Weekly Briefing, Vol. 65. No. 2 (BH) September 2023
BiH airports go into concessions?
Summary
Of the four airports in Bosnia and Herzegovina, one in Sarajevo has potential. The other three, in Banja Luka, Tuzla and Mostar, have different legal and economic positions and different treatment of the owners, that is different levels of government in Bosnia and Herzegovina. The ambassador of United States of America wrote a letter to the authorities in the Federation of BiH, in which it is said in an imperative tone that it is necessary to enable concessions in this sector. Experts in the civil aviation sector claim that the matter is already over, and that Sarajevo Airport will get a concessionaire. Other airports, according to the same experts, are not interesting. What will this mean for the performance of the airport itself, passenger service, the future development of the economy in general and tourism in particular, are questions that lack clear answers.
Introduction
The story became public, like many in Bosnia and Herzegovina, through the “foreign factor”. The Ambassador of the United States of America to Bosnia and Herzegovina Michael Murphy sent a letter to the Prime Minister of the Federation of BiH, Nermin Nikšić, and his deputies, Vojin Mijatović and Toni Kraljević, where he referred to the work of the Government of the Federation of Bosnia and Herzegovina, but also to the projects that need to be implemented in the future. Ambassador Murphy said that there is an urgent need to implement socio-economic structural reforms in order to respond to the main challenges that threaten competitiveness and to achieve long-term and sustainable growth that citizens will feel. Then he was very specific: “FBiH should give priority to the establishment of legal frameworks that will enable public-private partnerships and concessions and encourage private investments.” In particular, the concessions for the operation of the airport cannot be rationally postponed any longer[1]“.
Only those who do not know the situation in BiH can be surprised by such a transparent, almost commanding tone in the address of US officials to decision-makers in FBiH: The American Embassy in BiH together with the Delegation of the European Union (DEU) and the Office of the High Representative (OHR) have an exceptional influence on all processes in BiH , including primarily economic ones, such as granting concessions in a profitable (or potentially profitable) sector such as airport management.
Pro et contra
This letter coincided with the meeting held by the Minister of Transport and Communications of BiH in the Council of Ministers (CoM), Edin Forto, with the directors of airports in Bosnia and Herzegovina. Although this was not the topic of the meeting and although the BiH CoM does not make strategic decisions such as granting concessions over airports, the minister said that he supports concessions for the purpose to the increase in the number of passengers because it is in the state’s interest, due to economic, tourist reasons and quality of life[2].
The director of the Sarajevo International Airport, Alen Bajić, was also present at the same meeting. He said it was an interesting topic and that the management was thinking about it. He said that they had even created a hybrid model, trying to establish what the problems were and what the goals were. The owner of the Sarajevo airport is the Government of the FBiH. “The goal is to increase operations, increase the number of passengers and, in our case, at the Sarajevo International Airport, we face undercapacity. We must find ways to invest in capacities in order to increase both the number of passengers and the number of operations,” said Bajić[3].
The director of Tuzla International Airport Dževad Halilčević said that in 2007 they negotiated with the investor and that everything went well until issue of ownership was raised. The entire area of the airport is owned by the Ministry of Defense of BiH, and the high representative in BiH prohibited the disposal of military property. “So, in principle, no one wants to invest in assets that they cannot own. For now, as long as that decision stands, I think it will be more difficult, at least when it comes to Tuzla airport,” said the director of Tuzla International Airport, which is owned by the Government of Tuzla Canton[4].
On the other hand, their fellow director of the Mostar Airport, Marko Đuzel said in recent interview that “the airport should be kept in our ownership by all means.” Mostar Airport is owned by the City of Mostar. The mayor previously said that there is already a project where the European administration has offered technical assistance in the context of the preparation of documentation for the development of the master plan[5]. Indeed, following the message of his American colleague, the head of the DEU, Johan Satler, said that the EU has singled out 350.000 KM for development strategy and improving airport operations. He said that the airports in the region mostly chose the concession: “We are also looking at other airports, such as the Sarajevo airport, and we are actually putting money on the table, where it is needed, so we have already secured the necessary funds to prepare the documentation[6]”.
It seems that in the words of Ambassador Satler there is also the essence: Sarajevo International Airport and its concession[7]. This is what one of the most respectable regional aviation experts, Alen Šćuric, said in an interview for the influential BiH news portal, who believes that the issue of giving Sarajevo Airport under concession is a done deal. “When a letter like this comes from the ambassadors of the EU and the USA, be sure that it is a done deal. In our region, concessions are not decided by politicians, nor the profession, nor the management of the airport. It is only decided by the power holders who inform you that it is happening now under concession. You can resist it for a while, but eventually it will be like that,” he said[8]. Šćuric is among those who think that it was a mistake to give the airports in the capitals of the region under concession. He think that that they could have continued to develop if the state had continued to manage them.
“Why is an airport that brings profit to the state (direct money to the budget), which can be financed by itself and which is growing, given a concession? It does not make any sense. Especially because these are strategically important facilities. Aviation is today what the railway was 130 years ago. Aviation is the engine of the development of the entire economy. As such, the airport is extremely important,” he pointed out[9].
However, Šćuric argued that it is justified to give under concession small, poorly profitable or unprofitable airports that need investments. In his perception, this refers to the airports in Mostar, Tuzla and Banja Luka. This expert believes that Sarajevo Airport has become attractive to potential concessionaires because it has a large number of flights to the Middle East. Although it is not fulfilling its full potential, it has managed to become a regional airport for the Middle East. According to him, this is a comparative advantage that no one else in the region has[10].
Economic analyst Ms Svetlana Cenić is of a similar opinion. She observes things in a broader context. For her, the moment in which this letter was published is important, and that is at a time of heightened inter-ethnic tensions in BiH. However, she finds the request problematic because she believes that there is no rule of law in BiH. She looked back at the past, warning how dangerous privatization without the rule of law can be. “It’s like when they advised us to immediately privatize everything without the rule of law. We got predatory privatization. In this case, we would get predatory concessions,” she emphasized[11]. Dr Cenić also argued whether certain public companies should remain in public ownership: “Banks in America were private. When there was a financial crisis, who saved the banks – the state saved them, entering their ownership. I do not want to be preached from someone who showed by his own example that some things do not really work[12]“.
Aziz Šunje, a professor at the Faculty of Economics of the University of Sarajevo (EFSA), is of a similar opinion and is against giving the remaining public property under concession: “I don’t think there is a need for a concession. We should manage the airports and our own property. Train ourselves to manage our own goods[13]“.
We recall that this spring, the Agency for the provision of services in the air navigation of BiH (BHANSA) announced large investments in all four airports in BiH[14]. And while the addressees of Murphy’s letter, Nikšić, Mijatović and Kraljević, did not express themselves, the former Prime Minister of the FBiH Government, Fadil Novalić, gave his comment, who has no doubts that the new Government will agree to the instructions and fulfill the promises to “foreign power centers”, and make the FBiH energy dependent and deprive it of its key infrastructure. “They should not have even thought of proposing this to my government, because they knew it could not pass,” said Novalić[15], who, by the way, has been on the US government’s “blacklist” since October 2022 “for undermining democratic processes[16]”
Conclusion
Each club has its own rules and membership in each club costs. It is the same with the membership of BiH in the EU. Regardless of the fact that they come nominally from the American side, market liberalization – privatization of profitable public sectors is something that BiH will have to do on its way to EU membership. Although the ultimate goal – membership in the EU – is on a relatively long and crooked stick, the requirements are current. The question that remains is whether the future concessionaire of the Sarajevo airport will bring development and better service for citizens and passengers, or just additional profit in private pockets.
[1] Ambassador Murphy wrote to Nikšić and the ministry: The granting of concessions for the airport must not be delayed. https://www.klix.ba/vijesti/bih/ambasador-murphy-pisao-niksica-i-ministrima-dodjela-koncesija-za-aerodrome-se-ne-smije-odgadjati/230904052
[2] Forto is ‘for’ putting the airport under concession. Sarajevo already has a model, Tuzla tried but has a problem. https://raport.ba/forto-je-za-stavlen-aerodroma-pod-koncesiju-sarajevski-vec-ima-model-tuzla-pokusavala-ali-ima-problem/
[3] Ibid.
[4] Ibid.
[5] Airports in the Federation will go under concessions. https://bljesak.info/tvrtke/tvrtke/aerodromi-u-federaciji-idu-pod-koncesije/431401
[6] Ibid.
[7] Tuzla airport has, as we have seen, a property-legal problem, and the one in Mostar is a record holder in that in past years it had more employees than passengers: Mostar airport’s infamous record: In January, only five passengers.
https://bizlife.rs/neslavni-rekord-mostarskog-aerodroma-u-januaru-samo-pet-putnika/
[8] Aviation expert Alen Šćuric: Concessions for Bosnia and Herzegovina. airports are a fait accompli, Sarajevo is a “target”. https://www.klix.ba/biznis/privreda/strucnjak-za-zrakoplovstvo-alen-scuric-koncesije-za-bh-aerodrome-su-gotova-stvar-sarajevo-je-meta/230906038
[9] Ibid.
[10] Ibid.
[11] EU and US demands to Nikšić: Should large public companies be given concessions and/or privatized?
[12] Ibid.
[13] Ibid.
[14] Large investments announced in all BiH. airports, Sarajevo will get a completely new control tower.
[15] Is the letter to the FBiH Government a warning or is there no more support from the USA and the EU?! Novalić: “They shouldn’t have even suggested that to my government!” https://depo.ba/clanak/248554/je-li-pismo-vladi-fbih-upozorenje-ili-vise-nema-podrske-sad-i-eu-novalic-mojoj-vladi-to-nisu-smjeli-%20nor-suggest
[16] Fadil Novalić was put on the American blacklist for misusing data on pensioners.