Academic journal article Texas International Law Journal

Legal Legitimacy and the Promotion of Small Business in Sarajevo

Academic journal article Texas International Law Journal

Legal Legitimacy and the Promotion of Small Business in Sarajevo

Article excerpt

SUMMARY

I. INTRODUCTION

With the Bosnian war came a scale of economic collapse not seen in Eastern Europe since the end of World War 11.1 Largely due to physical destruction, Bosnia's GDP dropped more than two-thirds between 1991 and 1995, from US$8.7 billion to US$2.1 billion.2 By 1999, the GDP had recovered to only US$6.2 billion.3 Although countless issues remain unresolved before stability can be achieved in Bosnia and Herzegovina, the time has arrived to focus attention on economic reform.4 According to the International Crisis Group, "the long term success of the Dayton Peace Accords depends on Bosnia and Herzegovina's ability to develop a self-sustaining economy, which creates jobs, keeps inflation in check, and provides fertile ground for investment."5

Small businesses represent the seeds of that fertility. After a relatively recent theoretical shift from top-down to bottom-up analysis of economic transition in Central and Eastern Europe, it is now largely recognized that small to medium-sized businesses-rather than privatized state-owned enterprises-represent one of the most significant forces in facilitating economic growth. Among other benefits, small businesses facilitate the continued existence of a market economy, alleviate poverty, provide employment, and help to prevent ethnic conflict stemming from poor economic conditions. In addition, these enterprises are often the source of much-needed innovation and development.8

Unlike other post-Communist countries, the countries of the former Yugoslavia have historically supported small enterprises, which "have long played an important role in economic development and progress in the Balkans."9 Drawing on Yugoslavia's historical experience, as well as the experience gained in other East European countries since the collapse of Communism, small businesses and the entrepreneurial spirit from which they stem must again be encouraged in Bosnia and Herzegovina.

One important source of encouragement is a legal system that works to protect business interests.10 Legal support of market transactions fosters economic growth by ensuring economic actors that their interests are secure." This is largely due to the fact that, absent adequate legal protection, individuals will deal only within established-often small-spheres of influence, thereby retarding robust economic expansion.12

To ensure that such protections exist, the relationship between national law and small to medium-sized enterprises in Bosnia must be monitored, and organizations currently operating in the region must work to improve this relationship. Currently, Bosnia's economy is principally supported by international economic stimuli.13 Dependence on this international presence is particularly evident in Sarajevo, where there were approximately 15,000 foreign civilians as of 1999.14 It is imperative that Sarajevo become self-sustaining

before this force inevitably diminishes, taking foreign-sponsored employment and spending with it. 15

After observing societal perceptions of the legal system held by small businesses in Sarajevo, 16 it is clear that, regardless of efforts taken by the international community 17 or the laws passed by the government, business owners do not deem the legal system protective of their interests. Even more vital than the existence of a protective legal system is "a belief by the population in the stability and enforcement of these laws .... Even stable, consistent law enforcement is not an adequate measure of a society's legality without citizens believing that such a legal climate exists and will continue." 18 Unfortunately, this does not appear to be the case in Sarajevo, where business owners prefer to unilaterally protect their business interests outside of the legal system.

Standing alone, legal illegitimacy does not bode well for future economic development in Sarajevo, as "[flt would be hard to think of anything which discourages investment as much as uncertainty. …

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