15 January 2007

Like living in a Chagall painting

By Eric Jansson
Published by Financial Times, 13 January 2007

I met the old man in a kitchen. Whose kitchen I cannot say. It was impossible to tell who lived where in Lasi, the tiny village deep in Latvia’s glorious countryside where I had holed up for the weekend at the invitation of a friend.

Everyone, including the villagers’ dogs, a comic parade of mutts lorded over by a motherly shepherd bitch, wandered in and out of each other’s creaky wooden houses, passing through open doors with nary a knock or holler. They rummaged through each other’s refrigerators, catnapped on each other’s sofas, used each other’s outhouse toilets and sweated themselves clean in the same pirts, the scorching communal sauna.

From the moment I left my car on the rutted track, waded through the chest-high cow parsley and inserted myself into Lasi’s jolly rhythm of life, I became the beneficiary of these people’s magnificent capacity to share.

At the kitchen table sat the wizened old man, one eye squeezed theatrically into a squint and the other, sky blue and bulging in my direction, sizing me up sceptically. With his massive manual labourer’s hand he grabbed the vodka bottle. He slid a second glass out into the middle of the table and filled it for me, to the rim.

It quickly became evident that my paltry Latvian vocabulary was inadequate for the quality of conversation required on the occasion. But the old fellow, bursting with a lifetime’s supply of bittersweet anecdotes and folk wisdom, was willing to employ his surviving Soviet-era Russian if I was pleased to drink with him.

“Amerikanets”, he called me when I explained I grew up near Chicago. The name stuck all weekend, though, as he refilled my glass again and again, I, of course, forgot his.

As the vodka flowed, we traded anecdotes, political philosophies and notes on faith. The old man served up an account of his war against the Red Army six decades ago, some thoughts on the lines dividing western and eastern Europe (“Russians are Asians dolled up in European costume”) and a hearty denunciation of the Lenin cult. I answered with tales from my stint on Capitol Hill in Washington, a view on the origin of justice as perceived by citizens in western democracies and a wordy moan deriding the effort of modern states to pose themselves as gods above men.

Time arrived for the pirts. The men, about 10 of us, tramped back through the cow parsley, stripped under a blazing sun and climbed into the little board-and-nail shack. The interior greeted us with its burning breath. The old man scrambled on to the top tier and I followed.

We all whipped each other with birch branches, dunked heads in bucketfuls of water and passed around drinks to replenish our fast dehydrating bodies. Everyone lasted 20 minutes but after that, one by one, they began to give out. “Enough,” a man would say, leaving the pirts and collapsing into a bathtub full of cold water propped outside. The old fellow and I stayed put, layered in sweat and shining in the candlelight, until we were alone.

“Amerikanets! What are you doing in here still? We’re the last. I thought you Americans were soft, but you’re a man!” he roared, clasping my arm and shaking it. I was woozy but I beamed in the darkness. Out he went. I took another minute to revel in my victory of endurance, then stumbled to the cold tub.

The nap that followed, taken in a fallow field shaded by a giant oak, was vivid with dreams. My Saturday in Lasi already felt like a Chagall painting. The balmy summer afternoon dozed on in perfect stillness but for the buzzing bees, until the sudden blast of a nearby shotgun startled me to my feet. Karlis, the local Soviet-Afghan war veteran, came striding through the grass, shooting and bellowing: “Time for a swim!”

Men and women piled into cars. We bounced our way to a nearby bend in the mighty Daugava, Latvia’s section of the river Russians call the Dvina, flowing west to the Baltic sea. At the riverbank, we clambered down through brush and boulders to the shimmering water’s edge.

No sooner had I removed my shirt than my resolution began to wobble. Karlis had already run ahead. I saw him, stark naked, charge like a bull into the river and dive in, followed by two women, equally bare and yelping with delight. The others likewise disrobed to the last thread – men, women and children together, some 20 friends and relatives.

Prudish instinct held me back but soon my restraint felt absurd. So I did it. Like an audience member at Stravinsky’s Rite of Spring forced suddenly to join the cast, I plunged in, starkers. This clearly pleased the old man, bronzed head to toe from a thousand previous dips of the same kind. He laughed loudly then dived beneath the surface.

European Christianity reached nowhere later than the Baltic states, where in the 13th century it arrived masked in the ghastly armour of the Teutonic knight. Histories now recall how native Livonians in those day ran to the rivers and ponds to “wash off their baptism” when the invader was away. Amid the splashing, shouting and show of flesh, I wondered if our romp in the Daugava physically resembled those ancient scenes.

Swimming made for pleasurable work against the chilly river’s relentless westward flow. But a few minutes of going nowhere wore me out so with some others I retreated to the reedy bank, panting, to collect stray clothes and bask in the sun.

White butterflies flapped paper wings in the tall grass. Fat bumblebees climbed precariously over the petals of bobbing wild flowers. Laughter rang out from the far side of the river. Soon we would drive back to Lasi for supper and another round.

02 January 2007

Testing the limits of intervention

By Eric Jansson
Published by Financial Times, 20 December 2006

W hat will be the political legacy of more than a decade of international intervention in Bosnia-Herzegovina?

Few experts have answered this question more provocatively than the European Stability Initiative, a think-tank founded in a Sarajevo café seven years ago and now based in Berlin. Researchers there argued three years ago that, although the peace achieved in 1995 had laid a foundation for future stability, ongoing involvement by the international community had infantilised Bosnia’s domestic political leadership.

Successive UN-appointed high representatives have wielded powers to impose or reject laws, to back elected politicians and ban others from office. ESI called this situation an outrage. Bosnia resembled a “European Raj”.

Vigorous international intervention in Bosnian politics had reached the point of diminishing returns, the think tank said. The high representative had grown into a de facto executive whose farthest-reaching powers – a set of extra-constitutional levers called the Bonn powers – should no longer be used.

The UK’s Paddy Ashdown, the previous high representative, left office last year after using the Bonn powers frequently and aggressively in an effort to prepare Bosnia to fly on its own.

Christian Schwarz-Schilling, the veteran German parliamentarian who became high representative in January this year, is a staunch proponent of the ESI perspective. The resulting changes in the workings of Bosnia’s political system, from Lord Ashdown’s time in office until today, have therefore been immense.

A friend of the Berlin think-tank with a long background as an international mediator in Bosnia, Mr Schwarz-Schilling took up his post in early 2006 as the choice of Angela Merkel, the German chancellor, whose turn it was to select a candidate. He brought with him an ESI member, Chris Bennett, as his spokesman.

The infusion of anti-interventionism into the Office of the High Representative, an international office established on an interventionist premise, has not been universally welcomed. Mr Schwarz-Schilling endures much fierce criticism behind his back, even from OHR staff. Yet he is keen to defend a record that, according to his critics, has been mostly “doing nothing”.

Taking a hands-off approach may have caused some backsliding, he says, but “when we intervene, the truth does not rise to the surface”.

One of his highest-priority jobs is to determine whether his job can be eliminated next June, when the post could be downgraded to that of a European Union “special representative”. The EU supervisory position envisaged for Bosnia would carry fewer powers, in effect shifting the country from post-war semi-protectorate to fully sovereign status. When the international committee formed under the Dayton peace treaty makes its final assessment in February, “the question has to be really open”, he says.

Mr Schwarz-Schilling says he has not yet made up his own mind about the closedown date, but a retraction of the Bonn powers would be “too dangerous” at this moment. The country’s reform agenda is in a “very bad” state, with local political leaders failing to take sufficient responsibility for their own proposals – some of which would bankrupt the state if allowed to proceed.

Before Bosnia’s October general elections, the international community suffered a significant failure when a US-drafted proposal for constitutional reform failed narrowly to attract the required two-thirds support in the state parliament. That disappointment has left the US and EU without a clear plan for strengthening the domestic political system to ensure readiness for sovereign rule.

“We have no starting point at this time for constitutional reform,” Mr Schwarz-Schilling says.
Some senior European diplomats describe 2006 as a grim year for Bosnia. Yet Mr Schwarz-Schilling says there has been at least one big breakthrough. “Before I came, there was an illusion that everything was great. Now there is not.”

Yet the OHR remains, as the ESI pointed out, the country’s de facto executive.

With the relaxation of authority at the top, Bosnia’s elected leaders have tested the limits of international patience.

Milorad Dodik, the dynamic prime minister of Republika Srpska, the Bosnian Serb sub-state, raised the high representative’s ire by floating the idea of a referendum on independence. Such secessionist talk is the ultimate taboo in post-war Bosnian politics. While no one denies that the referendum would gain overwhelming support from Bosnian Serbs, the inviolability of Bosnia-Herzegovina’s borders as an ex-Yugoslav republic were a central plank of the Dayton accords.

Lord Ashdown might well have fired him outright. Mr Schwarz-Schilling’s reaction was more tentative. He spoke about sacking Mr Dodik, but then backed off. A Bosnian Serb political cartoon showed Mr Dodik casually urinating in Mr Schwarz-Schilling’s eye. Not many years ago, even the cartoonist would have faced international sanctions.

Mr Schwarz-Schilling insists he was “not outplayed” by Mr Dodik, even if the incident “did damage”. The Bosnian Serb leader “now knows that a referendum is not a possibility”.

Mr Dodik has strengthened links to Serbian leaders in Belgrade. Meanwhile the Bosnjak-Muslim and Croat members of Bosnia’s tripartite presidency insulted their Serb counterpart – a member of Mr Dodik’s party – by leaving together, unannounced, for a meeting with Stipe Mesic, president of Croatia.

Haris Silajdzic, the Bosnjak president, shows little appetite for painstaking diplomacy despite his relentless insistence that multi-ethnic rule can work. He even attacks the constitutional viability of the three-member presidency to which he has been elected. “It’s ridiculous, for God’s sake, a merry-go-round.”

Yet the president says that the US and EU, in particular, played with fire when lobbying for constitutional change this year. The proposed amendments would have enhanced “entity-based” voting in the state parliament, further cementing the powers of the Bosnian Serb sub-state. “It was practically the dissolution of the state,” he says, adding that it convinced some Bosnian Muslims previously allied to the US that Washington is no longer a friend.

Many true Bosnians from all ethnic groups remained peaceful despite facing the gravest threat during the war, Mr Silajdzic says. The international community should keep its high-mindedness to itself. “They come and lecture us on civility? I mean, come on.”

It may be time for Mr Schwarz-Schilling’s hands-off approach. But the initial results are not heartening.

Doin' the Kalashnikov

By Eric Jansson
Published by Financial Times, 20 December 2006

How to define the borders of a region when the usual measures – economic, political, cultural and topographical – overlap confusingly?

In the Balkans, one way is with music. Driving south-east from Austria, turn on the car radio and scan for unfamiliar sounds. Where the warbling melodies start, you’re crossing in. Where they dominate the dial, you are there.

By the time you get to central Bosnia-Herzegovina, you are fully submerged. All the hallmarks of Balkan music – the singers’ tortured warbling, the tonal structures modestly challenging to the western ear, the pounding beats of pumped up “turbofolk” pop songs – are unrelenting. Not just Bosnjak, Serb and Croat influences but Hungarian, Roma, Turkish and other sounds blend with the inevitable doses of rock n’ roll and hip-hop.

Balkan music is a volatile concoction. Though instantly identifiable, it can also be difficult to define. Selling it outside the region is even harder.

Yet at least one of its practitioners has found a way to shape Balkan music appealingly for a global audience. Goran Bregovic, a Sarajevan of mixed Serbo-Croat parentage, left Bosnia during Yugoslavia’s painful collapse. He has since lived in Paris, returning to Bosnia for holidays and gigs.

Formerly a rock n’roller with the Yugoslav-era band Bijelo Dugme (White Button), Mr Bregovic, 56, now works with broader orchestral forms. His compositions charm a broad international audience, although many listeners do not know him by name.

He frequently composes for the cinema, most recently contributing to the score for Borat, Sacha Baron Cohen’s wildly successful spoof, which Mr Bregovic predicts could prove “socially as important” as Charlie Chaplin’s 1940 parody, the Great Dictator.

“Humour is a higher form of communication,” he says. Like other artists from black-humoured Bosnia, Mr Bregovic deploys it powerfully and sarcastically in his music.

Among the original compositions he performs with his brass-heavy touring orchestra is a wild song called Kalashnikov, after the ubiquitous AK-47 assault rifle. Punctuated with blurting horns and hearty cries of “Boom! Boom! Boom! Boom! Boom!” the song manages to convey both a gleeful, devil-may-care will to destroy while delivering, through its conscious excess, a subtler message that perhaps the listener should care.

It may be easier to joke like this in Paris than in Sarajevo. At the executive level occupied by the international community in the Bosnian capital, diplomats do their utmost to infuse public life with a distinctly humourless political correctness – the antithesis of the whimsical, combative Balkan culture that many say perpetuated the war. Songs such as Mr Bregovic’s are a reminder of the grittier, franker culture that prevails at street level.

He manages to pose himself both as an advocate of inter-ethnic tolerance and as a battler against homogeneity in an age of globalised tastes and perspectives.

“Fortunately the world does not begin and end with MTV. In all parts of the world, I seem to come across curious people who appreciate weird composers whose music doesn’t sound like the mainstream,” he says.

This is a lesson many younger musicians in Bosnia struggle to heed. Sarajevo has long been a creative centre for aspiring pop and jazz musicians, a hub of nightlife and liberalism. Still, most upstarts are tempted either to mimic western groups, as Mr Bregovic acknowledges Yugoslav-era rockers did, in a “faint provincial echo” of their idols, or to indulge the kitschiest excesses of turbofolk. Local musicians rarely innovate. They do, however, respond to local stimuli, turning Bosnia’s political frustrations into fodder for protest songs.

A prime example is Sarajevo-based Dubioza Kolektiv (The Dubious Collective). Adding traditional Bosnian musical riffs to the western idioms of reggae, dub and hard core, the group of seven performers – a woman, Adisa Zvejic, joined by six unambiguously angry young men typically dressed in fatigues – rant stylishly about public life in Bosnia.

There is nothing inauthentic about the frustrations expressed by Ms Zvejic when she belts out Dubioza Kolektiv’s anthem “Triple Head Monster”, a boisterous tongue-lashing of Bosnia’s ludicrously ineffective tripartite presidency and political corruption in general. Her sentiment is one of the few shared across the country’s ethnic divides.

Diplomats at the helm in Sarajevo, if any hear this storm of noise or see the seething video that accompanies it, must feel lucky the anger is not directed at them.

High hopes, slippery slopes

By Eric Jansson
Published by Financial Times, 20 December 2006

“Say it’s like Colorado,” says Dragan Petkovic, grinning and dragging on a cigarette in an empty café at Jahorina, the Bosnian ski area where he is deputy manager.

But it is not like Colorado.

Outside, freshly fallen snow makes the mountaintops sparkle on a crisp, bright morning. Jahorina’s modest peaks link together in a row, forming a high ridge of brilliant white set against a clear blue sky. Ski trails plunge from the bare heights, cutting through tall pines on the mountainsides.

Mr Petkovic and others would like to see Jahorina become a major European ski destination. Unfortunately the similarity with premier resorts ends with the natural scenery.

Bombsites are not a big problem. Little visible damage remains from the airstrikes on Jahorina in 1995, when Nato warplanes dropped 1000-lbs bombs to disrupt the area’s use as a command centre and recreation spot for Ratko Mladic and the Bosnian Serb army. The mountain has been demined, too.

Still, the ski area suffers from the fundamental problems of underinvestment, lack of planning and Bosnia’s ongoing war-related isolation in the south-east European tourism market.

Jahorina saw bright days in the past – none brighter than its brief stint as an alpine skiing venue during the XIV Olympic Winter Games. The war cancelled out whatever marketing advantages the Olympic legacy once afforded. Yet hope springs eternal at this high-altitude destination 45 minutes away from Sarajevo.

Already, during the three-month high season, a healthy stream of visitors flows in from nearby Serbia and Slovenia, along with the nearby capital city. The trick now is to broaden and enrich the market by raising quality dramatically, say local tourism investors.

“Jahorina is a real skiers’ mountain. It is not a place for the elite right now, but that does not mean it never will be,” says Dragan Cirkolovic, manager at the Hotel Bistrica, one of the largest hotels on the slopes.

According to a master plan commissioned by public tourism officials for the Republika Srpska, the Bosnian Serb sub-state, and drafted by Hypo Alpe Adria Consulting, the ski area can be brought up to a high European standard by 2016.

The proposed upgrade is a massive undertaking, expected to cost an estimated €400m over a decade. This would be one of Bosnia-Herzegovina’s largest investment projects, dwarfing anything else seen in the tourist sector – and most other sectors. Indeed the sheer scale of the proposal raises doubts about its practicability.

Some tourism experts say Sarajevo’s dream of becoming a major winter sports destination, competing with the Alps, is a fantasy, despite Jahorina’s prospects. “It is never going to happen,” says Thierry Joubert, a Dutch entrepreneur at the helm of Sarajevo-based Green Visions, a specialist operator focusing on eco-tourism, including backcountry skiing.

Yet it is not entirely impossible to imagine a refurbished Jahorina rebranding itself, in the words of the master plan, as “the top mountain destination in southeast Europe”.

The master plan’s implementation will depend heavily on the participation of private investors, a prospect that Mr Petkovic, among others, welcomes. “We need privatisation right away. Better today than tomorrow,” he says.

Wholesale privatisation is not on the cards for Jahorina, although Bosnia’s other former Olympic ski areas, Igman and Bjelasnica, have considered the option. Defacto privatisation of business operations looks more likely. The master plan calls for a wide variety of investments, some private, some public and some through public-private partnerships, to tackle the resort’s many current shortcomings.

The plan would leave almost no aspect of Jahorina’s operations and infrastructure untouched.
It points out, for instance, that the resort area itself is prohibitively small. Four Jahorinas would fit inside a big European or American ski area. There is, however, plenty of room to expand onto the virgin territory of neighbouring mountains. The plan recommends two major rounds of expansion, with the first new slopes opening in 2010. By 2015, Jahorina’s total terrain is meant to reach a world-class 1,360 hectares.

The plan also foresees upgrades to key ski-related infrastructure – especially the lifts. Whereas many European and American resorts have invested since the 1980s in high-tech lifts and heated gondolas, Jahorina still uses the same pokey chairlifts of two decades ago.

Better accommodation will also be critically important. Most of the hotels clustered at the base of the slopes look anything but graceful. A few are totally unchanged from Yugoslav days, with hammer-and-sickle plaques on prominent display in entry halls. Just one, the Hotel Termag, offers what most western visitors would consider a high standard of comfort and style.

The planners know how much must be done to recapture Jahorina’s fleeting glory. But they still have a question to answer: how would Jahorina’s the area’s hypothetical private investors ever be able to recoup the enormous upgrade costs? Europe’s skiers, after all, already enjoy abundant, high-quality, low-cost competition in the Alps.

The wild frontier of European securities

By Eric Jansson
Published by Financial Times, 20 December 2006

Ahmed Hodzic and FIMA International, the Sarajevo stock brokerage he runs, operate on the wild frontier of emerging Europe’s new securities markets.

To visit FIMA’s offices, one must leave the cozy eastern end of the Bosnian capital, the zone where the big yellow Holiday Inn and the twin glass towers of the UNITIC office try to offer visiting foreign businesspeople a sensation of being somewhere like home.

The taxi pulls up at a concrete apartment block riddled with shrapnel splashes and bullet holes. Dreary shops occupy the street level. In a window above a hairdresser, a paper sign reads “FIMA”, indicating that the company’s entrance is around the other side.

Though a back passage and up a dim flight of stairs one finds Mr Hodzic and his assembled brokers, attending to telephones and computer screens. Market demand imposes a sober discipline in the modest office. Mr Hodzic checks his watch and explains that a surge in trading is anticipated in half an hour.

Perched in this battered apartment block, FIMA International claims to handle a third of total turnover on the five-year-old Sarajevo Stock Exchange.

By its appearance, the local brokerage firm is still a world away even from Croatia, where FIMA International’s parent company, FIMA Holding, is based.

But Mr Hodzic is counting on the emergence of a bigger, livelier market for Bosnian securities, having witnessed similar developments elsewhere in the region. “Our people still do not believe in markets like the Croatians or the Slovenes now do, having seen what happens when markets really take off. But they should, and I hope they will,” he says.

Growing demand is evident. Most of the business after the Sarajevo exchange’s opening involved domestic trades of publicly-issued funds, akin to privatisation vouchers. Today some 90 per cent of FIMA International’s clients are foreign. Many but not all come from wealthier Balkan economies, Mr Hodzic says.

This influx has helped push the SASX-10, an index of 10 leading Sarajevo-listed stocks, up 70 per cent from January to early December, despite lacklustre performance in the first half of this year.

Brokers in emerging markets expect big fluctuations. The recent strong gains do not eliminate concerns expressed by Mr Hodzic and other securities market experts that growth is artificially restrained by Bosnia’s restrictive trading rules and by a lack of transparency on the Sarajevo exchange.

Outdated law is the fundamental problem. Sarajevo is located in the Federation, the post-war “entity” in Bosnia-Herzegovina populated predominantly by Bosnjak-Muslims and ethnic Croats, where a new draft law on securities has been stuck in parliamentary procedure for a year.

The current law dates back to before the Sarajevo exchange existed. The result is a complicated mismatch between legislative theory and market realities, with regulatory institutions ill-equipped to carry out their duties and traders left to improvise. Neither brokers nor exchange officials are satisfied, yet together they have failed to persuade legislators to move faster.

“We constantly apply pressure, but we don’t have results,” Mr Hodzic says. Despite growth in demand, “investors have taken out a lot of money and gone to other markets such as Montenegro”.

Growth is also restrained by the division of the country’s securities markets along post-war entity lines. The country’s other, Serb-dominated, entity Republika Srpska, is home to a second, smaller exchange in Banja Luka. Laws prohibit a broker based in one entity from trading securities on the exchange in the other entity. Everyone but the country’s most hard-line ethnic politicians wants this changed.

The Serb sub-state has taken the first step, offering to open its market to Federation brokers if lawmakers in Sarajevo reciprocate. So far there is no deal, but chief executives at both exchanges are agitating for openness.

Jasna Zrilic, director of Broker Nova, the biggest broker in Banja Luka, predicts eventual market unification. “I think that the Sarajevo Stock Exchange and the Banja Luka Stock Exchange will be one in the future. It’s only natural. They are both so small,” she says.

One reason they are small is the underdevelopment of Bosnia’s bond market, still in its earliest infancy amid predictable political friction. For now, company shares and investment funds are the only products on offer.

Kemal Kozaric, governor of the country’s central bank, has dropped his previous cautious opposition to the issuance of securities by the central state. “There is no reason for Bosnia not to go ahead and issue state securities. I have been preaching so much on this point at conferences that my chest hurts from all the effort,” he says.

Privatisation stokes Bosnian rivalries

By Eric Jansson
Published by Financial Times, 20 December 2006

When a foreign investor bought Republika Srpska’s fixed-line and mobile telecommunications operator this month, privatisation officials in Bosnia-Herzegovina’s Serb-dominated sub-state cheered. The “entity” government set a minimum price of €400m for a 65 per cent stake in Telekom Srpske, and the winning bid came in at €646m.

It was a record-breaking privatisation price for Bosnia-Herzegovina, a country hungry for foreign investment. So why do Bosnians grumble about it?

As with most disputes in the country, it boils down to ethnic rivalry.

Privatisation sales are carried out at the entity level – by separate agencies in Republika Srpska and in the Federation, the entity dominated by Bosnjak-Muslims and ethnic Croats. Within the Federation, smaller sell-offs are the preserve of individual cantons. Big sales, therefore, boost overall revenue and investment but reinforce the country’s internal divisions. Few deals have been more sensitive than Telekom Srpske’s.

A significant reason is the buyer, Serbia’s state-owned operator Telekom Srbija.

For many non-Serb citizens, Belgrade’s involvement arouses deep suspicions. Conspiratorially- minded critics say the sale will help security services in Belgrade to listen in on Bosnian telephone conversations.

Vojislav Kostunica, Serbia’s prime minister, says the deal is all about smart investment, especially as Belgrade intends to sell Telekom Srbija to a global telecom operator.

Yet Mr Kostunica also has a rare knack for stoking nationalist fires with vague and muted rhetoric. “It is natural for Serbia to occupy the position that belongs to us,” he said of the telecom acquisition at a meeting with Milorad Dodic, prime minister of the Bosnian Serb statelet.
Telekom Srpske’s impressive sale price has also raised questions about non-business considerations behind the Serbian bid. The only other bidder, Telekom Austria, offered just €467m.

Vladimir Mackic, director of privatisation in Republika Srpska, says there was no political interference in the Telekom Srpske sale. “Our politicians want us to work according to the law,” he says.

He says he was disappointed six other bidders dropped out before the final round.
Policymakers in the Federation are also, by their own admission, upset that Mr Dodik’s privatisation team was quicker to the draw. BH Telekom, one of two Federation-based operators, is also slated for privatisation.

Despite their entity-based ownership, all local operators are licensed to offer mobile telephony throughout Bosnia-Herzegovina. With the injection of capital from Belgrade, the Bosnian Serb network will gain an early lead in the race to capture the whole mobile market. This reduces BH Telekom’s market value.

Before the Federation moves forward on BH Telekom, privatisation officials there aim to sell at least two other big properties, the civil engineering firms Energoinvest and Hidrogradnja.

While the entity has already sold 71 per cent of all its companies slated for sale, these have been mostly small firms and represent only 40 per cent of the earmarked assets.

Big sales in the Federation have included a steel mill, now owned by Mittal Steel, and a cement factory scooped up by Germany’s Heidelberger Zement, but nothing big sold this year.

Meanwhile, Mr Mackic’s team is looking ahead to the Serb statelet’s next big thing: the public power utility, Elektroprivreda.

Privatisation of the Bosnian Serb power system also, in effect, began this month. The decision by CEZ, the Czech power utility, to invest €1.5bn in the sub-state’s power network introduces new ownership into the sector.

By contrast, the Federation’s recent energy sector privatisation looks small. MOL, the Hungarian oil company, and its Croatian affiliate INA in August purchased a 67 per cent stake in Energopetrol through a €110m deal involving recapitalisation and direct payments.

That also raised tensions within the Federation, as the government in Croatia controlled INA at the time. Zagreb has since sold off its INA stake, but Bosnjak lawyers are still trying to undo the Energopetrol deal.