Announcement of investing 11 billion KM in energy sector is science fiction

The story about Bosnia and Herzegovina's energy potential has found its "new" beginning in the legislative authorities of FBiH, specifically at the session of the House of Peoples of FBiH.

The discussion itself and public statements apparently did not generate much interest. The reasons for this are most likely of a deeper nature, related to the emotional relationship towards miners as employees who earn their "bread with seven crusts".

The mere statement that "after the implementation of financial consolidation measures by the authorities of the Federation of BiH through budgets (public money), the situation has not changed for the better, but is even worse" did not excite anyone.

The announcement that there is a possibility of investing 11 billion KM in the energy sector with mines, requiring own accumulation, is at the level of fantasy.

Of course, 11 billion KM represents the total aggregated revenue of "Elektroprivreda BiH", d.d. Sarajevo, which can be generated over 11 years. The maximum amount of investment potential intended for investment maintenance and development on an annual level is around 200 million KM, and it is possible to secure it through depreciation and accumulation. These funds are not sufficient for maintaining the existing level of reproductive capacity of the business system in the Concern, which operates with dependent companies organized as coal mines. In terms of cash flow, these funds are the basis for maintaining mines that are not liquid and many are insolvent (liabilities exceeding assets).

Any talk of investments and development, even for a much smaller business system, requires in-depth financial and market analysis.

The system's rehabilitation clearly requires more radical measures hidden in crisis management. In this case, it concerns the line Ministry of Energy, Mining and Industry. The "famous" Decree of the Government of FBiH certainly did not resolve all problems, nor did the temporary management bodies of "Elektroprivreda BiH" appointed according to the party-based distribution of "conquered" power.

Management in the crisis conditions in which the entire energy sector of BiH undoubtedly finds itself requires a much broader framework than discussions on individual fragmented systems that reflect the national structure and decentralized system of government organization.

The weak business sector and its lack of competitiveness in this example stem from systemic causes. This picture is transferred to most activities that are key to the country's economy. The stagnation and slow progress of BiH's economy should be sought in the very understanding of the relationship towards public and private. The protection of public goods, natural and material resources, is the basis for strengthening the private sector through business activity and the disposal of its own assets.

In the case of the energy sector, the example is clear.

Therefore, any discussion at the level of any government about the state of the energy sector will not contribute to quality changes. As with everything in BiH, this sphere of the real economy also requires time. A long period of investment, time, and large material resources, financial sources, are the real limits that do not give us certain chances of success.

Therefore, even mentioning coal mines, water potentials, solar and all other alternative energy sources, should produce a thoughtful effort to make what has been dismantled the basis for the development of Bosnia and Herzegovina's economic infrastructure. Clearly, for this effort too, we need time, money, and of course, people. Therefore, the scarcity of resources also becomes a real limit to the implementation of key policies in Bosnia and Herzegovina. The energy sector of BiH serves as a clear example of the situation, and can serve as a matrix for potential success.

Written by: Prof. dr. Izudin Kešetović