-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO/NSIAD-98-138		

TITLE:     Bosnia Peace Operation: Pace of Implementing Dayton 
Accelerated as International Involvement Increased

DATE:   06/05/1998 
				                                                                         
----------------------------------------------------------------- 

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Cover
================================================================ COVER


Report to the Chairman, Committee on Foreign Relations, U.S.  Senate

June 1998

BOSNIA PEACE OPERATION - PACE OF
IMPLEMENTING DAYTON ACCELERATED AS
INTERNATIONAL INVOLVEMENT
INCREASED

GAO/NSIAD-98-138

Bosnia Peace Operation

(711299)


Abbreviations
=============================================================== ABBREV

  CRS - Congressional Research Service
  DOD - Department of Defense
  EBRD - European Bank for Reconstruction and Development
  HDZ - Croatian Democratic Union
  IFOR - Implementation Force
  IMET - International Military Education and Training
  IMF - International Monetary Fund
  IPTF - International Police Task Force
  JCC - Joint Civil Commission
  NATO - North Atlantic Treaty Organization
  OHR - Office of the High Representative
  OSCE - Organization for Security and Cooperation in Europe
  SDA - Bosniak Party of Democratic Action
  SDS - Serb Democratic Party
  SFOR - Stabilization Force
  SHAPE - Supreme Headquarters Allied Power Europe
  SNS - Serb People's Union
  SRT - Serb Radio and Television
  UNHCR - United Nations High Commissioner for Refugees
  UNMAC - United Nations Mine Action Center
  UNMIBH - United Nations Mission in Bosnia and Herzegovina
  USAID - U.S.  Agency for International Development
  USIA - U.S.  Information Agency

Letter
=============================================================== LETTER


B-279046

June 2, 1998

The Honorable Jesse Helms
Chairman, Committee on Foreign Relations
United States Senate

Dear Mr.  Chairman: 

This report responds to your request that we update our review of the
Bosnia peace operation, specifically the progress made since mid-1997
in achieving the operation's objectives. 

We are sending copies of the report to the Secretaries of State and
Defense, the Administrator of the U.S.  Agency for International
Development, and to other appropriate congressional Committees.  We
will make copies available to others upon request. 

This report was prepared under the direction of Harold J.  Johnson,
Associate Director, International Relations and Trade Issues, who may
be contacted on (202) 512-4128 if you or your staff have any
questions about this report.  Other major contributors to the report
are listed in appendix XI. 

Sincerely yours,

Benjamin F.  Nelson
Director, International Relations
  and Trade Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0

 Bihac                                      X         X        75
Bugojno                                                    X       800
Busovaca\c                                       X         X       164
Gorazde Canton                                   X                  20
Ilidza                                                     X       N/A
Jajce                                                      X     2,591
Kakanj\c                                         X         X       357
Konjic                                           X         X       358
Martin Brod                                                X       N/A
Vares                                                      X     2,050
Vogosca\c                                        X         X        40
Zenica\c                                         X               3,014
Republika Srpska
Kotor-Varos\d                                              X        14
Mrkonjic Grad\d                                  X         X       N/A
Laktasi\d                                        X                   7
Sipovo\d                                         X         X        30
Srbac\d                                          X                  40
======================================================================
Total 1                                        1 1         3     9,560
----------------------------------------------------------------------
Legend

N/A = Not available

\a As of April 1998. 

\b Registered minority returns as of December 31, 1997. 

\c USAID also provided economic assistance to these municipalities
through its Municipal Infrastructure and Services Project that was
not specifically linked to minority returns. 

\d USAID plans on implementing its Municipal Infrastructure and
Services Project in these cities in 1998. 

Sources:  UNHCR, USAID, and State Department documents. 


      UNHCR'S OPEN CITIES AND U.S. 
      STATE DEPARTMENT MINORITY
      RETURN INITIATIVES
-------------------------------------------------------- Chapter 5:2.1

UNHCR's Open Cities Initiative was announced in March 1997 as a means
of encouraging minority returns to cities or municipalities where
reconciliation between ethnic communities is believed possible.\7 The
initiative was also intended to provide an incentive to communities
to receive minorities and reward those communities that were
receptive.  Under this initiative, UNHCR designates cities or
municipalities as "open" based on a common set of criteria that
include a genuine and consistent political will on the part of local
authorities to allow minority returns, confirmation that minority
returns are occurring or will occur without any abuse of returnees,
and demonstrated impartiality of the police.  UNHCR and international
agencies monitor the progress of returns in open cities, and provide
assistance incrementally, in accordance with the progress of returns. 
UNHCR's recognition of Mrkonjic Grad as the first "open city" in
Republika Srpska on December 17, 1997, was a major step in light of
past resistance from hard-line SDS members, including Karadzic.\8

At the time of our mid-October 1997 field work in Bosnia, two of the
three UNHCR open cities that we visited--Konjic, a Bosniak-majority
area, and Busovaca, a Croat-majority area--were actively promoting
minority returns.  Vogosca, a predominately Bosniak area in Sarajevo
Canton, was not.\9

  -- In Konjic, according to UNHCR and IPTF officials, the Mayor (a
     Bosniak), the Mayor's deputy (a Bosnian Croat), and the Chief of
     Police were all genuinely committed to allowing people from
     other ethnic groups to return home and to providing security for
     those who did return.  In Busovaca, returnees and people working
     on their homes in preparation for return told us that they were
     not afraid to return nor did they fear that their newly repaired
     homes would be destroyed.  In both locations, significant
     problems remained in returning people to their homes, such as
     finding other accommodation for people living in the homes of
     potential returnees, clearing landmines from farmland, and
     improving the economy. 

  -- In Vogosca, according to UNHCR officials, the return initiative
     had essentially stopped after an incident in early August 1997,
     during which Bosniak displaced persons disrupted an assessment
     visit of Bosnian Serbs to their prewar homes in Vogosca. 
     Although the Mayor and cantonal police responded appropriately
     to the violence by protecting the Bosnian Serbs, local extremist
     political factions had organized a group of Bosniak women
     displaced from Srebrenica to disrupt the visit.  According to
     UNHCR officials, this incident effectively halted any efforts at
     non-Bosniak returns to the area. 

Through its minority return initiative, implemented by
nongovernmental organizations, the State Department committed $9
million in assistance to 13 municipalities during 1997-98--10 in the
Federation and 3 in Republika Srpska.\10 As of December 1997, the
number of minority returns directly and indirectly facilitated by
State's initiative included an estimated 1,100 people (225 families). 
According to State, in addition to demonstrating progress on minority
return, Vares and Bugojno--two Bosniak majority municipalities
controlled by antireturn elements of the SDA--were included in the
initiative to underscore the U.S.  government's conviction that
minority returns had to and could occur everywhere.  According to the
State Department, State at times threatened to cut off assistance to
Vares when local officials showed signs of not complying with their
agreement to allow people of all ethnic groups to return to their
homes.  The assistance was never stopped because the officials
eventually complied with the terms of the agreement. 


--------------------
\7 Of the 25 Federation municipalities and cantons that had applied
for UNHCR's open city designation in the spring of 1997, only 6 met
UNHCR's requirements for the initiative by the end of the year. 

\8 According to a senior U.N.  official, in June 1997 the Republika
Srpska Minister of Refugees was going to submit a list of nine cities
in Republika Srpska that wanted to take part in the Open Cities
Initiative.  However, the Minister was directed not to participate by
Karadzic, who effectively maintained control of Republika Srpska at
the time. 

\9 As of the time of our visit, UNHCR had designated four cities as
open:  Konjic, Busovaca, Vogosca, and Bihac. 

\10 Municipalities selected to receive assistance through the U.S. 
minority return initiative are chosen based on information collected
by the refugee coordinator at the U.S.  embassy, or provided by the
municipalities, IPTF, OHR, SFOR, UNHCR, and other organizations. 


   MINORITY RETURNS TO MORE
   CONTENTIOUS AREAS
---------------------------------------------------------- Chapter 5:3

Many minority returns took place in some of the more contentious
locations in Bosnia that had seen few returns in 1996 and early 1997. 
These returns required strong international pressure, as well as SFOR
support, to overcome local and higher-level political resistance. 
Throughout the year, people who attempted to return home across
ethnic lines, particularly to strategically important areas, faced
extremely difficult, hostile conditions upon their return due to this
political resistance.  For example, returnees and potential returnees
often faced destruction of property (see fig.  5.3); intimidation,
beatings, violent evictions, and in some cases murder; the laying of
landmines near their homes; local authorities who refused to provide
basic services such as water, electricity, or phone service; and
local police who did not intervene to protect them or who refused to
guarantee their safety.  As in 1996, NATO-led forces in Bosnia had to
respond to many violent incidents directed against minority
returnees. 

   Figure 5.3:  Recently
   Reconstructed Home That Had
   Been Subsequently Destroyed in
   Brcko

   (See figure in printed
   edition.)

Table 5.4 provides a more detailed description of the difficult
circumstances under which people returned to their homes across
ethnic lines in the contentious areas of Brcko, Drvar, Jajce, Stolac,
and the zone of separation, particularly Doboj. 



                                    Table 5.4
                     
                       A Description of Minority Returns to
                       Brcko, Drvar, Jajce, Stolac, and the
                             Zone of Separation/Doboj

Area      Description
--------  ----------------------------------------------------------------------
Brcko\a   During the war, as many as 30,000 Bosniaks and Bosnian Croats were
          driven from their homes in Brcko, now a hard-line SDS-controlled town.
          Since the end of the war, Bosnian Serb authorities have viewed the
          return of Bosniaks to the Brcko area as a "military campaign" to
          regain control of the area. In an attempt to prevent Bosniaks from
          returning to Brcko town, these authorities placed Serb displaced
          persons in homes that were owned by Bosniaks before the war and
          manipulated them to instigate violence to keep Bosniaks from
          returning. This effectively created a "biological front line" along
          the northern boundary of the zone of separation (which ran between the
          villages of Bosniak returnees and Brcko town.)

          Since mid-April 1997, the Brcko Supervisor has overseen the returns
          process for the Bosnian Serb-controlled areas of Brcko to ensure that
          returns occur in a phased and orderly manner. The Supervisor started
          by allowing Bosniaks to return to villages within the zone of
          separation; he later allowed them to return to villages slightly north
          of the zone, between the biological front line and Brcko town. From
          January 1, 1997, through June 17, 1997, only 159 displaced families
          had returned to their prewar homes; none were located outside the zone
          of separation. By late April 1998, 929 families (primarily Bosniaks)
          had returned home; many of these people had returned to villages north
          of the zone of separation, effectively bypassing and surrounding
          Bosnian Serbs along the biological front line. By that time, the Brcko
          Supervisor was still looking for ways to move the displaced Serbs
          either into new housing out of the return area or back to their prewar
          homes.

          Incidents of harassment and violence have occurred frequently in the
          area, largely instigated by local Bosnian Serb authorities who
          manipulate the vulnerable, displaced Serbs along the biological front
          line to commit acts of violence against returnees. Although SDS
          authorities repaired homes, reactivated wells, and provided
          electricity for these displaced Serbs, they have not provided these
          services for Bosniak and Bosnian Croat returnees.

Drvar     Prior to and during much of the war, Bosnian Serbs made up almost all
          of Drvar's population. They fled the area during a Croatian offensive
          near the end of the war; since then, Drvar has been Bosnian Croat-
          controlled. During 1997 and early 1998, the ruling Bosnian Croat
          political party, the HDZ, continued its effort to consolidate the
          ethnic predominance of Bosnian Croats in Drvar and to prevent Bosnian
          Serbs from returning home. Vacant Bosnian Serb houses have been burned
          and looted with the approval of police and municipal authorities,
          after Bosnian Serbs had visited their homes or had received approval
          to move back. Because of these actions, more houses have been
          destroyed in Drvar since the end of the war than during the war.
          Further, by June 1997, Bosnian Croat political leaders, directed by
          Croatia, had moved 5,000-6,000 persons--including displaced Croats and
          Bosnian Croat army members and their families--into Drvar.

          In September 1997, displaced Bosnian Serbs elected a Drvar municipal
          council with a majority Serb representation. By the end of the year, 3
          Bosniaks and 343 Bosnian Serbs had returned to villages around Drvar.
          As of March 1998, incidents of violence continued to be directed at
          non-Croat returnees; a Bosnian Croat army unit continued to be
          stationed in the center of Drvar; the soldiers occupied hundreds of
          socially-owned flats that were occupied by Bosnian Serbs before the
          war; and the civilian hospital had been converted to military use. In
          early April 1998, the army unit began departing the civilian housing
          to enable displaced persons to return to their homes, but returnees
          were still the victims of violence, including arson and murder. In
          late April 1998, after the murder of an elderly Bosnian Serb couple,
          the OHR removed the Chief of Police and Deputy Mayor in an effort to
          stop the incidents of violence from occurring. On April 24, 1998,
          violent attacks against returnees occurred again. During this
          incident, the Mayor (a Bosnian Serb) was injured, 180 returnees were
          driven from their homes, and the local IPTF office was burned to the
          ground.
--------------------------------------------------------------------------------
\a Includes returns to the Brcko area of supervision in Republika
Srpska. 



                                    Table 5.4
                     
                       A Description of Minority Returns to
                       Brcko, Drvar, Jajce, Stolac, and the
                       Zone of Separation/Doboj (continued)

Area      Description
--------  ----------------------------------------------------------------------
Jajce/    Before the war, Jajce, a municipality in central Bosnia, was populated
Central   by Bosniaks (39%), Croats (35%), Serbs (19%), and others (7%); by the
Bosnia    end of the war, it was Bosnian Croat-controlled and -populated. During
Canton    late July 1997, about 435 Bosniak displaced persons attempted to
          return to their unoccupied, severely damaged homes in five villages
          near Jajce. These people spontaneously returned home after they saw
          that local Bosnian Croat authorities allowed Bosniak refugees from
          Europe to return to their unoccupied homes in the area. A few days
          after they returned, the local authorities in Jajce instigated a crowd
          of about 1,000 people to riot against the Bosniak returns. The Chief
          and Deputy Chief of Police were complicit in this incident and did not
          attempt to break up the demonstration. The Bosniak returnees fled
          their homes between August 1 and 3, 1997.

          In response to this incident, cantonal and Federation authorities,
          supported by the international community, developed a return plan for
          Central Bosnia Canton. The Bosniak families who had fled returned to
          their homes by late August 1997, although they were still subject to
          harassment. For example, recently laid landmines went off near the
          returnees homes and, as of October 1997, the local Bosnian Croat
          authorities had not repaired electricity lines to the villages. As of
          December 1998, about 2,600 Bosniaks had returned to the Jajce area.

Stolac    Before the war, Stolac was an ethnically mixed municipality of
          Bosniaks (45%), Croats (32%), Serbs (21%) and others (2%); by the end
          of the war, it was predominately Bosnian Croat and controlled by hard-
          line HDZ leaders. In early November 1995, Stolac was designated a
          UNHCR "pilot project"\b that established a target of returning 100
          non-Croat families. As of mid-June 1997, after about 1-1/2 years of
          attempting minority returns, no non-Croat families had returned to
          Stolac due to Bosnian Croat authorities' intransigence and failure to
          provide security for returnees and their property. During that time,
          houses of potential Bosniak returnees were routinely blown up after
          Bosniaks had indicated a willingness to return.

          As of October 1997, 55 Bosniak families had returned home to one area
          around Stolac. Although these families were living in their prewar
          homes, they did not send their children to local schools because they
          feared for their safety and the curriculum was based on the Croatian
          education system. Bosnian Croat authorities were attempting to
          "ghettoize" these and future returnees, showing reluctance to allow
          Bosniaks to return to other areas of Stolac. By March 1998 the number
          of returns had risen to 96 families. Since incidents of violence
          continued to be directed at returnees, the High Representative removed
          the Stolac Chief of Police and Mayor in February and March 1998,
          respectively; these moves, however, did not stop the violence.

Zone of   During 1996 and early 1997, attempts by Bosniak displaced persons to
Separati  return to their villages in the zone of separation sparked numerous
on/       violent incidents that required the intervention of NATO forces. To
Doboj     address this problem, the international community established a
          process for approving return applications so that returns occur in a
          phased and orderly manner. Obstruction from Bosnian Serb authorities
          has blocked people (particularly Bosniaks) from returning home. As of
          the end of 1997, 489 people had returned to villages in the zone
          (excluding the area around Brcko). Almost all of these people have
          returned to villages located around Doboj, a strategically important
          area for Republika Srpska that before the war was populated by
          Bosniaks (40%), Serbs (39%), Croats (13%), and others (8%).

          During the winter of 1996-97, Bosniaks started to resettle in the
          Doboj area; however, they initially returned only to a village on a
          hillside that looks away from the city rather than directly down on
          it. During June 1997, they began to resettle in villages located on
          more strategically important hillsides that look down on the city. As
          of October 1997, about 80 Bosniak families had returned to villages on
          the Republika Srpska side of the zone of separation and about 50
          families had resettled on the Federation side. According to IPTF
          officials, these returns did not result in any large-scale violence
          because they were organized in accordance with a minority return plan
          developed by the SFOR contingent stationed near Doboj and agreed to by
          local Bosnian Serbs and Bosniaks.
--------------------------------------------------------------------------------
\b UNHCR designated four cities as "pilot projects" at Dayton, Ohio,
on November 2, 1995, and established a completion date of November
16, 1995, that was not met.  This effort, the first program to target
minority returns, was designed to return 600 families to the cities
of Bugojno, Jajce, Stolac, and Travnik.  As of December 1997, 564
families had returned to these cities. 

Source:  Documents and interviews with officials from UNHCR, IPTF,
NATO, OHR, and the State Department. 


      SECURITY MEASURES FOR
      RETURNEES
-------------------------------------------------------- Chapter 5:3.1

To facilitate the phased, orderly return of refugees and displaced
people to particularly contentious areas, the international community
in mid-1997 became more active in supporting security measures for
returnees.  Most importantly, SFOR provided a security presence in
many contentious returnee areas, patrolling in a manner that
demonstrated SFOR's presence and generally discouraged incidents of
violence against returnees.  Figure 5.4 shows patrols by U.S.  SFOR
in Brcko; Spanish SFOR in Stolac; and British SFOR in Jajce. 
According to a senior NATO officer, NATO plans to add a specialized
unit to its military force in Bosnia after June 1998.  NATO expects
that this unit would allow SFOR to enhance its security presence in
minority return areas. 

   Figure 5.4:  SFOR Patrols in
   Brcko, Jajce, and Stolac

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

By the fall of 1997, IPTF's efforts to integrate Federation police
forces were showing some early, encouraging results.  In October
1997, joint Bosniak-Croat police patrols were cited by returnees in
Jajce and Busovaca as an important factor in increasing their sense
of security.  Returnees told us that they believed the police would
help them if they requested assistance.  In Stolac, Bosniak police
had just arrived there and were not jointly patrolling with Bosnian
Croat police; still, their presence was viewed as a positive sign by
returnees.\11 A senior human rights observer in Bosnia told us that
where joint police patrols have been instituted--thus far only in the
Federation--security conditions and human rights in general have
improved.  Returnees and observers also stated, however, that SFOR
needed to continue its presence in contentious areas to ensure that
security problems did not occur. 

During 1997, the international community also created a number of
commissions that oversee the returns process and attempt to ensure
that minority returns do not spark violence.  For example, after
numerous incidents in the zone of separation, the European
Commission, IFOR, IPTF, OHR, and UNHCR in 1996 established a
commission to develop procedures for, and monitor progress in,
returning people to their homes.  A similar international commission
was established for monitoring returns to Brcko under the auspices of
the Brcko Supervisor.  The Supervisor is strictly managing the
returns process there in close consultation with SFOR, IPTF, and
UNHCR to reduce the likelihood of violent incidents. 


--------------------
\11 By March 1998, according to a State Department official, these
returnees believed that the Bosniaks on the police force only
provided symbolic representation for the Bosniak community. 


      ASSISTANCE PROVIDED TO OTHER
      CITIES NOT OFFICIALLY
      DECLARED OPEN
-------------------------------------------------------- Chapter 5:3.2

Although authorities of many municipalities are not supporting
minority returns, donors still provide economic reconstruction funds
to them as a means of assisting in the revitalization of the economy
and encouraging compliance with the provisions of the Dayton
Agreement.  For example, under the Municipal Infrastructure and
Services Project, USAID has funded small-scale economic assistance
projects in many municipalities that have not been declared "open" by
UNHCR or provided with minority return assistance by State.  Between
July and December 1997, USAID signed memorandums of understanding
with 26 such municipalities (excluding those in Sarajevo Canton)--21
in the Federation and 5 in Pale/SDS-controlled areas of Republika
Srpska--and had provided $72.7 million in economic assistance to them
($56.9 million to the Federation and $15.8 million to Republika
Srpska). 

USAID's memorandums of understanding with these municipalities state,
among other things, that municipal officials agree to support returns
of people including those from other ethnic groups.\12 A senior USAID
official told us that the USAID mission does not have the resources
to monitor whether municipalities are complying with these
conditions.  In April 1998, in commenting on a draft of this report,
USAID stated that it does require municipalities to demonstrate that
they are fulfilling the commitments made in the memorandums of
understanding; those that "blatantly disregard" the memorandum lose
the assistance.  They said that through nongovernmental
organizations, other donors, USAID contractors, and other groups and
individuals working in Bosnia, USAID is able to monitor the
commitment of a municipality to live up to its agreements. 

USAID also commented that it only invests in municipalities that are
already, by and large, in compliance with the conditions contained in
its memorandums.  However, our examination and those of other
international observers show that some of the municipalities that
have signed memorandums and received assistance, such as Doboj, have
exhibited poor performance on minority returns and continue to
obstruct the returns process. 


--------------------
\12 Among other things, these memorandums stipulate that (1)
officials and citizens of the municipalities will support the returns
of people who want to move back to their homes regardless of religion
or ethnic origin, (2) municipal officials will ensure that the
returnees have the same rights and privileges as any other citizens
in the municipality, and (3) local police will ensure and protect
returnees' freedom of movement. 


   MINORITY RETURNS TO SARAJEVO
---------------------------------------------------------- Chapter 5:4

The single largest area where minority returns occurred in 1997 was
the return of 13,300 Bosnian Croats to Sarajevo.\13 The return of
minorities to Sarajevo is crucial to support the city's status both
as the capital of the Federation and Bosnia and as a model of
co-existence and tolerance for the rest of the country.  Further,
returns of displaced Bosnian Serbs to Sarajevo would help open up
housing for non-Serb returnees to Brcko.  During 1998, the
international community will push for increased returns of
non-Bosniaks to the Sarajevo. 

To move this effort forward, in February 1998 international and
Bosnian officials established the Sarajevo Declaration, which is
designed to guide and accelerate the return of minorities to
Sarajevo.  The declaration contains the general principles that must
be followed and the legislative, housing, education, employment,
public order, and security issues that must be addressed to enable
Bosnian Serbs and Croats to return.  In addition, it assigns specific
tasks and related deadlines to various organizations such as OHR's
Reconstruction and Return Task Force; local police; and Federation
Ministry of Social Affairs, Displaced Persons and Refugees.  The
declaration also calls for the establishment of a Sarajevo Return
Commission, comprised of relevant international and Bosnian
officials.  The commission's role is to oversee the implementation of
the provisions of the declaration. 


--------------------
\13 According to UNHCR, the actual number of non-Bosniak returns to
the Sarajevo Canton remains uncertain because it is based on official
estimates provided by cantonal authorities, not on registration
figures.  Bosnian Croat and Bosnian Serb officials have criticized
the official estimates because they believe the actual number of
returns is lower. 


   SEVERAL MAJOR ISSUES REMAIN TO
   BE RESOLVED
---------------------------------------------------------- Chapter 5:5

Officials from State, UNHCR, and Bosnia's municipalities have
identified several unresolved issues that, even with the security
presence provided by SFOR, are hindering minority returns in Bosnia. 
These issues include (1) breaking the logjam of people living in the
homes of potential returnees, (2) revising existing property
legislation so that minority returnees can reclaim their homes, and
(3) reducing the level of unemployment. 

Potential minority returnees often cannot return home because their
homes are occupied by people of the majority ethnic group.  During
our fieldwork, international and local observers described three
categories of people who are living in the homes of potential
returnees: 

  -- Displaced persons of the majority ethnic group who cannot safely
     return home across ethnic lines or who are afraid to cross
     ethnic lines to return home;

  -- Croatian Serb refugees in Republika Srpska who cannot return
     home to Croatia because the Croatian government has not created
     conditions for their return; and

  -- People of the majority ethnic group who moved to the city from
     nearby villages during the war.  People in this category choose
     to stay in their city homes even though their prewar homes are
     located in areas controlled by their own ethnic group.  These
     people sometimes remain in their city homes while their family
     members move back to their prewar homes in nearby villages, a
     situation referred to by UNHCR and State as "double occupancy."

During 1997, according to OHR and State, property laws in both
entities did not comply with the provisions of the Dayton Agreement
and continued to be the largest source of complaints brought to human
rights monitors and institutions.  For example, the Federation law on
abandoned apartments required persons who left socially-owned
apartments during the war to reclaim their property within 15 days of
the cessation of hostilities.  Since most people could not return
within the established time frame, the law ensured that the original
occupants could not return to the apartments they occupied before the
war.  Consequently, this law and others placed insurmountable legal
barriers in the path of returnees, effectively blocking hundreds of
thousands of people from returning to their homes. 

In March 1998, according to OHR and USAID, the Federation, under
intense international pressure, passed property legislation that
complied with the Dayton Agreement.  However, since the laws had only
recently been passed, the policies and procedures necessary to
implement the laws had not been completed.  Republika Srpska had yet
to pass any property legislation that complied with Dayton. 

Despite the appearances of growth in major cities like Sarajevo, some
municipalities are experiencing grave economic conditions. 
Unemployment is high, and people continue to depend on humanitarian
assistance, remittances from relatives living abroad, and black
market activity.  Unemployment is considerably higher in small
villages.  Potential returnees view the lack of employment as another
reason not to return, and those people that have already returned
view new returnees as threats to their future employment.  The
employment issue must be solved in order for large-scale minority
returns to occur. 


   PLANS AND PROSPECTS FOR
   MINORITY RETURNS IN 1998
---------------------------------------------------------- Chapter 5:6

UNHCR's 1998 repatriation and return plan for Bosnia calls for the
international community to focus its efforts on minority returns of
refugees and displaced persons.  In October 1997, international
observers noted some positive signs and improved prospects for
creating conditions that would favor minority returns.  These include
the political crisis and potential change in government in Republika
Srpska, the softening of attitudes of some Bosnian Serb political
leaders, the results of the September 1997 municipal elections, and
the progress in developing and implementing a cantonwide return plan
in the Federation's Central Bosnia Canton.  However, as of early
1998, major political barriers to minority returns had not been
addressed, and there were no indications that large-scale, orderly
returns would occur during the year without an SFOR security
presence. 


      UNHCR'S 1998 REPATRIATION
      AND RETURN PLAN
-------------------------------------------------------- Chapter 5:6.1

UNHCR's main priority in 1998 will be the repatriation of refugees
and the return of displaced people to minority areas in Bosnia.  In
its plan, UNHCR estimates that as many as 220,000 refugees could
return to Bosnia in 1998.  The actual level of return is contingent
upon the occurrence of several actions, including the (1) return of
50,000 minority displaced people to their prewar homes by June 1998
(which would open up housing belonging to refugees and allow them to
return home); (2) progress in the normalization of relations among
states in the region; and (3) implementation of policy decisions by
west European states hosting refugees that would force nonvoluntary
returns and would encourage voluntary returns. 

Progress in normalizing relations among Bosnia, Croatia, and the
Federal Republic of Yugoslavia must occur for these states to develop
and implement a coordinated effort to accept potential returnees
currently residing in each of these states.  In December 1997, the
Peace Implementation Council directed UNHCR, in cooperation with
authorities of each country in the region and with relevant
international organizations, including the OHR, to develop a regional
return strategy.  As of April 1998, the strategy had not been
completed. 

Policy decisions made by west European states hosting refugees could
force or encourage large numbers of people to return.  If there are
no changes in the policies of the countries hosting refugees, the
refugees may decide to remain where they are.  UNHCR realizes that if
the actions do not occur, the level of refugee returns in 1998 could
be much lower than in 1997. 

Even if the actions do take place, UNHCR believes that Bosnia may be
unable to absorb 220,000 refugees due to continued housing and
employment problems.  UNHCR hopes that the Open Cities Initiative and
other efforts to encourage minority returns will help overcome
housing shortages, unemployment, and other obstacles and lead to a
significant increase in minority returns.  UNHCR expects to see a
considerable number of open cities recognized in 1998.  Potential
open cities include Donji Vakuf, Tuzla, and Bosanski Petrovac in the
Federation and Ribnik and Banja Luka in Republika Srpska. 
International officials acknowledge that to accomplish this, a strong
NATO-led military presence will be required throughout at least 1998,
but that in the long term, security will have to be provided by
Bosnians, rather than the international community. 


      INTERNATIONAL OBSERVERS
      BELIEVE POTENTIAL FOR
      MINORITY RETURNS COULD
      IMPROVE
-------------------------------------------------------- Chapter 5:6.2

Although there were no indications as of April 1998 that large-scale,
orderly returns would occur during the year without an SFOR security
presence, a number of statements by President Plavsic and the results
of Republika Srpska Assembly and Bosnian municipal elections are seen
as positive steps toward creating an environment more conducive to
the return of minorities.  International observers in Bosnia view
President Plavsic and other moderate Bosnian Serbs as more open to
returns of other ethnic groups to Republika Srpska than SDS political
leaders, particularly returns to areas where these ethnic groups
would not constitute a majority.  In late 1997, Plavsic told UNHCR
that all of Banja Luka's original inhabitants would be welcome to
return, while noting that solutions would need to be found for
refugees and displaced people currently living in the city. 

The election of a more moderate Republika Srpska parliament in
November 1997 and Prime Minister in January 1998 are also viewed as
positive steps toward solving the problem of minority returns.  In
February 1998, the new Prime Minister stated that his goal was to
have 70,000 non-Serbs return to Republika Srpska during the year.  He
also recognized, however, that there are "realistic problems" that
may prevent them from returning, including the 35,000 Serbs from
other parts of Bosnia and from Croatia who cannot return home and are
living in houses belonging to non-Serbs. 

The municipal elections held in 1997 are viewed by the international
community as a positive step toward creating favorable conditions for
minority returns.  The elections could provide potential returnees
with a sense of security because they believe the newly elected
leaders will support them when they return.  As of early May 1998,
133 of the 136 municipal governments had been certified as formed by
OSCE.  However, much work remains to be done to make them functioning
governments. 

In anticipation of larger numbers of minority returns in 1998, SFOR
and OHR's Reconstruction and Return Task Force developed plans to
facilitate the phased and orderly return of refugees and displaced
people.  Likewise, the implementation of the Central Bosnia Canton
Return Plan demonstrates to both the international community and
potential returnees that the authorities in this area are willing to
take steps to create an environment that encourages people to return
to their prewar homes.  It is estimated that, if completed, the plan
could benefit over 100,000 people. 

According to a senior executive branch official, the Federation and
Republika Srpska must develop integrated return policies and
procedures that are self managed and effective.  Until this is done,
the international community, with the support of SFOR, will have to
remain in Bosnia to ensure the right of people to return to their
prewar homes. 


PROGRESS IN REBUILDING BOSNIA'S
ECONOMY
============================================================ Chapter 6

The Dayton Agreement's goals for the economy of Bosnia and
Herzegovina include economic reconstruction, building national
government and Federation economic institutions, and promoting the
transition from a command economy to a market economy.  To support
these goals, the government of Bosnia, with the assistance of the
international community, designed a 3- to 4-year, $5.1-billion
assistance program known as the Priority Reconstruction Program. 
This program gave the international community a framework for the
economic reconstruction and integration of Bosnia.  In the program's
first year, 59 donors--48 countries and 11 organizations--pledged
$1.9 billion for Bosnia's reconstruction program at two donors'
conferences held in December 1995 and April 1996. 

During 1997, the pace of donor contributions slowed somewhat, as 31
of the program's original donors pledged an additional $1.2 billion
for Bosnia's economic reconstruction, for a total pledge of $3.1
billion.\1 Economic conditions continued to improve throughout Bosnia
in 1997, although progress in Republika Srpska still lagged because
donors were withholding assistance due to ongoing noncompliance by
hard-line Bosnian Serb political leaders.  Signs of progress in the
economic reconstruction program were evident throughout 1997. 
However, the continued obstruction and improper economic and fiscal
practices of Bosnia's political leaders threatened Bosnia's economic
recovery.  The international community and Bosnia's governments
recommended actions in 1997 to address shortcomings in Bosnia's
public finance system that could generate opportunities for fraud and
corruption and lead to improper use of economic assistance going to
Bosnia.  By the end of the year, donors' practice of attaching
political conditions to economic assistance had contributed to some
important political changes in Bosnia, but it had not increased the
level of cooperation of hard-line Bosnian Serb or Croat political
leaders. 


--------------------
\1 Bosnia and Herzegovina--The Priority Reconstruction Program: 
Achievements and 1998 Needs, European Commission and the Europe and
Central Asia Region of the World Bank (Washington, D.C.:  Apr. 
1998). 


   INTERNATIONAL DONOR SUPPORT IN
   1997
---------------------------------------------------------- Chapter 6:1

International donor support to Bosnia's reconstruction program
continued in 1997, but the pace of donor contributions slowed from
1996.  At a meeting in Brussels in January 1997, international donors
estimated that the program needed $2.5 billion for 1997-98, of which
the 1997 requirement is $1.4 billion.  The $1.2 billion pledged at
the third donors' conference in July 1997 fell short of this goal,
and the total number of donors declined from 59 in 1996 to 31 in
1997.\2

The World Bank and European Commission cited delays in holding the
third donors' conference and the political turmoil in Republika
Srpska as having contributed to the slowdown in new donor
contributions.  According to an OHR report, the third donors'
conference was scheduled to take place at the beginning of 1997. 
However, it was postponed several times due to the failure of
Bosnia's political leaders to meet the necessary conditions,
including the adoption of economic laws--known as the "Quick Start
Package"--related to the Central Bank, national budget, external debt
management, and customs policies.  The approval of these laws by
Bosnia's parliament on June 20, as well as the agreement reached
between the IMF and Bosnia's authorities on almost all of the
elements of a draft agreement on a letter of intent requesting an IMF
standby arrangement, cleared the way for the third donors' conference
to be held on July 23 and 24, 1997. 

The U.S.  government, primarily through USAID, committed $294.4
million during 1996 and $234.4 million during 1997 for economic
reconstruction.  These funds have been primarily used to repair
municipal infrastructure and provide municipal services, small
business loans, and technical assistance for the development of
national and Federation economic institutions.  In October 1997,
international officials in Bosnia told us that USAID's reconstruction
and technical assistance projects were the first to be implemented
and the first to show results in many areas of the country. 

During 1996 and 1997, donors committed about $3.3 billion to the
Priority Reconstruction Program.\3 With $528.79 million in
commitments, the United States was the second leading individual
donor after the European Commission ($698.64 million).  As a group,
European donors contributed 48.8 percent of the committed funds, and
the United States contributed 16.2 percent (see fig 6.1). 

   Figure 6.1:  1996 and 1997
   Donor Commitments to Bosnia's
   Priority Reconstruction
   Program, as of December 31,
   1997 (Dollars in millions)

   (See figure in printed
   edition.)

Note:  Donors also pledged funds specifically for Brcko at a donors'
conference held in early November 1997.  However, OHR Brcko could not
provide complete information on the amount of funds pledged or on
whether those funds are included in the above totals.  As of
mid-April 1998, USAID had provided about $14 million specifically for
the area of the Brcko supervisory regime. 

Source:  Data from Bosnia and Herzegovina--The Priority
Reconstruction Program:  Achievements and 1998 Needs. 

Of the $3.3 billion committed during the program's first 2 years, an
estimated $1.7 billion--52 percent of the committed funds--had been
expended, that is, spent on the ground.\4 The United States expended
more funds than any other donor, about $347.5 million, or 66 percent
of U.S.  commitments.  Appendix VI provides more information on the
Priority Reconstruction Program. 


--------------------
\2 The fourth donors' conference was held on May 7 and 8, 1998. 
According to a State Department official, 26 nations and 4
international organizations pledged $1.25 billion for the 1998
program, bringing the total amount pledged to $4.35 billion.  No
further details on the conference were available at the time this
report went to press. 

\3 Total commitments include both "firm" and "indicative"
commitments.  A firm commitment is a pledge that has been (1)
approved by a national legislative body or multilateral board and (2)
allocated to a specific sectoral program or project.  An indicative
commitment is a pledge that has either legislative approval but is
not yet allocated to a specific sectoral program or project or a
pledge that has been allocated in principle to a particular program
or project but is awaiting legislative approval. 

\4 Funds expended represent (1) actual expenditures made against
works, goods, and service contracts; (2) the value of assistance
delivered in kind; and (3) balance of payments support.  The
definition of funds expended does not include advances made to
implementing agencies for future payments to suppliers. 
Balance-of-payments support is provided to the government of Bosnia
for reserve buildup for imports and the startup of a currency board. 
The counterpart funds of balance-of-payments support can be used by
the government to finance overall fiscal needs, including recurrent
costs in different sectors and other reconstruction-related
expenditures. 


   ECONOMIC RECONSTRUCTION PROGRAM
   IS SHOWING RESULTS, BUT
   PROBLEMS REMAIN
---------------------------------------------------------- Chapter 6:2

The economy continued to grow significantly but unevenly in 1997.  In
a number of areas where donor support has been particularly
strong--including housing, fiscal and social support,
industry/finance, employment generation, and
education--implementation has proceeded at a steady pace.  Further,
the pace of clearing landmines accelerated and there were positive
signs of reestablishing economic links between the ethnic groups
during the year.  In some areas where there have been political
disagreements, such as telecommunications and railways, the progress
has been slow.  The creation and strengthening of common government
institutions continues to be a major challenge. 


      UNEVEN PROGRESS IN ECONOMIC
      REBUILDING
-------------------------------------------------------- Chapter 6:2.1

Economic growth in Bosnia, estimated to have been 50 percent in 1996
according to the World Bank, was expected to slow somewhat in 1997 to
a growth rate of 35 percent.  According to PlanEcon,\5 in mid-1997
the economy was at roughly one-fifth its prewar level, up somewhat
from the 10-15 percent World Bank estimates for 1996.  Unemployment,
albeit down from its postwar high of 90 percent, is still very
high--around an estimated 30 to 40 percent of the labor force at the
end of 1997--with wide regional variations throughout the country.\6
These overall unemployment rates are comparable to those in the
immediate prewar period (27 percent in 1991). 

Economic recovery in the Federation has been far more robust than in
Republika Srpska, which in 1996 had received only 3.2 percent of the
international aid being implemented due to the noncompliance of its
political leaders with the Dayton Agreement.  According to OHR data,
gross domestic product in Republika Srpska is estimated at less than
a quarter of that of the Federation.  At mid-1997, wages in the
Federation varied by sector and by canton between $140-$200 per
month;\7 in Republika Srpska, wages were estimated to be $48 a month,
with severe delays in wage payments. 


--------------------
\5 PlanEcon, Inc., is a Washington, D.C.-based business consulting
and research firm specializing in investment advisory services,
market analysis, and economic assessments of Eastern Europe and the
former Soviet Republics. 

\6 Bosnia and Herzegovina--The Priority Reconstruction Program: 
Achievements and 1998 Needs. 

\7 According to PlanEcon, as of February 1997, average monthly wages
were highest in Bosnian Croat areas. 


      ECONOMIC RECONSTRUCTION
      CONTINUED THROUGHOUT 1997
-------------------------------------------------------- Chapter 6:2.2

After 2 years of reconstruction, progress continued to be made in key
sectors of the economic reconstruction program.  For example,

  -- some 60,000 private houses or public apartment units, benefiting
     some 250,000 people, have been repaired or have received repair
     assistance;

  -- at least $62 million financed social programs for the most
     vulnerable in the population--the children, the elderly and the
     disabled;

  -- about $120 million in small- and medium-sized business loans
     have helped revive commerce and have generated some 18,000
     permanent new jobs;

  -- about 200 public works projects were completed in 98
     municipalities (70 in the Federation and 28 in Republika
     Srpska), resulting in the creation of 25,000 person-months of
     employment in addition to the 10,000 person-months in 1996;
     priority was given to areas with high unemployment, heavy war
     damage, and high levels of displaced persons and refugee
     returns;

  -- donor assistance has been critical in the rehabilitation of some
     490 primary schools and 90 kindergartens; and

  -- the Sarajevo airport continues to be open for commercial
     service, about 900 kilometers of the main road network have been
     completed, and 14 major bridges have been reconstructed. 

As of April 1998, one of USAID's major economic assistance projects,
the Municipal Infrastructure and Services Project, had helped
generate an estimated 5,000 short-term jobs and provided an estimated
17,000 people with permanent employment.  These funds have gone
toward such things as repairs or construction of water supply
systems, bridges, railroads, schools, and hospitals (see fig.  6.2). 
In addition, 8,700 demobilized soldiers were temporarily employed
through about 300 Community Infrastructure Rehabilitation Projects
that were funded by USAID and administered by SFOR soldiers in the
U.S.  military sector.  Further, USAID's Bosnian Reconstruction
Finance Facility program, as of October 1997, had disbursed $49
million in loans that averaged $485,000 for the year for businesses
such as clothes and shoes manufacturing; baked goods, fruit juice,
and dairy production; furniture manufacturing; construction;
sawmills; and agriculture.  Appendix I provides more information on
USAID's economic reconstruction and stabilization programs. 

   Figure 6.2:  USAID-funded
   Reconstruction Projects (Brcko
   Bridge and a school)

   (See figure in printed
   edition.)

Progress was made in 1997 in clearing landmines and in developing
Bosnia's capacity to manage a mine clearance program.  However, the
country's estimated 1 million landmines remained a significant
threat--particularly along the former front lines and strategically
important areas where the parties remained reluctant to remove
them--and continued to inhibit economic reconstruction and returns of
people to their prewar homes.  Donors funded over 1,000 deminers in
Bosnia, who removed 28,425 landmines and 19,572 pieces of unexploded
ordnance during the year.\8 These efforts opened up roads and
railways and allowed access to homes and farmland that had been
unusable because of landmines or because people feared that landmines
were present.  Further, in January, 1997, a National Commission for
Demining was organized to take over demining responsibility for the
country.  The commission was ordered to be formally established by
the High Representative on December 24, 1997, after a hard-line SDS
member of the Council of Ministers would not sign the documents that
would make the commission a legal entity.  Appendix VII provides more
information on Bosnia's demining program. 

Moreover, often with intense international involvement and pressure,
Bosnia's political leaders and people took first steps during 1997
and early 1998 toward linking the ethnic groups economically, a major
change from 1996 when they generally refused to cooperate across
ethnic lines.  The new, relatively moderate Republika Srpska
government was credited with facilitating the delivery of mail from
Sarajevo to Banja Luka and the signing of a memorandum of
understanding on the resumption of rail service between the two
entities.  Table 6.1 provides a description of important links that
were established during the year. 



                                    Table 6.1
                     
                     Steps Toward Reestablishing Interentity
                         Economic Links, as of April 1998

                Date            Description
Sector          --------------  ------------------------------------------------
Key economic    June 20, 1997   Legislation enacted by Bosnia's parliament. The
legislation                     package included laws establishing the Central
("Quick Start                   Bank; a national budget execution law for the
Package")                       1997 budget; uniform customs tariff and customs
                                policy legislation; a foreign trade law; and the
                                legal framework for external debt management.

Central Bank\a  August 11,      Officially opened. Will act as a simple currency
                1997            exchange for its first 6 years of operation.

                April 9, 1998   Collective Presidency signed an agreement on the
                                liquidation of the National Bank of the former
                                Republic of Bosnia and Herzegovina. The
                                liquidation will give full and clear
                                responsibility to the newly established Central
                                Bank. As of mid-May 1998, the National Bank had
                                not been liquidated.

Telecommunicat  August 5, 1997  For the first time in 5 years, direct
ions                            interentity telephone links between Sarajevo and
                                Banja Luka and Trebinje became operational.

                September 19,   A limited number of interentity telephone lines
                1997            were opened for local subscribers for calls
                                between the two entities.

                                By April 1998, three additional interentity
                                telephone links of 30 lines each had become
                                operational.

Civil aviation  September 5,    Bosniak, Serb, and Croat members of a joint
                1997            aviation commission reached agreement on the
                                establishment of a national civil aviation
                                authority,a major step toward the establishment
                                of regional airports in Banja Luka, Mostar, and
                                Tuzla.

                September 12,   Bosnia's Civil Aviation Authority was
                1997            established.

                                In mid-March 1998, an International Secretariat
                                for the Civil Aviation Authority was in the
                                process of being established, with the Chief
                                Executive to arrive on March 22. The secretariat
                                will function as an independent advisory body to
                                the authority and work to develop guidelines
                                accepted by the International Civil Aviation
                                Organization.

                November 18,    The Banja Luka airport was reopened for
                1997            commercial traffic, though the Mostar and Tuzla
                                airports were not reopened.

                March 17, 1998  The High Representative sent a letter to the
                                Mayor and Deputy Mayor of Mostar imposing a
                                temporary solution for the arrangements
                                necessary to open the Mostar airport for civil
                                air traffic.

Postal service  February 6,     More than a million letters that had been
                1998            accumulating in Sarajevo since 1992 were
                                delivered to Republika Srpska under U.N. police
                                escort.

                April 22, 1998  The transport and communications ministers of
                                the Federation and Republika Srpska signed a
                                memorandum of understanding that sets forth
                                interim arrangements for the establishment of
                                interentity mail exchanges. The memorandum was
                                also signed by the Principal Deputy High
                                Representative, who acted as a witness. The
                                first mail exchange is expected on June 1, 1998.

Railroads       February 11,    The two entities signed a memorandum of
                1998            understanding in Sarajevo agreeing on the
                                resumption of rail traffic.



                February 26,    The first commercial interentity train traveled
                1998            from Banovici to Doboj and from Doboj to
                                Sarajevo across the interentity boundary line.

                                Few trains are running, even though Bosnia's
                                rail system has been almost completely restored
                                with the help of international assistance.

                April 6, 1998   The High Representative and the Prime Ministers
                                of the Federation and Republika Srpska signed an
                                agreement on the establishment of a public
                                railway corporation for the country, a major
                                step in the reorganization of the rail sector.
--------------------------------------------------------------------------------
\a USAID is providing assistance to the Central Bank in computerizing
its operation, including the branch in Pale. 

Sources:  OHR, World Bank, USAID, and State Department documents. 

During the year, business people showed signs of reestablishing
cross-ethnic economic ties that had been broken by the war.\9 For
example, with USAID support, small business associations were
established throughout each entity as a step toward developing a
countrywide small business association.  Further, the first post-war
Sarajevo business fair was held in Banja Luka on November 26, 1997,
and a Banja Luka trade fair was held in Sarajevo on February 25,
1998. 

Despite these initiatives, there is no consensus among ethnic groups
on economic cooperation.  USIA polling data from February 1998 show
that given the choice between economic independence or cooperation
between the two entities, only Bosniaks (83 percent) clearly favor
working together.  A majority of Bosnian Serbs (61 percent) say they
prefer economic independence, and Bosnian Croats are more equally
divided (50 percent favor economic independence, and 41 percent favor
working together).  Previous USIA surveys have shown that the
majority of people from each of the three ethnic groups support trade
with the other groups, suggesting that opposition to economic
cooperation in principle may be outweighed by practical economic
opportunities. 


--------------------
\8 The major donors include the European Union, the United Nations,
the U.S.  government, and the World Bank. 

\9 According to some observer reports, criminal elements of Bosnia's
three major ethnic groups sold arms to each other during the war. 


      PARTIES HINDER FUTURE
      ECONOMIC GROWTH
-------------------------------------------------------- Chapter 6:2.3

Despite favorable steps in Bosnia's economic reconstruction, in early
December 1997 the Peace Implementation Council expressed concern that
Bosnia's political leaders were placing reconstruction and sustained
economic growth at risk by, among other things, allowing the common
institutions' shortcomings to impede sound economic management and
their political differences to slow down the pace of economic
transition.  Most importantly, Bosnia's political leaders had only
partially implemented the key economic legislation passed on June 20,
1997.  They had not adopted national-level legislation called for by
the council in May 1997.  According to a council document, as of
early December, the lack of an economic policy framework was
preventing an IMF standby arrangement and World Bank adjustment
lending, thus rendering the country vulnerable to financial crisis

To address these problems, the Peace Implementation Council called on
Bosnia's national authorities to agree on a common approach on the
standby arrangements and open negotiations with the IMF without
delay.  The council also established a number of short-term deadlines
for actions related to steps that the parties had thus far refused to
take.  Table 6.2 shows the status of actions called for by the
council, with deadlines up to March 1, 1998. 



                                    Table 6.2
                     
                       Status of Implementing Key Economic
                        Legislation, as of April 30, 1998

Action              Status
------------------  ------------------------------------------------------------
Develop the design  Design of the Convertible Marka currency imposed by the High
for a common        Representative on January 20, 1998.
currency for
Bosnia by December  The conversion to the Convertible Marka is scheduled to take
20, 1997.           place in June 1998 throughout Bosnia.

Adopt Foreign       Imposed by the High Representative on March 6, 1998.
Investment Law by
December 20, 1997.

Apply an interim    On December 24, 1997, after Bosnia's Council of Ministers
common customs      failed to adopt an interim customs tariff schedule, the High
tariff schedule by  Representative ordered the enactment of an interim national
December 20, 1997;  customs policy that was to take effect on January 10, 1998,
adopt and start     and remain in effect until the final customs tariff policy
implementing a      law are adopted.
permanent customs
code and tariff by  The interim customs tariff schedule was replaced by a
January 31, 1998.   permanent law/schedule that went into effect on March 13,
                    1998, but neither entity had implemented it.

Adopt mutually      Partially adopted, as discussed below.
consistent
national budget      The national budget was approved by the Council of
and entity-level    Ministers and adopted by Bosnia's Parliamentary Assembly on
budgets by January  April 27, 1998.
31, 1998.
                     The Federation budget was adopted by the House of Peoples
                    on March 31, 1998, but the second house had not adopted it
                    as of April 1998.

                     The Republika Srpska budget was adopted by the Republika
                    Srpska parliament on March 14, 1998.

Implement monthly   Partially implemented.
transfers from the
entity budgets      The entities had contributed to the servicing of the debt
covering national   but not to the administrative part of the national budget.
administrative
expenditures and
debt service by
March 1, 1998.
--------------------------------------------------------------------------------
Sources:  OHR documents. 


   EFFORTS TO ADDRESS FRAUD AND
   CORRUPTION
---------------------------------------------------------- Chapter 6:3

In December 1997, the Peace Implementation Council said that Bosnia's
economic recovery was being threatened by, among other things, the
parties' insufficient action against fraud and the lack of
transparency in the use of public funds.  In late 1997, OHR, the
World Bank, and major donors concluded that donor assistance had not
been used inappropriately by the Bosnian or entity governments;
however, they acknowledged that legislative and administrative
shortcomings in public finance generated opportunities for fraud that
have been exploited in the areas of (1) public revenue collection,
specifically the evasion of customs duties and sales taxes; (2) the
misappropriation of public funds; and (3) activities of
extrabudgetary institutions.\10 To address the problem of government
corruption and prevent the misuse of donor assistance, OHR, USAID,
the European Commission's Customs and Fiscal Assistance Office, the
World Bank, and the Federation government have instituted a number of
measures to investigate and combat the inappropriate use of donor
funds and corruption. 


--------------------
\10 We did not conduct an investigation to obtain information to
support or refute these claims. 


      AUDITS OF INTERNATIONAL
      ASSISTANCE
-------------------------------------------------------- Chapter 6:3.1

In late 1997, the High Representative and other representatives of
the international community stated that there is no evidence of
corruption related to donor funds.\11 In a proposed anticorruption
strategy presented to the Peace Implementation Council in December,
the High Representative said that major donor funds for World Bank
reconstruction projects were fully accounted for and adequately
monitored and audited.  The High Representative, however, also said
that the lack of coordination with smaller donor organizations, such
as private voluntary organizations, could lead to multiple funding of
the same project activities.  He also noted that weak project
management by these organizations could lead to overcharging for
goods and services by contractors and suppliers.  Although the donor
community identified no diversion of donor assistance funds, it
pointed out the need for more transparency and continued vigilance in
the accounting for and use of international assistance funds. 

To ensure that USAID's program funding is accounted for and used
appropriately, USAID's Office of Inspector General has completed a
series of audits of the agency's two major assistance efforts in
Bosnia, the Municipal Infrastructure and Services project and the
Bosnian Reconstruction and Finance Facility program.\12 These audits,
which have been conducted on a periodic basis throughout the life of
the programs, have not identified any major systemic internal control
weaknesses or misuse of program funds.\13 According to the State
Department, other donors have similar systems for auditing and
accounting to safeguard against fraud. 


--------------------
\11 During 1997, Federation parliamentarians and newspapers alleged
that international assistance provided to the Federation was being
diverted.  To respond to the allegations, the OHR and the World
Bank's resident mission in Bosnia conducted an exercise to account
for the assistance funds provided to the Federation. 

\12 These projects, as well as other U.S.  projects in Bosnia, are
implemented through contracts with U.S.  firms.  The firms and
contracts are subject to audits.  The firms must demonstrate that
they have an acceptable system of control, which is monitored by
USAID project managers in Sarajevo and Washington, D.C. 

\13 Although no major systemic internal control problems have been
identified, in one case involving the Bosnian Reconstruction and
Finance Facility program USAID found that a bank participating in the
program was misusing program funds.  The bank was removed from the
program.  An investigation by the Federation Banking Agency found
that the bank was violating a number of banking laws.  As of March
1998, the Federation government was trying to recover approximately
$700,000 in program funds that the bank was provided with but had not
disbursed to borrowers for approved loans.  As a result of this
incident, USAID is changing its procedures to prevent similar
problems in the future. 


   INVESTIGATIONS OF GOVERNMENT
   CORRUPTION
---------------------------------------------------------- Chapter 6:4

Investigations conducted by the European Commission's Customs and
Fiscal Assistance Office (hereafter referred to as the customs
assistance office) have identified incidents of corruption involving
government customs and purchasing organizations.  The corrupt
practices include (1) diversion of customs duties to parallel
government structures, (2) false transit destination documentation,
(3) undervaluation of imported goods, (4) false certificates of
origin on imported goods, (5) abuse of duty-free shop concessions,
(6) abuse of duty-free warehouse concessions, and (7) commercial
smuggling at guarded customs posts.  The customs assistance office
estimates that customs fraud in the Federation alone cost the entity
government approximately $56 million over a 1-year period. 

The customs assistance office was established in January 1996 to help
Bosnia form a coherent customs system at the national and entity
levels.  In addition, the office facilitates coordination and
cooperation between entity customs administrations by verifying
customs documentation on a random basis and provides advice to the
customs administrations.  While executing these tasks, officials from
the office uncovered systematic transit fraud involving more than 300
high-duty consignments declared as in transit across the Federation
to Republika Srpska.  The goods never reached their declared
destination, and the customs duty deposits, paid at the border, were
reclaimed by the criminals through the use of false receipts issued
by Republika Srpska customs officials.  These illegal practices
resulted in the loss of customs duties and tax revenues of about $11
million over a 6-month period.  The customs assistance office
recommended that, among other things, both entity governments take
immediate action, including legal proceedings, to stop the smuggling
of goods and associated loss of revenue. 

In another investigation, the customs assistance office found that
the Bosniak-controlled and Bosnian Croat-controlled State
Directorates for Strategic Reserves, which were supposed to cease to
exist after the signing of the Federation constitution in 1994, were
importing large quantities of fuel and goods duty free.\14 The
resulting loss of revenue incurred by the Federation government was
estimated at about $11 million over a 1-year period.  The results of
the investigations were presented in two reports that were given to
Federation Minister of Finance.\15

In response to the reports and the resulting media publicity,
according to a customs assistance office official, the Federation
Minister of Finance replaced the Director and Deputy Director of the
Federation Customs Administration and four other Customs
Administration officials.  The Republika Srpska Customs Director
fired all eight of its customs-house managers.  In addition, the
Federation Ministry of Finance conducted investigations of the
operations of the Bosniak and Bosnian Croat State Directorates for
Strategic Reserves.  As of January 1998, the investigation of the
Bosnian Croat Directorate was complete and the Directorate had ceased
operations.  An agreement was reached at the December 1997 Peace
Implementation Conference to close the Bosniak Directorate.  An OHR
official stated that the Bosniak Directorate will be closed as soon
as the contracts it has entered into can be completed; as of April
1998, it was still operating. 

In December 1997, the World Bank reported on problems in the
budgeting and financial management of entity-level governments that
could result in international assistance replacing diverted
government funds.\16 The bank reported that many opportunities exist
for the misappropriation of government funds, a problem shared by
other successor states of the former Yugoslavia.  Although the World
Bank identified the problem, it was unable to determine the extent to
which opportunities for misappropriation are being exploited. 


--------------------
\14 The Bosniak State Directorate for Strategic Reserves imported
fuel free of duty on the basis of invalid authorizations.  Some of
the fuel was sold on the commercial market inclusive of customs duty. 
However, the duty was never deposited into the Federation budget. 
Action to make examples of the persons involved was not taken or even
encouraged at the highest political level. 

\15 Loss of Revenue Within the Transit System and Failure of Control,
A Report by the European Commission Custom and Fiscal Assistance
Office (Sarajevo:  Oct.  24, 1997) and Report on Importations for
State Directorate for Strategic Reserves, Sarajevo and State
Directorate for Strategic Reserves, Mostar, A Report by the European
Commission Customs and Fiscal Assistance Office (Sarajevo:  Oct.  24,
1997). 

\16 Public Expenditure Review, World Bank (Washington, D.C.:  Nov. 
1997). 


      STEPS TAKEN TO ADDRESS
      CORRUPTION PROBLEM
-------------------------------------------------------- Chapter 6:4.1

The national and entity governments and the international community
have established a number of organizations and provided assistance
designed to address the issue of corruption in donor assistance and
in government operations and revenues (see table 6.3). 



                                    Table 6.3
                     
                        Efforts Undertaken and Proposed to
                            Address Corruption in 1997

Activity            Implementor         Comments
------------------  ------------------  ----------------------------------------
Antifraud           President           OHR believes that this type of
commission          Izetbegovic,        commission could raise awareness of the
established in      Bosniak member and  corruption problem and assist in the
1997                Chairman of         preparation of necessary legislative and
                    Bosnia's            judicial action. However, this
                    collective          commission is exclusively concerned with
                    Presidency          the use of international assistance and
                                        is viewed as partisan and unlikely to
                                        become part of an effective
                                        anticorruption effort.

Federation          Members of the      Commission's mandate is to investigate
parliament          Federation          the misuse of donor assistance money,
anticorruption      parliament          budgets, and loans, and the illegal use
commission                              of national wealth by institutions,
established in                          organizations, groups, and individuals
July 1997                               in the Federation. As of January 1998,
                                        the commission had not issued any
                                        reports. The international community
                                        views this commission as less biased
                                        than the President's antifraud
                                        commission because it includes members
                                        from several opposition political
                                        parties.

OHR anticorruption  OHR Economic Task   The objective of the strategy is to
strategy proposed   Force, antifraud    reduce the overall misuse of public
in December 1997\a  unit, and           funds in an effective and sustainable
                    interagency task    manner. Specific actions include (1)
                    force               establishing a permanent Secretariat for
                                        the economic task force to oversee
                                        sectoral task forces and smaller donors
                                        and encouraging donor governments to
                                        require that all aid institutions adhere
                                        to the Secretariat's guidelines to
                                        prevent multiple funding of project
                                        activities and overcharging for goods
                                        and services by contractors and
                                        suppliers;\b (2) establishing an
                                        antifraud unit\c in OHR to investigate
                                        cases of fraud and corruption; and (3)
                                        establishing an interagency task force
                                        in OHR to implement, coordinate, and
                                        report on anticorruption efforts.\d
--------------------------------------------------------------------------------
\a "Countering the Misuse of Public Funds in Bosnia and Herzegovina,"
strategy proposal presented to the participants of the Peace
Implementation Conference (Bonn, Germany:  Dec.  5, 1997). 

\b If the controls are deemed inadequate, the proposed strategy calls
for donors to oblige assistance agencies to use the management
services of the Entity Project Implementation Units established under
World Bank support. 

\c The unit will (1) be composed of a small group of experienced,
international prosecutors and judges; (2) cooperate with IPTF and
call on IPTF for support in cases of investigation; and (3) advise
OHR and UNMIBH on corruption-related aspects of criminal justice
reform.  OHR officials stressed that the relationship between the
unit and Bosnian authorities is to be more cooperative than
investigative.  As of April 1998, the unit had been staffed and was
scheduled to become operational by May 1998. 

\d According to State, the OHR officials responsible for establishing
the unit have an ambitious but not well-defined program.  In
addition, it is unclear how this unit will interact with existing law
enforcement, legal, and judicial structures.  Unless linked to
existing Bosnian institutions, the unit could undermine the role and
responsibilities of local legal institutions, thus reducing chances
for sustainability once international support stops.  The U.S. 
government would prefer that OHR contribute to the anticorruption
effort in a political rather than an operational capacity.  State
believes that OHR should facilitate resolution of bureaucratic
obstacles and encourage the development of an appropriate legislative
framework.  The implementing agencies and donor community should be
responsible for program design and execution. 

Sources:  OHR and State Department documents. 

According to an IPTF official, IPTF intends to work with ministries
in both entities in 1998 to improve their capacity to identify and
deal with financial crime that corrupts public institutions.  As part
of this effort, IPTF plans to extend its monitoring and advisory work
to this area of law enforcement and to train entity police forces in
the detection of financial crime, organized crime, smuggling, and
corruption and to assist in the development of special anticorruption
units.  In order to implement these plans, a number of experts in
financial crime will need to be hired to form a specialized training
team.  As of March 1998, budget and staffing estimates had been
developed for the team, but no specific date for its implementation
had been established.\17

The customs assistance office is continuing to assist Bosnia's
national and entity-level governments in updating its system of
customs laws and tariffs and in modernizing customs operations
through the computerization of procedures and the training of customs
personnel in customs operations and investigation.  In December 1997,
the Peace Implementation Council urged Bosnia's entity authorities to
extend the office's mandate to cover all indirect taxes levied by
national or entity governments.  The council also required the
national and entity governments to give the customs assistance office
access to all relevant customs and fiscal records. 

In January 1998, the office began conducting an investigation into
the valuation of imported goods and an examination of the
organization and administration of the Federation tax administration. 
The investigation pertaining to the valuation of goods was still
ongoing as of April 1998; however, it had found that undervaluation
of goods is endemic and is responsible for multimillion dollar loss
of revenue to the Federation budget.  The tax administration
examination was completed in March and did not find any hard evidence
to suggest corruption; however, it did find evidence of major tax
evasion.  In February, 1998 the new Republika Srpska government
drafted a decision to allow the office to examine its customs and tax
administrations.  A customs assistance official stated that Republika
Srpska officials were doing their best to provide all of the
information requested to conduct its examination. 

USAID has implemented a number of projects to address public
accountability and transparency and combat corruption in a systemic
manner.  USAID's ongoing and planned programs include activities that
(1) support the federal, cantonal, and municipal governments in
developing budgets and financial management systems that are
transparent and meet international standards; (2) provide training to
customs officers to increase their professionalism and establish a
code of ethics; (3) increase the Federation and Republika Srpska's
banking agencies' capacity to combat white collar crime; (4) assist
the Federation government in the revision of the criminal code; and
(5) support the drafting of key commercial laws that are essential to
any anticorruption effort.  USAID also conducted a study of
corruption in Bosnia and drafted a strategy to address corruption in
a more comprehensive manner. 

The study stated that for the economic and democratic development of
Bosnia to succeed, the large-scale fraud and corruption in the
government must be reduced substantially.  Bank fraud, customs fraud,
tax fraud, procurement fraud, bribery, extortion, and an active
organized crime network severely undermine economic and democratic
reforms.  The losses resulting from fraud and corruption appear
massive yet cannot be quantified accurately due to the lack of
transparency in government and business operations.  The strategy
developed by USAID consists of introducing a legislative agenda;
federalizing law enforcement; improving governmental budgeting,
accounting, and auditing; and implementing a massive public and legal
education/training campaign. 


--------------------
\17 This training team is part of a larger U.N.  effort to design and
deliver training and advice needed to address security concerns
raised in the conclusions of the Sintra and Bonn Peace Implementation
Council meetings.  Other training teams will address issues such as
public security crisis management, that is, crowd control and
disaster response, and drug control including interdiction. 


   USE OF POLITICAL CONDITIONALITY
   IN PROVIDING ECONOMIC
   ASSISTANCE
---------------------------------------------------------- Chapter 6:5

The Peace Implementation Council and international donors have stated
repeatedly since December 1996 that economic assistance provided to
Bosnia is conditioned--both negatively and positively-- on the
compliance of Bosnia's political leaders with political provisions of
the Dayton Agreement.\18 By placing political conditions on economic
assistance, the international community has attempted to give
additional impetus to the peace process by rewarding authorities at
all levels who cooperate with the international community in the
implementation of Dayton, depriving assistance to authorities who
obstruct the peace process, and encouraging change by linking
assistance to improvements in complying with specific aspects of the
agreement. 

At the July 1997 donors' conference, the task of coordinating donors'
efforts to implement political conditionality was assigned to OHR's
economic task force, which established guidelines for donors to
follow for certain projects.  By late 1997, donors' use of attaching
political conditions to economic assistance had resulted in some
important political changes in Bosnia, but it had not increased the
level of cooperation of hard-line Bosnian Serb or Croat political
leaders. 


--------------------
\18 The World Bank's charter prevents it from applying political
conditionality to the assistance it provides. 


      COORDINATION OF POLITICAL
      CONDITIONS ON ECONOMIC
      ASSISTANCE
-------------------------------------------------------- Chapter 6:5.1

In 1997, OHR's economic task force determined that applying strict
rules to determine when and how to condition assistance would not
achieve the international community's intended objectives because the
various donors operate differently, the situation in Bosnia is in a
constant state of change, and available information on recipients is
imperfect.  Consequently, the task force uses a set of general
guidelines.  These are applied on a case-by-case basis to assess the
applicability of political conditionality to assistance projects.\19
The task force's guidelines call for assistance to be withheld from
(1) municipalities where authorities actively obstruct the peace
process, (2) institutions and companies controlled by indicted war
criminals, and (3) persons actively involved in obstructing the peace
process.  The guidelines also state that donors should focus housing
projects on municipalities that allow significant minority returns
and should consult the economic task force on all projects over $10
million before either approving them or suspending them on
noneconomic grounds. 

USAID has attached political conditions to its two major economic
reconstruction projects--the Bosnian Reconstruction Finance Facility
program and the Municipal Infrastructure and Services project--since
the programs started in 1996.\20 For example, USAID requires
municipal authorities that want assistance under the Municipal
Infrastructure and Services project to sign memorandums of
understanding stating that, among other things, (1) the people living
in the municipality agree to abide by the principles of the Dayton
Agreement and will support the return of displaced people who want to
move back to their homes regardless of their religion or ethnic
origin; (2) the municipality agrees to allow freedom of movement for
all persons, at all times, and the police will enforce and honor this
right under the law; and (3) the municipality certifies that no
indicted war criminal is a member of the municipal government or is
involved in the operation and maintenance of any project funded by
the program. 

However, in October 1997 and February 1998, USAID officials stated
that the USAID mission does not have the resources to effectively
monitor the assistance to ensure that municipalities or companies
comply with the provisions in the memorandums.  According to the
Mission Director in Sarajevo, he was unable to gain approval to hire
an additional staff person to monitor compliance with the
memorandums.  Instead, USAID had informal monitoring procedures,
relying on information from its contractors, State's refugee office,
IPTF, OHR, and other international monitors.  Although this
information was often "episodic" and varied greatly depending on the
source, this official believed that by and large USAID has a fairly
good, impressionistic view of how municipalities are doing in terms
of complying with conditions placed on assistance. 

This official also said that USAID never expected that the
memorandums would bring about a major change in municipalities;
instead, they were intended to show at the grass-roots level that the
international community would support those who support Dayton.  In
some Republika Srpska municipalities, such as Doboj and Bijeljina,
USAID now expects a good deal of forward movement in implementing
Dayton due to the changing political conditions there. 

A USAID official said that monitoring efforts are made more difficult
by the lack of a master list of which municipalities are complying
with the Dayton Agreement.  OHR's economic task force had planned to
produce a list of the municipalities that were not complying with the
Dayton Agreement in 1997.  However, as of December 1997, according to
State officials, OHR had not done so.  OHR and other officials told
us that the international donor community would request a list from
OHR during 1998. 

After the election of the new, moderate Republika Srpska government,
the U.S.  government pledged to provide increased assistance to
Republika Srpska.  However, human rights organizations have expressed
concerns that this assistance would be going to municipalities that
do not meet the conditions of USAID memorandums, particularly the
condition related to people indicted for war crimes.  In early
February 1998, a USAID official said that due to a lack of USAID
resources, it would be difficult for the mission to monitor the new
tranche of assistance that the U.S.  government plans to provide to
the new Republika Srpska government. 

According to USAID, U.S.  assistance to Republika Srpska in 1998 is
estimated to be $60 million including $21 million for reconstruction
activities implemented as part of the Municipal Infrastructure and
Services project.  In the past, USAID has stated that it would
provide up to one-third of its total assistance for Bosnia to
Republika Srpska if the government complied with the provisions of
the Dayton Agreement.  An additional grant of $5 million in budgetary
support for the Republika Srpska government has been signed with OHR
to pay back-salaries for government employees; employees of the
Ministries of Justice, Defense, and Interior will not be paid with
U.S.  funds.  Other donors have assisted in this effort as well. 
According to a USAID mission official, USAID's Inspector General's
office and the mission's controller in Sarajevo are working with OHR
to monitor this support. 

In commenting on a draft of this report, in April 1998 USAID
officials stated that USAID does adequately monitor existing
assistance and will monitor the new tranche of assistance to
municipalities through on-site visits and information provided by its
contractors, the State Department's refugee office, IPTF, OHR,
nongovernmental organizations, and other international monitors.  The
mission plans to hire a staff person dedicated to monitoring and
recognizes that further monitoring of projects would necessitate
additional staffing. 


--------------------
\19 The guidelines state that humanitarian assistance, in principle,
should not be subject to conditionality. 

\20 Congress has also placed conditions on U.S.  assistance. 
Specifically, section 573 of the fiscal year 1998 Foreign Operations
Appropriations Act (P.L.  105-118) required restrictions on
assistance to any country, entity, or canton providing sanctuary to
indicted war criminals.  On December 4, 1997, restrictions were
placed on Serbia and Montenegro and Republika Srpska because the
Secretary of State determined they were not taking necessary steps to
apprehend war criminals.  The law permits the Secretary to waive
restrictions for programs that directly support the implementation of
the Dayton Agreement and its annexes.  On December 15, 1997, the
Secretary waived the restrictions with regard to USAID Municipal
Infrastructure and Services, Bosnian Business Development, and
Democratic Reform programs in Republika Srpska. 


      PROMISING DEVELOPMENTS IN
      APPLYING POLITICAL
      CONDITIONS TO ECONOMIC
      ASSISTANCE
-------------------------------------------------------- Chapter 6:5.2

According to U.S.  and other international officials, the use of
conditionality in providing economic assistance has contributed to
the political split in Republika Srpska and supported the relatively
moderate forces there as they worked to install a new, relatively
moderate entity-level government.  It has also encouraged some
minority returns in some municipalities, as discussed in chapter 5. 
The use of conditionality, however, has not yet affected the
attitudes or actions of hard-line Bosnian Serb and Croat political
leaders in complying with Dayton. 

In March 1997, State and USAID officials told us that some Bosnian
Serb political leaders, including President Plavsic, had shown a
willingness to accept economic assistance that includes conditions
such as employing multiethnic work forces; however, there were no
tangible results in this area as of late June because hard-line
Bosnian Serb political leaders, particularly Karadzic, were blocking
every attempt of moderate Bosnian Serb political leaders to work with
the international community.  These leaders, according to State, were
willing to accept conditional assistance because they saw the growing
gap in economic recovery between the Federation and Republika Srpska. 

Starting in July 1997, events in the Republika Srpska political
crisis indicated that the conditioning of economic assistance
contributed to the political split in Republika Srpska. 
Specifically, the conditioning of assistance helped President Plavsic
and the more moderate Bosnian Serb political leaders demonstrate how
the unwillingness of hard-line leaders to comply with the Dayton
Agreement was preventing Republika Srpska from receiving assistance,
thereby slowing the entity's economic recovery and causing people to
suffer. 

  -- In July, State officials told us that there was increasing
     evidence that elected officials of Republika Srpska were under
     mounting political pressure to make the necessary concessions to
     qualify for reconstruction assistance.  Specifically, President
     Plavsic had just started to move away from the more extreme SDS
     leadership in Pale.  During this time, Plavsic openly argued
     that these SDS leaders, led by Karadzic, were enriching
     themselves through corruption and not complying with Dayton; as
     a result, Plavsic argued, the Serb people were being denied
     reconstruction assistance. 

  -- After being elected on January 18, 1998, the new Prime Minister
     publicly stated that he would help promote returns of other
     ethnic groups to Republika Srpska and would encourage indictees
     to surrender to the war crimes tribunal, if the international
     community would provide economic assistance to the new
     government. 

Despite these promising developments and indications that
conditioning assistance was proving effective in encouraging some
municipalities to accept returns, U.S.  and other international
officials told us that applying conditions to economic assistance had
not changed the attitudes of hard-line Bosnian Serb and Croat
political leaders and separatists.  Further, it had not resulted in
Bosnian Serb authorities surrendering indictees to the war crimes
tribunal.  According to these officials, conditioning economic
assistance has had no impact on hard-line SDS authorities who are
loyal to Karadzic because they have other sources of funding, for
example, smuggling and other illegal activities.  It had not had an
impact on hard-line Bosnian Croat authorities as well, because (1)
they obtain assistance from Croatia and illegal activities and (2)
the areas they control have received relatively little international
economic assistance, as those areas were relatively undamaged by the
war. 


AGENCY COMMENTS AND GAO'S
EVALUATION
============================================================ Chapter 7

DOD, USAID, and the State Department provided written comments on a
draft of this report.  DOD generally concurred with the report, and
USAID commented further on the progress that has been made in Bosnia
over the past year. 

State commented that the report acknowledges and catalogs many of the
significant successes recorded over the last year in the
implementation of the Dayton Agreement but does not sufficiently
convey the momentum, hope, and prospects that the developments of the
last half of 1997 and the first few months of 1998 have brought to
the overall circumstances in Bosnia.  In particular, State identified
a number of changes that have occurred since late spring of 1997 that
give cause for optimism.  These include the ability of Bosnians to
move more freely around the country, further democratization and
pluralism in the political arena, and advances in arms control. 
Although State agreed that caution is in order, it noted its
inclination to be somewhat more optimistic than the report. 

While we agree with State that there is some cause for optimism in
Bosnia, the facts, events, and progress suggest that one may want to
view Bosnia's future with greater caution than State does.  We
believe that the report strikes an appropriate balance in describing
the progress in achieving the goals of the Dayton Agreement and the
challenges that remain.  The report discusses in some detail the
events referred to by State and specifically states that the pace of
implementing the Dayton Agreement has accelerated. 

However, as noted in the Executive Summary and throughout the report,
this progress was achieved largely because of intense international
pressure and involvement, the momentum for continued progress is not
self-sustaining, and conditions will have to improve significantly
before international military forces could substantially draw down. 
It is widely accepted in the international community that, even with
the accelerated pace of implementing the agreement, it will likely be
some time before these conditions are realized.  Further, while
events in the last half of 1997 and early 1998 give cause for
optimism, more recent events in March and April 1998--specifically,
an increase in incidents of ethnic conflict associated with people
crossing ethnic lines to visit or return to their prewar
homes--illustrate the difficulties that Bosnians and the
international community still face in implementing key aspects of the
agreement. 

DOD, USAID, and State also provided technical comments, updated
information, and other suggestions that have been incorporated where
appropriate.  DOD and USAID comments are provided in appendixes VIII
and IX respectively.  State comments and our evaluation of them are
included in appendix X. 


U.S.  CIVILIAN PROGRAMS IN SUPPORT
OF THE BOSNIA PEACE OPERATION,
FISCAL YEAR 1997
=========================================================== Appendix I

This appendix contains fiscal year 1997 obligation and programmatic
information on U.S.  civilian assistance programs to Bosnia.  These
programs are categorized into four areas:  economic reconstruction,
humanitarian aid, democracy and human rights programs, and other
support for civilian organizations in the peace operation (see table
I.1).  The programs were funded and/or implemented by the U.S. 
Agency for International Development (USAID); the U.S.  Information
Agency (USIA); the Trade and Development Agency; and the Departments
of State, Agriculture, Commerce, Justice, and the Treasury. 



                               Table I.1
                
                  U.S. Funding for Civilian Aspects of
                Bosnia Peace Operation, Fiscal Year 1997

                         (Dollars in millions)

Program/activity                                         Obligations\b
----------------------------------------------------  ----------------
Economic reconstruction
Municipal infrastructure and services                            $66.9
Reconstruction finance                                            65.3
Economic stabilization and institution-building\c                 19.9
Demining                                                           5.4
Commercial opportunities                                           1.9
======================================================================
Subtotal                                                         159.3
Humanitarian assistance
Food assistance                                                   43.9
Refugee assistance                                                72.3
Emergency humanitarian assistance                                 27.1
Commission on the Missing                                          1.5
======================================================================
Subtotal                                                         144.8
Democracy and human rights
Police training and equipment                                     18.4
War crimes tribunal                                               12.2
OSCE elections programs\a                                         14.1
Democratic reforms\a                                               9.6
Open Broadcast Network                                             2.4
Training and exchanges                                             5.4
IMET                                                               0.5
Human Rights Commission                                            1.0
======================================================================
Subtotal                                                          63.5
Other support for civilian activities/programs
IPTF monitors                                                     71.5
Office of the High Representative                                  3.9
OSCE mission assessment                                            2.4
USAID project design, planning, support and audit                  4.4
======================================================================
Subtotal                                                          82.2
======================================================================
Total                                                           $449.8
----------------------------------------------------------------------
Legend

IMET=International Military Education and Training
IPTF=International Police Task Force
OSCE=Organization for Security and Cooperation in Europe

\a USAID's support to OSCE for election activities is generally
included in the democratic reforms category; however, agency
officials have indicated that $1.5 million of USAID funds were
specifically obligated for OSCE election activities. 

\b Totals may differ due to rounding. 


   ECONOMIC RECONSTRUCTION
--------------------------------------------------------- Appendix I:1


      MUNICIPAL INFRASTRUCTURE AND
      SERVICES
------------------------------------------------------- Appendix I:1.1

In fiscal year 1997, USAID obligated $66.9 million for the Municipal
Infrastructure and Services program, which will provide a total of
$182 million for the rehabilitation of community infrastructure over
4 years.  This project is designed to facilitate the return of
displaced persons and refugees to their homes and reactivate the
local economy.  As of the end of September 1997, this program had
approved 93 projects totaling $93.7 million, generated approximately
2,500 short-term jobs, and provided 17,410 people with permanent
employment.  In addition, to strengthen the impact of USAID
assistance, municipal infrastructure projects were colocated in
communities benefiting from USAID's reconstruction finance loans. 

The program's projects are distributed among the power, transport,
education, water, and health sectors.  Its 43 power projects totaled
$60.1 million, or 64 percent of the dollar amount of approved
projects.  USAID estimates that the power repair projects will
benefit more than 750,000 people (about 25 percent of Bosnia's
population) in more than 35 towns.  In the transport sector, the
repair of roads and bridges will benefit 453,000 residents, while the
Tuzla-Brcko-Vinkovci rail project will affect the country's entire
population.  Municipal water system repairs will impact 450,000
people, and repair to schools will benefit 7,300 students. 

Funds from this program are also being used for the Community
Infrastructure Rehabilitation Project, implemented in partnership
with local officials and SFOR soldiers in the U.S.  military sector. 
This project is designed to provide short-term employment for
demobilized soldiers and other community residents, both in the
Federation and Republika Srpska, and to conduct high-impact community
restoration activities, such as minor road repairs, school and health
clinic rehabilitation, and the cleanup of war damage.  At the end of
September 1997, USAID had approved 221 of these projects--133 in the
Federation and 88 in Republika Srpska--totaling $9.2 million and
generating approximately 7,000 jobs.  By the end of fiscal year 1997,
135 of these projects were completed. 


      RECONSTRUCTION FINANCE
------------------------------------------------------- Appendix I:1.2

In fiscal year 1997, USAID obligated $65.3 million\1 for the Bosnian
Reconstruction Finance Facility Program,\2 a 5-year, $278-million
lending program.  The program's main objective is to help jump-start
the economy and increase the employment of the general population,
refugees, and demobilized soldiers.  As part of these efforts, the
program is providing balance-of-payments assistance to Bosnia for
needed imports and quick-disbursing commercial credits to private
Bosnian businesses.  This program also provides business consulting
services covering financial management, marketing, and business plan
development. 

As of October 1997, this program had approved 140 loans totaling
$65.3 million and had disbursed $49 million.  These loans are
expected to provide employment to over 11,000 Bosnians, including
demobilized soldiers and women adversely affected by the war,
representing a mix of ethnic backgrounds.  The average loan amount
this year was about $485,000 for businesses such as clothes and shoe
manufacturing; baked goods, fruit juice, and dairy production;
furniture manufacturing; construction; sawmills; and agriculture. 

USAID also provides business consulting services to Bosnia.  This
activity serves to augment the credit analysis performed by the
Bosnian Reconstruction Finance Facility Program by conducting an
assessment of the managerial and operational capabilities of all
enterprises requesting loans.  These assessments support loan
recommendations and identify key areas for improving enterprise
performance.  Using a combination of local professionals and resident
foreign advisers, business consulting provides more in-depth
management consulting to private Bosnian enterprises.  As of December
1997, this activity had conducted approximately 260 assessments and
50 management consulting projects.  USAID estimated that by September
1998, about 60 local professionals will have participated in this
program. 


--------------------
\1 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 

\2 The facility is staffed by bankers and accountants from the United
States and provides nonconcessional (market interest rate) loans,
with repayments to be used for further lending under the program. 


      ECONOMIC STABILIZATION AND
      INSTITUTION-BUILDING
------------------------------------------------------- Appendix I:1.3

USAID obligated $19.9 million\3 for economic stabilization activities
in fiscal year 1997, of which $2.4 million was transferred to the
Treasury Department for its programs in this category.  USAID and the
Treasury developed their programs in collaboration with the
International Monetary Fund (IMF) and the World Bank, which have
primary responsibility for economic stabilization and recovery in
Bosnia. 

USAID's assistance is designed to help the government of Bosnia
ensure that external assistance is provided within a macroeconomic
framework of sound monetary and fiscal management.  There are six
technical assistance components to USAID's macroeconomic
stabilization program: 

  -- Macroeconomic assistance to help the Bosnian government manage
     the large balance-of-payments inflows from donor governments. 

  -- Commercial bank training and advice for commercial bankers in
     market-oriented credit policies, procedures, and operations as
     well as other critical financial services and risk management. 
     This program has trained several hundred Bosnian bankers and has
     initiated training of Bosnian businessmen on the needs of
     bankers.  This program is run in conjunction with the Bosnian
     Reconstruction Finance Facility. 

  -- Bank supervision advice for operations and institutional
     development of the Federation Banking Agency. 

  -- Assistance to Bosnian businesses seeking to access Bosnian
     Reconstruction Finance Facility loans and other donor credit
     programs; specifically, helping them to develop loan
     applications and business plans and to improve business
     operations.  This program's core vehicle is the finance
     facility's business consulting services. 

  -- Assistance, in conjunction with the European Union, in the
     establishment of a customs training center and in the design and
     implementation of training programs for Bosnian customs
     officials. 

  -- Assistance to accelerate privatization by training Federation
     and cantonal officials in privatization strategies and
     enterprise preparation.  To date, USAID has taken the lead in
     training the Federation and cantonal privatization officials,
     equipped both the Federation and cantonal offices, developed the
     key privatization laws and helped get them passed, designed and
     will help execute the mass privatization programs, and helped
     write the underlying regulations of the privatization program. 
     The privatization program also contains a major public education
     component, which is crucial to allowing informed citizen
     participation in the privatization process and to educating
     citizens on what to expect with transition to a market economy. 

  -- In fiscal year 1997, USAID also launched a large
     legal/regulatory reform project within the economic
     stabilization program.  This project allowed USAID to provide
     technical assistance to Bosnia for developing the enabling
     environment for privatization and post-privatization activities. 
     For example, this assistance included analysis and revision of
     current laws and accounting principles to make them consistent
     with international standards in order to facilitate investment
     and protect investors. 

  -- USAID also supported economic institutions in both entities, as
     well as at the national level.  These institutions include the
     Federation Banking Agency, Customs Administration, Tax
     Administration, and Privatization Agency; the Federation's
     cantonal Privatization Agencies; National Bank Republika
     Srpska's Office of Bank Supervision and Regulations; the
     Republika Srpska Customs Administration; the Central Bank; and
     the Ministries of Finance. 

The Treasury's Office of Technical Assistance is also helping the
national and entity governments, primarily the Federation Ministry of
Finance, in the areas of tax, budget, debt, banking, and
infrastructure finance.  During fiscal year 1997, the Treasury
Department helped the Federation Ministry of Finance get established
and helped to develop working relations between the Bosnian Croat
Minister, the Bosniak Deputy, and their respective staff.  Treasury
tax advisers have been assisting the Federation Ministry of Finance
in (1) writing tax law and implementing new tax systems, (2)
developing a revenue analysis unit to understand the implications of
tax law and revenue allocation for the financing of different levels
of government, and (3) developing a tax administration system.  The
primary objective of the Treasury's budget assistance to the
Federation has been to create a transparent budget process by (1)
assisting the Federation Ministry of Finance in devising the
processes and procedures for developing a budget and techniques for
budget analysis and (2) helping the ministry staff revise the budget
law. 

The Treasury's role in external debt has been to give advice to (1)
the national government as it prepares for negotiations on
restructuring bilateral official and commercial debt and (2) the
entities on complementary procedures and laws to ensure that their
constitutional requirement to provide debt service is met.  In the
banking sector, the Treasury's main focus has been the reform and
privatization of the banking system.  The Department has also
provided technical assistance to the national and entity governments
to support the Dayton Agreement's provisions for joint institutions
to own, rebuild, finance, and operate certain major infrastructure
items.  According to Treasury officials, progress has recently been
greatest in restoring rail communications. 


--------------------
\3 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 


      DEMINING
------------------------------------------------------- Appendix I:1.4

The State Department obligated $5.4 million in fiscal year 1997 for
demining efforts.\4 These funds were for (1) continuation of the U.N. 
Mine Action Center, the information clearinghouse and training center
for mine clearance and mine awareness activities; (2) training and
staffing mine survey teams; and (3) demining teams. 


--------------------
\4 These funds include $5 million in fiscal year 1997 funds from
USAID. 


      COMMERCIAL OPPORTUNITIES
------------------------------------------------------- Appendix I:1.5

In fiscal year 1997, the U.S.  government obligated approximately
$1.9 million to support commercial opportunities activities.  The
U.S.  Trade and Development agency obligated $1.78 million to assist
Bosnian industrial rehabilitation efforts by funding feasibility
studies.\5 In fiscal year 1997, the agency (1) hosted orientation
sessions of Bosnian government and business to learn about U.S. 
technologies and to discuss investment and commercial projects, (2)
provided training for air traffic controllers at the Sarajevo airport
to familiarize them with U.S.  traffic control equipment and to
facilitate purchase of U.S.  equipment, and (3) provided technical
assistance and helped to revitalize a formerly incapacitated aluminum
facility in Mostar.  The agency also organized advisory programs and
missions to evaluate major infrastructure sectors in Bosnia based on
export potential and U.S.  corporate interests. 

The Commerce Department obligated $75,000 in fiscal year 1997 to
support continued expansion of its Central and Eastern European
Business Information Center's Bosnian/Balkan Reconstruction
Initiative.  The initiative is to process and distribute information
on procurement opportunities to U.S.  companies from reconstruction
projects through operation of a website and hotline service. 


--------------------
\5 Includes fiscal year 1996 carryover funds. 


   HUMANITARIAN ASSISTANCE
--------------------------------------------------------- Appendix I:2


      FOOD ASSISTANCE
------------------------------------------------------- Appendix I:2.1

USAID's Food for Peace office obligated a total of $43.9 million for
food assistance to Bosnia in fiscal year 1997.  USAID provided $23.5
million in food assistance through the World Food Program and four
private voluntary organizations including the American Red Cross,
Catholic Relief Services, and the Adventist Development and Relief
Agency.  Under Title II of Public Law 480, Food for Peace provided
$20.4 million in foodstuffs, such as wheat, flour, vegetables,
cornmeal, beans, and rice, to the people of Bosnia.  These foodstuffs
were distributed to an estimated 273,000 beneficiaries and
represented an estimated 40 percent of overall food needs identified
by the World Food Program. 


      REFUGEE ASSISTANCE
------------------------------------------------------- Appendix I:2.2

The State Department's Bureau of Population, Migration and Refugees
obligated $72.3 million in grants to assist Bosnian refugees and
displaced persons.  About $44 million of this amount was provided to
UNHCR, about $8.6 million in fiscal year 1997 was provided to the
International Committee of the Red Cross, about $7.5 million was
provided to Catholic Relief Services, and the remaining $12.2 million
was provided to eight other nongovernmental organizations and the
World Food Program. 


      EMERGENCY HUMANITARIAN
      ASSISTANCE
------------------------------------------------------- Appendix I:2.3

USAID obligated $27.1 million for emergency humanitarian assistance
in fiscal year 1997.  Of this amount, USAID's Office of Foreign
Disaster Assistance spent $19.7 million in fiscal year 1997 to
support emergency disaster relief activities, and USAID's Office of
Transition Initiatives contributed $7.4 million\6 in other emergency
assistance to Bosnians.  This assistance consisted of clothing, fuel,
food, health assistance, and other critical items needed for survival
until economic recovery activities take hold. 


--------------------
\6 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 


      COMMISSION ON THE MISSING
------------------------------------------------------- Appendix I:2.4

The State Department provided about $1.5 million in fiscal year 1997
to the Commission on Missing Persons in the Balkans.  This commission
used the funds to help equip expert forensic teams tasked with
excavating and identifying the remains of atrocity victims, provide
training on exhumation techniques, and set up a data base on the
missing in Srebrenica.  About 20,000 people--15,000 Bosniaks, 3,000
Serbs, and almost 3,000 Croats--were reported as missing as late as
November 1997, according to a U.N.  official.  Requests for
assistance in locating the missing are fielded annually by the
Commission's Working Group on Missing Persons.  Funds were also used
to further humanitarian demining efforts. 


   DEMOCRACY AND HUMAN RIGHTS
--------------------------------------------------------- Appendix I:3


      POLICE TRAINING AND
      EQUIPMENT
------------------------------------------------------- Appendix I:3.1

In fiscal year 1997, the U.S.  obligated about $18.4 million to
assist in training and equipping the local police forces in Bosnia. 
Of this amount, the State Department obligated almost $8.43 million
to assist IPTF in training and equipping the local police forces in
Bosnia.\7 In addition, the Justice Department obligated the remaining
$9.97 million for the International Criminal Investigative Training
Assistance Program\8 for police training and other assistance in
Bosnia.  This assistance consisted of (1) human dignity and basic
skills training, (2) model stations, (3) forensics equipment and
training, (4) executive development, and (5) development of the
Federation Police Academy. 


--------------------
\7 Some of these funds also went to assist the U.N.  peacekeeping
operation in Croatia, known as the U.N.  Transitional Administration
in eastern Slavonia, in training and equipping the new transitional
police force.  State Department documents did not allow us to
separate out these funds. 

\8 This amount includes fiscal year 1996 carryover funds. 


      WAR CRIMES TRIBUNAL
------------------------------------------------------- Appendix I:3.2

In fiscal year 1997, the State Department obligated $12.2 million for
the war crimes tribunal that paid administrative expenses for the
employment of almost 390 support staff, judges, and prosecutors.  Of
this amount, $6.1 million was in cash contributions for the assessed
portion, and another $6.1 million in transferred credits. 


      OSCE ELECTIONS PROGRAMS
------------------------------------------------------- Appendix I:3.3

The United States provided $14.1 million to support OSCE's activities
for Bosnia's elections held in September and November 1997:  the
State Department obligated $12.6 million and USAID provided an
additional $1.5 million.  Most of this money went directly to OSCE in
the form of a nonearmarked cash grants that covered mission expenses
and activities such as ballot printing, voter registration, support
of local election commissions, and in-kind contributions for U.S
funding of election monitors.  In addition, OSCE also used the funds
to provide support to strengthen local political parties and
implemented voter education programs. 


      DEMOCRATIC REFORMS
------------------------------------------------------- Appendix I:3.4

In fiscal year 1997, USAID obligated a total of $9.6 million\9 for a
variety of democracy projects designed, in general, to assist in the
development of a multiethnic Bosnia based on the rule of law and
democratic principles.  About $5.5 million of this amount was
obligated by USAID's Office of Transition Initiatives for over 200
small grants that directly supported 100 civic groups, among them
legal aid; private business; women, children, and refugee advocacy
organizations; and indigenous, nongovernment-controlled civil society
and media organizations throughout Bosnia. 

USAID's Bureau for Europe and the Newly Independent States of the
Former Soviet Union also obligated about $4.1 million in fiscal year
1997 for democratic reforms.  These funds went toward organizations
that (1) helped develop political parties prior to the elections, (2)
provided voter and civic education,(3) worked to strengthen
independent media, (4) sought to improve budgetary and financial
management in the Federation's cantons and municipalities, and (5)
helped to strengthen the judicial system.  They also paid for
contract personnel who staffed OSCE's election unit, including the
Director General position, which administered and implemented the
September and November 1997 elections.\10


--------------------
\9 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 

\10 USAID included support to OSCE election activities in the
democratic reforms category. 


      OPEN BROADCAST NETWORK
------------------------------------------------------- Appendix I:3.5

The United States obligated about $2.4 million in fiscal year 1997
for continuation of the Open Broadcast Network.  Of this amount,
USAID obligated about $1.3 million in fiscal year 1997 to expand
independent media operations in Bosnia.  In addition, USIA obligated
about $1.1 million\11 to fund the Open Broadcast Network, which was
intended by its international donors to provide greater coverage,
improved programming, and broader public access to the media than was
available under government-controlled programming.  These funds were
used to expand, link, and coordinate Open Broadcast Network
operations with regional bureaus, fund local productions, and acquire
a library of off-the-shelf programming to build an audience.  USIA
also provided funds to expand reporting capabilities of the Open
Broadcast Network in the Republika Srpska to set up a regional
eastern production center. 


--------------------
\11 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 


      TRAINING AND EXCHANGES
------------------------------------------------------- Appendix I:3.6

The United States obligated almost $5.4 million\12 for training and
exchanges during fiscal year 1997.  Of this amount, USIA obligated
about $1.4 million for training in Bosnia and in the United
States.\13 Programs in this category included the Ron Brown
Fellowships for graduate studies; internships in the United States;
international visitor programs; and journalist training in Sarajevo,
Tuzla, and Banja Luka.  USIA funds also supported Voice of America
broadcasts and an international civics education project designed to
promote democracy training for Bosnian teachers and integration of
democratic principles into school curriculums. 

USAID obligated the remaining $4 million in fiscal year 1997 for
training and exchange programs.  These funds provided training to 15
groups of 272 participants in democratic institution-building, fiscal
policy and taxation, and infrastructure building.  Events funded
included training (1) local and parliamentary officials in U.S. 
political process and volunteerism, fund-raising, and the role of
women in the political process; (2) officials on fiscal federalism,
who in turn trained additional officials on fiscal federalism in
Bosnia; and (3) 93 Bosnians in railway, aviation, and water and power
management. 


--------------------
\12 Both fiscal year 1996 carryover obligations occurring in fiscal
year 1997 and fiscal year 1997 obligations are included in this
figure. 

\13 USAID provided $920,000 of this amount. 


      IMET
------------------------------------------------------- Appendix I:3.7

In fiscal year 1997, the United States provided about $500,000 in
IMET training for the Federation military.\14 These funds paid for
English language training; company-grade officer training for
medical, engineer and infantry officers; and language instructor
training in this country.  The curriculum focused on military
justice, civil-military relations, and defense management. 


--------------------
\14 The IMET program is jointly managed by the State Department and
the Department of Defense (DOD).  The Secretary of State is
responsible for the program's general direction, recommends funding
levels for congressional approval, and allocates approved funds to
each country.  The Secretary of Defense is responsible for planning
and implementing the program, including administration and
monitoring, within established funding levels. 


      HUMAN RIGHTS COMMISSION
------------------------------------------------------- Appendix I:3.8

The United States provided $1 million for the Human Rights Commission
in fiscal year 1997.  USAID and the State Department each obligated
$500,000 to support this human rights institution which was mandated
by the Dayton Agreement.  These funds supported the the Commission's
Human Rights Ombudsperson and its offices in Sarajevo and Banja Luka
that receive complaints of human rights violations and take action to
address grievances. 


   OTHER SUPPORT FOR CIVILIAN
   ACTIVITIES/ PROGRAMS
--------------------------------------------------------- Appendix I:4


      IPTF MONITORS
------------------------------------------------------- Appendix I:4.1

The State Department provided over $71.5 million to support IPTF
police monitoring in Bosnia--$31.7 million\15 in voluntary
contributions and $39.8 million for the U.S.  assessment for the U.N. 
Mission in Bosnia and Herzegovina (UNMIBH).  State's voluntary
contributions went for as many as 260 U.S.  police monitors\16
assigned to IPTF in Bosnia, including 60 posted to a new district
established in Brcko, and an additional 50 U.S.  police monitors
assigned to the U.N.  peacekeeping operation in eastern Slavonia. 
The majority of the U.S.-assessed share of UNMIBH supported IPTF. 


--------------------
\15 This amount includes $21.7 million in fiscal year 1996 carryover
funds. 

\16 According to State Department officials, the number of civilian
police ranged from 200 to 222 during this period. 


      OFFICE OF THE HIGH
      REPRESENTATIVE
------------------------------------------------------- Appendix I:4.2

In fiscal year 1997, the State Department obligated $3.9 million for
administrative support to the Office of the High Representative. 
This office was established to facilitate the efforts of the parties
in implementing the Dayton Agreement and to mobilize and coordinate
the activities of civilian organizations participating in the peace
operation. 


      OSCE MISSION ASSESSMENT
------------------------------------------------------- Appendix I:4.3

In fiscal year 1997, the State Department obligated $2.4 million for
the OSCE mission assessment that covers the cost of OSCE's human
rights and arms control activities. 


      USAID OPERATING EXPENSES AND
      OTHER COSTS
------------------------------------------------------- Appendix I:4.4

USAID obligated $4.4 million in fiscal year 1997 for planning,
project design, audit, and other support for Bosnia programs. 


EVENTS IN THE REPUBLIKA SRPSKA
POLITICAL CRISIS, JUNE
1997-JANUARY 1998
========================================================== Appendix II

This appendix provides a chronology of events that occurred during
the political crisis in Republika Srpska from June 1997 through
January 1998 (see table II.1).  In mid-July 1996, Radovan Karadzic,
the leader of the Serb Democratic Party (SDS) and an indicted war
criminal, was forced by the international community to relinquish the
offices of Republika Srpska President and SDS President and was not
allowed to run for any office in Bosnia's September 1996 elections. 
Biljana Plavsic, an SDS executive and hard-line nationalist, became
Temporary Acting President of Republika Srpska immediately thereafter
and was elected Republika Srpska President in September 1996.  In
late 1996 and early 1997, there were signs of a growing rift between
President Plavsic and Karadzic, who retained the support of hard-line
SDS members.  Karadzic and his supporters operated from the city of
Pale in eastern Republika Srpska, while President Plavsic was based
in the western Republika Srpska city of Banja Luka, the largest city
in the entity. 



                                    Table II.1
                     
                        Chronology of Events in Republika
                      Srpska's Political Crisis, June 1997-
                                   January 1998

Date          Event
------------  ------------------------------------------------------------------
June 27,      Republika Srpska President Biljana Plavsic suspends Interior
1997          Minister Dragan Kijac, a supporter of Radovan Karadzic. This move
              followed an attempt by Kijac to remove certain officers and units
              from Banja Luka, who were believed to have been involved in
              compiling a special police investigative report on irregularities
              in the financial operations of two state companies.

June 29       Plavsic is detained at Belgrade airport by Federal Republic of
              Yugoslavia police and is subsequently escorted to Banja Luka. She
              refused to yield to demands that she attend meetings in Pale, the
              stronghold of SDS hard-liners. Shortly thereafter, Plavsic issues
              a statement on television, warning that the international
              community would not wait much longer for Republika Srpska to
              establish "a state of law, which is the only condition for
              survival" of a separate Serb state. She vowed to use all her
              constitutional authority to prevent the catastrophe of the
              international community merging Republika Srpska into a unified
              Bosnia, which she foresaw if Bosnian Serbs proved incapable of
              establishing order and constitutionality in their own state.

July 1        The SDS executive board calls on Plavsic to return to her office
              in Pale or resign. Republika Srpska state television (SRT)
              continues to attack Plavsic.

July 2        The Contact Group--a group consisting of the United States, the
              United Kingdom, Italy, Germany, France, and Russia--expresses
              sharp concern over the political situation in Republika Srpska and
              warns that unless the situation is resolved peacefully, Republika
              Srpska risks even greater isolation from international sympathy
              and assistance.

July 3        Plavsic orders dissolution of the Republika Srpska National
              Assembly (or parliament), which is controlled by the SDS, and
              calls for new elections.

July 4        The parliament begins a session in defiance of Plavsic's order for
              dissolution.

July 7        The peace operation's principal organizations--the Office of the
              High Representative (OHR), the Stabilization Force (SFOR), the
              Organization for Security and Cooperation in Europe (OSCE), the
              U.N. Mission in Bosnia and Herzegovina (UNMIBH) and the U.N. High
              Commissioner for Refugees (UNHCR)--send a letter to Plavsic,
              copied to Krajisnik, the Serb member of Bosnia's collective
              Presidency and an SDS leader. The letter acknowledged Plavsic's
              decision to dissolve the parliament, which was deemed by the
              international community to be in conformity with Republika
              Srpska's constitution. It also assured Plavsic that military
              activity in either entity that was not in accordance with annex 1A
              of the Dayton Agreement would not be tolerated by SFOR and
              concluded by assuring Plavsic of their support in her endeavors to
              implement the peace agreement.

July 9-10     Republika Srpska's Constitutional Court passes a ruling, which
              orders the suspension of all enactments and actions by state
              organs, organizations, communities, and public high-ranking
              officers in the entity, pending its final decision on the
              constitutionality of Plavsic's decision to dissolve the parliament
              and hold new elections.

July 10       British SFOR troops detain for the first time a person indicted
              for war crimes, a Bosnian Serb, and kill another in self-defense.
              The operation took place in Prijedor, Republika Srpska,and was
              followed by about 3 weeks of low-level violence directed against
              the international community, including SFOR.

July 19       The SDS executive board expels President Plavsic, a member of the
              board, from the party and calls for her to resign from her post as
              Republika Srpska President and to transfer her duties over to the
              Vice-President.

July 22       Republika Srpska Supreme Court rejects as "illicit" a government
              petition submitted against Plavsic for her decision to dissolve
              the parliament and call new elections. The Republika Srpska
              Constitutional Court is to make the final decision on the
              constitutionality of Plavsic's decision by mid-August.

August 1      Council of Ministers session cancelled due to nonattendance of the
              Republika Srpska delegation.

August 7      SFOR initiates new policy, within the existing SFOR mandate, for
              the control and restructuring of the entities' special police
              forces.

August 11     SFOR troops surround Republika Srpska special police force
              premises in a settlement near Banja Luka.

August 12     SFOR troops inspect five Bosnian Serb special police bases in Pale
              following the decision to clamp down on units that are suspected
              of being a paramilitary force.

August 15     The Republika Srpska Constitutional Court announces its decision
              that Plavsic's July 3 decisions to dissolve parliament and call
              early elections was not in conformity with the Republika Srpska
              constitution. On August 21, a Constitutional Court judge viewed as
              loyal to Plavsic states publicly that he was beaten and
              intimidated to prevent him from voting.

              Plavsic forms her own political party, the Serb People's Union
              (SNS).

August 17     Special police forces loyal to Plavsic take over the Banja Luka
              civilian police headquarters, the public security center. The
              International Police Task Force (IPTF), supported by SFOR, enters
              and inspects the public security center in response to Plavsic's
              charges about its human rights abuses and undemocratic activity,
              including illegal surveillance. Sometime later, Plavsic gains
              control of public security centers in Prijedor and Mrkonjic Grad,
              as well as over one municipal station under the Doboj public
              security center.

August 18     Plavsic rejects the Constitutional Court ruling that overturned
              her decision to dissolve parliament.

August 19     New Plavsic-appointed Banja Luka Police Chief arrested by pro-
              Pale security men, released later in the day.

August 22     The High Representative writes to Krajisnik in his capacity as
              chairman of the SRT board of directors expressing the
              dissatisfaction of the international community with SRT's
              continual instances of deliberate misinformation, inflammatory
              commentary, insulting language, and highly biased reporting.

August 23     Marko Pavic accepts post of Republika Srpska Interior Minister
              offered by Plavsic. Republika Srpska government cuts off relations
              with Plavsic and maintains own interior ministry that controls
              police in six of nine public security centers.

August 24     The Banja Luka studio of SRT begins broadcasting independent
              programming from Mount Kozara transmitter, while at the same time
              limiting SRT-Pale broadcasts to the Banja Luka region.

August 25     The scheduled session of Bosnia's collective Presidency is not
              held due to absence of Krajisnik, the Serb member of the
              Presidency and an SDS leader. The High Representative states that
              Republika Srpska authorities could face sanctions as the
              obstructing party on important issues such as citizenship and
              passport laws and ambassadors. Sanctions under consideration
              include denial of passports and visas to the Serb member of the
              Presidency.

August 27-    Pro-Plavsic police fail in their attempt to take over the Doboj
28            public security center. SFOR fires a warning shot at Bosnian Serb
              police near Doboj but denies taking over a Serb television
              transmitter. Seven Serbs arrested for takeover of a television
              transmitter near Doboj. Two bomb explosions were reported at the
              offices of the independent journal, "Alternativa," in Doboj, and
              inside offices of the Socialist Party, the first such attack in
              months.

August 28     Pro-Plavsic police fail in their attempt to take over Brcko and
              Bijeljina police stations, as rival factions also compete for
              television and radio towers and control over movements in the
              areas. Violence erupts in Brcko when crowds of 200-300 people
              began throwing rocks, bottles, and sticks at SFOR troops and other
              members of the international community. SFOR fires several warning
              shots as a deterrent. During the day, the crowd grows in size and
              the potential for violence increases significantly. The situation
              is exacerbated by Republika Srpska media, including SRT radio,
              misreporting incidents, claiming that SFOR was trying to occupy
              police stations, and attempting to incite the population to commit
              violent acts against the international community, particularly
              unarmed IPTF monitors and SFOR troops. As the crowd increases,
              SFOR soldiers are forced to use tear gas to deter further use of
              Molotov cocktails and to reduce the threat to their forces. At the
              request of the United Nations, SFOR assists in the evacuation of
              IPTF personnel from the town. The violence results in injuries to
              three Serbs, two SFOR soldiers, and an IPTF monitor, as well as
              severe damage to the IPTF station. After this incident, Pale
              consolidates its control over Brcko police.

August 30     In response to a request from the High Representative, the North
              Atlantic Council authorizes SFOR to shut down media whose output
              is in persistent and blatant violation of the spirit or letter of
              Dayton Agreement, in accordance with the Sintra declaration of May
              1997. The council reaffirms that SFOR would not hesitate to take
              the necessary measures, including the use of force, against media
              inciting attacks on SFOR or other international organizations.

September 1-  SFOR takes over Udrigovo transmitter in eastern Republika Srpska.
2             A crowd of about 250 people menaces troops with sticks and rocks
              in an attempt to force them to leave the site. In order to
              disperse the crowd, SFOR deploys a single canister of tear gas.
              Krajisnik reaches an agreement with the Principal Deputy High
              Representative and the SFOR Commander that calls for Pale-
              controlled SRT to curb inflammatory reporting. SFOR would remain
              in the vicinity of the transmitter site to secure the facility and
              ensure it would not be used to incite violence against SFOR or the
              international community. The agreement was signed by the Commander
              of SFOR's Multinational Division (North), the SRT Editor-in-
              Chief, and the Deputy Minister of Interior.

September 8-  On September 8, 1997, SDS buses in large numbers of people from
9             throughout Republika Srpska, including police from eastern Bosnia,
              for an SDS rally in Banja Luka. Based on evidence presented by the
              Banja Luka Chief of Police, the Principal Deputy High
              Representative determines that the buses contained people
              intending to provoke disorder and possible violence and requests
              SFOR assistance in inspecting and turning back buses deemed as a
              threat. The day after the rally, senior hard-line SDS members and
              their security personnel, including some with special police
              identification cards, are blockaded in a Banja Luka hotel by pro-
              Plavsic police and a crowd of local residents until the Principal
              Deputy High Representative and SFOR soldiers assist the majority
              of the pro-Pale group in safely leaving the hotel. The remaining
              members of the group--including Krajisnik and the Pale Minister of
              Interior, Kijac--decline SFOR's offer of assistance and are
              verbally assaulted and pelted with eggs and stones by the pro-
              Plavsic crowd upon leaving the hotel.

September     Municipal elections are held throughout Bosnia. SDS wins about 28
13-14         percent of the vote, down from about 52 percent of the vote during
              the September 1996 elections. The combined Serb opposition,
              excluding SNS, wins about 30 percent of the vote, and Federation-
              based parties win about 26 percent. (SNS was formed too late to
              run in the municipal election.)

September 15  European Union foreign ministers act on a proposal from the High
              Representative and suspend granting visas for Krajisnik; Boro
              Bosic, co-Premier on Bosnia's Council of Ministers; as well as
              Spasoje Albijanic, Bosnia's Minister of Communications and Civil
              Affairs; and Gavro Bogic, Bosnia's Deputy Minister for External
              Trade and the Economy, both of whom are Serbs.

September     UNMIBH finalizes the Republika Srpska police restructuring
16-26         agreement, dated September 16, 1997. On September 24, the pro-
              Pale, Republika Srpska Prime Minister accepts all of the
              conditions contained in the agreement for SDS-controlled police.
              The next day, President Plavsic sends a letter to UNMIBH
              indicating that restructuring of police could begin. On September
              26, the U.N. Special Representative to the Secretary General, the
              head of UNMIBH, announces that agreement was reached with
              Republika Srpska authorities on police restructuring.

September 24  Plavsic and Krajisnik meet with Federal Republic of Yugoslavia's
              President Milosevic. They decide to hold Republika Srpska
              parliamentary elections on November 15, 1997, under OSCE
              monitoring, and agree that news programs would be broadcast daily
              from studios in Pale and Banja Luka alternatively.

September 28  SRT-Pale broadcasts a "grotesque distortion" of a press conference
              by the Prosecutor of the International Criminal Tribunal for the
              Former Yugoslavia (war crimes tribunal) in violation of the
              September 2 agreement with SFOR. The broadcast includes editorial
              comments that depict Radovan Karadzic and Ratko Mladic (the two
              highest-ranking war crimes indictees) as national heroes, as well
              as accusations that the war crimes tribunal is a political
              instrument against the Serbs.

October 1     SFOR occupies and controls four SRT-Pale transmitters at Udrigovo,
              Duge Njive, Trebevic, and Leotar, as requested by the High
              Representative and authorized by the North Atlantic Treaty
              Organization (NATO) Secretary General and Supreme Allied
              Commander, Europe.

October 7     The High Representative sends a letter to Krajisnik in his
              capacity as chairman of the SRT-Pale board of directors, outlining
              a series of criteria for SRT's restructuring, prerequisites for
              resuming SRT-Pale broadcasts. The Banja Luka studio is sustaining
              programming output for SRT while the Pale studio's access is
              curtailed.

October 16-   SRT-Pale is back on the air in defiance of an international ban.
17

October 18    SFOR takes over a fifth transmitter at Veliki Zep, near Han
              Pijesak, and discovers upon inspecting the site that the
              transmitter had been tampered with and vital parts removed. Even
              though he denies having taken the stolen transmitter pieces,
              Krajisnik makes clear to the international community over the next
              few days that he is in a position to hand them back if he chooses.
              The sabotage results in 30 percent of Republika Srpska's
              population receiving blank screens on the SRT channel.

October 19    U.S. Air Force aircraft, Commando Solo, starts broadcasting to SRT
              receivers explaining that normal service was cut when a key
              transmitter at Veliki Zep was sabotaged.

October 20    Bomb destroys SRT local transmitter in Bijeljina. The
              international community believes it is likely that SRT-Pale
              carried out the explosion.


October 21    OSCE announces that Republika Srpska parliamentary elections will
              be concluded by November 23, 1997.

October 30    SRT-Banja Luka television signal in eastern Republika Srpska is
              restored by SFOR via satellite links.

November 3    SRT-Banja Luka agrees to fully restructure in accordance with OHR
              proposals and internationally recognized standards of broadcasting
              and journalism.

November 10   SFOR seizes control of and then decertifies a Republika Srpska
              special police unit in Doboj. SFOR took this action in response to
              the actions of Republika Srpska special police on September 8 and
              9, 1997, in Banja Luka, and the subsequent failure of Krajisnik to
              explain them.

November 22-  Parliamentary elections held with 70-percent voter turnout.
23

December 7    OSCE announces provisional results of the parliamentary elections.
              SDS loses majority, going from 45 (of 83) seats to 24 seats.
              Plavsic's party, SNS, wins 15 seats.

December 27   Plavsic proposes Mladen Ivanic as the next Prime Minister of
              Republika Srpska.

January 12,   Republika Srpska parliament reelects an SDS member as its
1998          President but fails to elect a new Prime Minister.

January 13    Bosnian Serb leaders in Pale begin operating a new television
              station. Although the station is registered as a private company,
              Pale's Information Minister is its director and most staff are
              former employees of SRT-Pale.

January 16    The High Representative writes a letter protesting an interview
              given by Republika Srpska Prime Minister Klickovic, an SDS member,
              in which he spoke about the need to "remove" certain individuals
              to ensure the unity of Republika Srpska police. He requests that
              Klickovic not be allowed to hold any public office in Republika
              Srpska or be a candidate in Bosnia's September 1998 elections and
              that criminal proceedings be initiated against him.

              Mladen Ivanic resigns from his post as Republika Srpska Prime
              Minister-designate after failing to secure the backing of SDS and
              other hard-line Serb nationalist members of the Republika Srpska
              parliament.

January 18    Serb opposition and Federation-based political parties in the
              Republika Srpska parliament elect by one vote a new, relatively
              moderate government after hard-liners walked out in an attempt to
              disrupt the proceedings. Milorad Dodik is elected Prime Minister,
              is given a mandate to form a government, and announces his intent
              to comply with the Dayton Agreement. The international community,
              including SFOR, support the first meetings of the new parliament
              and transition to the new government through political and
              military means; for example, following the election of the new
              government, SFOR increases patrols and establishes observation
              posts in the vicinity of Republika Srpska government offices in
              and around Pale.

January 22    U.S. SFOR troops in Bijeljina detain a Bosnian Serb indicted for
              war crimes and surrender him to the war crimes tribunal.

January 31    Republika Srpska parliament meets in Banja Luka, swears in the new
              government, and votes to move the seat of the government from Pale
              to Banja Luka.
--------------------------------------------------------------------------------
Sources:  OHR, OSCE, and NATO documents; interviews with UNMIBH,
IPTF, and SFOR officials. 


THE PROGRAM TO TRAIN AND EQUIP THE
FEDERATION ARMY
========================================================= Appendix III

This appendix provides details on the status of the U.S.-led
international program to train, equip, and integrate the Bosniak and
Bosnian Croat militaries into a unified Federation Army (see table
III.1).  The program remains a key element of the U.S.  effort to
establish a stable military balance in the region and sustain a
secure environment in Bosnia. 

As of April 1998, the total pledges and contributions to the train
and equip program was about $389 million, including $109.1 million
from the United States, with 14 countries pledging cash, equipment,
training, or other support.\1 The United States and 10 other
countries provided at least $236.9 million in equipment, training and
other in-kind donations.  In addition, five countries have donated
$152 million in cash to the program:  Saudi Arabia, Kuwait, the
United Arab Emirates, Brunei, and Malaysia.  According to State
Department officials, the amount of cash contributed by each country
is confidential. 



                                   Table III.1
                     
                           Train and Equip Pledges and
                      Contributions, by Country, as of April
                                       1998

                              (Dollars in millions)

                             In-kind Donations\a
            ------------------------------------------------------
                          Heavy         Light         Training &
            Value         weapons       weapons       other         Status
Donor       ------------  ------------  ------------  ------------  ------------
United      $100.0        45 M-60       840 AT-4      Combat        Heavy arms
States      drawdown      tanks         light anti-   simulation    training
            authority\b                 tank          systems       begun
                          80 M-113      weapons
                          armored                     2,332         Light arms
                          personnel     46,100 M-16   radios        distributed
                          carriers      assault
                                        rifles        4,100 field   UH-1Hs in
                          15 UH-1H                    phones        Germany for
                          helicopters   1,000 M-60                  training
                                        machine       168
                                        guns          generators

                                                      binoculars

                                                      uniforms

                                                      maps

                                                      manuals

            $7.68 EDA\c   126 155mm                   Camouflage    Howitzers
                          towed                       screens       delivered
                          howitzers                                 November
                          (10 to be                   minefield     1997
                          used for                    marking
                          spare                       sets          Remainder
                          parts)                                    not yet
                                                      tank          delivered
                                                      ammunition

            $1.40 IMET\d                              FY '96-98     34 officers
                                                      funding for   trained in
                                                      English       United
                                                      instructor    States
                                                      and officer
                                                      training

United      $120.0        51 AMX-30                   Artillery     Equipment in
Arab                      tanks                       training      storage in
Emirates                                              provided in   Bosnia
(UAE)                     31 Panhard                  UAE
                          AML-90
                          armored
                          reconnaissan
                          ce vehicles

                          11 M3
                          Panhard
                          transports

                          36 105mm
                          howizters

Egypt       $3.8          10 T-55                     Officer       Artillery
                          tanks\e                     training in   delivered
                                                      Egypt         December
                          12 M59 130mm                              1996;
                          field guns
                                                                    Tanks
                          12 D-30                                   delivered
                          122mm                                     October 1997
                          howitzers

                          18 ZU-23
                          anti-
                          aircraft
                          guns

Turkey      $2.0          10 T-55       1,000 HK33    500 soldiers  Weapons
                          tanks\\e      rifles        provided      delivered
                                                      tank and
                                        100 RPG-7     artillery     Training
                                        grenade       training in   ongoing
                                        launchers     Turkey

Malaysia    $0.8\f                                    Officer       Training
                                                      training in   completed
                                                      Malaysia

Jordan      not                                       18 trainers   Training
            available\g                               in Bosnia     ongoing
                                                      for M-113
                                                      instruction

Indonesia   $2.0                                      32 trainers   Training
                                                      in Bosnia     completed
                                                      for medical,
                                                      engineer
                                                      training

Pakistan    not                                       M-113, UH-    Training not
            available\g                               1H            yet started
                                                      maintenance
                                                      training

Germany\h   not                                       M-113, UH-    Training not
            available\g                               1H training   yet started
                                                      in Germany

Qatar       not           25 AMX-10                   Maintenance   Training
            available\g   armored                     training in   ongoing
                          personnel                   Qatar
                          carriers

Bangladesh  not                                       Officer       Training
            available\g                               training in   ongoing
                                                      Bangladesh

================================================================================
Totals      $236.9
--------------------------------------------------------------------------------
\a In addition, the $152 million in cash donations have been used to
(1) purchase 532 trucks and trailers, 36 multiple-launch rocket
systems; (2) fund the MPRI contracts; (3) purchase spare parts and
ammunition; and (4) fund the manufacturing of 51 artillery pieces,
50,000 kevlar helmets, and other equipment within the Federation. 

\b Congress authorized the transfer of up to $100 million in DOD
equipment stocks and services to the government of Bosnia in Public
Law 104-107, section 540, for fiscal year 1996.  The State Department
and DOD refer to this as "drawdown authority." As of December 1997,
$8.44 million in drawdown funding was not yet allocated, according to
DOD figures. 

\c Excess Defense Articles Program.  DOD provides these articles
under section 516 of the Foreign Assistance Act of 1961, as amended
(22 U.S.C.  2321j). 

\d IMET program, fiscal years 1996-1998.  The fiscal year 1998 IMET
budget for Bosnia is $650,000. 

\e Egypt and Turkey provided these tanks as donations in addition to
their original pledges. 

\f Malaysia used part of its donated funds to pay for the cost of
this training. 

\g Several donors did not place a monetary value on some or all of
their in-kind donations. 

\h Germany is providing helicopter pilot, helicopter maintenance, and
armored vehicle maintenance training as part of its own bilateral
assistance program with the Federation. 


--------------------
\1 Morocco pledged to support the program in 1996, but it has yet to
specify the amount and type of support it would contribute. 


USIA POLLING DATA ON OPINIONS THAT
BOSNIA'S ETHNIC GROUPS HOLD OF
EACH OTHER
========================================================== Appendix IV

Since the signing of the Dayton Agreement in December 1995, USIA has
fielded a series of public opinion polls in Bosnia.  USIA analyses
are based on responses from people belonging to the principal ethnic
group in each of the following sampling areas:  Republika Srpska;
predominately Croatian regions of Bosnia; and predominately Bosniak\1
areas of Bosnia.  Nineteen times out of 20, results from samples of
similar size to USIA samples will differ by no more than 4 percentage
points in either direction from what would be found if it were
possible to interview every Bosnian Serb in Republika Srpska, every
Bosniak in Bosniak-dominated areas of the country, and every Bosnian
Croat in Croat-dominated areas of the country.  The following figures
present some results from these polls on opinions that Bosnia's three
major ethnic groups hold of each other (see figs.  IV.1-6). 

   Figure IV.1:  Bosniak Opinion
   of Bosnian Croats, December
   1995 through January 1998

   (See figure in printed
   edition.)

   Figure IV.2:  Bosniak Opinion
   of Bosnian Serbs, December 1995
   through January 1998

   (See figure in printed
   edition.)

   Figure IV.3:  Bosnian Croat
   Opinion of Bosniaks, December
   1995 through January 1998

   (See figure in printed
   edition.)

   Figure IV.4:  Bosnian Croat
   Opinion of Bosnian Serbs,
   December 1995 through January
   1998

   (See figure in printed
   edition.)

   Figure IV.5:  Bosnian Serb
   Opinion of Bosniaks, December
   1995 through January 1998

   (See figure in printed
   edition.)

   Figure IV.6:  Bosnian Serb
   Opinion of Bosnian Croats,
   December 1995 through January
   1998

   (See figure in printed
   edition.)


--------------------
\1 USIA data show results for "Bosnian Muslims," not Bosniaks.  For
purposes of this report, we have used the terms synonymously. 


RETURNS OF BOSNIAN REFUGEES AND
INTERNALLY DISPLACED PEOPLE IN
1996 AND 1997
=========================================================== Appendix V

This appendix provides detailed information on the status of Bosnia's
refugees and internally displaced persons.  Table V.1 contains
information on the number and location of refugees that still remain
abroad.  The majority of refugees reside in the Federal Republic of
Yugoslavia and Germany.  Tables V.2 and V.3 show the number of
refugees and internally displaced persons, respectively, returning to
the Federation, by canton, and Republika Srpska in 1996-97.  Table
V.4 calculates the total number of refugees and internally displaced
persons that returned home in 1996-97. 



                                    Table V.1
                     
                      Bosnian Refugees in Host Countries, as
                               of December 1, 1997

Current     Persons with durable         Persons without  Projected returnees in
location             solutions\a       durable solutions                  1998\b
--------  ----------------------  ----------------------  ----------------------
Australi                  26,300                       0                     n/a
 a
Austria                   74,740                   8,300             2,000-4,000
Belgium                    4,736                   1,533                     800
Canada\c                  47,578                       0                     n/a
Croatia                  178,748                  77,091           20,000-40,000
Czech                      5,240                       0                     n/a
 Republic
Denmark                   21,421                   1,352                     400
Finland                    1,350                       0                     n/a
France                     7,606                   7,400                     n/a
Federal                    4,381                 294,006           20,000-40,000
 Republic
 of
 Yugosla
 via
Romania                    1,489                   3,500                     n/a
Germany\                 125,000                 220,000          80,000-120,000
 d
Greece                     3,750                     250                     n/a
Hungary                    2,254                     946                     200
Ireland                    1,062                      20                     n/a
Italy                        926                   9,285                     n/a
Liechten                     225                     171                     n/a
 stein
Luxembou                   1,443                      30                     n/a
 rg
Netherla                  18,440                   6,293                     n/a
 nds
New                          146                       0                     n/a
 Zealand
Norway                    12,885                       0                   2,000
Slovak                     2,400                       0                     n/a
 Republic
Slovenia                  27,500                   5,929                     n/a
Spain                        n/a                   2,000                     n/a
Sweden                    58,400                   3,100                   1,000
Switzerl                  12,449                  11,658                   8,000
 and
Turkey                     3,060                     940                     n/a
United                     4,646                   3,165                     200
 Kingdom
 \e
United                    64,400                       0                     n/a
 States
================================================================================
Total                    712,575                 611,969                134,600-
                                                                         216,600
--------------------------------------------------------------------------------
Legend
n/a = not available

\a Includes humanitarian/refugee status, other resident status,
resettlement, and repatriation. 

\b These figures are based on projections made available by countries
hosting refugees from Bosnia as well as on UNHCR estimates. 

\c This figure records the number of persons from the former
Yugoslavia granted Canadian landed immigrant status from 1992 until
the end of November 1997.  Although the largest component within this
number consists of citizens from Bosnia, the figure includes
immigrants from other countries of the former Yugoslavia. 

\d UNHCR estimates. 

\e Not including figures prior to 1996.  All nationals of the former
Yugoslavia. 

Source:  UNHCR data. 



                                    Table V.2
                     
                      Repatriation of Refugees to Bosnia in
                                  1996 and 1997

Federation (canton)                 1996              1997\a               Total
--------------------  ------------------  ------------------  ==================
Una Sana                          22,885              22,900              45,785
Posavina                           8,432              16,900              25,332
Tuzla-Podrinje                     5,695              11,000              16,695
Zenica-Doboj                       2,896               7,300              10,196
Gorazde                              682               3,700               4,382
Central Bosnia                     2,002               7,600               9,602
Neretva                              761               7,800               8,561
West Herzegovina                       6                 400                 406
Sarajevo                          29,000              30,500              59,500
West Bosnia                        4,924               3,550               8,474
Unknown destination                2,831                   0               2,831
================================================================================
Subtotal                          80,114             111,650             191,764
Republika Srpska                   7,925               8,700              16,625
================================================================================
Total                             88,039             120,350             208,389
--------------------------------------------------------------------------------
\a As of December 1997

Source:  UNHCR data. 



                                    Table V.3
                     
                      Displaced Persons Who Returned Home in
                                  1996 and 1997

Federation (canton)                 1996              1997\a               Total
--------------------  ------------------  ------------------  ==================
Una Sana                          36,993                 350              37,343
Posavina                             883               3,500               4,383
Tuzla-Podrinje                    16,891              13,600              30,491
Zenica-Doboj                       4,614               1,000               5,614
Gorazde                            1,558                 500               2,058
Central Bosnia                    29,279               6,000              35,279
Neretva                              257               3,000               3,257
West Herzegovina                       0                  10                  10
Sarajevo                          12,165              24,200              36,365
West Bosnia                          273               1,000               1,273
================================================================================
Subtotal                         102,913              53,160             156,073
Republika Srpska                  61,854               5,200              67,054
================================================================================
Total                            164,767              58,360             223,127
--------------------------------------------------------------------------------
\a As of December 1997

Source:  UNHCR data. 



                                    Table V.4
                     
                          Total Returns in 1996 and 1997

Entity/returnees                    1996                1997               Total
--------------------  ------------------  ------------------  ==================
Federation
Refugees                          80,114             111,650             191,764
Displaced persons                102,913              53,160             156,073
================================================================================
Subtotal                         183,027             164,810             347,837
Republika Srpska
Refugees                           7,925               8,700              16,625
Displaced persons                 61,854               5,200              67,054
================================================================================
Subtotal                          69,779              13,900              83,679
Total Bosnia
Refugees                          88,039             120,350             208,389
Displaced persons                164,767              58,360             223,127
================================================================================
Total                            252,806             178,710             431,516
--------------------------------------------------------------------------------
Source:  Calculated from UNHCR data. 


BOSNIA'S PRIORITY RECONSTRUCTION
AND RECOVERY PROGRAM FOR 1996 AND
1997
========================================================== Appendix VI

Bosnia's Priority Reconstruction and Recovery Program is providing
the framework for simultaneously carrying out economic
reconstruction, the development of governmental structures, and the
transition from socialism to a market economy.  The three main
objectives are to (1) provide sufficient financial resources to
initiate a broad-based rehabilitation process that will jump-start
economic recovery and growth; (2) strengthen and rebuild government
institutions; and (3) support, in parallel, the transition to a
market economy. 


   DONOR PLEDGES, COMMITMENTS, AND
   FUNDS EXPENDED
-------------------------------------------------------- Appendix VI:1

In 1996, 59 donor countries and organizations pledged $1.9 billion
and committed $2.04 billion in support of the reconstruction effort
in Bosnia.  According to an April 1998 report by the World Bank and
the European Commission, during 1997, 31 of the program's original
donors pledged an additional $1.24 billion, of which $1.22 billion
was committed toward Bosnia's reconstruction.  As of December 31,
1997, the 1996-97 combined donor pledge was $3.14 billion, and the
combined commitments totaled $3.26 billion. 

The largest individual donor is the European Commission, committing a
total of $698.64 million, followed by the United States ($528.79
million), the World Bank ($522.60 million), Japan ($212.30 million),
the Netherlands ($175.80 million), Italy ($103.00 million), and the
European Bank for Reconstruction and Development ($98.06 million). 
These top seven donors accounted for $2.34 billion, or 72 percent, of
the 1996-97 committed funds. 

Over the program's first 2 years, an estimated $1.7 billion--52.3
percent of the total committed funds--had been expended, that is,
spent on the ground.\1 The United States expended more funds than any
other donor during this period, about $347.5 million, or 66 percent
of U.S.  commitments, followed by the European Commission with
$318.16 million (46 percent of European Commission commitments) and
the World Bank with $281.60 million (54 percent of World Bank
commitments).  (See table VI.1.)



                                    Table VI.1
                     
                        Donor Pledges and Commitments for
                      Bosnia's Reconstruction Program During
                      1996 and 1997, as of December 31, 1997

                              (Dollars in millions)

                                                       Total
Donor                      Total pledges       commitments\a      Funds expended
--------------------  ------------------  ------------------  ------------------
European donors
European                         $673.20             $698.64             $318.46
 Commission\b
Albania                             0.02                0.02                0.02
Austria\b                          19.90               29.44               26.80
Belgium\b                          10.37                8.27                3.51
Bulgaria                            0.01                0.03                0.03
Croatia\b                          11.10               24.90               14.14
Czech Republic\b                    6.50                6.97                6.33
Denmark\b                          15.70               18.57               11.82
Estonia                             0.07                0.07                0.07
Federal Republic of                20.00               21.70               11.70
 Yugoslavia (Serbia
 and Montenegro)\b
Finland\b                          10.50               19.46                9.55
Former Yugoslav                     0.10                0.15                0.16
 Republic of
 Macedonia
France\b                           19.43               17.00               11.48
Germany\b                          51.45               77.62               65.54
Greece\b                           17.00               16.95                7.45
Hungary                             1.00                1.00                1.00
Iceland                             1.60                1.60                0.15
Ireland\b                           8.00                9.21                8.50
Italy\b                            98.45              103.00               26.07
Latvia                              0.09                0.11                0.11
Lithuania                           0.07                0.08                0.08
Luxembourg\b                        6.03                5.71                2.78
Netherlands\b                     175.02              175.80              102.82
Norway\b                           67.76               80.95               66.97
Poland                              2.90                3.00                  --
Portugal                            1.00                  --                  --
Romania                             0.21                0.24                0.24
Russia                             50.00                  --                  --
San Marino                          0.14                0.23                0.23
Slovakia\b                          3.00                1.50                1.50
Slovenia\b                          5.89                5.31                3.56
Spain\b                            38.70               37.30               16.74
Sweden\b                           55.40               65.45               57.93
Switzerland\b                      68.80               69.12               44.06
United Kingdom\b                   67.20               84.44               65.47
Council of Europe                   5.00                6.50                0.40
 Social Development
 Fund
================================================================================
Subtotal                        1,511.61            1,590.34              885.67
Islamic countries
Organization of the                 3.00                3.00                3.00
 Islamic Conference
Brunei                              2.00               23.12               19.47
Egypt\b                             3.60                4.03                1.03
Indonesia                           2.10                2.08                1.00
Jordan                              1.37                1.37                  --
Kuwait\b                           47.70               47.55                  --
Malaysia\b                         24.30               26.94               13.13
Qatar                               5.00                9.31                3.80
Saudi Arabia\b                     75.00               45.40               23.73
Turkey                             26.50               66.50                2.70
================================================================================
Subtotal                          190.57              229.30               67.86
Other non-European
 countries
Australia                           1.13                1.13                1.13
Canada\b                           40.04               35.77               24.94
Japan\b                           266.70              212.30               63.60
Republic of Korea\b                 1.80                1.80                1.00
United States\b                   523.80              528.79              347.45
================================================================================
Subtotal                          833.47              779.79              438.12
International
 financial
 institutions
European Bank for                  80.21               98.06               11.32
 Reconstruction and
 Development
Islamic Development                15.00               19.00                7.73
 Bank
World Bank\b                      490.00              522.60              281.60
================================================================================
Subtotal                          585.21              639.66              300.65
Other multilateral
 donors
International                       1.50                1.50                1.50
 Committee of the
 Red Cross
International Fund                  7.30                7.32                6.72
 for Agricultural
 Development
United Nations                      2.00                1.13                0.64
 Development Program
World Health                        1.18                1.88                1.88
 Organization
================================================================================
Subtotal                           11.98               11.83               10.74
Private donors
Soros Foundation                    5.00                5.96                0.26
================================================================================
Subtotal                            5.00                5.96                0.26
================================================================================
Total                          $3,137.84          \$3,256.88           $1,703.30
--------------------------------------------------------------------------------
\a Includes both indicative and firm commitments. 

\b Donor pledged funds for the 1996 and 1997 economic reconstruction
programs.  All other donors pledged funds for the 1996 program only. 

Source:  Bosnia and Herzegovina--The Priority Reconstruction Program: 
Achievements and 1998 Needs. 

A number of donors have transferred part of their contributions to
trust funds administered by international agencies, including
international financial institutions.  As of December 31, 1997, these
funds totaled $294.27 million, including $228.9 million that are
grant funds to Bosnia in a trust fund with the World Bank. 


--------------------
\1 Funds expended represent (1) actual expenditures made against
works, goods, and service contracts; (2) the value of assistance
delivered in kind; and (3) balance of payments support.  The
definition of funds expended does not include advances made to
implementing agencies for future payments to suppliers. 


   SECTORAL PROGRESS
-------------------------------------------------------- Appendix VI:2

Progress in the reconstruction effort can be measured by how much of
the firmly committed funds had been disbursed (see table VI.2).\2

As of December 31, 1997, $1.84 billion, or 61 percent of the $3
billion in firmly committed funds for 1996-97, had been disbursed.\3

Implementation of donor programs during 1997 was somewhat slower than
in 1996, according to the World Bank and European Commission report
because many of the new commitments were made after the end of the
construction season, as the third donors' conference was delayed
until July 1997 due to the parties' unwillingness to pass necessary
economic legislation. 



                                    Table VI.2
                     
                          1996-97 Program Requirements,
                     Commitments, and Disbursements by Sector
                      for the Bosnia Priority Reconstruction
                         Program, as of December 31, 1997

                              (Dollars in millions)

                                                                   Disbursements
                         Program            Firm                  as a % of firm
Sector              requirements     commitments   Disbursements     commitments
----------------  --------------  --------------  --------------  --------------
Reconstruction
 sectors
Agriculture                 $187            $126             $79             63%
Education                    142             173             109              63
Employment                   105             109              58              53
 generation
Energy                       713             456             248              54
 (District                 (251)            (90)            (45)            (50)
 heating and               (462)           (366)           (203)            (55)
 natural gas)
 (Electric power
 and coal)
Govt. and social             195             150              92              61
 support
Health                       235             172              82              48
Housing                      315             451             334              74
Industry and                 300             344             207              60
 finance
Landmine                     130              74              40              54
 clearing
Telecommunicatio             220              40              19              48
 ns
Transport                    492             308             145              47
Water and waste              240             171              93              54
 management
================================================================================
Subtotal                   3,274           2,574           1,506              59
Peace                         --             243             158              65
 implementation\a
Balance of                    --             189             177              94
 payments\b
================================================================================
Total                     $3,274          $3,006          $1,841             61%
--------------------------------------------------------------------------------
Note:  Items in parentheses indicate sectoral subtotals. 

\a Peace implementation activities, a majority of which have taken
place on an interentity basis, include support for elections, media,
and IPTF's police restructuring program.  These activities, while
essential to provide the necessary conditions for reconstruction and
recovery to take place, were not considered part of the framework of
the Bosnia Priority Reconstruction Program in 1996 and 1997.  The
World Bank added a security sector to the 1998 Priority
Reconstruction Program to request funds specifically for the police
restructuring program; this sector will require $72 million for the
year. 

\b Balance-of-payments support is provided to the government of
Bosnia for reserve buildup for imports and the startup of a currency
board.  The counterpart funds of balance-of-payments support can be
used by the government to finance overall fiscal needs, including
recurrent costs in different sectors and other reconstruction-related
expenditures. 

Source:  Bosnia and Herzegovina--The Priority Reconstruction Program: 
Achievements and 1998 Needs. 


--------------------
\2 Disbursed funds are those transferred to an account in the name of
a Bosnian agency, or a disbursement agency (foreign or local) in
Bosnia, and include expenditures made against works, goods, and
service contracts and for balance of payments support.  This category
also includes funds advanced to implementing agencies for the purpose
of payment to contractors or suppliers but not yet expended.  In-kind
assistance is considered disbursed once provided. 

\3 Information on funds expended by sector was not available. 


DEMINING OPERATIONS IN BOSNIA
========================================================= Appendix VII

This appendix provides an overview of the landmine problem in Bosnia
and the actions of the international community to address it. 


   THE LANDMINE PROBLEM AND
   EFFORTS TO SOLVE IT
------------------------------------------------------- Appendix VII:1

The United Nations and other donors have estimated that there are
over 30,000 mined areas containing between 750,000 and 1 million
landmines in Bosnia.  The minefields, located primarily in areas
surrounding the former confrontation lines, cover approximately 3,243
square miles.\1 (See
figure VII.1.) Between January 1996 and December 31, 1997, 328 people
received minor injuries, 561 people were seriously injured, and 209
were killed by landmines.  This is equal to approximately 46
casualties per month, 9 of which are fatal.  Thirty-two of the 209
fatalities were children.  Clearing mines from Bosnia has been
identified as one of the gravest problems facing the full
implementation of the Dayton Agreement. 

   Figure VII.1:  Map of Known
   Mined Areas in Bosnia

   (See figure in printed
   edition.)

   Note:  This map identifies the
   locations of the 18,086 known
   mined areas in Bosnia.  It is
   estimated that there are
   approximately 30,000 mined
   areas.

   (See figure in printed
   edition.)

   Source:  United Nations Mine
   Action Center, Sarajevo,
   Bosnia.

   (See figure in printed
   edition.)

A number of organizations, including the United Nations, the United
States, SFOR, the European Union, the World Bank, private companies,
and nongovernmental organizations have contributed to demining
efforts in Bosnia.\2 During 1997, there were over 1,000 deminers
working in Bosnia.  As of December 1997, the combined labor of all
deminers in Bosnia had cleared 28,425 landmines and 19,572 pieces of
unexploded ordnance.\3 This work has opened roads and railways and
allowed access to homes and farmland that had been unusable because
of the presence of landmines.  Despite this progress, it is estimated
that it will take decades to rid Bosnia of the landmines left over
from the 3.5-year war. 

Future efforts to remove landmines must be lead by the Bosnian
government.  To this end, a Bosnia-Herzegovina Commission for
Demining has been established.  Although the removal of landmines, by
the entity governments, left over from the war is covered by the
Dayton Agreement, the manufacture and stockpiling of landmines are
not.  Consequently, the decision to stop the production and storing
of landmines is a decision that the Bosnian and entity governments
must make on their own. 


--------------------
\1 Bosnia's total area is 19,781 square miles. 

\2 A U.S.  DOD official characterized the 1997, Bosnia demining
operation as an eclectic collection of well-intentioned organizations
that lacked shared leadership, vision, management, training, and
funding capabilities.  The Office of the High Representative's
Reconstruction and Return Task Force reported that the 1997 demining
effort in Bosnia had been marred by suboptimal delivery and competing
programs. 

\3 According to the United Nations, approximately 2.4 square miles of
land were cleared in 1997.  A U.N.  official estimated that it will
take 2,000 deminers to clear 9-12 square miles per year using manual
tools such as prods and metal detectors.  The speed of the landmine
clearance effort can be increased significantly if machines and
specially trained dogs are used. 


      ACTIONS TAKEN BY THE UNITED
      NATIONS TO REMOVE LANDMINES
----------------------------------------------------- Appendix VII:1.1

The United Nations Mine Action Center (UNMAC) was established in May
1996 at the request of the government of Bosnia to address problems
associated with landmines.\4 The UNMAC is responsible for
coordinating the efforts of the international community with those of
the Bosnian government.  Through assistance provided by the U.S. 
government and SFOR, the UNMAC created a data base that contains
records of 18,086 minefields or approximately 60 percent of the total
estimated minefields.\5 The data base is used by the various
organizations conducting demining operations in Bosnia to plan and
conduct their work.  The UNMAC also helped to coordinate a national
landmine awareness campaign and conducted landmine awareness
briefings.  The UNMAC originally planned to train 1,200 deminers. 
The revised 1997 U.N.  consolidated appeal for funding set a target
of $23 million for the UNMAC's work; however, only $7.8 million was
received.  (See table VII.1.) Consequently, only 120 deminers were
trained.\6 The UNMAC was to be transferred to the Bosnian government
in December 1997; however, as of April 1998, the transfer was still
ongoing.\7



                              Table VII.1
                
                 Major Funding Sources for Demining in
                 Bosnia, 1996-97 (Dollars in millions)

Organization                                                    Amount
------------------------------------------  --------------------------
World Bank\a                                                     $40.0
United States                                                     15.5
United Nations                                                     7.5
European Union                                                     7.2
======================================================================
Total                                                            $70.2
----------------------------------------------------------------------
\a During this period, the World Bank's total requirement for
demining was $130 million.  As of December 31, 1997, it had received
firm commitments for $74 million, or 57 percent, of the total
requirement and had disbursed $40 million. 

Sources:  U.S.  Department of State, UNMAC, European Union, and World
Bank documents. 


--------------------
\4 The United States provided funding and assistance to help
establish the UNMAC. 

\5 The minefield records are provided by the entity armies.  As of
April 1997, the entity armies had not supplied all of the minefield
information believed to be in their possession. 

\6 The UNMAC deminers are trained to meet humanitarian demining
standards.  There are two demining standards; a military standard
(landmine lifting) and a humanitarian standard (landmine clearing). 
To meet the military standard, deminers remove those landmines listed
on minefield records and any unlisted landmines they encounter.  To
meet the humanitarian standard, deminers focus on clearing an area to
ensure that the area is 99.6 percent free of landmines.  Areas
demined according to the military standard are considered unsuitable
for refugee returns and must be reexamined by humanitarian deminers
prior to resettlement. 

\7 The transfer includes vehicles, buildings, personnel, computers,
and office equipment, as well as demining coordination and oversight
responsibilities.  Some of the computers and equipment were purchased
with funding provided by the United States and were transferred to
the Bosnian government in June 1997.  This equipment will remain
under the control of the UNMAC until its authority is transferred to
the Bosnian government. 


      THE UNITED STATES HAS PLAYED
      AN IMPORTANT ROLE
----------------------------------------------------- Appendix VII:1.2

The United States has played a key role in Bosnian demining efforts. 
The initial focus of the U.S.  program was to establish an indigenous
demining capability and to (1) assist in the rapid establishment of
the UNMAC including the provision of computer equipment for the
archiving of landmine-related information; (2) establish three
regional centers for coordinating demining activities, providing
landmine threat information, and conducting landmine survey and
emergency clearance tasks; and (3) establish a landmine clearing
training school.  All three objectives were achieved.  Under this
program, in 1996, 165 Bosnian civilian deminers were trained and
equally divided into three regionally based teams.  In May 1997,
consistent with a transfer of assets agreement, the U.S.  State
Department turned over all U.S.-purchased equipment in the UNMAC to
Bosnia's national government.\8 At the same time, the equipment and
deminers located at the regional centers were transferred to
respective Bosnian Serb, Bosnian Croat, and Bosniak representatives
of the Bosnia-Herzegovina Commission for Demining. 

Between July and December 1997, all three regionally based teams
formed joint ventures with international demining companies and
conducted demining operations funded by the World Bank.  In March
1998, after the winter thaw permitted the resumption of demining
operations, the three groups (and their international partners)
commenced work on another series of demining contracts financed by a
U.S.  grant to the World Bank Demining Trust Fund. 

In addition, in 1997, the United States, with assistance from SFOR,
trained and equipped 450 military deminers from all three of the
former warring factions.  SFOR currently monitors the performance of
these deminers.  This effort was implemented to assist the parties to
the Dayton Agreement in complying with the provisions of the
agreement that specify that the parties must take responsibility for
removing landmines placed during the war.  According to State and
SFOR officials, most of these deminers have received little or no pay
from the entity governments, and some are suffering from a ration and
clothing shortage.  In addition, there is a disparity in the
compensation and benefits (that is, life and health insurance)
between civilian and military deminers.  Consequently, the motivation
of the military deminers is lower.  In spite of these conditions, the
military deminers are fulfilling their demining tasks in accordance
with the Dayton Agreement. 


--------------------
\8 As of April 1998, the computer equipment and mine information data
base, under the ownership of the Bosnian government, still resided at
the UNMAC so that all three ethnic groups had equal access to it. 


      OTHER EFFORTS TO RID BOSNIA
      OF LANDMINES
----------------------------------------------------- Appendix VII:1.3

The European Union, Bosnian government, nongovernmental
organizations, and private contractors contributed to the effort to
rid Bosnia of landmines in 1997.  The European Union has provided
demining equipment and training to the Bosnian government. 
Specifically, in 1996, the European Union provided landmine
detectors, protective suits, helmets, and landmine probes to
government demining authorities in each entity.  In 1997, the
European Union hired a contractor that trained, equipped, and
supervised 18 demining teams of 12 people each.  Six teams conducted
demining operations in Republika Srpska, and 12 teams operated in the
Federation.  Managers were also trained to oversee the demining
effort. 

In addition, nine explosive ordnance disposal teams of four people
each were trained, equipped, and supervised under another contract.\9
According to a European Union official, the explosive ordnance
disposal teams funded by the European Union were the only dedicated
teams of this type operating in Bosnia in 1997 and were responsible
for clearing approximately 66 percent (13,000 pieces) of the total
unexploded ordnance reported as cleared by the UNMAC.  The European
Union also funded the demining of the Sarajevo water supply system
and housing projects.  These demining operations were carried out by
an international, nongovernmental organization.  In 1998, the
European Union will provide funding to assist in the development of a
sustainable, national explosive ordnance disposal and demining
capacity in Bosnia.  As of April 1998, funding to support these
efforts totaled $2.6 million. 

In 1997, two nongovernmental organizations--Norwegian Peoples Aid and
HELP (German)--and 15 private companies (7 international and 8
domestic) also were involved in demining operations in Bosnia.  These
organizations and companies were hired by the donor community to
build local demining capacity and to clear specific sites near
reconstruction projects, hospitals, schools, major roads, railway
lines, bridges, power plants, water supply facilities, and
residential areas.  In some cases, they also provided emergency mine
clearing operations in places where mine accidents were occurring. 
Funding for the demining operations carried out by these
organizations came from the European Union, the United Nations, the
United States, the World Bank, and other donors. 

An amnesty for munitions, ordnance, and other warlike materials was
declared on February 11, 1998, by the Bosnian government.  Under the
amnesty program, Bosnian citizens can turn in material to local
police without the threat of prosecution.  Although the emphasis of
the program was on landmines and explosives, weapons were also
included.  SFOR monitored this program.  The actual collection of
material began in March and was scheduled to end on April 15, 1998. 
As of April 14, 1998, 6,350 landmines and 2,850 pounds of explosives
had been turned in by the citizens of Bosnia.  In addition to the
landmines and explosives, 4,500 artillery and mortar shells, 511,000
ammunition rounds, 14,900 grenades, and 2,000 assorted weapons had
also been turned over. 


--------------------
\9 The European Union provided salary support for the demining and
explosive ordnance disposal units it trained. 


      FUTURE EFFORTS TO REMOVE
      MINES
----------------------------------------------------- Appendix VII:1.4

In order to accomplish the long-term goal of removing all landmines
from Bosnia there must be (1) an indigenous capability to conduct
demining that is sustainable; (2) a long-term commitment by the joint
Bosnian presidency to take responsibility for humanitarian demining;
and (3) a cessation of the production, stockpiling, and use of
landmines by the entity governments.  To build an indigenous demining
capacity, a Bosnia-Herzegovina Commission for Demining, working under
the Council of Ministers, was established in January 1997, and a
Bosnia-Herzegovina Mine Action Center was formally setup in December
1997.\10 In addition, to comply with the directives of the Peace
Implementation Council, each entity government was to establish its
own mine action center by March 31, 1998.\11 The entity governments
must also provide adequate resources to support demining activities
and use their armed forces to carry out effective demining operations
as part of an overall Bosnian demining program.\12

The Bosnia-Herzegovina Commission for Demining will be supported by
experts provided by international organizations and donor
governments.  These experts will help build an indigenous demining
capacity within Bosnia.  As part of this effort, the United Nations
Development Program, in conjunction with the United Nations Office of
Project Services, will provide technical and financial assistance to
the Bosnian government for the implementation of the 1998 Mine Action
Plan.\13 In addition, a steering committee comprised of
representatives from the United Nations, the Office of the High
Representative, SFOR, the European Commission, the World Bank, and
the embassies of the United States and Norway in Sarajevo, will
provide guidance to the Commission.\14

The U.S.  government is assisting in the development of a long-term,
indigenous humanitarian demining capability in Bosnia.  The estimated
fiscal year 1998 U.S.  contribution is $9.3 million--$7.3 million
from the Department of State and $2 million from DOD.  The majority
of the State Department funds, $7 million, will be used to support
the World Bank Demining Trust Fund and to execute direct demining
contracts with the joint venture companies that employ many of the
165 regionally based deminers trained by the United States in 1996. 

The $2 million provided by DOD will be used to employ U.S.  Special
Operations Forces to assist SFOR in training Bosnian military
deminers from both entities.  As part of this effort, the United
States and SFOR had trained 71 military demining instructors during
December 1997 and January 1998.  These instructors, with U.S.  and
SFOR assistance, then trained 43 demining teams of 10 people each to
augment or replace the 450 military deminers trained in 1997.  In
addition, the United States is assisting SFOR in establishing three
military demining training centers in Travnik, Mostar, and Banja
Luka.\15 These centers will be staffed by the military demining
instructors trained earlier.  The first classes are expected to be
convened by mid-May 1998. 

UNHCR has developed its own dedicated landmine clearance capacity,
which operates through a memorandum of understanding with the United
Nations Development Program.  UNHCR is funding 6 demining teams, each
consisting of 40 deminers.  Current funding for this effort totals
approximately $2.6 million and is provided by UNHCR through the
United Nations Development Program trust fund for demining in Bosnia. 
UNHCR retains full control over the tasking of the six demining
teams.  The teams focus on areas where refugees are
returning--particularly those areas where UNHCR is implementing its
Open Cities Initiative. 


--------------------
\10 As of April 1998, the functions of these organizations were still
being carried out by the UNMAC.  According to U.N.  and U.S. 
officials, the transfer of responsibility from the UNMAC to the
Bosnian-Herzegovina Mine Action Center is taking longer than
anticipated and had not been completed as of April 20, 1998. 

\11 Although progress had been made, as of April 20, 1998, the entity
mine actions centers had not been established. 

\12 The Commission for Demining was created to provide the necessary
standards, guidelines, and policy directives for Bosnia as a whole,
as well as to channel donor-provided resources to the entity
governments and facilitate and coordinate demining operations across
the interentity boundary line and between the entities.  The
Bosnia-Herzegovina Mine Action Center was established to serve as the
technical advisor for the Commission and to maintain the national
mine information data base.  The entity-level mine action centers
will incorporate the field activities and capacities of the UNMAC and
act as a focal point for demining in each entity.  As of April 1998,
the entity-level mine action centers had not been established. 

\13 The United Nations Consolidated Appeal for 1998 set a target of
$23 million for the UNMAC's work in Bosnia.  As of February 28, 1998,
only $2.75 million was available. 

\14 The Bosnian and entity governments are required to obtain the
steering board's agreement on major decisions affecting the demining
program, including the appointment of senior staff to the mine action
centers.  The board insisted on a transparent funding structure that
allows close auditing and international controls at all levels.  The
board has the capability to stop funding and, therefore, force
relevant authorities to cooperate. 

\15 SFOR has revised its program to train entity army deminers and
demining instructors to U.N.-certified, humanitarian standards. 
SFOR's goal is to give these deminers the capability to lift mines in
more remote areas and clear mines in more populated areas. 


      CONTINUED PRODUCTION AND
      STOCKPILING OF LANDMINES ARE
      NOT COVERED BY DAYTON
----------------------------------------------------- Appendix VII:1.5

Landmine production and stockpiling are not covered by any of the
provisions of the Dayton Peace Agreement.  Consequently, it is up to
the Bosnian and entity governments to decide what to do with the
stockpiles of mines.\16 The members of the Peace Implementation
Council expressed concern at the December 1997 Peace Implementation
Conference about the lack of demining legislation and the continued
manufacture and export of landmines.  The council stated that the
Bosnian authorities must take steps to ensure that the facilities for
the manufacture of landmines are dismantled and that all stocks are
seized and destroyed.  In addition, the Bosnian authorities should
provide all landmine-related information to the Bosnia-Herzegovina
Mine Action Center.  As part of this effort, the council requested
the Bosnian authorities to adopt a detailed plan for the
implementation of the Convention on the Prohibition of the Use,
Stockpiling, Production, and Transfer of Anti-Personnel Mines and on
Their Destruction, by March 31, 1998.\17

As of April 23, 1998, the entity governments had informed the OHR
that they no longer produce, sell, or export anti-personnel landmines
and had taken steps to dismantle anti-personnel mine manufacturing
facilities or convert the facilities for other uses.  However, they
had not provided all landmine-related information to the
Bosnia-Herzegovina Mine Action Center nor had they included anti-tank
mines in their consideration of this issue.  The OHR continues to
pursue this matter further. 

According to an OHR official, the entities are developing a detailed
plan for the implementation of the Convention on the Prohibition of
the Use, Stockpiling, Production, and Transfer of Anti-Personnel
Mines and on Their Destruction.  The Ministries of Defense of both
entities were instructed to develop a plan at the December meeting of
the Bosnia-Herzegovina Standing Committee for Military Matters by
their respective presidents.  This plan will be reviewed by the
committee when completed. 



(See figure in printed edition.)Appendix VIII

--------------------
\16 The former Yugoslavia was one of the world's leading producers
and exporters of landmines. 

\17 The Bosnian government signed the convention at the international
Treaty-Signing Conference and Mine Action Forum held in Ottawa,
Canada, in December 1997.  The Bosnian assembly ratified the treaty
on March 5, 1998. 


COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================= Appendix VII




(See figure in printed edition.)Appendix IX
COMMENTS FROM THE U.S.  AGENCY FOR
INTERNATIONAL DEVELOPMENT
========================================================= Appendix VII



(See figure in printed edition.)




(See figure in printed edition.)Appendix X
COMMENTS FROM THE DEPARTMENT OF
STATE
========================================================= Appendix VII



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Department of State's letter
dated April 24, 1998. 

GAO COMMENTS

1.  We have modified the results in brief section of our Executive
Summary to more fully reflect that some progress has been made in
establishing multiethnic governmental institutions.  However, we
believe our basic conclusion that Bosnia lacks functioning
institutions at all levels is a valid and fair representation of the
condition that exists.  As described in detail in chapter 3 of our
report, despite intense pressure from and involvement of the
international community, efforts to create multiethnic institutions
at the national, entity, and local levels of government have been
hindered by the intransigence of the political leaders of Bosnia's
three major ethnic groups.  Moreover, we believe that our conclusion
regarding economic links is correct and supported by information in
chapter 6 of our report.  This chapter points out in considerable
detail that, while some steps have been taken toward the
reestablishment of key economic links between Bosnia's ethnic groups,
none of these links have been reestablished. 

2.  A subsequent section of the Executive Summary specifically
describes the achievements of the arms control efforts. 

3.  We do not agree that the paragraph referred to by State gives an
incorrect impression.  The Executive Summary notes that the pro-Pale
Bosnian Serb political leaders have not consistently followed through
on their commitment to restructure their police forces.  Chapter 2
provides the detail that shows that police in pro-Plavsic areas have
made more progress in the provisional certification process.  This is
in part due to the fact that the restructuring agreement called for a
sequential restructuring of Republika Srspka public security centers,
beginning with the pro-Plavsic centers in western Republika Srpska. 

4.  Our report provides no broad characterization of Bosnian police;
instead, it presents factual information on police-related human
rights abuses.  State's comments regarding growing police cooperation
were already reflected in this section and in chapter 2. 

5.  We believe the Executive Summary and chapters 3, 5, and 6 of our
report accurately reflect the actions of Prime Minister Dodik, for
example, the agreements reached on interentity postal delivery and
rail traffic.  (It should be noted that contrary to State's comment,
the agreement on Republika Srpska police restructuring was reached in
September 1997, 4 months prior to Dodik's election as Prime
Minister.)

6.  We believe that this paragraph and other sections of the report
make a clear distinction between the relatively moderate and
hard-line Bosnian Serb leaders.  Moreover, we disagree with State's
comment that cooperation and compliance of hard-line Serb leaders to
a large extent has been "obviated" by the rise of more moderate Serb
leadership.  As noted in the Executive Summary and chapters 3 and 4
of the report, the relatively moderate Serb leadership still has not
gained full political control in Republika Srpska.  As of 1998,
hard-line Serb leaders in Pale still controlled segments of the
entity's police and financial/economic institutions as well as many
municipal governments, primarily in the eastern part of Republika
Srpska.  They remained capable of blocking implementation of the
Dayton Agreement and, with the support of the President of the
Federal Republic of Yugoslavia, have actively sought to undermine
Dodik's government. 

Further, although the moderate Republika Srpska Prime Minister has
expressed full support for Dayton implementation, it was unclear
whether his government would have the political will or ability to
fulfill the pledges he has made to the international community.  For
example, the Prime Minister had appointed Ministers of Justice,
Interior, and Defense who had either expressed limited support for
Dayton implementation or were closely associated with hard-line
nationalists and people indicted for war crimes.  These individuals
may continue to attempt to obstruct efforts to implement Dayton. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix XI


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix XI:1

David M.  Bruno
Lenora R.  Fuller
B.  Patrick Hickey
Judith A.  McCloskey
RG Steinman


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