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Commentary: What Kosovo Doesn't Need: A Battle Over Aid (Int'l Edition)


International -- European Business

Commentary: What Kosovo Doesn't Need: A Battle over Aid (int'l edition)

Few companies are better suited for business in war-ravaged Kosovo than Italy's Appalti Bonifiche e Costruzioni (ABC). The Florence-based outfit, a global leader in its market, has experience in Bosnia. Plus there's a big demand for its services--clearing land mines. ABC isn't alone. Across Europe, dozens of companies are jockeying for contracts to rebuild roads, bridges, and hospitals to help make Kosovo livable again after 79 days of NATO air attacks (table).

But a dangerous aid trap looms. As companies lobby their governments to help them win contracts, there's a real risk that infighting could cripple redevelopment efforts. It will be a tragedy for the Kosovars if the West's political unity, so resilient during the war, disintegrates during the reconstruction. The allies must suppress their instinct to promote national interests and cede control to a central authority with broad powers. Only then can they avoid the lack of coordination that has crippled aid efforts in the region so far.

Bosnia provides a bitter lesson in what not to do. While it boasts an astonishing annual growth rate of 39% since 1995, that's solely the result of its $5.1 billion aid program, according to Brussels-based International Crisis Group (ICG). In fact, without the aid, gross domestic product would be shrinking at an annual rate of 1% across all three sectors of Bosnia. Much of the blame lies with the Bosnian government. Platoons of corrupt "inspectors" from local bureaucracies shake down companies for bribes, says the ICG. It also faults foreign donors for operating at cross purposes and assuming local officials would cooperate. As a result, many investors have fled Bosnia, and millions of dollars have disappeared.

The same could happen again if NATO allies allow Kosovo's reconstruction to become a battle for spoils. The money at stake could be substantial. The cost of rebuilding Kosovo could run to $7 billion in the first three years. If Yugoslavian President Slobodan Milosevic is driven from power, allowing aid to go to Serbia, the total could be $50 billion.

It's enough money to stir up political trouble, and already there are signs of it. The German construction industry, for example, is still burning mad that it came away from Bosnia practically empty-handed, even though German taxpayers supplied more than a quarter of the funds. Meanwhile, the Italian government has created a task force called Antenna Adriatica meant to play matchmaker for midsize Italian companies and reconstruction jobs in the Balkans. "If Italian companies don't move fast, it will be a major opportunity lost," says Gianmatteo Nunziante, a Rome lawyer organizing the group.

It's only natural for companies to vie for business and for governments to protect national interests. But in the end, the welfare of Kosovo must come first. The problem is how to ensure that happens. Goran Lindahl, CEO of ABB Asea Brown Boveri Ltd., offers one solution: the creation of what he calls a Regional Infrastructural Authority, which would award contracts according to EU standards and oversee the work. That would discourage corruption and reduce credit risk, making it easier to attract foreign investors.

Under this scheme, the European Investment Bank and World Bank would arrange financing. Some proj-ects could be financed with bond issues. Another approach comes from the European Commission, which on June 23 announced a new agency to coordinate reconstruction.

Whatever the vehicle, the important thing is that one agency be in charge. So now that NATO pilots have done their job, it's up to business leaders and politicians to display some bravery of their own.Correspondent Ewing Covers Economics from Frankfurt.; By Jack EwingReturn to top

TABLE

The Race for the Reconstruction Business

MAKING KOSOVO SAFE

Italy's Appalti Bonifiche e Costruzioni is vying for contracts to clear land mines from Kosovo.REPAIRING INFRASTRUCTURE

France's Suez Lyonnaise des Eaux, which already set up water systems at refugee camps in Macedonia, is angling for contracts inside Kosovo. Construction companies such as Germany's Walter Bau are ready to fix roads, bridges, and airports.REBUILDING PLANTS

ABB Asea Brown Boveri and Siemens are seeking opportunities to repair power plants and factories.

DATA: BUSINESS WEEKReturn to top


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