rtcis {_ 1 22964 WORLD BANK OPERATIONS EVALUATION DEPARTMENT SUMMER 1998 NUMBER 1 70 Post-Confl'ict Reconstruction: Bosnia & Herzegovina Case Study Summary ITq HF (CONF1lC. T IN BOSNIA AND HFRZEGOVINA RESULTED IN 250,000 deaths, massive internal displacement, and the exo- dus of one million refugees. The agreement in Dayton was reached only after the US and other key participants exerted substan- tial pressure on the three parties (Serbs, Croats, and Bosniacs). The agreement contains intentional ambiguities on many points, and avoids partition by calling for the three parties to participate in a highly decentralized relationship. It lays out a structure that com- bines two entities-the Muslim-Croat "Federation of Bosnia and Herzegovina" and the Serb "Republika Srpska" (RS) under the aegis of an unusually weak state. While the agreement calls for a major international aid effort for post-war reconstruction, it poses difficult problems for the reconstruction process and for the Bank and other agencies setting out to create economic and social condi- tions conducive to a sustainable peace. The Bank's response to post-conflict needs are generally appreciated. There is wide- in Bosnia and Herzegovina (BiH) was spread recognition that Bank-supported early and comprehensive. Its role in recon- projects were implemented quickly. Other struction and economic recovery is widely elements of success include: a wide disper- perceived to have been successful by BiH sion of benefits, both geographically and authorities, other donors, NGOs, and ben- to a broad range of beneficiaries; involve- eficiaries. The Bank's non-lending activi- ment of stakeholders; an early and bal- . ties, including providing a framework for anced inclusion of social sector projects ';IP' reconstruction and guidance to donors, to rebuild human and social capital; and 2 World Bank Operations Evaluation Department Resu lts on the Ground The benefits of Bank-assisted projects to date are being felt I _ _ _ throughout the Federation, and are increasingly reaching Republika Srpska. The range of benefits has been delivered quickly to a diverse set of bene- ficiaries, while involving stake- holders and building local implementation capacity. At this stage the projects cannot be evaluated for sustainability or institutional development. Rebuilding the F'conl(flA Despite obstacles arising from the problems of economic gov- ernance and from various fail- ures of the parties to adhere a contribution to local implementation capacity. BiH to major provisions of the Dayton agreement, the first authorities particularly appreciated the sense of owner- year and a half of peace have seen substantial eco- ship afforded them by Bank projects. nomic recovery. The Bank has played a central role in mobilizing and applying external resources critical to Bank Re-entry this recovery. The BiH experience demonstrates the Yugoslavia had been a steady borrower of the Bank importance of incorporating into a peace accord eco- since 1949, until lending ceased in 1991 with the nomic management provisions that are likely to breakup of the country. Bank planning for reconstruc- enhance the economic recovery process. tion began as soon as senior management expected that Major road and bridge repair has enabled traffic a peace agreement would be reached, and that the Bank to resume. Much electric power has been restored. would be a part of an integrated international effort. Production and commerce are recovering, although the The peace implementation agenda dictated a severe- manufacturing sector in late 1996 was still operating at ly compressed timetable for launching reconstruction only 10 percent of its pre-war level. Between the Bank's efforts. The Bank was able to adhere to this timetable balance of payments support and the sectoral infusions because of the availability of planning resources; the cat- by the Bank and other donors, both import capacity alytic role played by the Netherlands' ED; the strong and the demand for local goods and services have and visible support from the Bank's President; the Bank been recovering rapidly, especially in the Federation. taking the lead role in coordinating the planning work; Unemployment has fallen, but is commonly believed to coordination with other actors; and the dedication of remain very high (estimated at 50 percent in early 1997, Bank staff. with higher levels in the RS and the Mostar areas). The Bank developed a two-track assistance strategy; Although progress in privatization has been too slow to the first was a wave of emergency projects to help kick- draw foreign investment into the large enterprise sector, start the reconstruction effort without waiting for finan- small and medium-scale local firms have responded well cial normalization and membership in the Bank. The to opportunities created by the reconstruction effort. A sixteen emergency projects in this wave address all substantial number of schools and hospitals has been major infrastructure and social sectors. A full-scale reconstructed. assistance program followed, including clearing of arrears to the Bank and formalizing membership; devel- Rcbzuildinig Humwan and Social Capital opment and implementation of a full-scale medium- The Bank-supported BiH program shows an early and term assistance strategy to support BiH's systemic balanced inclusion of social sectors. Findings in the edu- reform program; and a continuation of support, in con- cation and health sectors so far include: junction with other donors, to the reconstruction pro- a education is not likely to contribute fully to reconcilia- gram for BiH. tion for some time, because of continuing sensitivities; Precis 3 * evenhandedness in addressing needs throughout the and sectoral implementation mechanisms that are the country is critical; natural areas for Bank activity. e investment programs designed by the entity govern- At the request of the Bank, BiH authorities appoint- ments are an appropriate framework for maximizing ed a Project Implementation Unit (PIU) director for the effectiveness of donor contributions. These pro- each Bank project. This sped the implementation grams facilitate donor coordination and fund raising; process, made it less expensive (because of the lower * support to ministries in both entities will be necessary costs of local staff), and allowed authorities to gain to ensure the transition from post-war emergency to implementation capacity. sustainable sector development; and e substantial sector restructuring and reform are required to D e m i n i n g ensure the sustainability of efforts made to date. BiH saw the implementation of the Bank's first stand- alone Landmine Clearance Project. Although the The employment-generation experience has been project provided valuable experience, it is not an area positive; however, there is a need for better information of Bank comparative advantage. The subject has major on job opportunities. Successful experience with micro- technical and military aspects that are not within the credit and employment-generation in the BiH program Bank's competence. Bank focus should remain on indi- indicates that the Bank may have a comparative advan- rect, non-clearance activities, such as coordination, tage in helping the government work with intermedi- information and mine awareness, training, and institu- aries at the local level in ways that result in effective tion-building. and efficient assistance to individuals. Despite the diffi- cult conditions (changing political and administrative Repatriation structure, high turnover) the first year showed progress Although the Bank has not been involved directly in in institution-building. resettling people, the demobilization and local initiatives projects address a main constraint facing returning Tbc Bank's Institutional Arrangements refugees and displaced people, namely, lack of employ- In BiH, the Bank adapted its institutional processes to ment and other opportunities for income-generation. the volatile post-conflict context, adopting streamlined With UNHCR as the lead agency, there is no compelling procedures; flexible financing; willingness to help inex- reason for the Bank to become more centrally involved. perienced local authorities with much of the initial preparation; and simplified procurement procedures, all The Next Phase of which allowed for quick and effective responses to The Bank's work in putting together the reconstruction urgent reconstruction needs. and recovery framework is appreciated by the govern- The rapid and successful implementation of Bank ment and the international community. There seems to efforts has been made possible by the high level of expe- be strong support for the Bank to drive policy work in rience and dedication on the part of staff; the strong the next phase. However, the Bank needs to ensure that senior management support; the early establishment it works with partners, even where it has the lead role. of an in-country presence; the establishment of good A problematic aspect, which occurs frequently in emer- working relationships with other partners; and the use gency assistance, has been the continuing tendency of of effective outreach efforts. some donors to work independently in project selection, The special attention within the Bank contributed priority setting, and procurement methods. However, to the overall quality of the program. A highly-skilled with those cautions in mind, the Bank's relationship country director was appointed solely for BiH. Her with NGOs and other partners in BiH is very good, and commitment to the process, and attention to speed and there are promising precedents for future work. quality of work was important in meeting the com- Working in post-conflict countries requires ade- pressed timetable for project processing. The resident quate budget, strong senior management support, representative's ability to deal with differing perspec- streamlined procedures, and experienced and dedicated tives and work with all involved parties in the resolu- staff. All those factors were present in the BiH recovery tion of issues is very much appreciated by the govern- efforts. For the most part, the Bank has delivered an ment, donors and other agencies. Although it has been effective "first wave" of reconstruction projects to the difficult to maintain the necessary separation between country. But as reconstruction continues, the Bank will reconstruction and politics, Bank staff have been sensi- have to focus less on "bricks and mortar" and more on tive to this and have tried to bring the parties together sustainability and transition issues. within the framework of the governance institutions OED Study Series Pr6cis Order Form Evaluation and Development: The Institutional Dimension (1998) Complete this coupon and return to: 1997 Annual Review of Development Effectiveness (1 998) The World Bank India: The Dairy Revolution (19981 Operations Evaluation Department Partnerships & Knowledge Programs (OEDPK) The World Bank's Experience with Post-conflict Reconstruction (1998) 1818 H Street, NW. Financial Sector Reform: A Review of World Bank Assistance (1998) Washington, D.C. 20433, U.S.A. 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