Invest In Bosnia?

By Mike Sergeant BBC business reporter, in Sarajevo

Work rebuilding Mostar's bridge has started

Strolling around central Sarajevo on a Saturday evening, you could almost be in any European city.

Young people, smart and slick, spill out of bars into the summer night.

The roads are smooth, there are no power cuts and you can almost always get a signal on a mobile.

Huge sums of aid have been absorbed into the economy and 90% of the infrastructure has been rebuilt.

Barely functioning

But the impression of a country buzzing with energy and hungry to rebuild is partly an illusion.

It's been an awkward peace here.

Seven years ago the war ended, and with it the brutal siege of this city.

They made the mistake of giving the money to the politicians, not the businesses

Husein Ahmovic, entrepreneur

But Bosnia-Herzegovina still barely has a functioning government, troops patrol the streets and ethnic divisions continue to blight progress.

Scratch the surface and economic problems are never far away either.

Poorest in Europe

In places like Mostar you can still see huge piles of rubble. Almost every building is riddled with bullet holes, and work reconstructing the historic bridge, destroyed in the war, is only now beginning.

"They made the mistake of giving the money to the politicians, not the businesses," says Husein Ahmovic, general manager of Klas a local food company and one of the few genuine entrepreneurs here.

Nobody is seriously, properly trying to attract foreign investment

Faud Strik, Coca-Cola manager

The official economic figures seem to confirm a sense of business stagnation. Growth is slowing, unemployment is 40% and Bosnia remains the poorest country in Europe.

Those are the official figures, anyway. The World Bank thinks most activity takes place in the unofficial "black" economy.

Creating a legitimate business culture continues to frustrate local politicians and aid organisations.

Fast money

A few brave West European companies are nevertheless hoping Bosnia's regeneration can be their opportunity.

It's certainly a cheap place to do business. Bombed out old factories are literally being sold for a dollar, salaries are low and the workforce is highly educated.

But investing here is fraught with risk.

A group of Norwegian businessmen have taken a punt on a fish company in the mountain lakes near Mostar. They originally hoped to make some fast money by steering Norfish to profit in two or three years.

I want to live in Germany, where schools are better and there are jobs

Young girl

But the business plan is already behind schedule. The manager now talks vaguely about a return "in five years".

It's not all going smoothly at the Coca-Cola factory in Sarajevo either. It produces all of the Coke consumed in Bosnia. But ethnic political disputes are holding back decisions.

It's apparently harder to distribute Coke into the Serb-controlled area, than export it into an entirely separate country.

Stuck in the past

Red tape and institutional paralysis aren't the only difficulties. There's an image problem too.

On the drive from the airport to Sarajevo centre, bombed-out buildings and apartment blocks dominate everyone's first impressions of Bosnia. Not a great advert for doing business here.

"Nobody is seriously, properly trying to attract foreign investment. We haven't even started," says Faud Strik the manager of Coke.

Foreign investors tell local business leaders they'll only put serious money in when domestic companies start to show signs of life.

A few state-of-the-art local manufacturing plants are springing up. But much of the economy is stuck in the past.

The site of what was Yugoslavia's biggest factory stands a ruined shell in Sarajevo - the windows smashed, the socialist-era machinery outdated and worthless.

Entitlement mentality

The legacy of Communism still colours attitudes to business and money.

Before the war, people expected the government to run business. During and after the war, they expected the international community to feed them and rebuild the economy.

"People feel that governments have to provide everything. There is that entitlement mentality which has to be broken," says Joe Ingram the World Bank's representative in Bosnia.

Everybody agrees that the economy needs to be weaned off its addiction to aid and international hand-outs.

But many experts wonder whether the country is strong enough to prosper, if the overseas money dries up and the peacekeeping troops pull out.

Five-minute stock market

Those who have lived and worked here say things are gradually getting better, and say the past two years have brought some concrete gains.

The country now has a properly functioning banking system for the first time since the war.

But wherever you look, there is so much more to be done. The stock market in Sarajevo, for instance, only trades for five minutes, one day a week.

At embassies in the city, young people queue for visas. Thousands want to leave this country.

"I want to live in Germany, where schools are better, there are jobs and people have more fun," says one young girl.

Soon Bosnia will have to find its own way, without the guiding hand of the international community.

Success depends on persuading its young talent to stay and play their part in rebuilding the economy.