COUNTRY PROFILE Bosnia and Hercegovina (BiH) Croatia Our quarterly Country Reports on Bosnia and Hercegovina and Croatia analyse current trends. This annual Country Profile provides background political and economic information. 1997-98 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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ISSN 1366-4247 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 October 10, 1997 Contents Bosnia and Hercegovina (BiH) 3 Basic data 4 Political background 4 Historical background 6 Constitution and institutions 7 Political forces 9 International relations and defence 11 The economy 11 Economic structure 11 Economic policy 13 Economic performance 14 Resources 14 Population 15 Education and Health 16 Natural resources and the environment 16 Economic infrastructure 16 Transport and communications 17 Energy provision 18 Financial services 18 Other services 19 Production 19 Industry 20 Mining and semi-processing 20 Agriculture and forestry 21 Construction 21 The external sector 21 Merchandise trade 23 Invisibles and the current account 23 Capital flows and foreign debt 24 Foreign reserves and the exchange rate 25 Appendices 25 Sources of information 26 Reference tables EIU Country Profile 1997-98 © The Economist Intelligence Unit Limited 1997 2 Croatia 29 Basic data 32 Political background 32 Historical background 34 Constitution and institutions 35 Political forces 36 International relations and defence 37 The economy 37 Economic structure 38 Economic policy 39 Economic performance 40 Resources 40 Population 41 Education and health 42 Natural resources and the environment 42 Economic infrastructure 42 Transport and communications 43 Energy provision 44 Financial services 45 Other services 45 Production 45 Industry 46 Mining and semi-processing 46 Agriculture, forestry and fishing 47 Construction 48 The external sector 48 Merchandise trade 50 Invisibles and the current account 51 Capital flows and foreign debt 51 Foreign reserves and the exchange rate 53 Appendices 53 Sources of information 54 Reference tables EIU Country Profile 1997-98 © The Economist Intelligence Unit Limited 1997 Bosnia and Hercegovina (BiH): Basic data 3 Bosnia and Hercegovina (BiH) Basic data Land area 51,129 sq km (21% arable, 10% pasture and 46% forest) Population 4.4m according to the last census, in 1991; estimated at 3.2m in 1996. Main towns Population in ’000, 1991 (wartime upheaval has brought considerable changes) Sarajevo 526 Banja Luka 195 Zenica 146 Tuzla 132 Mostar 126 Prijedor 112 Climate Continental in Bosnia and parts of Hercegovina; sub-Mediterranean in south- ern Hercegovina. Weather in Sarajevo Hottest month, July, 18-23°C; coldest month, December, 0-2°C; wettest month, June, 110-115 mm average rainfall; driest month, December, 20-70 mm average rainfall; Languages Bosnian, Serbian, Croatian (which are almost identical) Measures Metric system Currency The Bosnian dinar (BiHD), which is fixed against the D-mark at a rate of BiHD100:DM1, is used in Muslim-controlled parts of the Federation of BiH; the Yugoslav dinar (YuD) is used in the Republika Srpska; and the Croatian kuna (HRK) in Croat-controlled parts of the Federation of BiH. The D-mark is used throughout BiH. Time 1 hour ahead of GMT EIU Country Profile 1997-98 © The Economist Intelligence Unit Limited 1997 4 Bosnia and Hercegovina (BiH): Historical background Political background Historical background Ottoman and Slav tribes settled in the territory of modern Bosnia and Hercegovina (BiH) in Austro-Hungarian rule the sixth and seventh centuries. In the Middle Ages the area experienced peri- ods of Byzantine, Croatian, Serbian and Hungarian authority, as well as periods of independence under native Bosnian princes. In the 15th century Bosnia was incorporated in the Ottoman Empire, and it remained under Turkish rule until 1878, when it was placed under Austro-Hungarian control. During the Turkish period much of Bosnia’s population converted to Islam, contributing to the country’s complex profile in the modern era: by the 19th century the popu- lation was divided among three main ethnic or religious groups, Orthodox Serbs, Catholic Croats and Muslims, who were increasingly forced to assert their own identity in the face of competition for their allegiance from their Serb and Croat neighbours. Serbian aspirations to Bosnian territory, and resent- ment at Vienna’s annexation of the province in 1908, provided the spark for the First World War, when a young Bosnian Serb nationalist assassinated the Austrian archduke, Franz Ferdinand, in 1914, leading to an Austrian attack on Serbia. The war ended with the collapse of Austria-Hungary and the formation of a united Yugoslav state (called the Kingdom of Serbs, Croats and Slovenes until 1929), including Bosnia. Bosnia in Yugoslavia In the Kingdom of Yugoslavia, Muslim political leaders managed, by reaching an accommodation with the dominant Serbian rulers, to achieve some limited influence but the state was racked by ethnic divisions, especially between Serbs and Croats. From 1929 Bosnia was divided among administrative units in neighbouring Serbia, Croatia and Montenegro. Following the Axis occupation of Yugoslavia in 1941, BiH was incorporated in a German-puppet Independent State of Croatia (NDH), under the Croatian fascist Ustasha movement. The war magnified inter-ethnic tensions in BiH to a level not hitherto seen, in an upsurge of slaughter which was contained only by the takeover of the pan- Yugoslav, Communist-dominated partisan movement in 1945. BiH became one of the six constituent republics in Communist Yugoslavia, and, in 1968, its Muslims were recognised as one of the country’s six constituent nations. The demise of Yugoslavia The victories of nationalist parties in the first free elections in Yugoslavia in and descent into war 1990 set the country on the path to dissolution, with particularly damaging consequences for multi-ethnic BiH. Following the EU’s recognition of the inde- pendence of Slovenia and Croatia in January 1992, two-thirds of BiH’s popu- lation—mainly Croats and Muslims, as Serbs mostly boycotted the poll—voted for Bosnian independence in a referendum ending on March 1, 1992. Inde- pendence was declared on April 6, 1992, and was swiftly recognised by the EU and other states. Most of BiH’s Serb population rejected the move, and, having already carved out a number of Serb-controlled regions, with armaments left by the former Yugoslav army (JNA) unleashed a war which was to rage for three and a half years. The war eventually pitted each constituent nation against the other two EIU Country Profile 1997-98 © The Economist Intelligence Unit Limited 1997 Bosnia and Hercegovina (BiH): Historical background 5 and led to the forced uprooting (“ethnic cleansing”) of hundreds of thousands of people, widespread atrocities and slaughter. Croats in Hercegovina in July 1992 proclaimed their own para-state of Herceg-Bosna, following which fight- ing erupted between Croats and Muslims. This lasted until early 1994, when the USA brokered a peace deal, setting up a Muslim-Croat Federation of BiH on the