Abstract
The 1992-95 war left Bosnia' s road and railway infrastructure devastated.
Bosnia' s highway network
currently stretches for a mere 30km across the
country, significantly impacting on inter- and intracountry
transport, and
consequently trade and economic expansion. However, change is on the horizon.
In
October 2008, according to Reuters, Bosnia' s Serb Republic parliament
has approved a delayed EUR3bn
deal with Austrian builder Strabag to
construct 430km of road network. Additionally, the European
Bank for
Reconstruction and Development (EBRD) has finalised a loan of EUR180mn to
Bosnia-
Herzegovina to build key sections of the Trans-European Corridor
Vc. The EBRD loan is part of a
EUR480mn investment in the priority
motorway sections of Corridor Vc, a key transport artery linking
Bosnia-Herzegovina with the rest of Europe, which will be partly financed by
the European Investment
Bank (EIB). Corridor Vc starts in Budapest,
Hungary, and ends in the Adriatic port of Ploce, in Croatia.
All told, the
picture that emerges of Bosnia’s road and rail network is roughly
transposable to other key
infrastructure sectors including construction
and energy; namely, that they been significantly impacted by
war, are
consequently generally underdeveloped, and that opportunities and financing
exist for
established infrastructure companies and new entrants. Current
notable participants include Grupo Isolux
Corsan SA, Danieli Group, Enka
Construction & Industry Co. Inc., FCC, Fomento de Constr. y
Contratas SA,
Granit Construction Stock Co., KB, Obrascon Huarte Lain SA, the
aforementioned
Strabag and Vinci.
Bosnia is one of the few emerging
Europe markets, whose construction and infrastructure industry value
will
remain in positive territory throughout BMI’s forecast period. In
BMI’s Q109 Bosnia Infrastructure
Report we forecast that the
industry value real growth will be 0.6% for 2009. However, the reason why
it
will remain positive is because the market value is so small, a mere
US$670mn in 2008, that any small
change will gave a big impact in terms of
percentages.
Bosnia' s political climate continues to be characterised by
ongoing tensions among the country' s major
ethnic groups. While these poor
relations have so far failed to re-manifest themselves into scenes of
interethnic
violence, they have nevertheless caused a near paralysis of
policy-making inside national level
government institutions. We maintain
our core view that divisions among Bosnia' s political leaders will
continue to retard policy-formation, thus slowing the country' s progress
towards European Union (EU)
membership. Indeed, our negative outlook on
Bosnia' s political climate is reflected in the country' s low
score of 46.7
out of 100 (with higher ratings indicating a more positive outlook) in our
short-term
political risk ratings. Going forward, we believe the country' s
efforts at greater integration with euro-
Atlantic institutions, in
addition to its underlying longer-term stability, will in large part be
determined by
the policies and rhetoric of ethnic-nationalist political
leaders at the sub-state entity level.
Turning to the prevailing economic
conditions, we believe the ongoing slowdown in eurozone economic
activity,
combined with the continuing deterioration in global credit markets, are set
to negatively impact
Bosnia' s growth potential in the medium term. Going
forward we expect real GDP growth to slow to
5.0% in 2009, down from 5.8%
in 2008. That said, compared to our forecast that sees eurozone growth
crawling along at 0.2% and 1.6% for the same time period, respectively, Bosnia
is set to be a relative
outperformer compared to its regional peers.
Indeed, we expect the country to maintain relatively robust
rates of
growth through our forecast period, particularly as the expected recovery of
the eurozone in 2010
feeds through to the Bosnian economy. As such, we
forecast Bosnian real GDP growth to average 5.9%
between 2010-2013.
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