the Bank at its best.” Banks have seen their total assets increase
Moreover, IDA often acted as a catalyst and as by almost 100 percent over the four years
a skilled facilitator in bringing together dif- preceding the global crisis, enjoy good level
ferent local parties behind joint projects and of confidence, and are weathering the global
endeavors. In this way, IDA aimed not only to crisis better than in the rest of the region.
implement specific projects, but more gen-
erally to contribute to social reconciliation Cultural heritage and reconciliation. The
within the country. “In Bosnia in 1995, there old bridge in Mostar—one of the country’s
was no way the warring parties could discuss national icons destroyed during the war—was
reconstruction; they could not even agree fully reconstructed in 2004 with support of
where the discussion should be located,” the Pilot Cultural Heritage Project, and this
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contributed to reconciliation and economic Microfinance and employment. Roughly
growth in Mostar. Tourism has since picked 200,000 jobs were created or sustained under
up, boosting the local economy. While very two microfinance projects implemented dur-
few tourists visited the war-divided city in the ing the period 1997-2005. A labor redeploy-
years immediately after the conflict, some ment project (2000-2004) set a model for the
300,000 tourist visits were registered in 2004, social integration of former combatants into
450,000 in 2005, and 750,000 in 2006. In July civilian life by providing employment ser-
2005, Mostar’s Old Bridge and surrounding vices to over 7,000 ex-professional soldiers.
Old Town were registered on UNESCO’s list of Recently, an Employment Support Project
historic monuments. (2004-2009) facilitated employment of over
10,000 active job seekers (ages 45 and above)
Forestry. Around 550 hectares of new trees through a range of active labor market pro-
were planted, 210 kilometers of existing for- grams.
est roads were reconstructed, and new ones
were built with the support of the Forestry Power. The destruction of BH’s power grid
Project (1998-2003). The Forest Development has not only left its citizens without power
and Conversation Project, which is currently supply, but has also disconnected the South-
under implementation, supported comple- eastern Europe power grid from the rest of
tion of the National Forest Inventory. The Western Europe. Hundreds of kilometers
inventory found that coverage and quality of power lines, transmission stations, and
of forests in BH were better than expected, thermo and hydro power plants were reha-
while wood and wood products commerce bilitated since 1996 through four subsequent
has been contributing to economic growth (at power projects. Today, BH is one of the few
least 3 percent of GDP and above 4 percent of countries in the region with excess genera-
formal employment). tion and export potential.
Health. During the reconstruction phase, Transport. In the post-conflict period, about
the War Victims Rehabilitation Project 2,300 kilometers of roads, 41 bridges, three
(1996-1999) and Essential Hospital Services tunnels, the railroad network and Sarajevo’s
Project (1997-2002) achieved the following International Airport were rebuilt through
results: five clinical centers and 15 hospitals, three IDA transportation reconstruction
damaged in fighting, were rehabilitated; 24 projects. An ongoing Road Infrastructure and
medical facilities equipped; and health care Safety project has already rehabilitated over
professionals were trained. Reform of pri- 123 km of roads.
mary health care has been pursued under the
ongoing Health Sector Enhancement Project. Sanitation. Six EU-compliant regional landfills
With support of this project, about 2.8 mil- and management companies are now operat-
lion people will be registered with “family ing in the largest urban centers, and 144 wild-
medicine” teams by the end of 2010, creating dump sites have been cleaned. By the end of
a sustainable primary health care for 75% of the second phase of solid waste management
the country’s population. investment in 2014, it is expected that the
landfills and inter-municipal management
districts will cover the almost totality of BH.
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Safety-Nets. IDA recently supported the In addition to this over-arching donor coordi-
legislative reforms of the unsustainable and nation role, IDA often acted as a focal point
highly regressive cash benefits system that for donor coordination in specific sectors.
has been in place since the war with US$111 In the power sector, for example, through
million Public Expenditure Development three finalized and one continuing project,
Policy Operation (2010). The implementation IDA financing of about US$130 million served
of the new legal framework should result in to leverage a total of almost US$880 million
more affordable social programs that better from other sources, including Austria, Bel-
target the most vulnerable in BH. gium, the BH government, Canada, the Czech
Republic, the European Bank for Recon-
IDA Contribution struction and Development, the European
Commission (EC), the European Investment
IDA financed 45 projects and committed over Bank, France, Germany, Ireland, Japan, the
US$1.02 billion during the reconstruction Netherlands, Norway, Spain, Switzerland, the
phase (1996-2002) and IDA/International United Kingdom, and the United States, for
Bank for Reconstruction and Development a coordinated program of investments and
(IBRD) approved 18 additional projects in the associated sector reforms.
amount of US$324.4 million during the period
2002-2010. As of August 2010, the World Bank With BH now set on joining the EU, support-
Group’s portfolio in BH consists of 16 active ing the integration process has become the
projects with total commitments of US$440.4 overarching theme of IDA’s country partner-
million (financed with 11 IDA credits, three ship strategy, along with job creation and
IBRD loans, and three grants from the Global the improvement of public services. The
Environment Facility). Active projects are World Bank Group has tailored its support to
implemented in various sectors including complement EU efforts to build the country’s
agriculture and rural development, roads, capacity in this accession process.
energy, health, social protection, water and
sanitation, and environmental protection. In Moving Forward
fiscal year 2010, in an effort to respond to
the challenges posed by the global economic BH is progressively graduating from IDA, and
crisis, the World Bank approved US$231 mil- the current portfolio includes three IBRD
lion in additional financial support, compris- loans totaling US$175 million or 40 percent
ing US$ 81million in IDA credits, and US$150 of the portfolio. Continued access to IDA
million in IBRD loans. resources, combined with IBRD lending will
allow the Bank Group to support the inclusive
Partners and sustainable integration of BH’s economy
in Europe. In the short-term however, the
IDA, together with the EU, chaired five inter- Bank will focus on helping BH mitigate the
national donor conferences that eventually impact of the global economic crisis, particu-
mobilized US$5.1 billion for BH in the post- larly on the most vulnerable BH citizens.
war period. This financial package was central
to the quick and successful reconstruction of As poverty in BH is strongly correlated with
BH’s basic infrastructure and services. formal employment, the Bank’s focus will
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be on poverty elimination through economic context of regional cooperation, the Bank
growth, improvement of the business envi- will support BH and its regional neighbors
ronment and job creation. Finally, the Bank reclaim the river Sava for navigability, which
will continue to support improvements in tar- will permit passage of vessels of 3,000 tons
geting and management of social programs to between Sisak (Croatia) and Belgrade (Serbia)
help reduce poverty through increased effi- for the first time since 1990 on this important
ciency of government spending, particularly European waterway. The proposed project
when it is directed to the most vulnerable. In is supported by the EC and the Regional
the future, it is expected that the Bank will Cooperation Council, and involves the four
likely be asked to help the country introduce riparian countries under the auspices of the
better public wage and management policies, International Sava River Basin Commission.
improved pension management systems, and
social contributions and tax measures that Last updated September 2010.
support competitiveness. In addition, in the http://www.worldbank.org/ida
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