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UNITED NATIONS, Aug 27 (AFP) - Privatisation and other forms of liberal economy are the answer to widespread fraud and massive corruption in the Balkans, UN special envoy Carl Bildt said Friday.
He was commenting on an article in The New York Times on August 17, which said that one billion dollars of public funds in Bosnia had been stolen or lost through corruption or mismanagement.
About 20 million dollars of that was foreign aid money, the Times said.
The article raised a storm in Bosnia, where press reports said the Muslim member of the country's collective presidency, Alija Izetbegovic, intended to press charges against the newspaper.
Bildt admitted that he had not read the article in detail, but said that if it had created the impression "that one billion dollars had been pocketed by individuals, that is plainly wrong."
The problem in Bosnia, he said, was that the political structures that existed before the fall of communism had not been changed.
"Some of them are tied to different political interests," he told reporters at the UN headquarters here.
"That means there is inefficiency, there is diversion of money. There is a loss of tax revenues, there is a loss of tariff revenues."
He said it would be "very difficult to quantify" the loss.
Bosnia was one of six republics in the federation of Yugoslavia, which fell apart in 1991. Serbia, the dominant partner in what remains of the federation, is one of the few countries in eastern Europe that has not turned its back on socialism.
But the lack of political and economic reforms still plagued all former Yugoslav republics, Bildt said.
"In spite of a five billion dollar reconstruction programme there is not a self-sustaining economy in Bosnia, and that is profoundly disturbing.
"The economy is not developing on its own. It is developing because we put money into it."
Bildt, a former Swedish prime minister, recalled that when he was international High Representative in Bosnia, he had said he would "not recommend that taxpayers in the outside world continue to fund structures that are not reformed".
He continued: "That lesson must be learned when we deal with the rest of the region."
He described Serbia as "by far the most complicated case and the one most in need for reform."
Part of Serbia's problems were caused by sanctions imposed by the UN for its support of Serbian forces in Bosnia, he said. Part were due to NATO bombing, ordered to force Serbia to stop its repression in Kosovo.
"But part of it is that Serbia has the least reformed economy in Europe next to Belarus," Bildt said.
The Serbian economy suffered from "a combination of the mafioso and the nomenklatura."
The local mafia was "very much driven by sanctions which force people to try to survive by smuggling."
The nomenklatura "are the cronies of the socialist party that rule all the major industries in so far as they still exist."
All former Yugoslav states needed "a profound liberalisation of their economies," he said.
That meant "privatisation, property rights, and opening up to the European Union and the rest of the world."
Otherwise, he said, "you will never get the economic development that is the precondition to solving the social issues, and if you don't solve the social issues, sooner or later the problem will be used by some demagogue using nationalist rhetoric.
"That is the pattern of the past that is likely to be repeated."