Bosnia's failed sell-offs of state companies after communism root cause of unrest

The Associated Press

FILE - In this Friday Feb. 7, 2014 file photo, Bosnian protesters throw stones towards a local government building during a protest in the Tuzla, Bosnia. The violence engulfing Bosnia in recent days, with scenes of burning government buildings and protesters pelting police with stones, has many root causes. One of them is the failed privatizations of state-owned companies. (AP Photo/Amel Emric, File)

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"They couldn't earn them," he said. "The company made no profit and its accounts are blocked until the judgment is passed."

Stanic moved his other private companies into the Feroelektro facilities without making them pay rent, but requiring Feroelectrio to pay the utility costs, Feroelektro union worker chief Senad Smajic said.

Stanic took out a 2.4 million-euro loan and offered Feroelekro's most valuable building in downtown Sarajevo as collateral. With the money, he built a private lime factory while making Feroelektro pay his loan back, Smajic explained.

"He treated our company like a parasite that sucks your soul out," Smajic said.

The head of the government privatization agency, Suhret Fazlic, said before he took the post two years ago, everything at the agency was done according to a "mafia pattern that includes people in high positions and people in the judiciary."

Analysts and international officials blame Bosnia's political setup for the situation, saying the country must reform its constitution in order to start functioning properly.

The 1995 Dayton Peace Agreement ended the vicious war between Bosnia's three ethnic groups — Bosniaks, Croats and Serbs. It divided the country into two autonomous regions, one for Serbs and the other shared by Bosniaks and Croats. The regions are linked by a weak central government, parliament and presidency.

The Bosniak-Croat Federation is further divided in 10 cantons, each with a similar set of institutions, meaning that nearly 4 million people are governed by more than 150 ministries on four different levels of government - an expensive and ineffective system that scares off foreign investors and is preventing the country from joining the European Union.

The monthly salaries of parliamentarians are the highest in the region — up to 3,500 euros ($4,750.55) — while average salaries don't exceed 350 euros.

Corruption is widespread and high taxes for the country's bloated public sector eat away at residents' paychecks. Privatizations have decimated the middle class and sent the working class into poverty.

Some observers believe widespread corruption has been allowed to flourish, benefiting an elite group with political connections.

"They have penetrated the state, turning the government itself into a facade," said Denisa Kostovicova, an associate professor of global politics at the London School of Economics. "What now appears as a dysfunctional state is in actual fact a very functional system that distributes the privileges, but only to the networked."

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