Commanding Heights of Bosnia - privatization methods as product of political institutions

Abstract: Privatization of large State-Owned Enterprises (SOEs) is widely accepted as instrumental in Bosnia's effort to escape the persistent economic decline. Notwithstanding the colossal human and monetary resources invested into the process by the International Community the slow progress has turned into a virtual stalemate. The research question is aimed at analyzing this outcome, and it reads: "How has the political institutional structure affected the privatization process in Bosnia-Herzegovina 1995-2010 " The importance of the written constitution - and the political institutions heralding from it - is hence assumed from the outset. The problem is addressed through the lens of institutional economics, complemented with insights from public choice theory. The analysis shows that the chosen privatization methods had not primarily been grounded in economic principles, but have to a large extent been designed to conform to geopolitical circumstances shaped by the constitution. The flawed design of the privatization programs can also be traced to the International Financial Institution's standardized approach to privatization, which offers little room for tailoring the privatization process to a country's unique circumstances.