created a joint multi-ethnic and
democratic government. This national government--based on
proportional representation similar to that which existed in the
former socialist regime--is charged with conducting foreign,
economic, and fiscal policy. The Dayton Agreement also recognized a
second tier of government, comprised of two entities--a joint
Muslim/Croat Federation and the Bosnian Serb Republika Srpska
(RS)--each presiding over roughly one-half the territory. The
Federation and RS governments are charged with overseeing internal
functions.

Economy

Economy--overview: Bosnia and Herzegovina ranked next to The
Former Yugoslav Republic of Macedonia as the poorest republic in the
old Yugoslav federation. Although agriculture has been almost all in
private hands, farms have been small and inefficient, and the
republic traditionally has been a net importer of food. Industry has
been greatly overstaffed, one reflection of the rigidities of
communist central planning and management. TITO had pushed the
development of military industries in the republic with the result
that Bosnia hosted a large share of Yugoslavia's defense plants. The
bitter interethnic warfare in Bosnia caused production to plummet by
80% from 1990 to 1995, unemployment to soar, and human misery to
multiply. With an uneasy peace in place, output has recovered in
1996-98 at high percentage rates on a low base, but remains far
below the 1990 level. Key achievements in 1998 included approval of
privatization legislation, the introduction of a national
currency--the convertible mark, agreement with the Paris Club to
reschedule official debt, and the conclusion of a Standby Agreement
with the IMF. Economic data are of limited use because, although
both entities issue figures, national-level statistics are not
available. Moreover, official data do not capture the large share of
activity that occurs on the black market. The country receives
substantial amounts of reconstruction assistance and humanitarian
aid from the international community. Wide regional differences in
war damage and access to the outside world have resulted in
substantial variations in living conditions among local areas and
individual families. In 1999, Bosnia's major goals are to implement
privatization and make progress in fiscal reform and management. In
addition, Bosnia will have to prepare for an era of d