General Accounting Office Index


Bosnia Peace Operation: Progress Toward Achieving the Dayton Agreement's
Goals (Chapter Report, 05/05/97, GAO/NSIAD-97-132).

Pursuant to a congressional request, GAO reviewed the implementation of
the Bosnia peace operation, focusing on: (1) the progress made in
achieving the operation's four key objectives since the operation began
in December 1995; and (2) U.S. costs and commitments in support of the
operation.

GAO noted that: (1) the Bosnia peace operation has helped Bosnia take
important first steps toward the Dayton Agreement's goals; (2) the North
Atlantic Treaty Organization-led military forces have created and
sustained an environment that allows the peace process to move forward
and Bosnians to return to normal life; (3) the cease-fire has held,
general security has improved, and some progress has been made in
establishing political and economic institutions; (4) transition to an
effective multiethnic government had not occurred; (5) Bosnia remains
politically and ethnically divided, freedom of movement across ethnic
boundaries is still very constrained, and economic activity is still at
a low level; (6) the limited progress to date has been due principally
to the failure of the political leaders of Bosnia's three major ethnic
groups to embrace political and social reconciliation and to fulfill
their obligations under the Dayton Agreement; (7) the Bosnian people are
more secure than before the Dayton Agreement; (8) nonetheless, the
Bosnian Serb political leaders have not fully lived up to arms reduction
agreements, little progress has been made in reforming police forces so
that they operate in accordance with democratic policing standards, and
the Department of State believes an international military force is
still the only deterrent to major hostilities; (9) a unified, democratic
state that respects the rule of law and adheres to international
standards of human rights has yet to be achieved; (10) although national
and entity-level elections were held, most institutions intended to
unify Bosnia's ethnic groups are not yet functioning; (11) moreover,
according to human rights reports, the human rights situation worsened
in the months after the election, particularly in Bosnian
Serb-controlled areas, and ethnic intolerance remained strong throughout
Bosnia; (12) the executive branch initially estimated that U.S. military
and civilian participation in Bosnia would cost $3.2 billion through
fiscal year 1997; (13) the total estimated cost for U.S. participation
in the operation has since risen to $7.7 billion; (14) economic
conditions have improved somewhat since the end of the war; (15) people
generally have been unable to return to their prewar homes; (16) some
State and Department of Defense officials said that based on current
conditions, they believe some type of international military force will*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-132
     TITLE:  Bosnia Peace Operation: Progress Toward Achieving the 
             Dayton Agreement's Goals
      DATE:  05/05/97
   SUBJECT:  Federal aid to foreign countries
             International organizations
             Elections
             Military intervention
             International agreements
             Foreign governments
             NATO military forces
             Economic development
             War crimes
             International cooperation
IDENTIFIER:  Bosnia
             Priority Reconstruction Program
             General Framework Agreement for Peace in Bosnia and 
             Herzegonia (Dayton Agreement)
             Herzegonia
             Bosnian Serb Republic
             AID Emergency Shelter Program
             DOD Operation Deny Flight
             DOD Operation Provide Promise
             
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Cover
================================================================ COVER


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

May 1997

BOSNIA PEACE OPERATION - PROGRESS
TOWARD ACHIEVING THE DAYTON
AGREEMENT'S GOALS

GAO/NSIAD-97-132

Bosnia Peace Operation

(711184)


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

  CIMIC - Civil Military Cooperation
  CIRP - Community Infrastructure Rehabilitation Project
  DOD - Department of Defense
  EBRD - European Bank for Reconstruction and Development
  HDZ - Croatian Democratic Union
  IFOR - Implementation Force
  IMF - International Monetary Fund
  IMET - International Military Education and Training
  IPTF - International Police Task Force
  JCC - Joint Civilian Commission
  NAC - North Atlantic Council
  NATO - North Atlantic Treaty Organization
  OSCE - Organization for Security and Cooperation in Europe
  PIC - Peace Implementation Council
  SDA - Bosniak Party of Democratic Action (1996) Muslim Party of
     Democratic Action (1990)
  SDS - Serb Democratic Party
  SFOR - Stabilization Force
  SHAPE - Supreme Headquarters, Allied Powers Europe
  UNHCR - United Nations High Commissioner for Refugees
  UNICEF - United Nations Children's Fund
  UNMIBH - United Nations Mission in Bosnia and Herzegovina
  UNPROFOR - United Nations Protection Force
  USAID - U.S.  Agency for International Development
  USIA - U.S.  Information Agency

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


B-272558

May 5, 1997

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

Dear Mr.  Chairman: 

This report discusses the Bosnia peace operation, specifically the
progress made in achieving the operation's objectives and U.S.  costs
and commitments in support of the operation.  We are sending copies
of the report to the Secretaries of State and Defense, the
Administrator of the U.S.  Agency for International Development, the
Ranking Minority Member, Committee on Foreign Relations, 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.  Major contributors to the report are
listed in appendix IX. 

Sincerely yours,

Benjamin F.  Nelson
Director, International Relations
 and Trade Issues


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


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The 1995 General Framework Agreement for Peace in Bosnia and
Herzegovina and its supporting annexes (also known as the Dayton
Agreement) provided the structure and mandates for an international
operation intended to promote an enduring peace in Bosnia and
stability in the region.  While international in scope, the Bosnia
peace operation has received important political, military, and
financial support from the United States.  At the request of the
Chairman of the Senate Committee on Foreign Relations, GAO reviewed
the implementation of the Bosnia peace operation, specifically the
progress made in achieving the operation's four key objectives since
the operation began in December 1995 and U.  S.  costs and
commitments in support of the operation.  The operation's objectives
are to create conditions that allow Bosnia's political leaders to (1)
provide security for the people of Bosnia; (2) create a unified,
democratic Bosnia that respects the rule of law and internationally
recognized human rights, including cooperating with the war crimes
tribunal in arresting and bringing those charged with war crimes to
trial; (3) rebuild the economy; and (4) ensure the right of people to
return to their prewar homes. 

To determine the progress made in achieving the operation's key
objectives, GAO visited numerous locations in Bosnia during July and
December 1996, and obtained documentation and interviewed officials
from U.S., international, military, and local governmental
organizations there.  GAO also gathered and analyzed information from
the Departments of State, Defense, and the Treasury, and other U.S. 
government agencies; the World Bank, the United Nations, the
Organization for Security and Cooperation in Europe, and other
international organizations; and several participating foreign
governments.  In addition, GAO attended the Peace Implementation
Council session in London in December 1996 where progress and the
future of the peace operation were assessed by the international
community.  (A complete description of GAO's scope and methodology is
in chap.  1.)


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The war in Bosnia and Herzegovina was fought from 1992 through 1995
among Bosnia's three major ethnic/religious groups--Bosniaks
(Muslims), Serbs (Eastern Orthodox Christians), and Croats (Roman
Catholics).\1 During the war, Bosnian Serbs and Croats fought for and
declared the establishment of ethnically pure states separate from
Bosnia,\2 while Bosniaks fought for a unified, multiethnic Bosnia. 
United Nations and other international mediators' attempts throughout
the war to stop the fighting were generally unsuccessful, until
U.S.-led negotiations in 1995 culminated in a cease-fire in October
1995 and the Dayton Agreement in December 1995. 

The Dayton Agreement declared that Bosnia is a single state
consisting of two entities that were created during the war:  (1) the
Bosnian Serb Republic, known as Republika Srpska, and (2) the
Federation, an entity that joins together Bosniak- and Bosnian
Croat-controlled areas of Bosnia.\3 Most areas within Bosnia, with
the exception of central Bosnia, are populated and controlled by a
predominant ethnic group as a result of population movements during
the war. 

Implementing the Dayton Agreement was a complex, decentralized
operation with numerous objectives and subobjectives designed to
assist Bosnia's political leaders achieve the commitments they had
made in signing the agreement.  On the military side of the peace
operation, the North Atlantic Treaty Organization (NATO) authorized
two military forces--first the Implementation Force (IFOR) and later
the Stabilization Force (SFOR)--that had responsibility for mainly
military objectives and had clear lines of authority for planning and
implementation.  The United States was the largest force provider to
IFOR and SFOR, and Americans occupied the key NATO military
leadership positions that controlled their operations. 

On the civilian side of the operation, the Office of the High
Representative was established by the Dayton Agreement to assist the
parties in implementing the agreement and to coordinate assistance
efforts, but it had no operational authority over either the parties
or the civilian organizations and donors active in Bosnia.  Other
organizations participating in the operation include the United
Nations, with its unarmed, civilian police monitoring operation--the
International Police Task Force--and other components; the
Organization for Security and Cooperation in Europe; and the United
Nations High Commissioner for Refugees.  The United States has
provided important political, financial, and personnel support to
organizations participating in the operation, as well as to the
international community's economic reconstruction program for Bosnia. 

The peace operation faced a difficult task in attempting to help
rebuild and bring reconciliation to Bosnia.  For example, by the end
of the war, annual per capita gross domestic product had fallen from
its prewar level of $1,900 to $500; less than 25 percent of the
prewar working population was employed; and war damage estimates
ranged from $20 billion to $30 billion.\4 Further, the extreme
nationalism that precipitated and grew out of the war had made ethnic
identity a critical factor in many aspects of Bosnians' daily life,
and the violence, fear, and collapsed social structure that resulted
from the war had eroded support for pluralism. 


--------------------
\1 This report defines "Bosniaks" as "Muslims," the definition used
in State Department human rights reports.  The report also refers to
any citizen of Bosnia as a "Bosnian," regardless of ethnic group. 

\2 These states were never recognized by the international community,
whereas Bosnia and Herzegovina was granted diplomatic recognition and
became a member of the United Nations in 1992. 

\3 U.S.  mediation resulted in the establishment of the Federation in
March 1994.  Prior to this, the Bosniak and Bosnian Croat armies were
fighting each other in central Bosnia.  The Federation agreement led
to a cease-fire between these two armies that held throughout the
remainder of the war. 

\4 This is a World Bank estimate.  The government of Bosnia estimates
the damage at $50 billion to $70 billion. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The Bosnia peace operation has helped Bosnia take important first
steps toward the Dayton Agreement's goals.  The NATO-led military
forces have created and sustained an environment that allows the
peace process to move forward and Bosnians to return to normal life. 
The cease-fire has held, general security has improved, and some
progress has been made in establishing political and economic
institutions.  Additionally, the more secure environment has allowed
schools and shops to reopen, and families to start repairing damaged
homes.  Nevertheless, while the task of implementing the civil
aspects of the Dayton Agreement has begun, transition to an effective
multiethnic government had not occurred.  Bosnia remains politically
and ethnically divided, freedom of movement across ethnic boundaries
is still very constrained, and economic activity is still at a low
level.  The limited progress to date has been due principally to the
failure of the political leaders of Bosnia's three major ethnic
groups to embrace political and social reconciliation and to fulfill
their obligations under the Dayton Agreement.  Major obstacles to the
vision embodied in the Dayton Agreement remain, particularly the lack
of cooperation of Bosnia's political leaders, and experts say full
political and social reconciliation in Bosnia will be a long and
difficult process. 

The Bosnian people are more secure than before the Dayton Agreement. 
The fighting has not resumed, forces have separated, and force
reductions on all sides have occurred.  The U.S.-led "train and
equip" program intended to help stabilize the military balance in the
region is progressing, albeit slower than anticipated.  Nonetheless,
the Bosnian Serb political leaders have not fully lived up to arms
reduction agreements, little progress has been made in reforming
police forces so that they operate in accordance with democratic
policing standards, and the Department of State believes an
international military force is still the only deterrent to major
hostilities. 

A unified, democratic state that respects the rule of law and adheres
to international standards of human rights has yet to be achieved. 
Although national and entity-level elections were held, most
institutions intended to unify Bosnia's ethnic groups are not yet
functioning.  Moreover, according to human rights reports, the human
rights situation worsened in the months after the election,
particularly in Bosnian Serb-controlled areas, and ethnic intolerance
remained strong throughout Bosnia.  Additionally, as of April 1997,
only Bosniak authorities had surrendered indicted war criminals to
the war crimes tribunal; the other two parties had made no arrests of
indicted war criminals.  U.S.  and other officials view progress in
this area as critical to achievement of the overall Dayton
objectives. 

Economic conditions have improved somewhat since the end of the war. 
Economic reconstruction has begun, and about $1.1 billion in
international assistance was disbursed in 1996 as part of the 3- to
4-year reconstruction program.  However, economic activity remains at
low levels, and progress toward building economic institutions
designed to unify the country has been very limited. 

People generally have been unable to return to their prewar homes. 
Of the estimated 2 million people who were forced or fled from their
homes during the war, only about 250,000 have returned home. 
Virtually no returnees went back to homes in areas controlled by a
different ethnic group. 

The executive branch initially estimated that U.S.  military and
civilian participation in Bosnia would cost about $3.2 billion
through fiscal year 1997.  The total estimated cost for U.S. 
participation in the operation has since risen to $7.7 billion.  The
increase is primarily due to the December 1996 decision to extend the
presence of U.S.  forces in and around Bosnia until June 1998.  Some
State and Defense Department officials said that based on current
conditions, they believe some type of international military force
will likely be required after June 1998.  U.S.  participation in such
an effort could push the final cost significantly higher than the
current $7.7 billion estimate.  The executive branch has repeatedly
stated that it plans to withdraw U.S.  troops when the current
mission ends in June 1998. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      PROGRESS IN PROVIDING A
      SECURE ENVIRONMENT
-------------------------------------------------------- Chapter 0:4.1

To improve the security environment in Bosnia, the Dayton Agreement
sought a durable cessation of hostilities,\5 a stable military
balance in the region, and civilian police forces that operate in
accordance with democratic policing standards.  The U.S.  government
believes that there are two key elements of a stable military
balance:  arms control efforts called for by the agreement and the
train and equip program for the Federation military that was
established outside of the Dayton framework.  Some progress has been
made in stabilizing the military situation, but progress in reforming
civilian police forces has been slow in the Federation and virtually
nonexistent in Republika Srpska. 

Bosnia's three militaries have observed the cease-fire, allowed IFOR
and later SFOR to monitor their weapons sites and troop movements,
and have reduced force levels by a combined total of 300,000. 
Moreover, the U.S.-led program to train and equip the Bosniak and
Bosnian Croat militaries as they are integrated into a unified
Federation military is making progress, although somewhat more slowly
than expected.\6 As of March 1997, three brigades were being trained,
and heavy weapons from the United States have been delivered.  This
program was delayed because Bosniak and Bosnian Croat political
leaders were slow to comply with conditions that had been set,
including the removal of foreign forces from Bosnia, the enactment of
legislation creating an integrated Defense Ministry and a joint high
command, and the replacement of certain officials. 

However, the political leaders of all three major ethnic groups have
failed to fully comply with measures designed to achieve lasting
security.  Republika Srpska has not lived up to its agreement to
reduce its arms to the lowest amount needed for its security. 
According to a State Department official, the United States could
increase assistance under the Federation train and equip program to
provide a military balance if the Bosnian Serbs do not comply with
the arms control agreements. 

Furthermore, Bosnian Croat and Bosniak political leaders have made
limited progress in reforming their civilian police so that they
provide security for Bosnians of all ethnic groups and do not commit
human rights abuses; Bosnian Serb political leaders have yet to
cooperate with the International Police Task Force in reforming their
police force.  In December 1996, the United Nations reported that
Bosnia's police are responsible for most human rights violations--by
some estimates as many as 70 percent--that occur in Bosnia.  A U.S. 
embassy official told GAO that the primary problem in reforming
police is that political leaders of all three ethnic groups continue
to use police as a means of furthering their political aims. 

In December 1996, the unstable security situation led to NATO
authorizing SFOR for an 18-month mission to deter an outbreak of
hostilities.  Many western observers told GAO that based on the
current pace of political and social change in Bosnia, some sort of
international military force would likely be needed there for many
years to deter an outbreak of hostilities while Bosnians continue the
reconciliation process.  The following three sections discuss
elements of Bosnia's political and social reconciliation. 


--------------------
\5 The Dayton Agreement does not define "a durable cessation of
hostilities."

\6 The Federation defense law calls for the Bosniak and Bosnian Croat
armies to be fully integrated by August 1999. 


      PROGRESS IN DEVELOPING A
      UNIFIED, DEMOCRATIC BOSNIA
-------------------------------------------------------- Chapter 0:4.2

Only limited progress has been made toward the Dayton objective of a
unified, democratic Bosnia that upholds the rule of law and adheres
to international standards of human rights.  Under strong
international pressure, the parties had taken some steps to link
politically the country's three major ethnic groups through the
creation of national and Federation-level governmental institutions,
but continuing tension, distrust, and political discord among
Bosnia's ethnic groups has slowed progress toward a unified,
democratic Bosnia. 

U.S.  officials acknowledge that progress toward a unified Bosnia
depends heavily on the willingness of the three ethnic groups'
political leaders to cooperate in developing indivisible political
institutions.  This has not yet happened.  For example, institutions
have been formed since the September 1996 election and the
three-person Presidency had met 15 times; but as of March 1997 the
Parliamentary Assembly had met once but passed no legislation; and
the Council of Ministers had met 10 times but had no staff, funding,
or office space.  Further, Bosnia's three separate, ethnically-based
armies continue to be controlled by their wartime political leaders. 
According to State, these armies must evolve into a unified armed
forces before Bosnia can become a unified country.  The committee
called for in the Dayton Agreement to coordinate military matters at
the national level had not met as of March 1997. 

The September 1996 elections that began the development of Bosnia's
national institutions were intended to be a step in the progressive
achievement of democratic goals throughout Bosnia; however, it is
unclear what impact the elections will have on Bosnia's democratic
development.  According to State Department officials, the elections
were a necessary first step in developing democratic institutions in
Bosnia, and they helped develop a viable opposition that did better
than expected against the ruling political parties. 

On the other hand, the Organization for Security and Cooperation in
Europe said that the elections were not held in a fully free and fair
environment.  For example, opposition political parties were not
permitted to campaign in a free atmosphere and their access to the
media was restricted, as Bosnia's ruling political parties controlled
the media and used it to propagate fear and insecurity among voters. 
State acknowledged this, but believes the results nonetheless
represented the will of the people.  A U.S.  Agency for International
Development (USAID) analysis stated that the September 1996 election
may have actually hampered Bosnia's democratic development because it
kept in power authoritarian political leaders.  Some State and USAID
officials acknowledged that these victories may hinder efforts to
build a democratic state, but no one was surprised by the election
outcome.  State said that despite the election's flaws, it was an
essential first step in creating democratic institutions in Bosnia. 

According to official intergovernmental agency monitoring reports,
the human rights situation actually worsened in the months following
the election, particularly in Republika Srpska, as the ruling parties
worked to consolidate their power.  On April 14, 1997, the High
Representative reported that a precarious human rights situation,
characterized by widespread discrimination, harassment, and abuse on
ethnic grounds, continues to reign in Bosnia, with the most severe
abuses occurring in Republika Srpska and in Bosnian Croat-controlled
areas. 

Ethnic intolerance among all three ethnic groups and separatist
tendencies of Bosnian Serbs and Croats remain strong, in large part
because Bosnia's political leaders have controlled the media and used
it to discourage reconciliation among the ethnic groups.  A U.S. 
Information Agency poll taken in January 1997 indicated that 79
percent of Bosnian Croats and 94 percent of Bosnian Serbs thought the
areas under their control should be part of Croatia and Serbia,
respectively.  In contrast, 99 percent of Bosniaks wanted a unified
country. 

As of April 1997, 66 of the 74 people indicted by the war crimes
tribunal remained at large,\7

some openly serving in official positions and/or retaining their
political power.  While the Bosniaks had surrendered all indicted war
criminals in their area of control to the war crimes tribunal,
Bosnian Serbs and Bosnian Croats had not surrendered to the tribunal
any indicted war criminals in their areas.  U.S.  and other officials
view progress on this issue as central to the achievement of the
Dayton Agreement's objectives, but the international community had
not decided on how to resolve this problem. 


--------------------
\7 These figures do not include one person who was indicted by and
surrendered to the war crimes tribunal, but who was released by the
tribunal for humanitarian reasons and later died. 


      PROGRESS IN REBUILDING THE
      ECONOMY
-------------------------------------------------------- Chapter 0:4.3

The Dayton Agreement viewed economic rehabilitation and
reconstruction as essential to achieving peace--the negotiators
believed that the people must have an economic stake in the process
to see that peace is better than war.  Thus, economic reconstruction,
economic institution building, and the promotion of a market economy
were deemed to be of major importance.  To support these goals, the
government of Bosnia, with the assistance of the World Bank, the
European Commission, the European Bank for Reconstruction and
Development, and other international agencies and organizations,
designed a 3- to 4-year, $5.1-billion Priority Reconstruction
Program.  This program provided the international community with the
framework for the economic reconstruction and integration of Bosnia. 

In 1996, 59 donor countries and organizations pledged $1.9 billion to
the program, exceeding the first year goal of $1.8 billion, and
disbursed $1.1 billion of those funds.\8 The U.S.  government,
primarily through USAID, committed $294.4 million during the
program's first year for, among other things, repair of municipal
infrastructure and services, small business loans, and technical
assistance for the development of national and Federation economic
institutions.  By the end of 1996, there were many signs of economic
recovery, primarily in the Federation.  For example, key roads, rail
links, and bridges were being restored, houses were being repaired,
and some basic services like water and heating were being
reestablished.  The Sarajevo airport is now open to limited
commercial traffic, and the tram system has been restored to half its
prewar capacity.  Over $100 million in business loans has helped
revive commerce, generating an estimated 11,000 new jobs.  Also, two
key Federation agencies, the Federation Customs Administration and
the Federation Banking Agency, became operational during 1996. 

At the end of 1996, however, economic activity was still at a very
low level, and much reconstruction work remained to be done. 
Furthermore, many key national and Federation economic
institutions--such as Bosnia's central bank--were not yet fully
functioning.  The biggest obstacle to progress in economic
reconstruction and economic institution building has been the lack of
cooperation among Bosnia's political leaders in implementing
infrastructure projects and economic institutions that would unite
the ethnic groups within the Federation and across the two entities. 
According to November 1996 and March 1997 donor reports, problems in
coordinating donor assistance have also contributed to delays in
achieving results, though the pace of disbursements accelerated after
the middle of the year. 

Civilian landmine clearing, an area of critical importance to
economic reconstruction and refugee returns, did not start in Bosnia
until the fall of 1996 due to, among other things, persistent
disagreements between the national and entity governments.  In
December 1996, a senior IFOR officer told GAO that the political
leaders of Bosnia's three major ethnic groups do not want to remove
landmines because they believe the cease-fire is only a temporary
cessation of hostilities. 


--------------------
\8 World Bank data on funds that have been disbursed do not
necessarily translate into results on the ground.  Hence, while $1.1
billion had been disbursed by December 1996, GAO cannot say what
portion of this represents physical results. 


      PROGRESS IN RETURNING
      REFUGEES AND DISPLACED
      PERSONS TO THEIR HOMES
-------------------------------------------------------- Chapter 0:4.4

Despite guarantees in the Dayton Agreement and extensive
international effort to resolve the issue, the return of refugees and
displaced persons to their homes had barely begun in Bosnia as of
March 1997.  Fear, stemming from lack of personal security; violence
triggered by attempted cross-ethnic returns; nonviolent resistance
from Bosnia's political leaders of all ethnic groups; poor economic
prospects; and lack of suitable housing combined to hinder returns. 
The returns that did take place in 1996 were mainly people going back
to areas controlled by their own ethnic group because returns across
ethnic lines proved nearly impossible.  Efforts to address the return
problem touch many aspects of the Bosnia peace operation, leading to
calls by the international community for improved integration between
groups responsible for implementing the Dayton Agreement's security,
political, and economic reconstruction provisions. 


      U.S.  COSTS AND COMMITMENTS
-------------------------------------------------------- Chapter 0:4.5

In February 1996, the executive branch estimated that the Bosnia
peace operation would cost the United States about $3.2 billion for
fiscal years 1996 and 1997:  $2.5 billion in incremental costs for
military-related operations and $670 million for the civilian
sector.\9 These estimates assumed that U.S.  military forces would be
withdrawn from Bosnia when IFOR's mission ended in December 1996. 
The executive branch's current cost estimate for fiscal years 1996
and 1997 is more than $5.9 billion:  about $5 billion in incremental
costs for military-related operations and about $941 million for the
civilian sector.  Almost all of the increase was due to the decision
to extend the U.S.  military presence in and around Bosnia through
June 1998.  In fiscal year 1998, the United States plans to commit
about $1.8 billion for the Bosnia peace operation:  about $1.5
billion for military operations and $340 million for civilian
activities. 

Under current estimates, which assume that U.S.  military
participation in Bosnia will end by June 1998, the United States will
provide a total of about $7.7 billion for military and civilian
support to the operation from fiscal years 1996 through 1998.\10


--------------------
\9 Department of Defense costs are incremental costs; that is, they
are costs that would not have been incurred if it were not for the
Bosnia operation. 

\10 At the time this report went to press, the Department of Defense
was considering a proposed change to the SFOR operational plan that
would increase the number of SFOR troops around the time of the
municipal elections scheduled for September 1997.  If approved, this
option would likely change the Defense Department's cost estimates
for fiscal years 1997 and 1998. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:5

The Departments of State and Defense and USAID provided comments on a
draft of this report.  The Department of Defense generally concurred
with the report and offered only technical changes that have been
incorporated where appropriate.  USAID said that, overall, the report
provides comprehensive information on progress in achieving the goals
of the Dayton Agreement, although it suggested that the
accomplishments achieved be given greater emphasis.  In response to
USAID comments, additional information was added to our discussion of
USAID programs in chapter 4 and appendix V.  However, GAO did not
evaluate individual USAID programs and is not in a position to
comment on their effectiveness.  Our objective was to assess progress
towards the broad objectives in the Dayton Agreement. 

The Department of State had two principal concerns with the draft
report.  State said that the report does not adequately recognize the
enormity of the task of implementing the Dayton Agreement, nor does
it sufficiently discuss the progress made thus far.  GAO believes
that the report properly recognizes the difficulty of the task of
bringing peace to Bosnia.  The full breadth of the overall challenge
is outlined in chapter 1 and appendix I, and additional context is
provided in chapters 2 through 5 as each area of Dayton
implementation is assessed.  GAO also believes that the report
presents a balanced picture of the progress made thus far in all
sectors, both militarily and in rebuilding civil society. 

State also specifically disagreed with GAO's reporting that (1) the
human rights situation had worsened in the months following the
September 1996 elections and (2) the September 1996 elections may
hinder Bosnia's democratic development.  According to State, "it is
categorically untrue" that the human rights situation worsened in the
months following the election and that the elections may have
hampered the process of democratic development in Bosnia.  GAO's
reporting on these matters is based on an analysis of information
contained in biweekly reports submitted by on-the-ground human rights
monitors from the Organization for Security and Cooperation in
Europe, an internationally recognized organization, and information
obtained from USAID and other sources.  The biweekly reports
described a continuing deteriorating human rights situation in many
parts of Bosnia in the months following the elections.  This was
particularly true, but not exclusively so, in Republika Srpska.  GAO
fully acknowledges that the September 1996 elections may have been a
necessary first step in the process of democratic development in
Bosnia and that opposition parties did better than expected in the
election.  However, GAO believes it is equally important to note that
the election resulted in legitimizing and keeping in power the
authoritarian political leaders who brought civil war and atrocities
to Bosnia and who continue to resist working cooperatively to achieve
the goals of the Dayton Agreement in the areas of democratic
policing, the return of refugees, the smooth functioning of national
government institutions, and economic integration, among other areas. 

The agencies also provided technical comments that have been
incorporated in the report as appropriate.  Comments received from
Defense, USAID, and State are reprinted in appendixes VI through
VIII, respectively. 


INTRODUCTION
============================================================ Chapter 1

The 1992-95 war in Bosnia and Herzegovina (referred to as Bosnia) was
part of the violent dissolution of Yugoslavia, which had been an
ethnically diverse federation of six republics with almost no history
of democratic governance or a capitalist economy.  The war was fought
among Bosnia's three major ethnic/religious groups--Bosniaks
(Muslims), Serbs (Eastern Orthodox Christians), and Croats (Roman
Catholics)\1 --the latter two being supported directly by the
republics of Serbia and Croatia, respectively.  During the war,
Bosnian Serbs and Croats fought for and declared the establishment of
ethnically pure states separate from Bosnia:  Bosnian Serbs
established Republika Srpska, and Bosnian Croats established
Herceg-Bosna.\2 In contrast, Bosniaks fought for a unified,
multi-ethnic Bosnia. 

In March 1994, U.S.  mediation resulted in the establishment of the
Federation, a joint Bosniak-Bosnian Croat entity.\3 The United
Nations and other international mediators were generally unsuccessful
in their attempts to stop the war until the U.S.  government took the
lead in negotiations during mid-1995.  By October 1995, a cease-fire
among all three militaries was established.  In December 1995, the
Dayton Agreement was signed, continuing the complex and difficult
process of attempting reconciliation among the parties to the
conflict.  A brief history of events leading to the conflict in
Bosnia and a discussion of the international community's role through
the fall of 1995 is in appendix I. 


--------------------
\1 For purposes of this report, the term "Bosnian" refers to any
citizen of Bosnia, regardless of ethnic group. 

\2 These states were never recognized by the international community,
whereas Bosnia and Herzegovina was granted diplomatic recognition and
became a member of the United Nations in 1992. 

\3 It also led to a cease-fire between the Bosniak and Bosnian Croat
armies, which continued to fight against the Bosnian Serb army. 


   SITUATION IN BOSNIA AT THE TIME
   OF THE CEASE-FIRE
---------------------------------------------------------- Chapter 1:1

At the time of the cease-fire, Bosnia's three militaries had over
400,000 men under arms, including armed civilian militias and an
estimated 45,000 police that fought in conjunction with the three
armies.  The soldiers were largely deployed facing each other in
static lines of fortified bunkers and trenches, behind minefields
containing millions of landmines.  These fortifications formed a
nearly continuous front line over 1,100 kilometers long that split
the country into two separate entities. 

The war and its social dislocations left Bosnia a shattered country. 
Out of a population of 4.4 million, an estimated 250,000 people were
killed or missing and 200,000 wounded.  Over 2 million had fled or
were forcibly driven from their homes, many as the result of "ethnic
cleansing." While the fighting raged from 1992 through the late 1995,
civilians received 85 percent of their food through the United
Nations.  At the end of the war, about 80 percent of Bosnians were
relying on outside food aid, annual per capita gross domestic product
was at about $500--down from $1,900 in 1990--and less than 25 percent
of the prewar working population war employed.  Estimates of war
damage ranged from $20 billion to $70 billion.\4 Two-thirds of
private houses in Bosnia were damaged or destroyed; roads, bridges,
telecommunications, health care facilities, and schools were
seriously damaged; and industrial output was about 5 percent of its
prewar level.  (See figure 1.1.)

Due to extreme nationalism that precipitated and grew out of the war,
ethnic identity had become a critical factor in determining whether
one would keep a job or lose it, remain at home or be driven out, and
all too often live or die.  Throughout Bosnia, the war had resulted
in violence, fear, and a collapsed social structure, conditions that
had eroded support for pluralism.  In Bosniak and Bosnian
Croat-controlled areas, the ruling Bosniak and Bosnian Croat
political parties only partially respected civil liberties, exerting
great influence over the media and political activity.  In Bosnian
Serb-held territory, the ruling party controlled both the media and
political activity and did not permit dissent. 

   Figure 1.1:  Destruction in
   Postwar Bosnia

   (See figure in printed
   edition.)


--------------------
\4 The World Bank estimates damage to be $20 billion to $30 billion. 
The government of Bosnia estimates the damage at $50 billion to $70
billion. 


   DAYTON AGREEMENT AND RELATED
   SIDE AGREEMENTS
---------------------------------------------------------- Chapter 1:2

Building on the October 1995 cease-fire, representatives from
Croatia, the Federal Republic of Yugoslavia,\5 and Bosnia's three
major ethnic groups signed the Dayton Agreement in Paris on December
14, 1995.  The agreement declared that Bosnia is a single state
consisting of the two entities that had been created during the
war--Republika Srpska and the Bosniak-Croat Federation--and divided
them by an interentity boundary line (see fig.  1.2).  Both entities
agreed to the transfer of territory.  Republika Srpska would comprise
49 percent of Bosnia (and nearly all of the Bosnian Serb-controlled
areas), and the Federation would consist of 51 percent of Bosnia. 
The Federation territory would be made up of noncontiguous areas of
Bosniak and Bosnian Croat control.  Most areas within Bosnia, with
the exception of central Bosnia, are populated and controlled by a
predominant ethnic group as a result of population movements during
the war. 

   Figure 1.2:  Map of Bosnia (as
   of October 1996)

   (See figure in printed
   edition.)

At the time the Dayton Agreement was signed, the Bosniaks and Bosnian
Croats also signed a related side agreement on the development of
Federation economic and governmental institutions.  Also, the U.S. 
government initiated a separate program to train and equip a unified
Federation military.  According to State Department officials, the
program is intended to correct an imbalance of military power in the
region and fulfill a commitment the U.S.  government made to the
Bosniaks in return for their approval of the Dayton Agreement. 

In signing the Dayton Agreement and related side agreements,
political leaders of Bosnia's three major ethnic groups pledged to
provide security for the people of Bosnia; create a unified,
democratic Bosnia within internationally recognized boundaries;
rebuild the economy; and ensure the right of people to return to
their homes (see table 1.1).  In response to the leaders' request for
assistance in achieving these goals, the international community
established the Bosnia peace operation. 



                               Table 1.1
                
                  Goals and Specific Agreements of the
                 Dayton Agreement and Related Programs

Operation's goals   Specific agreements
------------------  --------------------------------------------------
Provide security    Maintain cease-fire and separate forces; undertake
for the people of   arms control; participate in train and equip
Bosnia              program; maintain civilian police that provide
                    security for all people in jurisdiction and
                    respect human rights.

Create a unified,   Implement national constitution that calls for the
democratic Bosnia   creation of national institutions; create
within              functioning Federation institutions; ensure
internationally     conditions exist for free and fair elections that
recognized          would be a step in country's democratic
boundaries          development; secure highest level of human rights
                    for all persons; cooperate with the international
                    war crimes tribunal.

Rebuild the         Rehabilitate infrastructure and undertake economic
economy             reconstruction; create a central bank;
                    economically integrate the Federation: unify the
                    payments systems, activate the Federation Customs
                    and Tax Administrations, prepare a Federation
                    budget.

Ensure the right    Allow all refugees and displaced persons the right
of people to        to freely return to their homes; take actions to
return to their     prevent impediments to safe return; cooperate with
homes               international organizations; establish an
                    independent property commission.
----------------------------------------------------------------------

--------------------
\5 The former Yugoslavia republics of Serbia and Montenegro have
asserted a joint independent state with this name.  The United States
has not recognized this entity. 


   DECENTRALIZED OPERATION
   ESTABLISHED TO IMPLEMENT THE
   DAYTON AGREEMENT
---------------------------------------------------------- Chapter 1:3

The Dayton Agreement and its various annexes established a
decentralized organizational structure to implement the agreement. 
This structure is depicted graphically in figure 1.3.  The agreement
specified that a military force led by the North Atlantic Treaty
Organization (NATO) would implement provisions of the agreement
designed to stop the parties' military operations.  The NATO force
would thereby provide general security and a discrete amount of time
for the peace operation's other organizations to help Bosnians attain
the political and social reconciliation necessary for a more durable
cessation of hostilities.  The implementing organizations and their
roles are described below.  None of these organizations had the
mandate to arrest indicted war criminals. 

   Figure 1.3:  Organization of
   the Bosnia Peace Operation in
   1996

   (See figure in printed
   edition.)

Source:GAO analysis. 

Legend

NAC = North Atlantic Council
SHAPE = Supreme Headquarters, Allied Powers Europe
IFOR = Implementation Force
CIMIC = Civil Military Cooperation
OSCE = Organization for Security and Cooperation in Europe
PIC = Peace Implementation Council
JCC = Joint Civilian Commission
UNHCR = United Nations High Commissioner for Refugees
UNMIBH = United Nations Mission in Bosnia and Herzegovina
IPTF = International Police Task Force
IMF = International Monetary Fund
EBRD = European Bank for Reconstruction and Development

By design, the Dayton Agreement did not give any one organization
authority over the entire peace operation.  Instead, the operation's
NATO-led force and major civilian organizations responded to
different lines of authority.  At no single point did planning for
each of the major organization's activities come together in a
civil-military or consolidated civilian plan for Dayton
implementation in 1996, although coordination occurred at all levels
of the operation, and the NATO force often supported the civilian
organizations. 


      NATO-LED IMPLEMENTATION AND
      STABILIZATION FORCES
-------------------------------------------------------- Chapter 1:3.1

The Dayton Agreement called for the creation of an international
military force under NATO command, to enforce annex 1A of the Dayton
Agreement.\6 IFOR was created for this purpose, and began operations
in December 1995.\7 As outlined by annex 1A, IFOR's primary military
tasks were to ensure (1) continued compliance with the October 1995
cease-fire, (2) the separation of the three Bosnian parties'
militaries and their withdrawal from the zone of separation back to
their respective territories,\8 (3) the collection of heavy weapons
into cantonment sites and troops into barracks, and (4) the
demobilization of remaining forces.  If resources were available,
IFOR was also expected to (1) help create secure conditions for the
conduct of other Dayton Agreement tasks, such as elections; (2)
assist the UNHCR and other international organizations in their
humanitarian missions; (3) observe and prevent interference with the
movement of civilian populations, refugees, and displaced persons,
and respond appropriately to deliberate violence to life and person;
and (4) monitor the clearing of minefields and obstacles. 

Annex 1A called for IFOR to complete its mission in about 1 year and
be withdrawn from Bosnia by December 1996.  As of July 1996, IFOR
consisted of about 54,000 troops from 34 countries--15 NATO countries
and 19 non-NATO countries.  The United States, the largest force
provider to IFOR, contributed about 16,200 troops\9 to the operation,
and Americans occupied the key NATO military leadership positions
that controlled the operation. 

Recognizing the need for a continued international military force, in
December 1996 the North Atlantic Council authorized a new
mission--the stabilization force (SFOR)--for an 18-month period that
will end in June 1998.\10 The mission of SFOR is to deter renewed
hostilities and to stabilize and consolidate the peace in Bosnia. 
SFOR has an authorized force level of 31,000 troops or about half the
size of IFOR.  As of January 13, 1997, SFOR had a force level of
about 36,000 troops, including about 8,500 U.S.  troops in Bosnia.\11
As with IFOR, the United States is the largest force provider to
NATO's operation in Bosnia, and Americans hold the key NATO military
positions that control the operation.  The North Atlantic Council
provided political guidance to both NATO military operations. 

The Commanders of IFOR and SFOR had the authority to control the
operations of all NATO and non-NATO forces participating in the
missions, within the operational parameters specified by each
participating country's national command authority.\12 The NATO
forces had an integrated headquarters, including planning staff, for
all military operations.  No civilian organization in Bosnia had
authority over NATO operations there. 


--------------------
\6 IFOR, and later SFOR, had the authority to use force to ensure
implementation of annex 1A and the protection of IFOR.  The U.N. 
Security Council provided IFOR's authority to use force in Resolution
1031 on December 15, 1995, and provided SFOR's authority in
Resolution 1088 on December 12, 1996. 

\7 The transfer of authority from the U.N.  Protection Force
(UNPROFOR) to IFOR took place on December 20, 1995.  At that time,
all NATO and non-NATO forces participating in the operation,
including about 17,000 UNPROFOR troops, came under the command and/or
control of the IFOR Commander. 

\8 The zone of separation is an area generally 2 kilometers wide on
each side of the interentity boundary line between the Federation and
Republika Srpska. 

\9 In addition, about 6,000 U.S.  troops were stationed outside
Bosnia to provide support to IFOR. 

\10 The North Atlantic Council is NATO's political authority and
consists of permanent representatives of all 16 member countries.  It
has decision-making power over and provides political guidance to
NATO military operations. 

\11 The United States also contributed 5,000 troops to support SFOR
from locations outside of Bosnia. 

\12 National command authority remained with each country. 
Participating countries allowed their forces to participate in IFOR
within specified areas and with specific rules of engagement.  When
the IFOR Commander wanted to deploy forces outside of agreed areas,
participating forces would request permission through their national
command authorities who would approve or deny the request. 


      CIVILIAN ORGANIZATIONS
-------------------------------------------------------- Chapter 1:3.2

In contrast to IFOR and SFOR's unified structure, no organization has
authority over all of the operation's major civilian organizations. 
These organizations are described below. 


         OFFICE OF THE HIGH
         REPRESENTATIVE
------------------------------------------------------ Chapter 1:3.2.1

The Dayton Agreement created the Office of the High Representative
and gave the High Representative many responsibilities, including
monitoring implementation, coordinating civilian organizations,
maintaining close contact with the parties, and giving the final
interpretation in theater on civilian implementation of the
agreement.  However, according to officials from the Office of the
High Representative, the agreement did not give the High
Representative the authority to control any organization beyond his
own staff and required him to respect the autonomy of the operation's
civilian organizations.  According to officials from this office, the
role of the High Representative is to help resolve political issues
associated with the agreement, rather than deal with detailed
operational questions.  The High Representative did not have the
ability to enforce the parties' compliance with the civil provisions
of the Dayton Agreement.  IFOR provided physical support to the High
Representative's headquarters and field offices by providing staff
and limited logistical support for their operations. 

The High Representative received political guidance from the Steering
Board of the Peace Implementation Council, which was created in
December 1995.\13 The council's Steering Board consisted of eight
countries and three multilateral organizations and is chaired by the
High Representative. 


--------------------
\13 The Peace Implementation Council is a large deliberative body. 
It has only met twice since its inception, once in June 1996 and
again in December 1996. 


         UNITED NATIONS MISSION IN
         BOSNIA AND HERZEGOVINA
------------------------------------------------------ Chapter 1:3.2.2

UNMIBH is headed by the Secretary General's Special Representative in
Bosnia, who is the U.N.  Chief of Mission and U.N.  Coordinator for
Bosnia.  UNMIBH consists of IPTF, U.N.  Civil Affairs, and the Mine
Action Center. 

  -- IPTF had about 1,700 unarmed police monitors from 34 different
     countries deployed throughout Bosnia as of December 1996. 
     IPTF's mandate through December 1996 was to (1) monitor,
     observe, and inspect the parties' law enforcement activities and
     facilities; (2) advise governmental authorities on how to
     organize effective civilian law enforcement agencies; and (3)
     advise and train law enforcement personnel.  IPTF's mandate does
     not include power of arrest.  In December 1996, its mandate was
     expanded to include the investigation and reporting of human
     rights abuses by Bosnia's police.  When requested, IFOR troops
     supported IPTF by accompanying monitors on their patrols,
     helping them to inspect weapons at police stations, and
     providing backup security support. 

  -- U.N.  Civil Affairs officers (1) analyze and report on local
     political events and trends; (2) provide regular briefings on
     local political dynamics to IPTF commanders and assist them in
     developing working relationships with local and international
     officials; and (3) assist local authorities in confidence-
     building and problem-solving methods to help in establishing
     local government bodies. 

  -- The Mine Action Center's mandate was to coordinate donor's mine
     awareness and mine clearance activities and to encourage the
     Bosnian government to assume full responsibility for mine
     clearance.  IFOR helped the Mine Action Center develop its
     minefield database by providing the center with reports of
     minefield locations. 


         UNITED NATIONS HIGH
         COMMISSIONER FOR REFUGEES
------------------------------------------------------ Chapter 1:3.2.3

UNHCR's role in the implementation of the Dayton Agreement was to
work with the parties to develop a repatriation plan that would allow
the early, peaceful, and phased return of refugees and displaced
persons.  UNHCR chaired international and local meetings of the
numerous assistance providers and developed databases tracking the
delivery of humanitarian assistance at the local level.  To foster
returns, among other things UNHCR refurbished about 18,000 homes,
operated 11 bus lines that crossed ethnic lines, and facilitated
cross-ethnic visits to prewar homes.  IPTF helped coordinate and
monitored local police support for many of these efforts, and when
requested, IFOR provided a site specific security presence for
assessment visits. 


         ORGANIZATION FOR SECURITY
         AND COOPERATION IN EUROPE
------------------------------------------------------ Chapter 1:3.2.4

OSCE, an organization of 55 member countries,\14 was assigned
responsibility for supervising the election process, monitoring human
rights, assisting with negotiation and implementation of confidence
building measures and arms control.  OSCE made the final decision on
whether to hold elections mandated by the Dayton Agreement and
certified the validity of election results.  In addition, the head of
the OSCE mission in Bosnia chaired the Provisional Election
Commission, the organization that established election rules and
regulations.  This commission included representatives of each of
Bosnia's three major ethnic groups. 

In July 1996, OSCE's Director General for Elections told us that
without IFOR's support, OSCE would not be able to administer the
elections within the time period specified in the Dayton
Agreement.\15 According to an OSCE report, IFOR provided substantial
assistance for the election, including staff support for planning and
operations, area security, air and land transport, radio networks,
operations centers, publicity through the IFOR information campaign,
and mapping.  (See fig.  1.4.) Further, IFOR and IPTF developed
security plans used by OSCE, and IPTF provided training for all three
of Bosnia's police forces on election security. 

   Figure 1.4:  IFOR Security for
   a Provisional Election
   Commission Meeting (July 1996)

   (See figure in printed
   edition.)


--------------------
\14 One member of the OSCE, the Federal Republic of Yugoslavia
(Serbia and Montenegro), is not recognized as a state by the United
States. 

\15 The Dayton Agreement required OSCE to conduct elections for
national and entity level positions no later than September 14, 1996. 


         BILATERAL AND
         MULTILATERAL DONOR
         ORGANIZATIONS
------------------------------------------------------ Chapter 1:3.2.5

During 1996, 59 donors--11 multilateral and private organizations and
48 countries--provided funds for Bosnia's reconstruction program,
known as the Priority Reconstruction and Recovery Program.  The
reconstruction program is a 3- to 4-year, $5.1 billion-effort that
intends to provide a common framework for donor support for the
country's reconstruction.  The government of Bosnia and Herzegovina
prepared the plan for the program, with the support of the World
Bank, the European Commission, the European Bank for Reconstruction
and Development, and other donors.  Many multilateral organizations
and donor governments established policy for their own efforts that
support the reconstruction program.  IFOR and humanitarian assistance
organizations, including UNHCR, supported the reconstruction effort
through the implementation of small-scale, quick impact assistance
projects. 


         BRCKO SUPERVISORY
         STRUCTURE ADDED IN EARLY
         1997
------------------------------------------------------ Chapter 1:3.2.6

At Dayton, the parties were unable to agree on which of Bosnia's
ethnic groups would control the strategically important area in and
around the city of Brcko.  The agreement instead called for an
arbitration tribunal to decide this issue by December 14, 1996.  The
tribunal consisted of three members:  a Bosnian Serb, a Bosniak, and
an American.  The American arbitrator was selected by the President
of the International Court of Justice and was granted authority to
issue rulings on his own, including a final award, if the board could
not reach consensus.  At the end of the war, Brcko was controlled by
Bosnian Serb political leaders and populated predominately by Serbs
due to "ethnic cleansing" of the prewar Muslim and Croat population
and resettlement of Serb refugees there.  We were told by western
observers in Bosnia that an arbitration decision that awarded control
of the area to either the Bosniaks or Bosnian Serbs would lead to
civil unrest and would possibly restart the conflict because the
location of Brcko made it vitally important to both parties'
respective interests. 

After granting a request for a 2-month extension, the tribunal issued
its decision on February 14, 1997.  In the decision, the tribunal
called for the international community to designate a supervisor
under the auspices of the Office of the High Representative, who
would establish an interim supervisory administration for the Brcko
area.\16 This organization would be designed to supervise the
implementation of the civil provisions of the Dayton Agreement in the
Brcko area:  specifically, to allow former Brcko residents to return
to their homes, provide freedom of movement and other human rights
throughout the area, give proper police protection to all citizens,
encourage economic revitalization, and lay the foundation for local
representative democratic government.  As of March 27, 1997, the
interim administration was scheduled to start on April 1, 1997, and
is to operate for at least 1 year.\17

On March 7, 1997, the Peace Implementation Council Steering Board
announced that the High Representative had appointed a U.S.  official
as Brcko supervisor.  The Steering Board stated that the High
Representative was to ask the U.N.  Secretary General to add 200 IPTF
monitors to promote respect for freedom of movement and to facilitate
the orderly and phased return of refugees in the Brcko area; on March
31, 1997, the Security Council authorized an increase in the strength
of UNMIBH by 186 police monitors and 11 civilian personnel for this
purpose.  The board also called for other steps to help implement the
Dayton Agreement in Brcko, such as targeting economic assistance for
repairs to Brcko's infrastructure, transportation links, housing, and
social facilities.  The arbitration decision and a Peace
Implementation Council document noted the need for civilian
coordination with SFOR in implementing the arbitration decision, but
they did not describe SFOR's role in assisting the effort. 

As described in these documents, the Brcko supervisor has more
specific responsibility in this area of operations than the High
Representative has in Bosnia in general.  The tribunal's decision
gave the supervisor authority to issue binding regulations and orders
to assist in implementing the Dayton Agreement in the Brcko area and
to strengthen the area's local democratic institutions.  These
regulations and orders would prevail over existing laws in the area
if a conflict existed.  Further, in reaffirming the right of persons
to return to their homes of origin, the Peace Implementation Council
said that any new influx of refugees or displaced persons should
occur only with the consent of the supervisor in consultation with
UNHCR.  Neither document, however, described how the supervisor would
enforce his regulations, orders, or decisions if the parties did not
choose to comply. 


--------------------
\16 The tribunal decision noted that (1) the national and entity
governments were not sufficiently mature to take on the
responsibility of administering the city, and (2) Republika Srpska's
disregard of its Dayton implementation obligations in the Brcko area
had kept the tensions and instability at much higher levels than
expected.  Only the American member of the tribunal signed the
decision. 

\17 The arbitration tribunal may make a further decision on the
status of the Brcko area by March 15, 1998, if the parties request
such action between December 1, 1997, and January 15, 1998. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:4

At the request of the Chairman, Senate Committee on Foreign
Relations, we reviewed the implementation of the Bosnia peace
operation.  Our specific objectives were to determine what progress
had been made in achieving the operation's objectives since the
operation began in December 1995 and identify U.S.  costs and
commitments in support of the operation.  In determining progress, we
focused on the operation's four key goals, which are to create
conditions that allow Bosnia's political leaders to (1) provide a
secure environment for the people of Bosnia; (2) develop a unified,
democratic country; (3) rebuild the economy; and (4) return refugees
and displaced persons and ensure their right to return to their
prewar homes.  In addition, we reviewed the progress of the program
designed to train and equip the Federation military. 

To determine progress, we made field visits to Bosnia in July and
December 1996.  We did audit work in Sarajevo, Mostar, Stolac,
Capljina, Gornji Vakuf, Vitez, Banja Luka, Doboj, Tuzla, Brcko,
Kalesija, Zenica, Ugljevik, and numerous villages throughout Bosnia. 
While in Bosnia we interviewed officials and obtained documents from
the U.S.  Embassy; U.S.  Agency for International Development
(USAID); U.S.  Information Agency (USIA); the headquarters of IFOR,
two of its multinational division headquarters, and three of its
non-U.S.  brigade headquarters; the Office of the High
Representative; UNMIBH, including IPTF, U.N.  Civil Affairs, and the
Mine Action Center; the World Bank; the European Union Administration
in Mostar; UNHCR; OSCE; government officials and opposition party
leaders; and numerous nongovernmental organizations. 

We also interviewed officials and obtained documents from (1) the
Departments of State, Defense (DOD), and the Treasury; USAID; USIA;
the Central Intelligence Agency; the World Bank; the European
Commission; the Embassy of Bosnia-Herzegovina; and numerous
nongovernmental organizations in Washington, D.C.; (2) the U.S. 
Mission to the U.N.  and U.N.  headquarters in New York, New York;
(3) the U.S.  European Command and U.S.  Army Europe in Germany; (4)
the U.S.  mission to NATO, NATO international staff, the European
Commission, and the Office of the High Representative in Brussels,
Belgium; (5) the U.S.  Mission and the United Kingdom delegation to
the OSCE in Vienna, Austria; and (6) U.S.  Embassy, IFOR support
units, UNHCR, and U.N.  Civil Affairs in Zagreb, Croatia.  We also
attended the Peace Implementation Council conference in London,
England, in December 1996.  Many of the officials with whom we met,
including officials in the United States, assisted us in interpreting
the Dayton Agreement's provisions.  In addition, we interviewed
academic experts on the history and culture of Bosnia and the former
Yugoslavia. 

To assess progress toward achieving the operation's objectives, we
compared conditions in Bosnia with the goals laid out in Dayton and
related agreements.  We analyzed numerous situation reports from many
organizations participating in the operation and reviewed U.S.  and
NATO documents.  We also interviewed many observers of the situation
in Bosnia to expand upon or clarify information contained in the
situation reports.  To gain an understanding of the obstacles and
opportunities facing the operation, we interviewed experts on the
history, culture, and politics of Bosnia and the former Yugoslavia. 

To assess U.S.  costs and commitments for civilian programs and
activities, we contacted 14 U.S.  civilian agencies and the Defense
Security Assistance Agency to collect the financial and programmatic
information.  Of these 15 agencies, 11--USAID, USIA, the Defense
Security Assistance Agency, the Trade and Development Agency, and the
Departments of State, the Treasury, Commerce, Agriculture, Health and
Human Services, Labor, and Justice--reported that they had incurred
costs related to the Bosnia peace operation.  Obligations of these
agencies represent binding agreements, such as orders placed or
contracts awarded, that will require payment immediately or in the
future.  The data reported included only program costs for U.S. 
agencies, except that we also included USAID's salary and overhead
identified in the fiscal year 1996 supplemental appropriation for
Bosnia.  We also included funds provided by U.S.  agencies for the
operating expenses of non-U.S.  organizations that were participating
in the peace operation. 

For DOD, we collected information on incremental costs for operations
inside and outside of Bosnia that supported IFOR and SFOR.  DOD
defined its incremental costs as those costs that would not have been
incurred were it not for the peace operation. 

We generally excluded DOD and civilian agency costs for U.N. 
peacekeeping operations in the former Yugoslavia that operate outside
of Bosnia, such as the U.N.  Transitional Authority in Eastern
Slavonia and the peacekeeping operation in Macedonia.  We also did
not include U.S.  annual contributions to multinational
organizations, such as the World Bank or NATO, that subsequently
provided financing or funded programs; however, we did include U.S. 
voluntary payments to multinational organizations that specifically
supported U.S.  programs, such as funding to UNHCR for humanitarian
assistance. 

We conducted our work from March 1996 through March 1997 in
accordance with generally accepted government auditing standards.  We
did not verify the accuracy and completeness of the information DOD
or civilian agencies provided to us.  Our information on foreign law
was obtained from interviews and secondary sources, rather than
independent review and analysis. 

We received comments from the Departments of State and Defense and
USAID.  The Department of Defense and USAID generally agreed with our
report and offered technical comments that have been incorporated in
the report as appropriate.  State disagreed with our description of
the human rights situation in the months following the September
elections and the potential impact of the elections on Bosnia's
democratic development.  We address State's comments in these two
areas in chapter 3.  Comments received from Defense, USAID, and State
are reprinted in appendixes VI through VIII, respectively. 


PROGRESS IN PROVIDING A SECURE
ENVIRONMENT
============================================================ Chapter 2

To promote a permanent reconciliation between all parties, the Dayton
Agreement sought to establish "lasting security" based on a durable
cessation of hostilities,\18 a stable military balance in the region,
and civilian police that operate in accordance with democratic
policing standards.  The U.S.  government believes that there are two
key elements of a stable military balance:  arms control efforts
called for by the agreement and the program for training and
equipping the Federation military that was established outside of the
Dayton framework.  Some progress has been made toward achieving the
goal of a secure environment.  The parties observed the cease-fire,
separated their forces, and have largely completed the reduction of
their militaries to agreed-upon force levels.  Moreover, the U.S.-led
program to train, equip, and integrate the Federation military is
making progress, although somewhat slower than expected. 

Despite this progress, however, the parties have failed to fully
comply with measures designed to achieve lasting security.  Republika
Srpska has failed to live up to its agreement to reduce its arms to
the lowest numbers consistent with its security needs. 

Furthermore, Bosniak and Bosnian Croat political leaders have made
limited progress in reforming their civilian law enforcement agencies
in accordance with democratic policing standards, and Bosnian Serb
political leaders have not yet started reforming their police force. 
Recognizing that the security situation warranted a continued
international military presence, in December 1996 NATO authorized
another military mission, SFOR, to stabilize and consolidate the
peace in Bosnia. 


--------------------
\18 The Dayton Agreement did not define "a durable cessation of
hostilities."


   CEASE-FIRE HAS HELD, WEAPONS
   WERE PUT IN CANTONMENT SITES,
   AND FORCES WERE DEMOBILIZED
---------------------------------------------------------- Chapter 2:1

Under IFOR monitoring and supervision, Bosnia's three militaries have
observed the October 1995 cease-fire; withdrawn their forces from
territories specified in the Dayton Agreement, including the zone of
separation--an area generally 4 kilometers wide across the
interentity boundary line; placed their heavy weapons into
IFOR-approved storage sites and military installations where they are
routinely monitored and inspected by IFOR troops; and demobilized
approximately 300,000 soldiers.  IFOR troops ensured the cease-fire
and separation of the three militaries by continuously patrolling
throughout the country and by conducting routine inspections of
military facilities (see fig.  2.1). 

   Figure 2.1:  U.S.  IFOR on
   Patrol

   (See figure in printed
   edition.)

Because the fighting has not resumed, the operation's civilian
organizations have been able to begin their work and the people of
Bosnia have started the long process of political and social
reconciliation.  Officials of numerous civilian organizations in
Bosnia told us that they would not have been able to operate in
Bosnia without the security presence provided by IFOR. 


   MILITARY TRAIN AND EQUIP
   PROGRAM IS PROGRESSING SLOWLY
---------------------------------------------------------- Chapter 2:2

The U.S.  policy position is that a key element of establishing and
sustaining a secure environment in Bosnia is the program to train,
equip, and integrate the Bosniak and Bosnian Croat militaries into a
unified Federation military.  U.S.  officials see this program as
necessary to help establish a stable military balance in the country
and the region.\19 The program has progressed, but has been delayed
somewhat by the time required for Bosniak and Bosnian Croat political
leaders to comply with U.S.  preconditions placed on the program. 
Congress held back 50 percent of economic revitalization funding\20
and the executive branch withheld arms shipments until all foreign
forces were withdrawn from Bosnia and the Federation ended its
military and intelligence relationships with Iran.  In June 1996, the
President certified that this had occurred.\21

Also, the United States would not begin the program until a defense
law passed the Federation assembly.  The law was passed on July 9,
1996.  It created an integrated Ministry of Defense and joint high
command and requires the Bosniak and Bosnian Croat militaries to be
fully integrated into a unified Federation military by August 1999. 
The United States further delayed the delivery of heavy weapons until
the Federation's Minister and Deputy Minister of Defense were
replaced.  The Defense Minister, a Bosnian Croat, was viewed as
obstructing progress in integrating the ministry.  The Deputy Defense
Minister, a Bosniak, had unacceptable ties to the Iranian government. 
The Minister resigned, the Deputy Minister was removed, and the heavy
weapons were delivered in mid-November 1996. 

According to a State Department official, implementation of the
program has also been affected by the continuing European Union
embargo on arms shipments to the former Yugoslavia.  Because of this
embargo, the Federation has been unable to purchase equipment from
current European Union members and eastern European countries that
aspire to join the union. 

As of March 31, 1997, 14 countries had pledged at least $376.24
million in cash, equipment, training, and technical support for the
program for the Federation military, including about $103 million
worth of equipment, training, transportation support, and other
services contributed by the U.S.  government to Bosnia.\22 As part of
a Federation contract with a U.S.  firm, three brigades were being
trained in Bosnia with U.S.-supplied light weapons, and a training
school and computer simulation center for command and staff training
had been opened.  According to State Department officials, progress
in implementing this program has required heavy pressure from the
United States.  (See app.  II for further information on the train
and equip program.)

In August 1996, according to a State Department official, the United
States offered training under the program to the Bosnian Serb army,
if the Bosnian Serb political leaders and military would participate
in the integrated Ministry of Defense and joint command structure
called for in the Federation defense law.  Bosnian Serb political
leaders would also have to comply with all areas of the Dayton
Agreement, including arresting indicted war criminals, guaranteeing
freedom of movement, and following through on arms control
agreements.  As of April 1997, they had not agreed to participate in
the program under these conditions. 


--------------------
\19 State Department officials stated that the specific weaponry
provided under the program would contribute to a stable military
balance and would be within the limits of the arms control agreement
negotiated under annex 1B, article IV, of the Dayton Agreement.  This
provision called for negotiations on arms control measures for
Bosnia's three militaries and those of Croatia and the Federal
Republic of Yugoslavia (Serbia and Montenegro). 

\20 The Dayton Agreement required the removal of all foreign fighters
from Bosnia.  Congress linked the fulfillment of this requirement to
economic revitalization funds in Public Law 104-122. 

\21 According to IFOR and U.S.  government officials, a number of
foreign fighters remained in Bosnia as of December 1996, but they had
acquired Bosnian citizenship and were not actively engaged in any
military activities in conjunction with the Bosnian government. 

\22 According to State Department officials, many donors did not
place a monetary value on in-kind assistance. 


   BOSNIAN SERBS HAVE NOT COMPLIED
   WITH ALL ARMS CONTROL
   AGREEMENTS
---------------------------------------------------------- Chapter 2:3

The international community and political leaders of Bosnia's three
major ethnic groups have negotiated and begun to implement two of the
three arms verification and control agreements called for by annex
1B, articles II, IV, and V, of the Dayton Agreement.\23 These
political leaders signed the first agreement, the article II
agreement, in January 1996 and fulfilled its first-year
objectives,\24 which were to (1) declare their holdings of heavy
weapons, (2) complete scheduled inspections of those holdings under
OSCE auspices, and (3) exchange military liaisons and other
communications links.  As called for by annex 1B, article IV, the
political leaders of all three ethnic groups joined the Federal
Republic of Yugoslavia and Croatia in a second agreement\25 that (1)
established voluntary military manpower limits, (2) set mandatory
ceilings on heavy weapons significantly below their declared current
holdings, (3) instituted an additional round of inspections of all
five signatories' heavy weapons holdings, and (4) set timetables for
the disposal of their surplus heavy weapons.\26

According to OSCE, the parties carried out all of the first
agreement's inspections and 74 of the 96 inspections called for by
the second agreement for 1996.  However, only three of those not
carried out were rescheduled. 

Under the second agreement, the article IV agreement, Bosnian Serb
political leaders have not complied in two areas, according to U.S. 
and OSCE officials.  First, they seriously underreported holdings of
heavy weapons.\27 Second, according to these officials, they
circumvented the agreement by exempting about 1,250 surplus weapons
from disposal.  Because of these two factors, the Bosnian Serb army
disposed of only 45 heavy weapons rather than the required
percentages by December 31, 1996. 

In response to pressure from the Peace Implementation Council, on
February 26, 1997, Bosnian Serb political leaders agreed to dispose
of about an additional 1,100 heavy weapons by November 1, 1997. 
However, according to a State Department official, to fully comply
with the agreement, the Bosnia Serb army would have to dispose of
2,200 to 2,300 heavy weapons in total.  An OSCE official said that
Bosnian Serb noncompliance could undermine the Dayton Agreement's
goal of creating a stable military balance in the region.\28

According to a State Department official, however, the United States
could increase assistance under the Federation train and equip
program to provide a military balance if the Bosnian Serbs do not
comply with the arms control agreements. 

Negotiations have not yet begun on a third agreement called for by
annex 1B, article V, to establish a regional arms control balance in
and around the former Yugoslavia.  OSCE has not yet named a special
representative to foster these negotiations as required by the Dayton
Agreement.  The agreement placed no time limit on these negotiations,
nor did it define the geographic area subject to this agreement. 
According to a State Department official, negotiations on the
regional agreement will not begin until Bosnian Serb political
leaders comply with the second agreement. 


--------------------
\23 The two agreements defined five major categories of heavy weapons
to be declared and subject to limitations:  (1) battle tanks, (2)
armored combat vehicles, (3) combat aircraft, (4) combat helicopters,
and (5) artillery with a caliber of 75 millimeters and above.  The
first agreement also included a category for antitank guided missile
launchers mounted on armored vehicles. 

\24 Negotiations conducted under annex 1B, article II, of the Dayton
Agreement resulted in the "Agreement on Confidence- and
Security-Building Measures in Bosnia and Herzegovina," signed on
January 26, 1996 . 

\25 Negotiations conducted under annex 1B, article IV, of the Dayton
Agreement resulted in the "Agreement on Sub-Regional Arms Control,"
signed on June 16, 1996. 

\26 The agreement required the parties to reduce their surplus heavy
weapons by set percentages--40 percent of surplus artillery, combat
aircraft, and combat helicopters, as well as 20 percent of surplus
tanks and armored combat vehicles--by December 31, 1996.  The parties
agreed to dispose of the rest of their surpluses no later than
November 1, 1997. 

\27 Republika Srpska declared a total of about 2,161 heavy weapons as
part of its holdings.  U.S.  officials estimated that Republika
Srpska failed to declare between 1,700 and 2,000 of its heavy
weapons. 

\28 While the Bosniak and Bosnian Croat militaries also underreported
some of their holdings and did not meet their interim disposal
targets, U.S.  and OSCE officials agreed that their failure to comply
was largely due to technical problems and was not an attempt to
circumvent the agreement.  As of March 1997, the Bosniak and Bosnian
Croat militaries had disposed of 728 of their heavy weapons, or about
94 percent of the heavy weapons required by their interim disposal
target, according to State Department documents; they had yet to
dispose of only 48 mortars to meet their target. 


   LITTLE PROGRESS IN REFORMING
   POLICE FORCES
---------------------------------------------------------- Chapter 2:4

Bosniak and Bosnian Croat political leaders have made limited
progress and Bosnian Serb political leaders have made no progress in
developing police forces that provide a safe and secure environment
for all people in their jurisdictions and that respect human rights. 
According to many observers and human rights reports, Bosnia's three
ethnically-based police forces, which are controlled by their
respective political leaders, have done little to provide personal
security and uphold human rights of citizens of outside their
respective ethnic groups. 

Instead, most human rights violations--by some estimates as high as
70 percent, according to a December 9, 1996, U.N.  report--have been
committed by police.  The State Department, the High Representative,
the OSCE, the Federation Ombudsman's office, and a U.S.-based human
rights organization have all reported that Bosnia's police forces in
many instances have not acted to protect people of other ethnic
groups who still live in their jurisdictions or who wish to travel or
return to their homes across ethnic lines.  In November 1996, the
three members of the Federation Ombudsman's office told us that based
on the information gathered from their casework, they believe that
police are the greatest violator of human rights in the Federation. 
For example, according to an IPTF report, in one particularly
egregious incident in February 1997 the Bosnian Croat police beat and
fired on a procession of several hundred Bosniaks who had crossed
into west Mostar to visit a cemetery.  According to a U.S.  embassy
official, the primary problem in reforming police is that political
leaders of all three ethnic groups lack the will to stop using police
as a means of furthering their political aims. 

In 1996, IPTF started a process designed to restructure and train the
three police forces in accordance with democratic policing standards. 
On April 25, 1996, Bosniak and Bosnian Croat political leaders agreed
to comply with IPTF restructuring plans and democratic policing
standards and to integrate their separate police forces into a
unified Federation police force.\29 The agreement called for
Federation police restructuring and integration to be completed by
September 1, 1996.  According to a U.N.  report, these efforts did
not meet expected timetables because of political disputes between
Bosniak and Bosnian Croat political leaders. 

As of March 1997, Bosnian Serb political leaders had not started to
restructure the Bosnian Serb police force in accordance with IPTF
democratic policing standards, although in early December 1996 they
agreed to submit a restructuring plan to IPTF by the end of January
1997.  According to a State Department official, the Bosnian Serb
plan finally submitted in February 1997 did not comply with IPTF's
democratic policing standards.  Specifically, it did not include
screening police for human rights offenders or identifying individual
members of the police force.\30

According to many officials and other observers with whom we spoke,
during its first year, IPTF did not have the mandate, authority or
resources to take effective action against human rights offenders on
police forces.  In December 1996, the Peace Implementation Council
and U.N.  Security Council, with the parties' agreement, attempted to
correct this situation by giving IPTF the authority to investigate
human rights abuses by civilian police forces and to propose
sanctions against offenders.  However, in early December 1996 neither
the Peace Implementation Council nor other U.N.  contributors agreed
to provide the 300 additional police monitors requested by the IPTF
Commissioner to perform these investigations. 

According to a State Department official, the United Nations was
encouraged to recruit monitors having specific investigative skills
for this purpose while staying within its current ceiling of 1,721. 
Later that month, the U.N.  Secretary General reported that if IPTF
needed additional monitors to exercise its new authority, he would
submit proposals in this regard to the Security Council.  The IPTF
leadership determined that it needed an additional 120 monitors to
perform its mandate effectively.  In early March 1997, the Secretary
General asked the Security Council to consider authorizing an
increase in the number of IPTF personnel by 120 so that IPTF could do
human rights investigations while continuing its police monitoring,
restructuring, and training functions.\31 As of April 21, 1997, the
Security Council had not acted on this request. 


--------------------
\29 Specifically, they agreed to review police functions and reduce
the size of their forces to bring them closer to European standards,
to screen all police for human rights abuses, to test all police to
ensure they have the requisite skills, and to overhaul police
policies and procedures to promote service to the community rather
than service to the state. 

\30 IPTF, in conjunction with the United States, designed and
solicited contributions for a program to train and equip police
forces as a way of assisting police restructuring.  The program's
implementation was slowed by delays in restructuring the Federation
and Republika Srpska police and lack of support from donor countries
other than the United States. 

\31 The report also asked that the Security Council authorize another
186 police monitors and 11 civilian personnel for deployment to
Brcko.  The Security Council authorized the increase in personnel for
Brcko on March 31, 1996. 


   SFOR ESTABLISHED TO ADDRESS
   NEED FOR A CONTINUED
   INTERNATIONAL MILITARY FORCE
---------------------------------------------------------- Chapter 2:5

In December 1996, western observers in Bosnia told us that absent an
international military force, the conflict would likely resume.\32

They noted persistent, low-level violations of the military
requirements by the three militaries, an accelerated pace of the
destruction of housing for returnees of other ethnic groups, and
organized confrontations between ethnic groups during attempts to
resettle displaced persons in the zone of separation that prompted
IFOR intervention.  Many of these observers said that some sort of
international military force would be needed for many years to deter
an outbreak of hostilities while Bosnia continues the process of
political and social reconciliation.  They based this projection on
their assessments of the current pace of political and social change
in Bosnia, which we describe in the following three chapters of this
report. 

Recognizing the need for a continued international military force, in
December 1996 the North Atlantic Council authorized a new mission,
SFOR, which is about half the size of IFOR.  The mission of SFOR is
to continue to stabilize the situation in Bosnia, deter renewed
hostilities, and consolidate the peace.  According to the SFOR
operation plan approved by NATO in mid-December 1996, the desired
NATO end state is an environment adequately secure for the "continued
consolidation of the peace" without further need for NATO-led
military forces in Bosnia.  The plan lists four conditions that must
be met for the desired end state objective to be realized: 

  -- The political leaders of Bosnia's three ethnic groups must
     demonstrate a commitment to continue negotiations as the means
     to resolve political and military differences;

  -- Bosnia's established civil structures must be sufficiently
     mature to assume responsibilities for ensuring compliance with
     the Dayton Agreement;

  -- The political leaders of Bosnia's three ethnic groups must
     adhere on a sustained basis to the military requirements of the
     Dayton Agreement, including the virtual absence of violations or
     unauthorized military activities; and

  -- Conditions must be established for the safe continuation of
     ongoing nation-building activities. 

The operation plan asserts that these objectives will be achieved by
June 1998.  However, the plan does not provide information on how the
civil-related objectives are to be achieved.  The plan bases this
time frame on the assumption that the international community will
develop a political framework and civil implementation strategy for
1997 and 1998 that will increase the emphasis on efforts of the
operation's civilian organizations and Bosnia's political leaders to
consolidate the peace. 

The executive branch has repeatedly stated that it plans to withdraw
U.S.  troops when the current mission ends in June 1998.  Some State
and Defense Department officials said, however, that based on current
conditions, they believe some type of international military force
will likely be required after SFOR's mission ends. 


--------------------
\32 Estimates of the length of time necessary for the militaries to
resume the conflict after the international force withdraws range
from days to months. 


PROGRESS IN DEVELOPING A UNIFIED,
DEMOCRATIC BOSNIA
============================================================ Chapter 3

As previously discussed, a principal objective of IFOR, and later
SFOR, was to create and maintain a secure environment with an absence
of war where political reconciliation could occur.  A second
principal objective of the Dayton Agreement was to establish Bosnia
as a unified, democratic state that would uphold the rule of law and
adhere to international standards of human rights.  In early 1997,
Bosnia was far from achieving this goal, due to continuing tension,
distrust, and political discord among Bosnia's three major ethnic
groups. 

Under strong international pressure, the political leadership from
all three ethnic groups have taken some steps to link the country's
ethnic groups politically through the creation of national and
entity-level governmental institutions,\33 but leaders and the
majority of people in two of the three ethnic groups still want to
live in ethnically pure states separate from Bosnia.  The September
1996 elections that began the development of these institutions were
intended to be a step in the progressive achievement of democratic
goals throughout Bosnia; however, they were not held in a fully free
and fair environment, and international observers and executive
branch analyses reported that they may have even hampered Bosnia's
democratic development.  In the months following the elections, the
human rights situation worsened, particularly in Bosnian
Serb-controlled areas, and ethnic intolerance remained strong.  As of
March 1997, political leaders from two of the three Bosnian ethnic
groups still had not begun cooperating with the International
Criminal Tribunal for the Former Yugoslavia (referred to as the "war
crimes tribunal") in its prosecution of war crimes and other
violations of international humanitarian law even though the
political leadership of all three ethnic groups had agreed to do so. 


--------------------
\33 Bosnia's constitution gives the national government authority in
10 specific areas, excluding armed forces.  All governmental
functions not specifically granted to the national level are devolved
to the entities. 


   BUILDING INSTITUTIONS UNDER
   WAY, BUT SOME ETHNIC GROUPS
   STILL WANT SEPARATE STATES
---------------------------------------------------------- Chapter 3:1

Progress toward creation of a genuinely unified Bosnia is not
self-sustaining and depends heavily on the willingness of the
political leadership from all three ethnic groups to cooperate as
well as on continued international pressure and support, especially
from the United States.  Since the September 1996 election of the
multiethnic, national presidency and Parliamentary Assembly, elected
Bosnian officials from all three ethnic groups have begun to build a
national government.  Table 3.1 shows a list of national institutions
and their status as of March 1, 1997. 



                                    Table 3.1
                     
                          Progress in Creating National
                                   Institutions

Institution                Function under Dayton      Status as of March 1997
-------------------------  -------------------------  --------------------------
Parliamentary Assembly     Enact national             Met once; passed no
                           legislation to implement   legislation.
                           decisions of the
                           presidency, make revenue
                           decisions, approve
                           national budget, and
                           ratify treaties.

Presidency                 Act as executive of        Met 15 times since October
                           national government        1996, with representatives
                                                      from all 3 ethnic groups
                                                      meeting to establish
                                                      national, multiethnic
                                                      governing institutions;
                                                      reached several
                                                      agreements.

Council of Ministers       Implement policies and     Co-chairs, vice-chair,
                           decisions of national      ministers, and deputy
                           government                 ministers selected. Met 10
                                                      times since initial
                                                      January 1997 meeting.
                                                      Ministries still had no
                                                      staff, funding, office
                                                      space, or effective
                                                      authority.

Standing Committee on      Coordinate military        Has never met.
Military Matters\a         matters at national
                           level.

Constitutional court       Highest appellate court;   International and Bosniak
                           resolve disputes over      members appointed; Bosnian
                           constitution and between   Serb and Croat members not
                           entities.                  appointed; court has never
                                                      met.

Central bank               Issue currency and         Members selected but could
                           conduct monetary policy    not agree on bank's role;
                                                      separate currencies
                                                      continue to be used in
                                                      Bosnia's Serb, Croat, and
                                                      Bosniak areas.
--------------------------------------------------------------------------------
\a Bosnia's Serbs, Croats, and Bosniaks still maintain three separate
armed forces, a condition that must evolve into a unified armed
forces, according to a State Department official, if Bosnia is to
become a unified country.  As an interim measure, the Dayton
Agreement calls for members of the collective presidency to select
representatives for a standing committee on military matters that
would coordinate the activities of the armed forces. 

Under significant pressure from the international community, Bosnian
officials from all three ethnic groups have taken steps to build
national and entity institutions that link Bosnia's ethnic groups
politically.  However, Bosnia is still a long way from having a
functioning national government because ethnic political leaders
continue to disagree first on the requirements of the Dayton
Agreement and, second, on the scope, size, and authority of the
national institutions. 

According to various international observers, Bosnian Serbs very
narrowly interpret the national institution-building requirements in
the agreement because they want a small, weak national government. 
The Bosniaks on the other hand, believe the agreement calls for a
stronger, more robust central government.  This fundamental
disagreement has slowed the process of starting national
institutions.  For example, final agreement on the number of
ministries in the national government was delayed because Bosnian
Serb political leaders wanted to create only the two ministries
specifically mentioned in Bosnia's constitution, whereas Bosniak
political leaders wanted a larger national government with additional
ministries.  Also, Bosnian Serb political leaders continue to insist
on using a different currency in Republika Srpska than in the
Federation and have blocked efforts to establish a common central
bank. 

Although the Federation between Bosniaks and Bosnian Croats was
established in March 1994, Bosniak and Bosnian Croat leaders have
made only limited progress toward creation of the joint Bosniak-Croat
Federation--this despite pressure from the United States and others. 
For example, the complete Federation House of Representatives has met
only twice since its election in September.  Bosnian Croat members
boycotted the third meeting partly because they could not reach
agreement with Bosniak members on redrawing the Federation's
municipality boundaries; the Bosnian Croats sought to redraw the
boundaries to create additional ethnically pure municipalities. 
Also, from 1994 through the end of 1996, the European Union
implemented a program that attempted to politically integrate the
divided city of Mostar.  This effort did not succeed because the
Bosnian Croats want to remain separate from the Bosniaks, and Bosnian
Croat actions taken during the period tended to undermine the
development of a unified city government. 

According to international observers in Bosnia, as of December 1996
real governmental power and authority in the Federation continued to
reside in separate Bosniak and Bosnian Croat governmental structures,
despite three formal announcements in 1996 that they had been
abolished.  Some of these observers also noted that Bosnian Croat
authorities in late 1996 seemed to be hardening their position with
regard to not cooperating with Federation institutions.  Efforts to
build a viable Federation were further undermined by the violence in
Mostar in February 1997.\34

After 1 year of implementing the Dayton Agreement, the three Bosnian
ethnic groups continued to hold differing views on whether a unified
Bosnia should exist.  Although the political leaders for all three
groups maintain publicly that they support the goals of a unified
Bosnia, according to a December 1996 U.N.  report some nationalist
leaders of Republika Srpska, as well as some Bosnian Croat leaders,
have continued to advocate the complete separation of their
territories from Bosnia.  In January 1997, the State Department
reported that Bosnian Serb and Bosnian Croat political leaders still
retained their commitment to the concepts of a "greater Serbia" and a
"greater Croatia," after having agreed in the Dayton accords to
abandon them. 

According to polls conducted by USIA in December 1996 through January
1997, the political leaders' views are shared by their ethnic groups. 
While the majority of all three ethnic groups said they favor Dayton
Agreement goals and view the agreement as better than war, 79 percent
of Bosnian Croats and 94 percent of Bosnian Serbs think the areas
under their control should be part of Croatia and Serbia,
respectively.  In contrast, 99 percent of Bosniaks support a unified
Bosnia, with two-thirds believing a unified Bosnia is worth dying
for.\35


--------------------
\34 On February 10, 1997, a group of uniformed and plainclothes
Bosnian Croat police attacked an unarmed group of several hundred
Bosniaks attempting to visit a cemetery as part of a religious
holiday, killing 1 and wounding at least 20 Bosniaks.  This attack
triggered violence between Bosniak and Bosnian Croats throughout
Mostar, including two attacks on SFOR vehicles.  According to DOD, it
is suspected that Bosnian Croats attacked the SFOR vehicles in both
instances. 

\35 USIA data shows results for "Bosnian Muslims", not Bosniaks.  For
the purposes of this report, we have used the terms synonymously. 


   ELECTIONS WERE HELD, BUT WERE
   CONSIDERED NOT FULLY FREE AND
   FAIR
---------------------------------------------------------- Chapter 3:2

In June 1996, the OSCE Chairman-in-Office announced that while
conditions were not suitable to hold the national, entity, and other
elections scheduled for September 14, 1996, they should be held.  In
this statement, the Chairman-in-Office noted serious problems with
the political and human rights climate.\36 On election day, less than
1 year after the cessation of hostilities, voter turnout was high,
the security situation was generally calm throughout Bosnia despite
concerns about the potential for violence,\37 and voters were able to
vote for the candidates of their choice. 

However, the report of the OSCE Coordinator for International
Monitoring stated that the ability of all Bosnian political parties
to (1) campaign in a free and fair atmosphere, (2) receive equal
treatment before the law, and (3) obtain unimpeded access to the
media was below the minimum OSCE standard.  During the campaign, the
three ethnically based political parties that have ruled since
Bosnia's 1990 election--the Bosniak Party of Democratic Action (SDA),
the Serb Democratic Party (SDS), and the Croatian Democratic Union
(HDZ)--harassed and intimidated opposition parties.  Moreover, the
three ruling political parties generally controlled the media during
the campaign and used this control to propagate fear and insecurity
among voters. 

Although SDA allowed a greater degree of media freedom than SDS or
HDZ, opposition parties in general had a very difficult time
campaigning through television, radio, or print media.\38 State
Department officials acknowledged that the elections were not
conducted in a fully free and fair atmosphere.  However, they
believed that the results accurately represented the will of the
people. 

The impact of the elections on Bosnia's progress toward becoming a
democratic nation is unclear.  With some exceptions in Republika
Srpska, the three ruling political parties won overwhelmingly
because, according to USAID and human rights documents, Bosnians
believed that only the ruling political parties could protect their
respective interests in light of the threat of renewed conflict and
the fear instilled by the parties.  (See app.  III for election
results.)

Many observers told us that the elections, while not conducted in a
fully free and fair environment, turned out as well as could be
expected less than 1 year after the war.  In their view, the
elections were the first step in a democratization process,
culminating in the Bosnian national elections planned for 1998.  In
addition, the election process helped create an active political
opposition which could set the stage for later political changes in
Bosnia.  Further, although the ruling political parties were the
major winners on election day, opposition candidates, particularly in
Republika Srpska, did somewhat better than expected.  A Bosnian Serb
opposition candidate told us that before he started campaigning, he
was supported by 3 percent of the population, but ended up getting 30
percent of the vote.  A Bosnian Croat opposition candidate reported
that receiving 10 percent of the vote almost constituted a victory,
relative to the 7 percent he would have been satisfied with. 

However, according to various reports, the election results may have
had some negative effect on democratic progress in Bosnia.  According
to international observers and a USAID strategy document for
promoting democratic reforms in Bosnia, the election results
decreased, rather than strengthened, the probability that
reconciliation and political tolerance would occur because they kept
in power authoritarian leaders and political parties that control the
media and the flow of information.  State Department and USAID
officials told us that while these victories may hinder efforts to
build a democratic state, no one was surprised that the ruling
political parties won by such wide margins.  However, State's
official position is that despite its flaws, the September 1996
election was an essential first step in the long-term process of
creating democratic institutions in Bosnia. 


--------------------
\36 The Dayton Agreement required OSCE to conduct elections for
national and entity-level positions no later than September 1996. 
OSCE could also conduct cantonal and municipal-level elections during
this time frame, if feasible.  On August 27, 1996, OSCE announced it
would postpone the municipal elections because of serious distortions
in the use of the rule that allowed people to vote where they
intended to live.  As of March 1997, OSCE planned to hold municipal
elections in September 1997. 

\37 Many observers attributed the lack of violence on election day to
the postponement of municipal elections. 

\38 The Open Broadcast Network--an effort by the international
community to establish an alternative media source for opposition
parties--began operation only 1 week before the election due to the
late arrival of equipment and unwillingness of some of the ethnic
political leaders to allow it to operate.  State Department and USAID
officials said its impact on the election was minimal. 


   HUMAN RIGHTS SITUATION
   WORSENED, AND ETHNIC
   INTOLERANCE WAS STRONG AFTER
   THE ELECTION
---------------------------------------------------------- Chapter 3:3

According to human rights observers and their reports, the overall
human rights situation deteriorated in the months after the September
1996 election, particularly in Republika Srpska, as the ruling
parties worked to consolidate their power.  For example, OSCE human
rights reports noted increasing numbers of bombings and arson
attacks, and evictions directed at ethnic minorities throughout the
country; intensified repression of the opposition press and political
parties, including evictions aimed at opposition party members in
Republika Srpska; and the destruction of 95 Bosniak houses in
Prijedor, Republika Srpska, over a several-hour period in late
October 1996.  These human rights reports noted a continuing
deteriorating human rights situation throughout Bosnia, but
particularly in Republika Srpska, through December 1996 at the time
we completed our fieldwork in Bosnia. 

In addition, Bosnians of all three ethnic groups could not travel
freely across ethnic boundaries in many areas of the country, even
though many physical barriers to freedom of movement have been
removed and IFOR data show that large numbers of vehicles cross the
interentity boundary line.  According to human rights reports, much
of the population could not freely cross ethnic lines at will or
remain behind ethnic lines to visit, work, or live without facing
harassment, intimidation, or arrest by police of other ethnic groups. 
A December 1996 NATO document stated that IFOR suspected all three
ethnic groups of continuing to use mobile, fast-moving checkpoints to
hinder freedom of movement. 

In December 1996, the United Nations reported that the police
throughout Bosnia were responsible for most human rights
violations--by some estimates as much as 70 percent.  To help address
this critical issue, the Peace Implementation Council, at its
December 1996 London conference, imposed new responsibilities on the
United Nation's IPTF to, among other things, investigate human rights
abuses by police.  An additional 120 IPTF monitors, with
investigative skills, were requested in March 1997 for this purpose. 

According to USIA polls and international observers, ethnic animosity
and intolerance in Bosnia have remained strong.  For example,
according to a January 1997 poll, 92 percent of Bosnian Serbs had an
unfavorable opinion of Bosniaks and 76 percent had an unfavorable
view of Bosnian Croats.  Bosnian Serbs were viewed unfavorably in
return by 70 percent or more of the other two groups.  Relations
between Bosniaks and Bosnian Croats actually grew worse through 1996. 
While in December 1995 over 40 percent of Bosnian Croats viewed
Bosniaks favorably, by January 1997 85 percent viewed Bosniaks
unfavorably.  During the same period, the percentage of Bosniaks who
viewed Bosnian Croats favorably fell from 72 percent to 42 percent. 

In February 1997, the Archbishop of Sarajevo said that Bosnians hold
these views because their political leaders control and use the media
to encourage animosity and discourage reconciliation among the ethnic
groups.  Moreover, according to international observers, the bitter
memories from the recent war contribute to the strong ethnic
animosities--people remember who killed their family members or
forced them from their homes. 

On April 14, 1997, the High Representative reported that a precarious
human rights situation, characterized by widespread discrimination
and abuse on ethnic grounds, continues to reign in Bosnia.  The High
Representative reported continued harassment of minorities residing,
visiting, or travelling through areas where another group is in the
majority, with the most severe abuses occurring in the Republika
Srpska and in Bosnian Croat-controlled areas.  The report also noted
a worrying development during the reporting period--tit-for-tat
attacks on religious and cultural edifices, such as churches,
mosques, and cemeteries, within the Federation. 

According to a State Department document, the international community
must engage in a long-term democratization effort to counter the
continued presence of separatists and unreconstructed, authoritarian
centralists in Bosnia.  By late 1996, many international aid donors,
including USAID, USIA, and OSCE, had already started democratization
projects designed to foster ethnic tolerance and reconciliation
within and across the two entities and to develop alternative media
outlets and political, social, cultural, and business organizations. 
See appendix V for descriptions of USAID and USIA democracy programs
in Bosnia. 


   LEADERSHIP OF TWO ETHNIC GROUPS
   HAVE NOT COOPERATED WITH THE
   WAR CRIMES TRIBUNAL
---------------------------------------------------------- Chapter 3:4

The Dayton Agreement calls for all parties--including Bosnia's Serb,
Croat, and Bosniak authorities--to cooperate with the War Crimes
Tribunal, which includes arresting people indicted for war crimes and
surrendering them to the war crimes tribunal; however, as of April
25, 1997, only 8 of the 74 people\39 indicted for war crimes had been
arrested and brought to the tribunal.  While the Bosniak authorities
arrested all indicted persons who were in Bosniak-controlled areas,
the Bosnian Serbs and Bosnian Croats did not arrest people indicted
for war crimes in their areas of control. 

The international community made some attempts to politically isolate
and remove from power the most prominent Bosnian Serbs indicted by
the war crimes tribunal.  Under pressure from OSCE and the
international community, Radovan Karadzic\40 stepped down as the head
of the SDS on July 18, 1996.  According to international observers,
however, the international community's efforts to remove him from
power did not work; instead, he has effectively retained his control
and grown in popularity among people in Republika Srpska (see fig. 
3.1).  USIA polls showed that between April 1996 and January 1997,
the percentage of Bosnian Serbs who viewed Karadzic very favorably
increased from 31 percent to 56 percent, and the percentage who
viewed him somewhat favorably or very favorably rose from 68 percent
to 85 percent. 

   Figure 3.1:  Karadzic-SDS
   Campaign Poster Over OSCE
   Office in Doboj (July 28, 1996)

   (See figure in printed
   edition.)

According to State Department officials and documents, until indicted
war criminals are arrested and turned over to the tribunal, it will
be impossible to establish a stable peace in the region.  Human
rights reports also support this conclusion; according to some
reports, indicted war criminals control the economy and governmental
institutions in many places in Bosnia.  Further, according to an
expert on Bosnian culture, reconciliation among Bosnians cannot take
place until war criminals are brought to justice and held accountable
for their actions. 

The State Department has indicated, however, that countries
participating in the Bosnia peace operation are divided over how to
resolve the issue of noncompliance with the war crimes tribunal. 
While some countries, including the United States, would support an
active strategy for the arrest of war criminals, other countries
would not do so. 


--------------------
\39 These figures do not include one person who was indicted by and
surrendered to the war crimes tribunal, but who was released by the
tribunal for humanitarian reasons and later died. 

\40 Radovan Karadzic was indicted on charges of violating the laws of
war, crimes against humanity, and genocide by the war crimes
tribunal. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 3:5

State specifically disagreed with two issues discussed in this
chapter:  (1) that the human rights situation had worsened in the
months following the September 1996 elections; and (2) that the
elections may have had the effect of hindering the process of
democratic development in Bosnia.  According to State, it is
"categorically untrue" that the human rights situation had worsened,
or that the elections may have had any long-term negative effect on
the pursuit of democracy in Bosnia.  Despite reports to the contrary,
to which State gave little weight, State said the human rights
situation had improved, and that the elections represent an
"unqualified validation" of the work of the international community. 
State said that although the September 1996 elections kept in power
leaders from the nationalist parties, they were a necessary
prerequisite for Bosnia's democratic development. 

Our discussion of the human rights situation in the months following
the election is based on an analysis of information contained in
biweekly reports submitted by on-the-ground observers from an
internationally recognized organization.  These reports described a
continuing deteriorating human rights situation in many parts of
Bosnia in the months following the elections.  This was particularly
true, but not exclusively so, in Republika Srpska.  Moreover, the
international community itself, in late 1996 and early 1997,
recognized the seriousness of human rights abuses in Bosnia when it
sought an expanded mandate and an 120 additional monitors for IPTF
specifically to investigate allegations of abuses by members of
Bosnia's police forces. 

We acknowledge that the September 1996 elections may have been a
necessary first step in the process of democratic development in
Bosnia and that opposition parties did better than expected in the
election.  We also agree that it was no surprise that the ruling
parties won by such wide margins, particularly given the fact that
the ruling parties controlled the media, making it difficult for
opposition parties to campaign.  Moreover, we recognize State's
position that the elections were an essential first step in the
long-term process of developing democratic institutions in Bosnia. 
However, we believe it is equally important to note the potential
negative aspects of the elections.  As State itself acknowledged, the
election resulted in legitimizing and keeping in power the
authoritarian political leaders who brought civil war and atrocities
to Bosnia.  These leaders have continued to resist working
cooperatively to achieve the goals of the Dayton Agreement in many
critical areas, including the development of democratic policing; the
return of refugees, particularly cross-ethnic returns; the
implementation of smooth functioning national government
institutions; and economic integration across entity boundaries and
within the Federation. 


PROGRESS IN REBUILDING BOSNIA'S
ECONOMY
============================================================ Chapter 4

The Dayton Agreement's goals for the economy of Bosnia and
Herzegovina include economic reconstruction, building national
government and Federation economic institutions, and promoting a
market economy.  To support these goals, the government of Bosnia,
with the assistance of the World Bank, the European Commission, the
European Bank for Reconstruction and Development, and other
international agencies and organizations, designed the 3- to 4-year,
$5.1-billion Priority Reconstruction Program.  This program gave the
international community a framework for the economic reconstruction
and integration of Bosnia.  In addition to supporting the Dayton
Agreement's goals, the program sought to jump-start economic
recovery, thereby creating visible results quickly so that the people
of Bosnia could experience an immediate betterment of their lives and
become stakeholders in creating conditions for an enduring peace. 

In 1996, 59 donor countries and organizations pledged $1.9 billion,
exceeding the program's first-year pledging goal of $1.8 billion.  By
the end of the year, there were many signs of economic recovery in
the Federation.  Overall, however, economic activity was still at a
very low level, much reconstruction work remained to be done, and
mass unemployment was still a major concern.  The biggest obstacle to
progress has been the lack of cooperation among Bosnia's political
leaders in implementing projects and developing institutions that
would economically link their respective ethnic groups.  Problems in
donor coordination have also contributed to delays in achieving
results.  At a December 1996 conference in London, the international
community stated that it would use economic assistance as a tool to
encourage compliance or discourage noncompliance with Dayton goals in
the areas of refugee return and freedom of movement. 


   DONORS EXCEEDED 1996 PLEDGING
   GOAL FOR THE RECONSTRUCTION
   PROGRAM
---------------------------------------------------------- Chapter 4:1

Fifty-nine donors--48 countries and 11 organizations--exceeded the
$1.8 billion goal of the December 1995 and April 1996 pledging
conferences, bringing the total international pledge for the 1996
reconstruction program to $1.9 billion.\41 However, as of December
1996, $2.03 billion, more than the amount pledged, had been committed
to the program.  The U.S.  government, primarily through USAID,
committed $294.4 million during the program's first year for, among
other things, repair of municipal infrastructure and services, small
business loans, and technical assistance for the development of
national and Federation economic institutions.  The United States as
a donor was third behind the European Commission's $430.21 million
and the World Bank's $357.8 million.  European donors as a group
committed 47.2 percent of the committed funds and the United States
committed 14.5 percent
(see fig.  4.1). 

   Figure 4.1:  Donor Commitments
   to the Priority Reconstruction
   Program, as of December 1996
   (Dollars in millions)

   (See figure in printed
   edition.)

Source:  Implementation of the Priority Reconstruction Program in
1996, prepared by the European Commission and the Central Europe
Department of the World Bank (Mar.  1997). 

As of December 1996, nearly all of the $2.03 billion of the committed
funds had been designated for reconstruction activities, and $1.1
billion, or
54 percent of the total commitments had been disbursed,\42 exceeding
the disbursement target of $950 million (about half of the pledged
funding) set in June 1996.  A November 1996 donor report prepared by
the European Commission and the World Bank\43 estimated the financing
needs of the program over the next 2 years to be $2.5 billion, of
which the 1997 requirements represent $1.4 billion.  Appendix IV
provides more information on the Priority Reconstruction Program. 


--------------------
\41 Funding for the reconstruction program in subsequent years is to
be raised at succeeding conferences. 

\42 World Bank data on funds that have been disbursed do not
necessarily translate into results on the ground.  Hence, while $1.10
billion had been disbursed by December 1996, we cannot say what
portion of this represents physical results.  That information is not
currently available. 

\43 The Priority Reconstruction Program:  From Emergency to
Sustainability, prepared by the European Commission, the European
Bank for Reconstruction and Development, and the Central Europe
Department of the World Bank for the Donor Information Meeting, vols. 
1, 2, and 3 (Nov.  1996), hereafter referred to as the "November 1996
donor report." The March 1997 status report to the donor community,
Implementation of the Priority Reconstruction Program in 1996,
prepared by the European Commission and the Central Europe Department
of the World Bank (Mar.  1997), is referred to as the "March 1997
donor report."


   ECONOMIC ACTIVITY REMAINS AT
   LOW LEVEL, BUT SIGNS OF
   ECONOMIC RECOVERY NOW VISIBLE
---------------------------------------------------------- Chapter 4:2

Overall, economic activity remains at low levels throughout Bosnia,
although there are visible signs of economic recovery.  According to
the World Bank, by the end of 1996 industrial production, though
recovering, was still only at 10 to 15 percent of its prewar level;
half the labor force remained unemployed, and wages in the Federation
averaged little more than $150 per month, for those who were
working.\44

According to the November 1996 donor report, economic conditions in
the Federation had improved since the war's end, albeit from very low
levels.  Bosniak-controlled areas of the Federation sustained the
heaviest physical damages from the war, and by year-end 1996 the
Federation, as a whole, had received $1.1 billion, or 81 percent, of
the total assistance efforts under implementation ($1.36 billion).\45
In the Bosniak-controlled part of the Federation, the World Bank
estimated unemployment at 50-60 percent, an improvement from the 90
percent unemployment at the end of the war.  Industrial output
roughly doubled to 15-20 percent of its prewar levels, and wages, for
those who were working, had roughly quadrupled, to an average of a
little more than $100 per month.  According to the World Bank, during
1996 the Federation cash budget was balanced and prices remained
broadly stable.  The November 1996 donor report indicated that in the
Bosnian Croat-controlled areas of the Federation, which suffered less
war damage than the Bosniak-controlled areas, industrial production
was running at 85 percent of its prewar level, and wages stood at
more than $200 per month.\46

Although Republika Srpska suffered less physical damage from the war,
the economic embargo\47 had an adverse impact on industrial
production.  At the end of 1996, industrial production was estimated
to be at 8-10 percent of its prewar level, and unemployment was
estimated to be over 60 percent.  Because of international sanctions
and donor governments' policies, about 3.2 percent of the total
assistance efforts under implementation ($1.36 billion), or $43
million, was actually being implemented in Republika Srpska in 1996. 
This included activities primarily of an emergency nature.  Growth in
Republika Srpska during 1996 was close to zero. 

The first results of the economic reconstruction program are now
visible, primarily in the Federation.  For example, key transport
linkages including airports, roads, railways, and bridges have been
restored.  The Sarajevo airport is now open to limited commercial
traffic, and the tram system has been restored to half its prewar
capacity.  Repairs and renovations have been made to thousands of
homes, including the reconnection of 32,000 apartments to the
district heating system in Sarajevo before winter.  Four major
transmission lines were restored, and three major thermal power
plants are being repaired.  Basic services like water, electricity,
and heating have been or are being restored in many areas.  Over $100
million in small- and medium-sized business loans have helped revive
commerce and have generated an estimated 11,000 new jobs.  According
to the November 1996 donor report, an estimated 250,000 jobs were
created at the peak of the 1996 reconstruction program. 

Fiscal support has been provided to more than 10 government
institutions, including the Federation Customs, Tax, and Banking
Supervision Agencies, and economic institutions are beginning to
emerge.  The Federation Customs Administration became operational in
April 1996, and revenues began flowing into the Federation from
Bosnian Croat-controlled, as well as Bosniak-controlled, areas,
though not without numerous delays and interruptions.  The Federation
Banking Agency became operational in July 1996, following the passage
of legislation in June.  The agency had issued more than 21 licenses
to banks in the Federation as of January 1997 and had begun to
monitor all banks in the Federation based on prudential standards.\48
The Federation parliament passed the tax administration law in August
1996, and it became effective in October.  At a meeting of the
presidency on April 15, 1997, the three parties agreed to establish a
single central bank operating as a currency board, as provided by
Dayton, and to establish a single currency valid for all transactions
in Bosnia.  (See app.  IV for details on sectoral progress.)

In addition to the reconstruction work going on within the framework
of the Priority Reconstruction Program, other international efforts
have benefitted the economy.  IFOR, in the conduct of its mission,
carried out substantial repairs to restore infrastructure,
particularly in the area of transport.  The international community
has also funded humanitarian assistance projects that rehabilitated
housing and micro-level infrastructure.  As of November 1996, UNHCR's
humanitarian housing program had repaired 18,000 houses and
apartments, benefiting over 90,000 people in both the Federation and
Republika Srpska, and USAID's Emergency Shelter Program repaired over
2,500 homes in the Federation as of November 1996 (see fig.  4.2). 
However, UNHCR indicated in a November 1996 report that lack of
housing remains a constraint to refugee return. 

   Figure 4.2:  USAID-funded
   Housing and Bridge Repairs

   (See figure in printed
   edition.)


--------------------
\44 According to several international financial institutions
involved in the program, there are no reliable end-of-war (1995)
financial statistics, and reliable financial statistics are not yet
available for Bosnia's 1996 economic performance. 

\45 Funds under implementation are those firmly committed funds for
which contracts have been tendered, signed, or are under way
(including amounts disbursed). 

\46 The report did not provide an end-of-war estimate of industrial
production in Bosnian Croat-controlled areas. 

\47 On April 17, 1993, the United Nations Security Council adopted
Resolution 820, which barred all trade and financial transactions
with the Serb-controlled areas of Bosnia.  On February 27, 1996,
economic sanctions imposed upon the Republika Srpska were suspended
by the Security Council in accordance with Resolution 1022, and they
were completely terminated in October 1996 by Resolution 1074. 

\48 According to USAID officials, banks in both parts of the
Federation are receiving licenses subject to uniform bank licensing
criteria using western norms. 


   LACK OF PARTIES' COOPERATION
   AND PROBLEMS IN DONOR
   COORDINATION HINDER PROGRESS
---------------------------------------------------------- Chapter 4:3

According to the November 1996 and March 1997 donor reports,
converting the reconstruction funds into actual results on the ground
has been slower than estimated.  In many key sectors, this has been
due to the reluctance of the three ethnic groups' political leaders
to cooperate in infrastructure projects and economic institutions
that would link the ethnic groups within the Federation and across
the entities.  In addition, the donor reports indicated that donor
coordination problems have also contributed to delays in achieving
results on the ground. 


      LACK OF COOPERATION FROM THE
      PARTIES
-------------------------------------------------------- Chapter 4:3.1

The November 1996 donor report stated that there has been little
cooperation both within the Federation and between the entities in
the major network sectors such as telecommunications, electric power,
and transport, where projects frequently involve link-ups between the
different ethnic groups.  For example, connecting Bosnia's Serb,
Croat, and Bosniak areas by telephone has been held up by a
three-sided insistence on separate networks.  Implementation of
intra- and interentity electric power projects has been stalled by a
lack of cooperation among Bosnia's three electric power plant
companies; each company is located in a different area of ethnic
control.  Further, the regularity of railway operations has been
impeded by the lack of contact between the three railway companies
that now operate the 1,000 kilometers of lines.  Though successful
water works projects were undertaken in 1996, in municipalities
divided along ethnic lines but served by a common water source there
has been a reluctance to cooperate. 

Moreover, civilian landmine clearing, particularly critical to
reconstruction efforts and refugee return, has been slow to start. 
While progress has been made in institution-building, training, and
identification of minefields, according to the March 1997 donor
report, implementation of actual mine clearing has been much slower
than expected due to persistent disagreements between the central and
entity governments, among others, on the sharing of responsibilities,
and the lack of local capacity to do mine clearing.\49 Because of
these problems, civilian mine clearing operations did not start in
Bosnia until the fall of 1996.  In December 1996, a senior IFOR
officer told us that the political leaders of Bosnia's three major
ethnic groups do not want to remove landmines--most of which are
located in strategic locations in the zone of separation--because
they believe the cease-fire is only a temporary cessation of
hostilities.  Further, according to a December 1996 USAID report, the
parties are continuing to lay landmines in the zone of separation and
other areas of Bosnia. 

According to USAID officials, the main obstacles USAID has
encountered in implementing its municipal infrastructure program have
involved freedom of movement issues and noncompliance by municipal
leaders who do not support the principles and practices embodied in
the Federation constitution and the Dayton Agreement with respect to
equal protection and opportunity for all ethnic groups. 

The lack of cooperation and differing views of the political
leadership of all three ethnic groups, fueled in part by differing
opinions on whether a unified Bosnia should exist, has limited
progress in economic institution building, stalling economic
integration at the national government and Federation level.  As of
late March 1997, the newly constituted central bank had not yet met
officially, awaiting the passage of a central bank law that had yet
to be enacted due to lack of agreement between the three parties on
the structure of the bank and the new currency.\50

Political barriers, not technical obstacles, also have hindered the
linking of the payment systems in the Croat-, Bosniak-, and
Serb-controlled areas of Bosnia.  For political reasons, business
accounts are settled once a week rather than daily, thus contributing
to segmentation of Bosnia's financial system.  The circulation of
separate currencies in Bosnia's Serb-, Croat-, and Bosniak-controlled
areas has also impeded the unification of the payment systems.  While
the newly established Federation Customs Administration has unified
the trade and tariff regimes in Bosnian Croat- and Bosniak-controlled
areas of the Federation, and has begun integrating customs staff of
the two parts of the Federation, different trade and tariff regimes
continue to apply between the two entities. 

According to U.S.  Treasury officials, underlying tensions and
continuing distrust between the Bosnian Croat and Bosniak members of
the Federation, and between political leaders of all three ethnic
groups, have impeded progress in the areas in which the Treasury is
providing technical assistance.  The resulting disagreements, delays,
reluctance to change, and logistical problems (hiring and paying
Federation staff and acquiring office space and computers), and the
replacement of Ministry of Finance staff with whom the Treasury had
developed good working relations, have obstructed the implementation
of a fully functioning budget process and threaten to halt the
implementation of the unified Federation tax administration, which
has just begun. 

A unified Federation tax administration is intended to merge the two
existing, separate tax administrations in Bosnian Croat- and
Bosniak-controlled areas and establish the enforcement and collection
of tax revenues, a prerequisite for running a government.  The lack
of a functioning budget process impedes the development of the
national government, Federation, and cantonal budgets, which require
agreement concerning revenue sources and expenditure responsibility. 
As of March 1997, the 1997 budgets for all three levels of government
had not been developed, and separate fiscal systems for the three
ethnically-controlled areas of Bosnia continued to operate, each with
its own tax policy.  Political tensions and disagreements have also
stalled progress in bank privatization and the passage of an external
debt law. 


--------------------
\49 Bosnian authorities disagreed with the initial donor mine
clearing plan, which called for the use of international firms to
perform urgent mine clearing around infrastructure that was key to
economic recovery.  Instead, they wanted to wait until there was a
cadre of Bosnian firms that could clear mines as a means of
generating employment.  Thus, demining efforts were unable to start
until near the end of 1996. 

\50 The Central Bank Law was still awaiting passage as of April 22,
1997, even though the Presidency agreed to a single central bank and
single currency on April 15, 1997. 


      PROBLEMS IN DONOR
      COORDINATION
-------------------------------------------------------- Chapter 4:3.2

Problems also exist concerning the coordination of donor funds,
according to the November 1996 and March 1997 donor reports.  The
November 1996 report stated that donor coordination is the key to
matching scarce donor funds with programs so as to avoid gaps and
overlaps, to ensure appropriate geographical balance, and to obtain
the maximum amount of synergy between the different donor programs. 
Although donors surpassed their original funding commitment target
set for 1996, there were a number of gaps, mismatches, and surpluses
in the overall reconstruction program. 

Many areas of the reconstruction program were underfunded,
specifically job creation, social safety net programs, health and
education, transport, and energy.  In 1996, the transport sector had
a shortfall of $125 million, or 39 percent of the first-year program
requirement.  The energy sector, with $284 million committed against
estimated 1996 needs of $403 million, had an overall funding gap
totaling $119 million.  And telecommunications, with $37 million
committed against the $160 million program requirement, was
significantly underfunded.  According to a State Department official,
telecommunications was underfunded because donors refused to commit
money for three separate ethnic phone systems, particularly since the
Bosnian Serb entity would not even link its system with the other
two. 

Other areas of the program, notably housing, fiscal support, and
industry and finance, met or exceeded their 1996 program
requirements.  The March 1997 donor report said that improved
coordination of donor activities in the housing sector was needed and
called for better planning to coordinate the efforts of the local
municipalities, the many donors, and the many nongovernmental
organizations repairing the homes.  Although the education sector met
its 1996 target, it lacked adequate funding to complete the primary
school reconstruction program.  Overall, the industry and finance
sector well exceeded its 1996 program requirement.  However, while
the commitments for lines-of-credit and technical assistance exceeded
the first-year requirements, other components of the program, such as
equity funds, remained under-funded. 

The World Bank and U.S.  government took actions during 1996 to
improve donor coordination.  The World Bank established sector task
forces in Sarajevo that, according to USAID officials, helped to
correct donor coordination problems that occurred early in the
reconstruction program.  The United States, recognizing the
coordination problem, appointed a Special Representative to serve as
U.S.  reconstruction coordinator in mid-1996.  In early 1997, the
successor Special Representative was appointed to a newly created
position of Deputy High Representative for Economic Reconstruction,
where he will coordinate the international effort. 


   USE OF CONDITIONALITY IN
   PROVIDING ECONOMIC ASSISTANCE
---------------------------------------------------------- Chapter 4:4

During 1996, according to a State Department official, all major
bilateral donors had withheld economic assistance from Bosnian
Serb-controlled areas because Bosnian Serb political leaders failed
to comply with key human rights and other provisions of the Dayton
Agreement.  Donors in 1996 at times also withheld assistance in the
Federation at the city/town level due to noncompliance with the
Dayton Agreement.  For example, USAID held up implementation of three
municipal infrastructure projects because local authorities would not
allow full freedom of movement for refugees and displaced persons
wishing to return to their homes.  As of January 1997, USAID had
restarted only one of these three projects. 

In December 1996, the Peace Implementation Council emphasized that
the international community would use economic assistance as a tool
to encourage compliance or discourage noncompliance with Dayton
goals, such as furthering the return of refugees and cooperating with
the war crimes tribunal.\51 Further, the donors' conference,
originally planned to be held at the end of February 1997, was
postponed because Bosnia's council of ministers had not yet adopted
key economic laws. 

Western observers in Bosnia have questioned the effectiveness of
threatening to withhold economic assistance from Bosnian Serb- and
Croat-controlled areas in this conditional manner, partly because
they have received little international assistance to date.  They
also questioned attaching political conditions to economic assistance
as a means of encouraging Bosnian Croat compliance with the Dayton
Agreement because Bosnian Croats have other sources of financial
support, including Croatia.\52 Furthermore, according to World Bank
officials, conditioning economic assistance on political leaders'
compliance with the Dayton Agreement is complicated by the difficulty
of determining the appropriate mix of politically conditional aid
with humanitarian aid, which is not conditional, as well as by the
need for making judgment calls in regard to financing ongoing
projects. 

State and USAID officials told us that in March 1997, some Bosnian
Serb political leaders, including the President of Republika Srpska,
had shown a willingness to accept economic assistance that includes
conditions such as employing multiethnic work forces.  These leaders,
according to State, are willing to accept conditional assistance
because they see the growing gap in economic recovery between the
Federation and Republika Srpska.  However, as of April 16, 1997,
there were no tangible results in this area. 


--------------------
\51 The Congress has placed conditions on some U.S.  assistance. 
See, for example, Public Laws 104-107, section 584; 104-122; and
104-208, Title II. 

\52 According to State officials, Bosnian Croat-controlled areas
received little economic assistance to date because they suffered
little war damage. 


PROGRESS IN RETURNING REFUGEES AND
DISPLACED PERSONS TO THEIR HOMES
============================================================ Chapter 5

Despite guarantees in the Dayton Agreement and significant
international effort, the return of refugees and displaced persons to
their homes has barely begun in Bosnia.  Fear, stemming from lack of
personal security; resistance from Bosnian political officials of all
ethnic groups; poor economic prospects; and lack of suitable housing
have combined to hinder returns.  The returns that did take place in
1996 were mainly people going back to areas controlled by their own
ethnic group because returns across ethnic lines proved extremely
difficult.  Efforts to address the return problem affect many aspects
of the Bosnia peace operation, leading to calls by the international
community for improved integration among groups responsible for
security and political and economic reconstruction implementation. 


   POLITICAL LEADERS ARE ACTIVELY
   DISCOURAGING RETURNS
---------------------------------------------------------- Chapter 5:1

Bosnia's constitution and annex 7 of the Dayton Agreement clearly
established the right of refugees and displaced persons to freely
return to their homes of origin.  The political leadership of all
three ethnic groups further agreed to take action to "prevent
activities within their territories which would hinder or impede the
safe and voluntary return of refugees and displaced persons" and not
to hinder UNHCR and other organizations' efforts to implement UNHCR's
repatriation plan.  Annex 7 also established a Commission for Real
Property Claims of Refugees and Displaced Persons.  Its mission is to
help receive and resolve claims for property from which people fled
and to which they wish to return. 

In practice, all three ethnic groups have widely ignored the various
agreements to allow returns.  In October 1996, UNHCR reported that
"in general, there has been no compliance with the provisions of
Annex 7." As a result, only about 250,000 out of the estimated 2
million Bosnian refugees and displaced persons returned to their
homes during 1996--less than a third of UNHCR's initial planning
figure of 870,000.\53

Over 80,000 others fled or were driven from their homes during the
year.  Most Bosnians would have had to cross ethnic lines to return
home, but few of the returnees in 1996 did so. 


--------------------
\53 In May 1996, a UNHCR official told us that this initial estimate
was overly optimistic. 


      SECURITY CONCERNS HINDERED
      RETURNS
-------------------------------------------------------- Chapter 5:1.1

The issue of cross-ethnic returns is highly contentious politically
and has led to many violent incidents.  Bosnian Serbs and Bosnian
Croats do not want to allow Bosniaks to return to their homes,
because this goes counter to their war aims of creating ethnically
pure states separate from Bosnia.  However, according to
international observers, the return of Bosniaks to their prewar homes
is one of the highest priority policy objectives for Bosniak leaders. 
These leaders have encouraged returns across ethnic lines to test the
right to return home. 

Many of the violent incidents in Bosnia during 1996 were the direct
result of Bosniaks attempting to cross ethnic lines to visit or
re-settle in their prewar homes.  For example, in a series of
incidents in late 1996, groups of Bosniak displaced persons crossed
the interentity boundary line and forced their way into abandoned
villages within the zone of separation.  In each instance these
unannounced movements triggered violent responses from Bosnian Serbs. 
International observers told us they suspected that these actions had
been organized by Bosniak political leaders in an effort to occupy
strategically important areas within Republika Srpska.  In some
instances, members of the Bosniak military supported these
efforts.\54 IFOR officials in Tuzla told us it was challenging to
contain and eventually control the ensuing violence.  A DOD official
also told us he was concerned that these returns of displaced persons
would continue to trigger violence and potentially affect NATO's
ability to draw down its military force in Bosnia. 

In general, the political leaders of all three ethnic groups have not
met their obligation to provide security for refugees and displaced
persons of other ethnic groups.  Ethnic minorities are facing growing
levels of violence and intimidation.  In an effort to discourage
cross-ethnic returns, over 300 homes were destroyed in late 1996 and
early 1997.  In many cases, these homes were blown up after they
appeared on UNHCR lists of Bosniaks intending to return and reoccupy
their homes in Bosnian Serb-controlled areas (see fig.  5.1). 

   Figure 5.1:  Blown Up Housing
   in the Brcko Area

   (See figure in printed
   edition.)

Expulsions of minorities from Serb- (Banja Luka), Croat- (West
Mostar), and Bosniak- (Sarajevo suburbs)\55 controlled areas
continued throughout 1996.  While the Bosniak record is generally
better than that of Bosnian Serbs and Croats, Bosniaks have prevented
Bosnian Croats and Serbs from returning to their homes in some areas
under their control and have allowed harassment of other ethnic
groups in Sarajevo and elsewhere in Bosniak-controlled areas. 


--------------------
\54 A human rights monitor and IFOR officials told us that there is
no evidence that the Bosniak military forced civilians to cross
ethnic lines in these instances.  Instead, according to the human
rights monitor, the goals of the two groups were mutually supporting. 

\55 Throughout 1996 Bosniaks attempted to force out Bosnian Serbs who
did not leave when administrative control of the Sarajevo suburbs was
given to Bosniak authorities in February 1996. 


      LEADERS CREATE NONVIOLENT
      BARRIERS TO RETURN
-------------------------------------------------------- Chapter 5:1.2

Active resistance from political leaders of the three major ethnic
groups has also created barriers to returns.  Bosnian Serb
authorities have publicly stated that there can be no returns of
Bosnian Croat and Bosniaks to Republika Srpska territory.  Serb
displaced persons from the western parts of the Federation have not
been able to return home--Republika Srpska officials have used
pressure and intimidation to keep them from trying to leave, and
Bosnian Croat officials have forbidden them from returning.  Bosniak
authorities in Bugojno have also hindered Bosnian Croat efforts to
return. 

The regional nature of the refugee problem further complicates
efforts for returns.  Some 30,000 Croatian Serb refugees who fled
from areas that were occupied by the Croatian army in 1995 are
already living in Republika Srpska.  Bosnian Serb political leaders
say they cannot allow Bosniaks or Bosnian Croats to return because
the Croatian Serbs currently occupy all available housing.  Further,
several international observers were concerned that thousands of
Croatian Serbs could flee the eastern Slavonia region of Croatia when
the U.N.  mission there ends during the summer of 1997, placing
additional burdens on already over-crowded areas in Republika Srpska. 

According to international observers, thousands of Bosnian families
cannot return to their prewar homes across ethnic lines because they
are now occupied by someone else.  In many locations, officials have
moved displaced persons from the ruling ethnic group into homes that
were previously occupied by families from other ethnic groups. 
Moreover, both the Federation and Republika Srpska have adopted
restrictive property laws that make it difficult for persons to
reclaim homes abandoned during the war.  A number of human rights
organizations are involved in property disputes, as property rights
issues are the type of human rights complaint they most frequently
receive.  However, limited progress has been made in resolving
property rights complaints.  The Commission for Real Property Claims
of Refugees and Displaced Persons, which has responsibility under
Dayton to resolve these disputes, started taking claims in November
1996, but according to the chairman of the commission, it may not be
able to operate beyond June 1997 due to lack of funds.  Other human
right organizations lack investigative and other resources needed to
resolve the complaints. 


      UNHCR'S CROSS-ENTITY BUS
      SERVICE
-------------------------------------------------------- Chapter 5:1.3

To help improve freedom of movement across ethnic lines, in May 1996,
UNHCR began running a free bus line between Bosniak- and Bosnian
Serb-controlled neighborhoods in the Sarajevo area.  During the year,
UNHCR overcame attacks on some buses and efforts of some local
political officials to administratively block bus operations.  By the
end of the year, the bus service had expanded to 11 routes, allowing
241,000 passengers to safely cross the boundary between Republika
Srpska and the Federation.  State Department and UNHCR officials told
us the bus line proved to be a great success and offered some hope in
an otherwise grim situation. 


   POOR ECONOMIC CONDITIONS DETER
   RETURNS
---------------------------------------------------------- Chapter 5:2

Potential returnees face poor economic prospects, including lack of
job opportunities and devastated infrastructure.  According to
international officials and the November 1996 donor report, many
Bosnian refugees are reluctant or unwilling to return to Bosnia
because of the poor economic conditions there.  In recognition of the
impact of economic conditions on returns, the World Bank and the
Peace Implementation Council have called for improved integration
between these areas. 

In many areas of Bosnia, there is not enough suitable housing to
accommodate Bosnians wishing to return home.  World Bank figures
showed that over half of the prewar housing stock had been destroyed
or damaged.  Although UNHCR and USAID rehabilitated over 20,000
damaged homes during 1996, some areas in Bosnia continued to suffer
serious housing shortages by the end of 1996.\56


--------------------
\56 The Omnibus Consolidated Appropriations Act of 1997 prohibited
the use of Assistance for Eastern Europe and the Baltic States funds
for housing repair or construction in Bosnia, unless directly related
to efforts of U.S.  troops to promote peace.  (P.L.  104-208, Title
II). 


   INTERRELATED NATURE OF RETURN
   ISSUE
---------------------------------------------------------- Chapter 5:3

Attempting to return thousands of Bosnians to their prewar homes
touches on a variety of security, political, and economic issues
involving numerous international organizations and levels of the
Bosnian government.  At the end of 1996, the international community
recognized the need to develop a more integrated approach to address
the return issue.  In December 1996, the Peace Implementation Council
noted the potential impact of political efforts and economic
reconstruction on the return of refugees and displaced persons.  The
Council called on UNHCR, the High Representative, the World Bank, and
the European Commission to develop closer linkages in these areas.\57
Later that month, a UNHCR humanitarian issues working group developed
guidelines for a repatriation program for Bosnia in 1997 and
recommended that a plan be finalized and presented to the
international community by the spring of 1997.  The final plan would
be developed in conjunction with national, regional, and
international organizations and would include political, economic,
and security considerations. 

The State Department supports the development of a new commission to
address freedom of movement and refugee return issues.  Such a
commission could be tasked by the Peace Implementation Council to
develop an integrated plan for securing full compliance with the
Dayton Agreement's freedom of movement requirements.  The commission
could consider all factors associated with the return issue. 
However, even if this commission were to be established, State
officials told us that refugee and freedom of movement issues were
not likely to be resolved by the time SFOR withdraws in June 1998. 


--------------------
\57 This political guidance came at the 1996 London Peace
Implementation Conference. 


U.S.  COSTS AND COMMITMENTS EXCEED
INITIAL ESTIMATES
============================================================ Chapter 6

In February 1996, the executive branch estimated that the Bosnia
peace operation would cost the United States about $3.2 billion for
fiscal years 1996 and 1997--$2.5 billion in incremental costs for
military-related operations and $670 million for the civilian
sector.\58 These initial estimates assumed that U.S.  military forces
would be withdrawn from Bosnia when IFOR's mission ended in December
1996.  The executive branch's current cost estimate for fiscal years
1996 and 1997 is more than $5.9 billion:  $5 billion in incremental
costs for military-related operations and about $941 million for the
civilian sector.  Almost all of the increase was due to the decision
to extend the U.S.  military presence in and around Bosnia through
June 1998. 

As presented in the fiscal year 1998 budget request to Congress, the
United States plans to commit about $1.8 billion for the Bosnia peace
operation--about $1.5 billion for military operations and $340
million for civilian activities.  Under current estimates, which
assume that the U.S.  military participation in Bosnia will end by
June 1998, the United States will provide a total of about $7.7
billion for military and civilian support to the operation from
fiscal years 1996 through 1998. 


--------------------
\58 As used in this report, "incremental costs" means those costs
that would not have been incurred if it were not for the operation. 
This is the same definition that is contained in 10 U.S.C.  127a, as
amended by the National Defense Authorization Act for Fiscal Year
1996. 


   FISCAL YEAR 1996 ESTIMATES AND
   COSTS
---------------------------------------------------------- Chapter 6:1

At the end of the fiscal year 1996, the executive branch estimated
that about $3 billion in fiscal year 1996 funds would be spent in
support of the Bosnia peace operation (see table 6.1).  This is
approximately $569 million more than the executive branch's initial
estimate for the fiscal year. 



                               Table 6.1
                
                Comparison of Fiscal Year 1996 Estimates
                and Costs for the Bosnia Peace Operation

                         (Dollars in millions)

                                                    Fiscal
                                       Initial    year-end
Government branch                   estimate\a  estimate\b     Costs\c
----------------------------------  ----------  ----------  ----------
DOD                                     $2,000      $2,479      $2,479
Civilian agencies\d                        470         560         501
======================================================================
Total                                   $2,470      $3,039      $2,980
----------------------------------------------------------------------
\a As of February 1996. 

\b As of December 30, 1996, for DOD and as of October 22, 1996, for
civilian agencies. 

\c For DOD, costs are incremental costs, i.e, those costs that would
not have been incurred if it were not for the operation.  For the
civilian agencies, this amount represents obligations. 

\d Includes USAID; USIA; and the Departments of State, Agriculture,
Commerce, Justice, Labor, Health and Human Services, and the
Treasury. 

DOD's incremental costs were about $500 million more than the initial
estimate due to increases in such items as logistics, communications,
and force sustainment.\59 DOD incurred some of these additional costs
because IFOR and its large contingent of U.S.  troops remained at
full strength longer than originally planned in order to support the
September 1996 elections.\60

Estimated costs for civilian agencies increased by about $90 million
primarily because of increased spending for humanitarian relief and
refugee assistance.  As of April 1997, civilian agencies had not
obligated about $59 million of their fiscal year 1996 funds. 


--------------------
\59 For a more detailed discussion of DOD's costs estimates and costs
see Bosnia:  Costs Are Uncertain but Seem Likely to Exceed DOD's
Estimate (GAO/NSIAD-96-120BR, Mar.  14, 1996), and Bosnia:  Costs Are
Exceeding DOD's Estimate (GAO/NSIAD-96-204BR, July 25, 1996). 

\60 As of March 1996, the U.S.  Army assumed that the drawdown of
U.S.  forces from Bosnia would start in the summer of 1996 because it
was anticipated that elections in Bosnia would occur in June or July. 


      DOD COSTS AND ESTIMATES
-------------------------------------------------------- Chapter 6:1.1

In fiscal year 1996, DOD incurred about $2.5 billion in incremental
costs for its participation in IFOR and other DOD operations that
supported the Bosnia peace operation (see table 6.2).  These other
operations included Operation Deny Flight (now called Deliberate
Guard), which involves air operations for maintaining the no-fly zone
over Bosnia, and Operation Provide Promise, which airlifted and
airdropped humanitarian supplies into Bosnia. 



                               Table 6.2
                
                 Fiscal Year 1996 DOD Costs for Bosnia,
                              by Operation

                         (Dollars in millions)

                                                           Incremental
Activity/operation\a                                           costs\b
------------------------------------------------------  --------------
IFOR                                                          $2,073.2
Operation Deny Flight                                            225.9
IFOR preparation                                                 158.5
Operation Provide Promise                                         21.7
======================================================================
Total                                                         $2,479.3
----------------------------------------------------------------------
\a Excludes $30.9 million spent on U.S.  participation in a U.N. 
peacekeeping operation in Macedonia, $9.3 million spent on
enforcement of the arms embargo and U.N.  sanctions on
Serbia-Montenegro, and $500,000 spent on U.S.  military personnel and
supplies for the operation of a Zagreb hospital in support of the
United Nations. 

\b As of December 30, 1996. 

Most of DOD's costs--about 89 percent--were in operation and
maintenance accounts that pay for such items as transportation, per
diem, supplies, fuel, communications, contractual services, equipment
maintenance, and other mission-related expenses.  The remaining costs
are in military personnel accounts.  These accounts fund certain
special pays that military personnel deployed to Bosnia are eligible
to receive, such as imminent danger pay, family separation allowance,
certain places pay (formerly called foreign duty pay), and basic
allowance for subsistence for enlisted personnel, as well as the
military pay for activated reservists. 

The U.S.  Army, which is deploying and logistically supporting ground
troops in and around Bosnia,\61 incurred the majority of the
costs--over $1.8 billion--in fiscal year 1996, including $37.5
million for NATO contributions.  The U.S.  Air Force spent about $340
million, while the Navy and Marine Corps spent about $97 million and
$3 million, respectively.  In addition, about $198 million was spent
by other organizations such as the National Security Agency, the
Defense Mapping Agency, the Defense Intelligence Agency, and the U.S. 
Special Operations Command. 


--------------------
\61 The U.S.  Army is logistically supporting ground troops for all
services in Bosnia, Croatia, and Hungary. 


      CIVILIAN AGENCY COSTS AND
      PROGRAM DESCRIPTIONS
-------------------------------------------------------- Chapter 6:1.2

At the end of the fiscal year, the executive branch estimated that
the State Department, USAID, USIA, and four other agencies would
spend about $555 million in fiscal year 1996 funds for economic
reconstruction, humanitarian aid, democracy and human rights
programs, and other support for civilian organizations in the peace
operation (see table 6.3). 



                               Table 6.3
                
                   Fiscal Year 1996 U.S. Funding for
                  Civilian Aspects of the Bosnia Peace
                               Operation

                         (Dollars in millions)

                                Fiscal year-
                                         end      Amount        Amount
Program/activity\a                estimate\b   obligated   unobligated
------------------------------  ------------  ----------  ------------
Economic reconstruction               $183.8      $151.8         $32.0
Humanitarian assistance                253.5       243.1          10.4
Democracy and human rights              56.6        46.7           9.9
Other support for civilian              65.9        59.7           6.2
 programs/activities
======================================================================
Total                                 $559.8      $501.3         $58.5
----------------------------------------------------------------------
\a Includes programs and activities funded by USAID; USIA; and the
Departments of State, Agriculture, Commerce, Justice, Labor, Health
and Human Services, and the Treasury. 

\b As of October 1996. 

Most of this assistance, about $337 million, was funded by USAID
primarily in the areas of economic reconstruction, humanitarian
assistance, and democracy and human rights.  The State Department
provided about $164 million for programs such as landmine removal
under the economic reconstruction program, support for democracy and
human rights, and refugee assistance.  Other U.S.  civilian
agencies--USIA and the Departments of Justice, Health and Human
Services, Labor, the Treasury, and Commerce--also administered
relatively small programs that directly or indirectly supported the
Bosnia peace operation.  For example, USIA funded small-scale
democracy projects, including independent media, civics education,
and international exchange programs.  Most of the unobligated funds
were in the areas of economic reconstruction and democracy and human
rights.  Appendix V provides more information on civilian program
costs for the Bosnia peace operation in fiscal year 1996. 


   FISCAL YEAR 1997 COST ESTIMATES
---------------------------------------------------------- Chapter 6:2

In fiscal year 1997, the U.S.  government plans to provide about $2.9
billion in support of the peace operation (see table 6.4).  This is
about $2.2 billion more than the executive branch's initial estimate,
which assumed that all U.S.  troops in or supporting the peace
operation would be out of Bosnia and neighboring countries by
December 20, 1996. 



                               Table 6.4
                
                Fiscal Year 1997 U.S. Cost Estimates for
                       the Bosnia Peace Operation

                         (Dollars in millions)

                                                   Initial     Current
Government branch                               estimate\a  estimate\b
----------------------------------------------  ----------  ----------
DOD                                                   $500      $2,500
Civilian agencies\c                                    200         381
======================================================================
Total                                                 $700      $2,881
----------------------------------------------------------------------
\a As of February 1996. 

\b As of January 30, 1997 for DOD; as of October 25, 1996 for
civilian agencies. 

\c Civilian agencies include USAID, USIA, and the Department of
State. 

In January 1997, DOD estimated its fiscal year 1997 incremental costs
for the operation at about $2.5 billion, an increase of about $2
billion over the initial estimate.  This increase is primarily
attributable to the decision to commit up to 13,500 troops to
participate in or support SFOR.\62 These funds will support two troop
rotations, equipment refurbishment, and increased intelligence
operations in the former Yugoslavia.  During the third week of
November 1996, the number of U.S.  troops deployed to participate in
or support NATO operations in Bosnia peaked at 27,700 as IFOR was in
the process of transitioning to SFOR--19,300 in Bosnia and 8,400 in
Italy, Hungary, and Croatia.  By early December 1996, total U.S. 
deployment had dropped to 16,000. 

The U.S.  government plans to provide about $381 million in support
of the peace operation's civilian elements in fiscal year 1997.  This
includes about $184 million for economic reconstruction, $98 million
for humanitarian assistance, $40 million for democracy and human
rights programs, and $59 million in other support to civilian
organizations of the peace operation.  According to a State
Department official, U.S.  civilian commitments may increase during
the fiscal year if refugees and displaced persons do not return home
in large numbers, as these estimates assume. 


--------------------
\62 Up to 8,500 U.S.  troops will be deployed in Bosnia and 5,000
troops outside of Bosnia. 


   FISCAL YEAR 1998 COST ESTIMATES
---------------------------------------------------------- Chapter 6:3

In the fiscal year 1998 budget request, the President asked Congress
to commit about $1.8 billion in fiscal year 1998 funds to support the
peace operation.  As of March 1997, the State Department had
projected fiscal year 1998 costs for continued humanitarian and
transition aid at $340 million, and DOD had projected its fiscal year
1998 costs for the operation about $1.5 billion.  DOD's cost estimate
is based on an assumption that all U.S.  troops will be out of Bosnia
by June 1998. 


BACKGROUND ON THE BOSNIAN CONFLICT
=========================================================== Appendix I

In the spring of 1990, Yugoslavia held republic-level elections that
brought nationalist and independence-minded governments to power in
the republics of Slovenia and Croatia.  These elections were followed
by the collapse of Yugoslavia's central civilian authority in 1991,
as its republics and various independence movements rejected central
authority and escalating ethnic animosities propelled parts of the
country into a vicious armed conflict.\1

In 1991, Serbia, the largest Yugoslav republic, began to dominate
Yugoslav institutions and gained control of the Yugoslav army.  After
Slovenia and Croatia declared their independence in June 1991, Serbia
tried forcibly to prevent them from becoming independent.  During the
ensuing 6-month war in Croatia, Yugoslav army soldiers and Serbian
paramilitary forces were stationed in Bosnia.  By the end of 1991,
ethnic Serbs in areas of Croatia and Bosnia had declared local
autonomy and had rejected the two republics' authority over their
regions. 


--------------------
\1 Except where noted, the material in this appendix was derived from
State Department reports. 


   BOSNIA'S INDEPENDENCE AND THE
   OUTBREAK OF WAR
--------------------------------------------------------- Appendix I:1

Before the war, Bosnia's population was 4.4 million people--44
percent Muslim, 31 percent Serb, 17 percent Croat, and 8 percent
other ethnic groups.  The spring 1990 election in Bosnia resulted in
three ethnically based political parties--the Muslim Party of
Democratic Action (SDA), the Serbian Democratic Party (SDS), and the
Croatian Democratic Union (HDZ)--forming a governing "partnership"
under the leadership of President Alija Izetbegovic, a Muslim.  After
the election, ethnic polarization grew as the republic dealt with
nationalist sentiments coming from Croatia and Serbia and growing
independence movements from Bosnian Serbs.  In February and March
1992, an independence referendum was held, and 63 percent of Bosnia's
electorate--primarily Muslims and Croats--voted for independence. 
Shortly thereafter, Bosnia gained diplomatic recognition as an
independent state and became a member of the United Nations. 
Throughout the war that followed, ethnic differences were manipulated
by SDS and HDZ to sustain concepts of "greater Serbia" and "greater
Croatia."

Under the leadership of Radovan Karadzic, SDS and its pan-Serbian
nationalists boycotted Bosnia's independence referendum in an attempt
to remain part of Serbia-dominated Yugoslavia and form a "greater
Serbia." By mid-1992 SDS forces, supported by the Yugoslav army and
Serbia, had seized territory in northern and eastern Bosnia and
controlled 60 percent of Bosnia's territory.  SDS forces began
expelling much of the non-Serbian population, primarily Muslims and
Croats, from areas under their control--including the cities of Banja
Luka, Prijedor, and Doboj--in a campaign of terror that became known
as "ethnic cleansing." The Bosnian Serb army also began carrying out
massive artillery attacks against Sarajevo and other population
centers such as the Muslim enclaves of Srebrenica, Gorazde, and Zepa. 
By mid-1992, SDS had completely withdrawn from Bosnian institutions
and had started creating institutions for its own ethnically pure
state, later named the "Serb Republic," or Republika Srpska. 

About this same time, Croatian nationalists of the HDZ proclaimed
their own entity within Bosnia, which they called "the Croatia
Community of Herceg-Bosna." Their army, the Bosnian Croat army, was
supported and controlled by Croatia.  Early in the war, the Bosnian
government welcomed the presence of Croatian forces on its territory
as the two sides fought together against Serbian aggression.  By
April 1993, however, periodic skirmishing between the Bosnian
government army and Bosnian Croat army escalated into outright war,
as HDZ insisted on creating Herceg-Bosna with Mostar as its capital. 
When the Bosnian government refused to submit its troops to Bosnian
Croat army command, the Bosnian Croat army blockaded Mostar, attacked
it, brutalized its Muslim residents, and evicted non-Croats from west
Mostar and nearby cities of Stolac and Capljina.  Regular Croatian
army units, originally in Bosnia under a bilateral cooperation pact,
fought on the side of the Bosnian Croat forces. 

The Bosnian government, headed by President Izetbegovic of SDA,
supported and fought for a unified, multiethnic Bosnia.  By the end
of 1993, the government was Muslim-dominated and controlled only 20
percent of the country.\2 While only the Bosnian Serbs pursued
"ethnic cleansing" as a matter of policy, local units of Bosnian
government troops also killed many people out of nationalistic or
religious hatred and targeted civilians, particularly Bosnian Croats
during the conflict in central Bosnia.  In early 1994, Bosnian
government forces started receiving material and other support from
Iran and other Islamic countries in contravention of the United
Nations-mandated and U.S.-supported arms embargo. 


--------------------
\2 The Bosnian Serb army controlled 70 percent. 


   INTERNATIONAL INTERVENTIONS AND
   SHIFT IN THE WAR
--------------------------------------------------------- Appendix I:2

In 1992 and 1993, the U.N.  Security Council sent peacekeepers from
the United Nations Protection Force (UNPROFOR) to Bosnia to
facilitate the delivery of humanitarian relief being provided by the
U.N.  High Commissioner for Refugees (UNHCR),\3 established a "no-fly
zone" over Bosnia, and declared Sarajevo and five Muslim enclaves
"safe areas" under the protection of UNPROFOR.  NATO agreed to
enforce the no-fly zone and use air power to protect U.N.  forces if
attacked.\4

The U.N.  and NATO operations provided humanitarian assistance to
thousands of people in the region, but they did not accomplish their
other mandated objectives because (1) UNPROFOR lacked resources
required for its operations; (2) U.N.  operations lacked overall
leadership to provide consistent direction and strategy for the
mission, effectively coordinate military and humanitarian operations,
and develop an overall plan; and (3) UNPROFOR used NATO airstrikes
sparingly due to UNPROFOR concerns about having to appear impartial
in its dealings with the Bosnian parties.\5

In March 1994, after U.N.-European Union diplomatic efforts had
stalled, U.S.  mediation produced an agreement between the Bosnian
government, Bosnian Croats, and the government of Croatia to
establish a Federation between Bosniaks and Croats in Bosnia, which
would be joined in confederation with Croatia.  This agreement led to
a cease-fire between the Bosniaks and Bosnian Croats and started the
process of transforming the internal structure of the Bosnian
territories under Bosniak and Croat control.  During the remainder of
the war, the cease-fire between the Bosniaks and Croats held, but the
Federation did not function as a government and Herceg-Bosna
continued to exist. 

In the spring of 1994 the Contact Group--the United States, Russia,
Britain, France, and Germany--was established to broker a settlement
between the Federation and Bosnian Serbs.  By the summer of 1995, the
United States had taken the lead in the negotiation process. 

In July 1995, the Bosnia Serb army launched an offensive and forced
the removal of the majority Bosniak population from the U.N.  safe
area of Srebrenica by killing many thousands and driving out the
rest.  In response to the attack on Srebrenica and continued ethnic
cleansing, in July NATO started an intensive month-long bombing
campaign of Bosnian Serb military targets.  About this time, a joint
Bosniak-Croat offensive supported by Croatia allowed the Federation
to capture about 20 percent of Bosnian Serb-controlled territory in
western and northwestern Bosnia. 

In October 1995, a cease-fire resulted from the changed battlefield
circumstances, the intensive diplomatic effort by the United States
and the Contact Group, and the cumulative effect of economic
sanctions on Serbia and Bosnian Serb-controlled territory.  The
cease-fire, which UNPROFOR monitored, ultimately led to the
negotiation of the General Framework Agreement for Peace in Bosnia
and Herzegovina in November 1995 near Dayton, Ohio.  The agreement
was signed on December 14, 1995, in Paris. 


--------------------
\3 UNPROFOR was originally established in February 1992 to oversee
the cease-fire in Croatia. 

\4 NATO also enforced the U.N.  arms embargo against the former
Yugoslavia. 

\5 See Humanitarian Intervention:  Effectiveness of U.N.  Operations
in Bosnia (GAO/NSIAD-94-156BR, Apr.  13, 1994) and Peace Operations: 
Update on the Situation in the Former Yugoslavia (GAO/NSIAD-95-148BR,
May 8, 1995). 


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

In 1996 Congress approved and the United States began a program that
was intended to train and equip the Bosniak and Bosnian Croat armies
as they are integrated into a unified Federation army.\6

This program was designed to help create a stable military balance
within Bosnia by offsetting Republika Srpska's military advantages
while staying within the Dayton Agreement's arms control limits; to
provide incentives and assistance for Bosniak and Bosnian Croat
political leaders to integrate their armies and to develop an
integrated defensive and deterrence capability; and to eliminate the
Bosniaks' wartime military and intelligence ties with the Republic of
Iran.\7


--------------------
\6 Public Law 104-107, section 540. 

\7 In 1996, according to a State Department official, the U.S. 
government offered to extend the program to the Bosnia Serb army if
Bosnian Serb political leaders agreed to implement the Dayton
provisions. 


   CHRONOLOGY
-------------------------------------------------------- Appendix II:1

  -- In November 1995, the Department of Defense commissioned a
     U.S-based organization--the Institute for Defense Analyses--to
     identify the force structure and military equipment needs of the
     peacetime Federation army. 

  -- In December 1995, the President told Congress that the United
     States would follow through on commitments made during the
     Dayton negotiations to initiate the train and equip program. 
     That same month, the State Department established the Office of
     the U.S.  Special Representative for Military Stabilization in
     the Balkans to run the Federation train and equip program. 

  -- The Federation's force structure study was completed on February
     5, 1996.  It recommended the creation of a unified Bosniak-Croat
     joint military staff and an integrated peacetime force of 55,000
     active-duty troops composed of 14 brigades (10 Bosniak and 4
     Bosnian Croat).  It also identified the types of training and
     facilities such a force required and the heavy and light
     equipment it would need.  The quantities of heavy weapons the
     study recommended were kept within the limits proposed by the
     arms control section of the Dayton Agreement.  About $50 million
     in cash was considered sufficient to initiate a basic training
     program.\8

  -- In March 1996, the U.S.  government announced the program and
     began soliciting international cash and in-kind donations for
     the program at a conference held in Turkey.  Although 32 nations
     and 5 international organizations attended, only Turkey and the
     United States made a specific pledge at that time, while 5 other
     nations pledged to provide unspecified material and technical
     assistance in Bosnia.  Following an appeal by the U.S. 
     President in April, subsequent donations were announced,
     including sufficient cash donations from five Islamic nations to
     start the program, and training courses were started in three
     other countries. 

  -- On May 29, 1996, a U.S.-based firm--Military Professional
     Resources, Incorporated--was awarded a contract by the
     Federation government to begin a basic train and equip program. 
     This contract included provisions for integrating the Federation
     Ministry of Defense and organizational structure of the
     Federation army, establishing training schools, and training the
     army on equipment that would be provided by the United States. 

  -- On June 26, 1996, the President certified that (1) the
     Federation had complied with article III of annex 1A of the
     Dayton Agreement concerning the withdrawal of foreign forces
     from Bosnia; and (2) intelligence cooperation on training,
     investigations, and related activities between Iranian officials
     and Bosnian officials had been terminated.  According to IFOR
     and U.S.  government officials, a number of foreign fighters
     remained in Bosnia as of December 1996, but they had acquired
     Bosnian citizenship and were not actively engaged in any
     military activities in conjunction with the Bosnian government. 

  -- On July 9, 1996, a Federation defense law was signed that
     created an integrated Federation Ministry of Defense and joint
     high command and called for the Federation partners to fully
     integrate their armies by August 1999. 

  -- On July 16, 1996, the U.S.-based firm signed the contract with
     the Federation.  The contract included an option for a 13-month
     extension if necessary. 

  -- In August 1996, the contractor began performing the contract. 
     As of December 1996, according to contractor officials, the
     contractor had about 170 trainers and advisers in Bosnia to
     carry out the contract, which covers four broad undertakings: 
     (1) to conduct infantry unit training and integration, provide
     individual soldier training, and develop a noncommissioned
     officer corps; (2) to train and integrate the staffs of the
     Federation Ministry of Defense and Joint High Command; (3) to
     integrate the Federation military logistics and logistics
     management systems; and (4) to conduct heavy weapons integration
     and training. 



--------------------
\8 According to a State Department official, the cost methodology
used in the study showed that the program would require up to $800
million to be fully implemented, including about $600 million in
in-kind assistance and $200 million in cash to conduct the program. 
The study's method of valuing equipment and services differs from
that used by the U.S.  government in valuing its contribution to the
program. 


   TRAIN AND EQUIP CONTRACT STATUS
-------------------------------------------------------- Appendix II:2

As of March 27, 1997, the status of the four areas of the contract
was as follows: 

  -- The small unit infantry training had made the most progress,
     according to contractor officials in Bosnia.  In August 1996,
     the United States began delivering light equipment and weapons. 
     That month the contractor also began to provide military
     training, including training for three Federation brigades and
     seminars for senior leaders.  The contractor opened the
     Federation army school for officers and noncommissioned officers
     as scheduled on October 7, 1996, and completed instruction for
     its first three classes of Bosniak and Bosniak Croat army
     personnel by mid-January 1997.  According to State Department
     officials, a total of 523 students--officers and
     non-commissioned officers--have graduated from the school. 

  -- As of mid-March 1997, the Ministry of Defense had moved into its
     Sarajevo headquarters building, and both Bosniak and Bosnian
     Croat officials had been named to senior Ministry and Joint
     Military Command positions.  Joint working groups were formed to
     conduct the joint staff integration process, according to a
     contractor official, but both the Bosniak and the Bosnian Croat
     defense organizations still functioned separately. 

  -- The logistics management section of the contract, although
     approved in theory, remained in the discussion phase.  A
     contractor official told us that a lack of trust between the
     parties and a reluctance to abandon their wartime logistics
     sources had slowed performance of this section of the contract. 

  -- The heavy weapons integration and training task had not
     progressed as scheduled because the U.S.  heavy weapons shipment
     had been delayed by about 1 month from October to November 1996. 
     The shipment had been sent on the understanding that the
     Federation's Deputy Minister of Defense would be removed.  The
     ship carrying the weapons arrived October 24 but did not unload
     until November 21, after the Federation Minister of Defense
     resigned and Deputy Minister of Defense had been removed. 

According to U.S.  government and contractor officials, the
Federation train and equip program will not be completed within the
13-month contract period, but the Federation government will probably
exercise its option to extend the contract for an additional 13
months. 


   STATUS OF PROGRAM DONATIONS
-------------------------------------------------------- Appendix II:3

As of April 17, 1997, 14 countries had pledged at least $376 million
in cash, equipment, training, and technical support for the program
for the Federation military.\9 Most of the program donors are Islamic
countries, as concerns over the program's potential to destabilize
the military situation have led most members of the European
Union--with the exception of Germany--to decline to participate in
the program.\10 The U.S.  contribution to the program included
donations of $100 million in drawdown equipment and services.\11 DOD
also provided, and will continue to provide, additional defense
articles under the Excess Defense Articles program.\12 Table II.1
provides information on the status of equipment donations as of March
31, 1997. 



                                    Table II.1
                     
                       Equipment Donations to the Train and
                       Equip Program, as of March 31, 1997

                              (Dollars in millions)

                               Equipment
                               value,
                               quantity, and
Donor           Total value    type             Other            Status
------------  ---------------  ---------------  ---------------  ---------------
United           $103.44\a     $51.5 in         $34 for
States                         drawdown         transport and
                               equipment\b\c:\  other
                                                services\d
                               45 M-60 tanks
                                                                 First shipment
                               15 UH-1H                          of light arms
                               helicopters      .76 for IMET\e   and equipment
                                                                 delivered
                               80 M113 armored                   August 29,
                               personnel                         1996.
                               carriers
                                                                 Bulk of heavy
                               840 AT-4 light                    arms and
                               antitank                          equipment
                               weapons                           delivered
                                                                 November 21,
                               46,100 M-16                       1996.
                               rifles
                                                                 Helicopters yet
                               1,000 M60                         to be
                               machine guns                      delivered.

                               80 M2 .50
                               caliber machine
                               guns

                               45 M85 machine
                               guns

                               45 M245 machine
                               guns

                               2,332 Radios

                               4,100 Tactical
                               telephones

                               168 Generators

                               400 Binoculars

                               Combat training                   Uniforms,
                               simulation                        publications
                               systems                           delivered March
                                                                 1997.
                               Maps

                               Ammunition

                               Uniforms

                               Publications \
                                                                 Howitzer
                               $2.64 in excess                   deliveries to
                               defense                           start in
                               articles:\c                       September.

                               116 155mm Towed
                               Howitzers

United Arab        $120        42 French-made   Artillery        Delivered 36
Emirates                       AMX30 tanks      training in      howitzers on
                                                United Arab      November 27,
                               36 105mm         Emirates         1996.
                               howitzers

                               44 Armored
                               reconnaissance
                               vehicles

Egypt              $3.8        12 130mm guns    Officer          Equipment all
                                                training in      delivered by
                               12 122mm         Egypt            early December.
                               howitzers

                               18 Antiaircraft
                               guns

Turkey             $2.0        1,000 Rifles     $2 million for   Arms delivered
                                                tank and         in July;
                               100 Grenade      artillery        two training
                               launchers        training in      courses
                                                Turkey           complete or
                               Ammunition                        underway.

Pakistan                                        Technical
                                                training

Germany\f                                       Helicopter
                                                pilot and
                                                armored vehicle
                                                maintenance
                                                training in
                                                Germany

Qatar                                           Technical
                                                training

Bangladesh                                      Technical
                                                training

Indonesia                                       Technical
                                                training

Morocco                                         Unspecified
--------------------------------------------------------------------------------
Legend

IMET = International Military Education and Training Program

\a The State Department estimated the value of the total U.S. 
equipment and transportation contribution at $293 million to $303
million based on current commercial market value estimates. 

\b There is $14.5 million in drawdown authority remaining.  According
to State Department officials, $10.8 million of this amount will be
used to provide additional equipment, and about $3.7 million will be
used to refurbish, transport, and provide spares for the howitzers. 

\c The value of these articles is not included in DOD's incremental
cost estimates included in chapter 6 of the report. 

\d In chapter 6, these transportation costs are included in DOD's
incremental cost estimates and IMET costs are included in civilian
cost estimates. 

\e This figure consists of $259,000 in fiscal year 1996 and $500,000
in fiscal year 1997.  The IMET program is a world wide grant training
program that, among other objectives, seeks to promote military
rapport between the United States and foreign countries and promote
better understanding of the United States, including its people,
political system, and institutions.  IMET funding was allocated for
Bosnia, but funding has been made available only to the Federation as
of April 1997.  IMET funding will not be made available for the
Bosnian Serbs until they comply with the Dayton agreement, according
to a State Department official. 

\f Germany is providing this assistance as part of its own bilateral
program with the Federation. 

In addition to the equipment donations, five Islamic countries
pledged a total of $147 million in cash donations as of April 8,
1997.  Of this amount, $127 million was deposited in the program's
account held by the U.S.  Treasury; $40 million of deposited funds
have been obligated.  One country, Brunei, has pledged but not yet
deposited an additional $20 million. 


--------------------
\9 Not all donors provided an estimate of the value of their
contribution, according to State Department officials. 

\10 According to a State Department official, the European Union
renewed its ban on arms transfers to the former Yugoslavia in January
1997.  Germany offered to provide training on U.S.-provided equipment
through its own bilateral program rather than donate equipment. 

\11 For fiscal year 1996, Congress authorized the transfer of up to
$100 million in defense articles from DOD stocks and DOD services to
the government of Bosnia in Public Law 104-107, section 540.  The
State Department and DOD refer to this as "drawdown authority."

\12 DOD provides excess defense articles under section 516 of the
Foreign Assistance Act of 1961, as amended (22 U.S.C.  2321j). 


   REMAINING PROGRAM REQUIREMENTS
-------------------------------------------------------- Appendix II:4

To complete the program, the Bosniak and Bosnian Croat political
leaders would have to (1) secure funding to maintain the Federation
army;\13 (2) identify donors to make up equipment shortfalls, for
example, 2,700 trucks; and (3) fulfill their commitments to integrate
their forces.  In January 1997, a State Department official told us
that the United States is not actively seeking additional funds for
the program and would not do so until the Federation identifies
additional requirements for cash donations and expends the funds
currently on account.  Furthermore, DOD intends to provide 21 heavy
equipment transporters to the Federation from excess defense article
stocks before the end of 1997.  Although the State Department has
assessed the price and availability of compatible military equipment
in other countries, as of April 1997 no country had made additional
arms donations to the program to address remaining equipment
shortfalls. 


--------------------
\13 The Federation's force structure proposal scaled back its
peacetime force level from 55,000 troops to a more affordable level
of 30,000-35,000 troops. 


RESULTS OF BOSNIA'S SEPTEMBER 1996
NATIONAL AND ENTITY ELECTIONS
========================================================= Appendix III

When Bosnians went to the polls in September 1996, they were voting
for a variety of public offices at different levels of government. 
Although the ruling political parties were the major winners on
election day, opposition parties, particularly in Republika Srpska,
did better than expected. 


   NATIONAL LEVEL ELECTION RESULTS
------------------------------------------------------- Appendix III:1

At the national level, voters throughout Bosnia voted for two
offices--the Presidency and for members of the Bosnian House of
Representatives. 

The Bosnian Constitution created a national Presidency with three
members--one for each ethnic group.  Voters whose ballots were
counted in the Federation were able to select either the Bosnian
Croat or Bosniak member of the Presidency.  Voters who cast their
ballots in Republika Srpska were only able to vote for a Bosnian Serb
candidate.  The ruling parties captured all three seats of the
Presidency by wide margins, although the race for the Bosnian Serb
member was closer than expected.  The Bosniak SDA candidate, Alija
Izetbegovic, received the most votes and was declared Chair of the
Presidency.  (See table III.1.)



                              Table III.1
                
                  September 1996 Election Results for
                           Bosnian Presidency

                           Winnin   Percent
                           g       of votes  Second place candidate
Position                   party       cast  and percent of votes cast
-------------------------  ------  --------  -------------------------
Bosniak Member of          SDA           80  Party for Bosnia, 14
Presidency                                   percent

Bosnian Serb Member of     SDS           67  Democratic Patriotic
Presidency                                   Block, 30 percent

Bosnian Croat Member of    HDZ           89  United List, 10 percent
Presidency
----------------------------------------------------------------------
Source:  Election data from the Organization for Security and
Cooperation in Europe (OSCE). 

The Bosnian House of Representatives is the highest directly elected
legislative body in Bosnia.  Federation voters selected 28 of the 42
members of the House; the other 14 were selected by voters in
Republika Srpska.  Voters cast their ballots for specific political
parties, which were then awarded seats based on the percentage of the
vote they received within each entity.  The ruling parties won 36 of
the 42 seats in the Bosnian House of Representatives (see fig. 
III.1). 

   Figure III.1:  September 1996
   Election Results for Bosnian
   House of Representatives

   (See figure in printed
   edition.)

Source:  OSCE election data. 


   ENTITY LEVEL ELECTION RESULTS
------------------------------------------------------- Appendix III:2

In the Federation, voters selected the 140 members of the Federation
House of Representatives (see table III.2), and 406 representatives
to the 10 cantonal assemblies (see table III.3).\14

In both elections, voters chose from political parties on their
ballot, which then received a proportion of seats equal to the
percentage of vote they received.  The two ruling parties in the
Federation--SDA and HDZ--captured nearly 80 percent of the seats in
the Federation assembly and over 80 percent of the seats in the ten
cantonal assemblies.  The SDA won the majority in six cantons, while
the HDZ was the majority party in the other four cantons. 



                              Table III.2
                
                  September 1996 Election Results for
                  Federation House of Representatives

                                               Number of    Percent of
Political party                                    seats   total seats
--------------------------------------------  ----------  ------------
SDA                                                   78            56
HDZ                                                   36            26
United List                                           11             8
Party for Bosnia                                      10             7
Democratic People's Union                              3             2
Croatian Rights Party                                  2             1
======================================================================
Total                                                140           100
----------------------------------------------------------------------
Source:  OSCE election data. 



                              Table III.3
                
                  September 1996 Election Results for
                     Federation Cantonal Assemblies

                                               Number of    Percent of
Political party                                    seats   total seats
--------------------------------------------  ----------  ------------
SDS                                                  221            54
HDZ                                                  124            31
Party for Bosnia                                      27             7
United List                                           26             6
Democratic People's Union                              6             1
Croatian Rights Party                                  2             1
======================================================================
Total                                                406           100
----------------------------------------------------------------------
Source:  OSCE election data. 

In Republika Srpska, voters cast ballots to select the President of
Republika Srpska\15 and the 83 members of the Republika Srpska
National Assembly.\16 The SDS candidate was elected President of
Republika Srpska, with 59 percent of the vote.  The SDA's candidate
garnered 18 percent of the vote, while the top Bosnian Serb
opposition candidate received 16 percent of the vote (see table
III.4). 



                              Table III.4
                
                  September 1996 Election Results for
                      Republika Srpska Presidency

                                                            Percent of
Political party                                              vote cast
------------------------------------------------------  --------------
SDS                                                                 59
SDA                                                                 18
People's Union for Peace                                            16
Democratic Patriotic Block                                           4
Other parties                                                        3
======================================================================
Total                                                              100
----------------------------------------------------------------------
Source:  OSCE election data. 

Representatives to the Republika Srpska National Assembly were
selected based on the proportional vote received from voters in the
Republika Srpska.  The SDS received just over half of the vote, with
substantial numbers of seats going to Bosniak and opposition Bosnian
Serb candidates (see table III.5). 



                              Table III.5
                
                  September 1996 Election Results for
                   Republika Srpska National Assembly

                                               Number of    Percent of
Political party                                    seats   total seats
--------------------------------------------  ----------  ------------
SDS                                                   45            54
SDA                                                   14            17
People's Union for Peace                              10            12
Serb Radical Party                                     6             7
Democratic Patriotic Block                             2             2
United List                                            2             2
Party for Bosnia                                       2             2
Serb Party of Krajina                                  1             1
Serb Patriotic Party                                   1             1
======================================================================
Total                                                 83            98
----------------------------------------------------------------------
Note:  Percent does not add to 100 due to rounding. 

Source:  OSCE election data. 


--------------------
\14 The Federation consists of 10 smaller governing units known as
cantons.  The number of seats in the cantonal assembly varied from
canton to canton. 

\15 The Federation President is selected by the Federation Assembly. 

\16 Republika Srpska has no cantonal level of government. 


BOSNIA'S PRIORITY RECONSTRUCTION
AND RECOVERY PROGRAM
========================================================== Appendix IV

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 AND COMMITMENTS
-------------------------------------------------------- Appendix IV:1

In 1996, 59 donor countries and organizations pledged $1.9 billion
and committed even more, $2.03 billion, in support of the
reconstruction effort in Bosnia.  The 12 largest donors contributed
$1.7 billion, about 84 percent, of the total commitments of $2.03
billion.\17 The largest individual donor is the European Commission,
committing a total of $430.21 million, followed by the World Bank
($357.8 million), the United States ($294.40 million), Japan ($107.7
million), the Netherlands ($100 million), and the European Bank for
Reconstruction and Development ($89.31 million).  (See
table IV.1.)



                               Table IV.1
                
                   Donor Pledges and Commitments for
                 Bosnia's Reconstruction Program, as of
                             December 1996

                         (Dollars in millions)

                                                   Total         Total
Donor                                             pledge   commitments
--------------------------------------------  ----------  ------------
European donors
European Commission                              $367.10       $430.21
Albania                                             0.02          0.02
Austria                                            11.50         23.07
Belgium                                             7.57          7.28
Bulgaria                                            0.01          0.03
Croatia                                             0.50          7.50
Czech Republic                                      6.00          6.42
Denmark                                             5.10          9.63
Estonia                                             0.07          0.07
Federal Republic of Yugoslavia (Serbia and         10.00         11.70
 Montenegro)
Finland                                             5.00          8.94
France                                              9.29         13.19
Germany                                            39.25         51.49
Greece                                              7.00          7.00
Hungary                                             1.00          1.00
Iceland                                             1.60          1.60
Ireland                                             6.00          6.20
Italy                                              63.65         70.70
Latvia                                              0.09          0.11
Lithuania                                           0.07          0.08
Luxembourg                                          3.23          2.87
Macedonia                                           0.10          0.10
Netherlands                                       100.02        100.00
Norway                                             40.76         42.40
Poland                                              2.90          3.00
Portugal                                            1.00            NA
Romania                                             0.21          0.21
Russia                                             50.00            NA
San Marino                                          0.14          0.23
Slovakia                                            1.50          1.50
Slovenia                                            2.89          3.19
Spain                                              17.50         14.40
Sweden                                             30.40         38.50
Switzerland                                        33.50         31.87
United Kingdom                                     39.70         57.75
Council of Europe Social                            5.00          5.00
 Development Fund
======================================================================
Subtotal                                          869.67        957.26
Islamic countries
Organization of the Islamic Conference              3.00          3.00
Brunei                                              2.00         18.70
Egypt                                               1.00          1.03
Indonesia                                           2.10          2.08
Jordan                                              1.37            NA
Kuwait                                             35.00         21.15
Malaysia                                           12.00         12.00
Qatar                                               5.00          5.00
Saudi Arabia                                       50.00         50.00
Turkey                                             26.50         46.50
======================================================================
Subtotal                                          136.60        159.46
Other non-European countries
Australia                                           1.13          1.13
Canada                                             25.44         22.71
Japan                                             136.70        107.70
Republic of Korea                                   1.00          1.00
United States                                     281.70        294.40
======================================================================
Subtotal                                          365.97        426.94
International financial institutions
European Bank for Reconstruction and               80.21         89.31
 Development
Islamic Development Bank                           15.00         19.00
World Bank                                        330.00        357.80
======================================================================
Subtotal                                          425.21        466.11
Other multilateral donors
International Committee of the Red Cross            1.50          1.50
International Fund for Agricultural                 7.30          7.32
 Development
United Nations Development Program                  2.00          0.64
World Health Organization                           1.18          1.88
======================================================================
Subtotal                                           11.98         11.34
Private Donors
Soros Foundation                                    5.00          5.96
======================================================================
Subtotal                                            5.00          5.96
======================================================================
Total                                          $1,895.80    \$2,026.87
----------------------------------------------------------------------
Legend:

NA = Not available

Source:  Implementation of the Priority Reconstruction Program in
1996, prepared by the European Commission and the Central Europe
Department of the World Bank (Mar.  1997). 

A number of donors have transferred part of their contributions to
trust funds administered by international agencies, including
international financial institutions.  As of December 1996, these
funds totaled $191.8 million, or about 9 percent of the total
commitments.  These funds administered by international agencies
include $145.07 million that are grant funds to Bosnia in a trust
fund with the World Bank. 


--------------------
\17 According to the November 1996 donor report, all the information
on implementation progress has been provided by the donors.  There
are information gaps, and figures should be considered best
estimates. 


   SECTORAL PROGRESS
-------------------------------------------------------- Appendix IV:2

Progress in the reconstruction effort can be measured by how much of
the firmly committed funds had been disbursed (see table IV.2).\18

As of December 1996, $1,104 million, or 58 percent of the $1,904
million in firmly committed funds for 1996, had been disbursed.  This
disbursal rate exceeded the reconstruction program's year-end
disbursement target of about $950 million (about half the pledged
funding). 



                                    Table IV.2
                     
                     1996 Program Requirements, Commitments,
                       and Disbursements by Sector for the
                     Bosnia Priority Reconstruction Program,
                               as of December 1996

                              (Dollars in millions)

                                                                   Disbursements
                                                   Disbursements       as a % of
                         Program            Firm  as of December            firm
Sector            requirements\\     commitments          1996 \     commitments
----------------  --------------  --------------  --------------  --------------
Reconstruction
 Sectors
Agriculture                  $97             $73             $56             77%
Education                     72             104              55              53
Employment                    75              54              15              28
 generation
Energy                       403              84             165            (58)
 (District                 (141)            (53)            (33)            (62)
 heating and
 natural gas)              (262)           (231)           (132)            (57)

 (Electric power
 and coal

Govt. and social              75             128              76              59
 support
Health                       145             111              49              44
Housing                      165             302             184              61
Industry and                 120             192              77              40
 finance
Landmine                      70              51              24              47
 clearing
Telecommunicatio             160              37              15              41
 ns
Transport                    317             192              91              47
Water and waste              140              96              47              49
 management
================================================================================
Subtotal                   1,839           1,624             854              53
Peace                          -             132             115              87
 implementation\a
Balance of                     -             148             135              91
 payments\b
================================================================================
Total                     $1,839          $1,904          $1,104             58%
--------------------------------------------------------------------------------
\a Peace implementation activities, a majority of which have taken
place on an interentity basis, include support for elections, media,
and the local police.  These activities, while essential to provide
the necessary conditions for reconstruction and recovery to take
place, are not considered part of the framework of the Bosnia
Priority Reconstruction Program. 

\b Balance-of-payments support is provided to the government of
Bosnia for reserve build-up for imports and the start-up 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:  Implementation of the Priority Reconstruction Program in
1996. 



--------------------
\18 According to the November 1996 donor report, "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, for
balance of payments, and advanced for the purpose of payment of
contractors.  In-kind assistance is considered disbursed once
provided.  "Firmly committed funds" are those funds that have been
approved by national legislative bodies or boards of multilateral
agencies and allocated to specific activities. 


   SECTOR OBJECTIVES
-------------------------------------------------------- Appendix IV:3

Table IV.3 provides information on the objectives of the program's
12 sectors. 



                               Table IV.3
                
                Sector Objectives of the Reconstruction
                                Program

Sector              Objective
------------------  --------------------------------------------------
Agriculture         Ensure the availability of imported critical
                    inputs and equipment, including key seasonal
                    inputs, farm equipment and livestock, and seeds;
                    rehabilitate critical sectors with potential for
                    export, including high-value orchards and
                    vineyards, forestry activities, and wood
                    processing.

Education           Ensure that classrooms are minimally supplied with
                    textbooks and educational materials for students
                    and teachers; reconstruct highly damaged primary
                    and general secondary schools to make them
                    functional quickly; strengthen capacities for
                    education administration at all levels.

Employment          Create rapid employment for those unemployed as a
generation          result of the war; rehabilitate small-scale public
                    infrastructure and clean up war-damaged public
                    property and assets; reinforce the decision-
                    making role of municipality governments in
                    municipal infrastructure project design and
                    management; and deliver immediate visible impact
                    at the local level.

Energy Heating and  Restore district heating service in Sarajevo and
natural gas         enhance system efficiency and the commercial
                    performance of the district heating entity; reduce
                    Bosnia's dependence on natural gas by providing
                    dual gas/light oil firing capability.

Electric power and  Restore electric service to acceptable levels in
coal                major cities and for vital industries; increase
                    coal production to supply fuel required for
                    thermal power plants; reconfigure the electric
                    power network; and enhance institutional capacity
                    and help restructure the electric power and coal
                    sectors.

Government and      Develop and strengthen institutional capacity of
social support      key government institutions, including salary
                    supplements for national and Federation government
                    staff and repairs to damaged government buildings
                    in Sarajevo and Mostar; provide minimal social
                    protection to ease severe hardship faced by
                    vulnerable population groups.

Health              Prevent and control epidemics and communicable
                    diseases through priority public health
                    interventions; reconstruct and rehabilitate
                    priority health infrastructure; rehabilitate war
                    victims by addressing physical disability and
                    psychological trauma; support recurrent
                    expenditures, including salaries for health sector
                    staff and purchases of essential generic drugs and
                    supplies.

Housing             Create conditions to enable the return of refugees
                    and the internally displaced; rapidly expand the
                    usable housing stock for the entire population.

Industry and        Stimulate sustainable growth and employment by
finance             making loans to small-and medium-sized
                    enterprises; help enterprises restore trade links;
                    facilitate expansion of financial intermediation
                    and stimulate the saving-investment process.

Landmine clearing   Make land available for use by clearing identified
                    mine fields and surveying systematically "priority
                    areas" to remove most of the uncertainty on the
                    mine situation, and prevent mine-related
                    accidents.

Telecommunications  Restore and modernize critical parts of the
                    existing networks; establish a global system for
                    mobile communications; support institution
                    building and provide technical assistance on legal
                    and regulatory matters.

Transport           Reconstruct and repair urgent, high-priority links
                    and services in the transport system, particularly
                    roads, bridges, tunnels, the railways, Sarajevo
                    airport, and urban transport.

Water and waste     Restore water, sewerage, solid waste disposal,
management          flood control, and irrigation systems to prewar
                    levels; establish the proper institutional
                    arrangements to make the improvements sustainable.
----------------------------------------------------------------------
Source:  The Priority Reconstruction Program, and Priority
Reconstruction Projects Update, World Bank (Washington, D.C.:  The
World Bank, Sept.  1996). 


   GEOGRAPHIC DISTRIBUTION OF
   RECONSTRUCTION ACTIVITIES
-------------------------------------------------------- Appendix IV:4

Reconstruction efforts have focused primarily on the Federation,
which had received $1.1 billion, or 81 percent of the funds under
implementation ($1.36 billion) as of December 1996.\19 The amount
disbursed to the Federation, $868 million, represented 46 percent of
the funds firmly committed to the 1996 reconstruction program ($1.904
billion).  Disbursements to Republika Srpska were $35 million, or 1.8
percent.  (See table IV.4.)



                               Table IV.4
                
                    Distribution of Implemented and
                Disbursed Funds by Entity as of December
                                  1996

                         (Dollars in millions)

                                                          Disbursement
                                     Under                  as percent
                              implementati  Disbursement  of 1996 firm
Entity                                 on\             s   commitments
----------------------------  ------------  ------------  ------------
Federation                          $1,098          $868          45.6
Republika Srpska                        43            35           1.8
National and interentity               219           201          10.6
======================================================================
Total                               $1,360        $1,104          58.0
----------------------------------------------------------------------
Source:  Implementation of the Priority Reconstruction Program in
1996. 

Of the $868 million disbursed to the Federation, $455 million could
be identified by cantonal allocation.  As of December 1996, the
Bosniak-majority cantons had received $323 million, or 17 percent of
the 1996 commitments; Croat-majority cantons had received $25
million, or
1.3 percent; mixed cantons had received $107 million in disbursed
funds, or 5.6 percent.  The remaining $413 million, or 21.7 percent,
includes amounts that benefited more than one canton and amounts for
which more specific information was not available.  (See table IV.5.)



                               Table IV.5
                
                  Distribution of Disbursements in the
                    Federation by Canton and Ethnic
                    Composition, as of December 1996

                         (Dollars in millions)

                                                          Disbursement
                                                                s as a
                                                            percent of
                                Ethnic      Disbursement     1996 firm
Canton                          majority               s   commitments
------------------------------  ----------  ------------  ------------
Canton\
Una-Sana (Bihac region)         Bosniak              $23           1.2
Posava                          Croat                  9           0.5
Tuzla-Podrinje                  Bosniak               79           4.1
Zenica-Doboj                    Bosniak               75           3.9
Gornjedrinski (Gorazde)         Bosniak               13           0.7
Central Bosnia (Travnik-        Mixed                 32           1.7
 Vitez)
Neretva (Mostar-Konjic)         Mixed                 75           3.9
West Herzegovina (Posusje-      Croat                  8           0.1
 Grude)
Sarajevo                        Bosniak              133           7.0
West Bosnia (Glamoc-            Croat                  8           0.4
 Tomislavgrad)
======================================================================
Subtotal                                             455          23.9
Multicanton                                          413          21.7
======================================================================
Total                                               $868          45.6
----------------------------------------------------------------------
Source:  Implementation of the Priority Reconstruction Program in
1996. 


--------------------
\19 According to the December 1996 donor report, amounts "under
implementation" are those firmly committed funds for which contracts
have been tendered, signed, or are under way (including amounts
disbursed). 


   RECONSTRUCTION PROGRAM STRATEGY
   FOR 1997
-------------------------------------------------------- Appendix IV:5

According to the November 1996 donor report, the strategy for the
1997 program continues to reflect the three broad objectives of the
1996 program, though with a focus on reconstruction in contrast to
the first year's focus on emergency assistance.  The strategy for
1997, from emergency to sustainability, includes four priorities: 
(1) continued rehabilitation of physical and social infrastructure;
(2) support of refugee return, with an emphasis on an integrated
approach covering housing, job creation, and basic infrastructure;
(3) employment generation through private and financial sector
development; and (4) support of sustainable budgets and transition
policies, and a strengthening of government institutions.  The
external financing target for 1997 is $1.4 billion. 


U.S.  CIVILIAN PROGRAMS IN SUPPORT
OF THE BOSNIA PEACE OPERATION,
FISCAL YEAR 1996
=========================================================== Appendix V

This appendix contains fiscal year 1996 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
V.1).  The programs were funded and/or implemented by the U.S. 
Agency for International Development (USAID); the U.S.  Information
Agency (USIA); the Defense Security Assistance Agency; the Trade and
Development Agency; and the Departments of State, Agriculture,
Commerce, Justice, Labor, Health and Human Services, and the
Treasury. 



                               Table V.1
                
                  U.S. Funding for Civilian Aspects of
                Bosnia Peace Operation, Fiscal Year 1996

                         (Dollars in millions)

                                            Fiscal year-
                                                     end
Program/activity                              estimate\a  Obligations\
------------------------------------------  ------------  ------------
Economic reconstruction
Municipal infrastructure and services              $79.3         $75.0
Reconstruction finance                              68.0          46.5
Economic stabilization and institution-             23.0          16.8
 building
Demining                                             8.5           9.4
Gorazde road                                         3.0           3.0
Commercial opportunities                             2.0           1.1
======================================================================
Subtotal                                           183.8         151.8
Humanitarian assistance
Food assistance\                                    99.2          98.3
Refugee assistance                                  84.3          84.3
Emergency humanitarian assistance                   40.3          34.1
Emergency shelter program                           29.0          25.7
Commission on the Missing                            0.7           0.7
======================================================================
Subtotal                                           253.5         243.1
Democracy and human rights
Police training and equipment\b                     20.0           3.9
War crimes tribunal                                 11.7          10.9
OSCE elections programs\c                           13.1          14.2
Democratic reforms                                   6.9          11.3
Open Broadcast Network                               2.0           2.0
Training and exchanges                               1.7           2.1
UNICEF programs                                      1.0           2.0
IMET                                                 0.2           0.3
======================================================================
Subtotal                                            56.6          46.7
Other support for civilian programs/
 activities
IPTF monitors                                       55.7          47.6
USAID operating expenses and other costs             5.0           5.3
Office of the High Representative                    3.0           3.0
OSCE mission assessment                              2.2           3.8
======================================================================
Subtotal                                            65.9          59.7
======================================================================
Total                                             $559.8      $501.3\d
----------------------------------------------------------------------
Legend

OSCE = Organization for Security and Cooperation in Europe
UNICEF = United Nations Children's Fund
IMET = International Military Education and Training program
IPTF = International Police Task Force

\a As of October 1996. 

\b The fiscal year-end estimate includes costs for police training in
the eastern Slavonia area of Croatia because the estimates provided
by the State Department did not separate them from assistance to
Bosnia.  The obligation amount is for Bosnia only. 

\c USAID's support to OSCE for election activities is included in the
democratic reforms category because the obligation data provided by
USAID did not allow us to separate out OSCE support from other USAID
democracy projects. 

\d The Department of Labor and Health and Human Services also
obligated negligible amounts for programs in Bosnia during fiscal
year 1996. 


   ECONOMIC RECONSTRUCTION
--------------------------------------------------------- Appendix V:1


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

In fiscal year 1996 USAID obligated $75 million for the Municipal
Infrastructure and Services program, which will provide a total of
$182 million to finance community infrastructure projects over 4
years.  The program is to help stabilize Bosnian communities damaged
by the war, primarily in the U.S.  military sector and in Sarajevo;
support the return of displaced persons and demobilized soldiers to
their homes; and reactivate the local economy.  Municipal
infrastructure projects were collocated in communities benefiting
from USAID's Emergency Shelter Program and reconstruction finance
loans. 

According to USAID, as of the end of February 1997, the Municipal
Infrastructure and Services program had approved 39 projects totaling
$49.1 million and had generated about 1,000 short-term jobs.  The
program's 15 power projects totaled $32.5 million, or 66 percent of
the dollar amount of approved projects.  The remainder of the
projects were distributed among the transport, education, water, and
health sectors.  According to USAID project estimates, the power
repair projects will benefit more than 500,000 people in 17 towns and
villages; in the transport sector, the repair of roads and bridges
will benefit 3,000 homes and 10,000 residents; municipal water system
repairs will impact 175,000 people; and repairs to schools will
benefit 5,300 students. 

A subactivity of the Municipal Infrastructure and Services Program,
the Community Infrastructure Rehabilitation Project (CIRP), is being
administered by SFOR in the U.S.  military sector of Bosnia.  The
subactivity was created to provide employment for demobilized Bosnian
soldiers, both in the Federation and Republika Srpska (within the
U.S.  military sector), and to accelerate economic and social
rehabilitation at the community level in order to stimulate the
return of displaced persons.  CIRP consists of small-scale,
community-level, labor-intensive projects that can be quickly
implemented for immediate impact.  SFOR identifies, monitors, and
reports on the projects, while the USAID mission in Bosnia approves
them.  According to USAID, as of late February 1997, USAID had
approved 113 CIRP projects--73 in the Federation and 40 in Republika
Srpska--totaling $4.7 million and designed to generate 4,700 jobs. 
Seventy-two CIRP projects had been completed by February 1997.  The
SFOR Commander in the U.S.  military sector views these small-scale
projects as a means of ensuring force protection; they help SFOR
troops develop better relations with local communities. 


      RECONSTRUCTION FINANCE
------------------------------------------------------- Appendix V:1.2

USAID obligated $46.5 million for the Bosnian Reconstruction Finance
Facility program,\20 a 5-year, $278-million lending program.  The
program's primary 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 commercial credit to small- and medium-sized businesses in the
form of quickly disbursed loans.  In addition, the program is
assisting local enterprises in the preparation of loan applications
and is providing technical assistance and training to commercial
bankers.  Priority is being given to borrowers in the U.S.  military
sector in Bosnia, including Tuzla and Zenica, and in Sarajevo and to
equitable distribution of credit along ethnic lines. 

As of March 1997, this program had approved 57 loans totaling $32.3
million, with 52 more applications in the pipeline, and had disbursed
$27.7 million.  About 7,500 jobs were created by these loans.  The
average loan amount was about $560,000 for businesses such as clothes
and shoes manufacturing; baked goods, fruit juice, and dairy
production; furniture manufacturing; construction; agriculture; and
pharmaceuticals. 


--------------------
\20 The facility is staffed by bankers and accountants from the
United States and provides nonconcessional loans, with repayments to
be used for further lending under the program. 


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

In fiscal year 1996 USAID obligated $16.8 million including $1.2
million transferred to the Treasury Department for economic
stabilization and institution building.  USAID and the Treasury
developed their programs in collaboration with the International
Monetary Fund and the World Bank who 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:  (1) macroeconomic assistance to help the
Bosnian government manage the large balance-of-payments inflows from
donor governments; (2) 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; (3) bank supervision advice for operations and
institutional development of the Federation Banking Agency; (4)
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; (5) 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; (6) assistance to
accelerate privatization by training Federation and cantonal
officials in privatization strategies and enterprise preparation. 

The Treasury's Office of Technical Assistance is helping the national
and entity governments, primarily the Federation Ministry of Finance,
in the areas of tax, budget, debt, banking, and infrastructure
finance.  During 1996, Treasury 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 advisors 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) assisting the ministry staff
in the revision of 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 Treasury has also provided
technical assistance to the national and entity governments to
support the Dayton Agreement's provisions for joint institutions to
own, rebuild, rebuild, finance, and operate certain major
infrastructure items.  According to Treasury officials, progress has
recently been greatest in restoring rail communications. 


      DEMINING
------------------------------------------------------- Appendix V:1.4

The State Department obligated $9.4 million in fiscal year 1996 for
demining efforts.  These funds were for (1) the start-up of the
United Nations Mine Action Center, the information clearinghouse and
training center for mine clearance and mine awareness activities; (2)
training and staffing of mine survey teams; and (3) three demining
teams headquartered out of Tuzla, Banja Luka, and Mostar.  In the
fall of 1996, the teams started clearing mines with the goal of
returning land to the local population for resettlement, economic
expansion, agricultural development, and a safe living and working
environment.  As of February 4, 1997, the State Department contractor
had cleared or certified as cleared 570,000 square meters of land,
thereby returning back to productive use such areas as hospitals,
schools, airports, power lines, agricultural areas, and places used
by local people for transit. 


      GORAZDE ROAD
------------------------------------------------------- Appendix V:1.5

In fiscal year 1996 USAID transferred $3 million to DOD for the
Gorazde road improvement project.  This road was called for in the
Dayton Agreement.  This project was aimed at improving the 61
kilometers of road between Gorazde and Sarajevo and was implemented
by the U.S.  Army. 


      COMMERCIAL OPPORTUNITIES
------------------------------------------------------- Appendix V:1.6

USAID transferred $2.0 million to the U.S.  Trade and Development
Agency and the Commerce Department in fiscal year 1996 for activities
in this category, of which $1.1 million was obligated.  The Trade and
Development Agency provided air traffic control training and funded
three engineer advisors in the areas of transportation, utilities,
and energy.  The Commerce Department funded the start-up of a Central
and Eastern European Business Information Center in Bosnia. 


   HUMANITARIAN ASSISTANCE
--------------------------------------------------------- Appendix V:2


      FOOD ASSISTANCE
------------------------------------------------------- Appendix V:2.1

In fiscal year 1996, the Department of Agriculture funded and USAID
obligated $98.3 million under the title II, Public Law 480 program,
which provided foodstuffs such as wheat, flour, vegetables, cornmeal,
beans, and rice to the people of Bosnia. 


      REFUGEE ASSISTANCE
------------------------------------------------------- Appendix V:2.2

The State Department's Bureau of Population, Migration and Refugees
obligated $84.3 million in grants to assist Bosnian refugees and
displaced persons.  About $57 million of this amount was provided to
UNHCR, about $11.7 million was provided to the International
Committee of the Red Cross, about $4.1 million was provided to
International Rescue Committee, and the remaining $11.5 million was
provided to nine other nongovernmental organizations. 


      EMERGENCY HUMANITARIAN
      ASSISTANCE
------------------------------------------------------- Appendix V:2.3

USAID's Office of Foreign Disaster Assistance provided $34.1 million
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. 


      EMERGENCY SHELTER PROGRAM
------------------------------------------------------- Appendix V:2.4

USAID obligated $25.7 million for the Emergency Shelter Program in
fiscal year 1996.  The objective of this program, which complemented
USAID economic reconstruction projects, was to accelerate the return
of Bosnian displaced families and refugees to their homes and to
stimulate economic activity by doing limited emergency repairs on
single-family houses for approximately 2,500 families.  The program
aimed to simultaneously revitalize communities and economic life, by
focusing on villages rather than isolated homes and by generating at
least 2,000 short-term jobs. 

As of December 1996, about 2,550 houses for 12,500 people were
repaired under the Emergency Shelter Program, figures exceeding the
program goal.  The program also resulted in the creation of 2,000
jobs.  According to a USAID official, the Emergency Shelter Program
did not have serious problems primarily because it generally did not
attempt to bring people back home across ethnic lines. 

A micro-infrastructure program was also implemented under the
auspices of the Emergency Shelter Program.  The purpose of this
program was to help consolidate the positive effects of the program
by repairing and restoring essential services and utilities to
selected villages.  According to USAID, the program repaired 15 water
systems, 14 schools, 4 health clinics, and 2 electricity systems. 


      COMMISSION ON THE MISSING
------------------------------------------------------- Appendix V:2.5

The State Department provided $700,000 in fiscal year 1996 for the
International Committee of the Red Cross's International Commission
on Missing Persons in the Balkans.  This commission used the funds to
(1) exhume bodies of atrocity victims, (2) set up clearinghouse
facilities on missing persons in Sarajevo, and (3) prepare for its
first major planning meeting to be held in Geneva, Switzerland, in
October 1996. 


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


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

The State Department had planned to provide $20 million in fiscal
year 1996 funds to assist (1) the U.N.  peacekeeping operation in
Croatia, known as the U.N.  Transitional Administration in Eastern
Slavonia, to establish, train, and equip the new transitional police
force; and (2) IPTF to train and equip local police forces in
Bosnia.\21 In conjunction with the United States, IPTF had designed
and solicited contributions for a 2-year, $100-$200 million program
to train and equip Bosniak, Bosnian Croat, and Bosnian Serb local
police forces as a way of implementing IPTF's police reform
efforts.\22 However, as of November 1996, only $3.9 million had been
obligated by the State Department for police assistance in Bosnia--$3
million for training and technical assistance provided by the Justice
Department's International Criminal Investigative Training Assistance
Program and about $900,000 for other purposes--because the
restructuring in the three police forces was slower than expected and
there were very few people to train. 

During fiscal year 1996, the Justice Department provided technical
assistance and training for IPTF and Federation police executives. 
Among other things, the department's technical assistance helped IPTF
in assessing the potential for police reform in Bosnia and in
developing its standard operating procedures.  Further, in
conjunction with IPTF, and at the State Department's request, the
Justice Department developed a mobile training program that oriented
about 1,700 IPTF personnel to standardize their operational
procedures in the daily performance of their jobs.  Prior to the
September 1996 election, it also provided training to 109 IPTF
station commanders on election monitoring and the basics of
democratic policing during an election.  Station commanders then
taught these subjects to IPTF monitors, who in turn instructed local
police. 

The Justice Department also helped plan and fund two executive
seminars for Federation police executives.  One seminar was held in
Germany during August 1996; the second was held in the United States
during December 1996.  The seminars helped familiarize senior police
and ministry of interior executives with democratic policing
standards.  During the second seminar, the executives developed a
first draft of implementation plans for restructuring police forces
in their respective cantons that are consistent with internationally
recognized standards of democratic policing. 

The State Department directly provided $900,000 in assistance to
local police and IPTF.  About half of this amount directly supported
for the local police force in the Sarajevo canton; the remainder was
to provide technical assistance to the IPTF in developing its
standard operating procedures, reviewing existing police structures,
identifying specific local police training and equipment needs, and
assessing the compatibility of local laws. 

As of March 25, 1997, the United States had not provided any training
or equipment to Republika Srpska police.  According to a State
Department official, U.S.  policy is to withhold training and
equipment until Republika Srpska authorities formally commit to
police restructuring, including identification and vetting of
officers for human rights violations, in accordance with democratic
policing standards. 


--------------------
\21 A breakout of estimated costs for activities in Bosnia and
Croatia was not available. 

\22 According to a State Department official, the U.S.  government
provides training and technical assistance to Bosnia's local police
and to IPTF on a bilateral basis.  The United States does not
transfer funds to either the United Nations or IPTF for these
purposes. 


      WAR CRIMES TRIBUNAL
------------------------------------------------------- Appendix V:3.2

In fiscal year 1996, the State Department obligated $10.9 million for
the administrative expenses of the war crimes tribunal. 


      OSCE ELECTIONS PROGRAMS
------------------------------------------------------- Appendix V:3.3

The State Department provided $14.2 million to support the OSCE's
electoral activities in Bosnia during 1996.  Most of this money went
directly to OSCE in the form of a nonearmarked cash grant.  In
general, the grant covered OSCE's office expenses and activities
related to administering the September 1996 election, including the
printing of voter education materials. 


      DEMOCRATIC REFORMS
------------------------------------------------------- Appendix V:3.4

USAID obligated $11.3 million for a variety of democracy projects
designed, in general, to assist in the development of a multiethnic
Bosnia based on rule of law and democratic principles.  About $6.3
million of this amount was obligated by USAID's Office of Transition
Initiatives for democracy-building and elections-related grants. 
Operating out of four locations in Bosnia, this office directly
provided about 260 small grants as of March 1997 to local media and
civic advocacy groups in the Federation and Republika Srpska, in an
effort to give a greater voice to organizations that support Dayton
goals.  USAID's bureau for Europe and the New Independent States also
obligated about $5 million for democratic reforms.  These funds paid
for contract personnel who staffed OSCE's election unit, including
the Director General position, which administered and implemented the
September 1996 election.  USAID funds were also provided to
organizations that (1) helped develop political parties prior to the
election, (2) provided voter and civic education, (3) worked to
strengthen independent media, and (4) sought to improve budgetary and
financial management in the Federation's cantons and municipalities. 


      OPEN BROADCAST NETWORK
------------------------------------------------------- Appendix V:3.5

USIA obligated $2 million for the establishment of the Open Broadcast
Network,\23 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. 
This effort included upgrading five independent television stations. 


--------------------
\23 These funds were transferred to USIA from USAID. 


      TRAINING AND EXCHANGES
------------------------------------------------------- Appendix V:3.6

USIA obligated $2.1 million for training in Bosnia and in the United
States.  Programs in this category included the Ron Brown Fellowships
for graduate studies, internships in the United States, international
visitor programs, civics education, and Voice of America broadcasts. 
USIA used some of these funds to conduct its public opinion polls in
Bosnia. 


      UNITED NATIONS CHILDREN'S
      FUND PROGRAMS
------------------------------------------------------- Appendix V:3.7

USAID contributed $2 million to UNICEF programs in Bosnia.  It
granted $1 million in support of the crisis education fund for
rebuilding the primary education system in Bosnia, where over 50
percent of schools suffered major damage or destruction due to war. 
It also granted $1 million in support of UNICEF's primary
immunization program for children. 


      IMET
------------------------------------------------------- Appendix V:3.8

In fiscal year 1996, the United States provided about $300,000 in
IMET training for the Federation military.\24 These funds paid for
two English language labs in Bosnia, as well as English language
instructor training and English language training in the United
States for seven Federation military personnel.  It also funded the
followon training of five of the seven officers at U.S.  military
education institutions. 


--------------------
\24 The IMET program is jointly managed by the State Department and
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. 


   OTHER SUPPORT TO CIVILIAN
   PROGRAMS/ACTIVITIES
--------------------------------------------------------- Appendix V:4


      IPTF MONITORS
------------------------------------------------------- Appendix V:4.1

The State Department obligated $47.6 million for the IPTF mission in
Bosnia, which monitors, advises, and provides training for Bosnia's
law enforcement personnel.  The IPTF also works with local
authorities in restructuring police in accordance with democratic
policing standards and investigates human rights abuses by police. 
This category includes $28.7 million for the U.S.-assessed share of
the U.N.  Mission in Bosnia and Herzegovina, the majority of which
went to fund IPTF.  It also includes $l8.9 million in voluntary
contributions that funded about 170 U.S.  police monitors who served
in the IPTF mission in Bosnia.\25


--------------------
\25 The number of U.S.  police monitors in Bosnia varied throughout
the year. 


      USAID OPERATING EXPENSES AND
      OTHER COSTS
------------------------------------------------------- Appendix V:4.2

USAID obligated $5.3 million in fiscal year 1996 for project design,
planning, audit, and other support for its Bosnia programs, including
$3.5 million in operating expenses.  We included these salary and
overhead charges because they were identified by the executive branch
in its fiscal year 1996 supplemental request as being specifically
for the peace operation in Bosnia. 


      OFFICE OF THE HIGH
      REPRESENTATIVE
------------------------------------------------------- Appendix V:4.3

In fiscal year 1996, the State Department obligated $3 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 V:4.4

The State Department obligated $3.8 million for the OSCE mission
assessment that covers the cost of OSCE's human rights and arms
control activities. 




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix V




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



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)




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



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



   GAO COMMENTS
--------------------------------------------------------- Appendix V:5

The following are GAO's comments on State's letter dated April 28,
1997. 

1.  We do not underestimate the enormity of the task of implementing
the Dayton Agreement, and we believe our report properly recognizes
the difficulty of bringing peace to Bosnia.  The full breadth of the
overall challenge is described in chapter 1 and appendix I. 
Additional context is provided in chapters 2 through 5 as each area
of the implementation of the Dayton Agreement is discussed.  While
our report makes every effort to present information and analysis of
progress made thus far, we believe it is equally important to inform
decisionmakers about problems and impediments encountered.  Although
one high level State official recently stated that one should always
try to focus on the positive with regard to Bosnia, we believe that a
realistic assessment that considers both the positive and negative
has more value in helping decisionmakers to make informed decisions. 

2.  We have not reprinted State's line-by-line wording suggestions,
but have incorporated them in the text where appropriate. 

3.  We have addressed State's comments on these matters on pages 11,
12, 53, and 54 in this report. 

4.  Our report acknowledges the progress that has been made in
meeting the goals of the Dayton Agreement specifically mentioned by
State.  However, our review did not confirm that nearly all
authorities of the former Republic and "Herceg-Bosna" governments
have been devolved to the Federation.  Instead, as discussed on page
46, we found that although the Federation was established in 1994,
Bosniak and Bosnian Croat political leaders had made only limited
progress toward the creation of the Federation--despite strong
pressure from the United States and others.  Moreover, even in those
areas where progress has been made, care must be taken not to
overstate the degree of success achieved, as State has done in some
instances.  For example, while national elections have been held and
elected officials have taken office, the governmental institutions
are not yet functioning.  While progress is being made in rebuilding
Bosnia's infrastructure and economy, there are still severe
impediments in many areas such as rail links and an integration of
the telecommunications system. 

5.  Chapter 2 of our report discusses the major achievements in this
area. 

6.  See comment 3.  While we do not disagree with State that the
human rights situation has improved when viewed in the long
perspective, i.e., wholesale murder of thousands of civilians and
mass ethnic cleansings are no longer occurring as they did during the
war, evidence indicates that a deterioration did occur in the months
following the September 1996 elections as compared with the months
preceding it.  We believe this measure of the condition in Bosnia at
this point is important because it demonstrates efforts undertaken by
nationalist political leaders to consolidate their power and
illustrates their level of commitment to key provisions of the Dayton
Agreement, including promoting democratic practices and respect for
human rights and ensuring the right of refugees and displaced persons
to return to their prewar homes. 

7.  Our report does not imply that the lack of donor coordination
pertained to U.S.-funded projects.  Information on the appointment of
an American as the Deputy High Representative for Economic
Reconstruction was added to page 64 of the report. 

8.  While this may be the first time Federation and Republika Srpska
Refugee Ministers issued a statement expressing support for
cross-ethnic returns, it is not the first time such a pledge was made
by Bosnia's political leaders.  In signing the Dayton Agreement in
December 1995, political leaders of all three major ethnic groups
pledged to ensure the right of refugees and displaced persons to
return to their prewar homes.  As of April 1997, none of these
political leaders have fulfilled the agreement they made in December
1995 with respect to allowing cross-ethnic returns, as discussed in
chapter 5 of our report. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IX


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

Lenora R.  Fuller
B.  Patrick Hickey
David R.  Martin
David C.  Maurer
Judith A.  McCloskey
Tetsuo Miyabara
RG Steinman


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