lV) SELF-SUSTAINlNG ECONOMY

Economic Reconstruction and Reform

1.The war all but destroyed the BiH economy. Since then, it has been assisted by billions of dollars provided by the international community.This was inevitable and essential in the immediate post-war period. But that period is now at an end. BiH must start to stand on its own feet.The flow of donor assistance -- unprecedented in its scope and scale--has reached its height, and will soon inevitably start to diminish. BiH and its leaders must make the most of what remains of this window of opportunity, and strive for a BiH that is ready for life with a reduced level of foreign aid.

2. The Council commends local authorities, the Council of Ministers and the Entities, for economic reforms and transition steps achieved in 1998. In particular the Council considers that the successful introduction of the stable KM has been a major achievement towards bringing macro economic stability throughout the country. This progress must be built upon in 1999 on the basis of the macro policy framework agreed under the Stand-by Arrangement with the IMF.

3. It is also essential for progress towards an efficient market economy that the Entities integrate more open and modern mechanisms within their economic institutions and markets to ensure a self-supporting economy. BiH's economy remains crippled by a bureaucratic mind-set and a statist system. Domestic equity is very limited and mostly restricted to trade activities. Foreign capital, which is necessary for the economy to take off, will not come before a set of drastic reforms have been completed, including a transparent privatization of enterprises and banks. The establishment of the rule of law and an independent judiciary is also a sine qua non of a free market economy. All these reforms should be in line with the European Union standards and practices.

4. Sustainable economic growth is essential to political stability. Normalization of Bosnia and Herzegovina's economic relations with its neighbors and the region as a whole is essential to building sustainable trade and investment links to the larger global economy. Bosnia and Herzegovina must commit itself to free-market principles, it must be prepared to harmonize its trade and investment regimes, laws, and institutions to international standards, to begin the process of accession to the  World Trade Organization, and to become a signatory to all other generally-accepted  international codes, conventions, and treaties that facilitate trade and investment.

Reconstruction and donors co-ordination

5. The Council invites donors to complete the four year reconstruction program in 1999 by sufficient allocations at the next Donors' Conference, due in the beginning of 1999. While it acknowledges the need to continue the physical reconstruction of infrastructure at all levels, the Council wishes to see additional international funds used in support of the political and economic priorities proposed by the High Representative and endorsed by the Council or the PlC Steering Board.

6. The Council stresses that reforms in all sectors of the country must gain further momentum. The reform program supported by the Council needs to receive appropriate funding. Therefore the Council asks the World Bank and the European Union to stress at the next donors' conference the importance of funding:

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