Bosnia Reborn

Elvir Causevic left sarajevo in 1990, just before the war engulfed Bosnia and smashed it to smithereens. Now 33 and educated in America, a member of Yale University's research staff, he recently moved back --and continues to be amazed at the town's transformation. The city he had seen so often on TV during the dark years was devastated, full of scarred and burned-out buildings, bereft of its once vibrant cosmopolitanism.

But no more. Sarajevo today is the very image of a thriving European capital, chockablock with chic restaurants and upscale art galleries. Cranes punctuate the skyline, erecting offices and putting a new face on, among many other things, Bosnia's postmodern Parliament, ruined during the war. Strolling the cobbled streets of the capital's ancient Old Town--a twisty maze of bars and tourist shops selling everything from Turkish coffee sets to T shirts reading i'm muslim, don't panic--Causevic is positively boosterish. "Now is the time for this country," he exults. His plan: to set up branches of his New York medical-instruments company in Sarajevo and Tuzla--a great investment, he thinks, because of Bosnia's strong engineering tradition and still inexpensive work force. He's already hired 12 employees and expects to grow to 100 within a couple years. "I see a real enthusiasm here," he concludes, reflecting national optimism.

It's hard to believe this is Bosnia--the place that introduced the world to the term "ethnic cleansing." A decade after its brutal war ended, the country is finally emerging from the wilderness. A recent World Bank report touts it as "a post-conflict success story." And it certainly looks that way. "Our economy used to be entirely dependent on international aid," Prime Minister Adnan Terzic tells NEWSWEEK. But these days, he enthuses (somewhat nerdily), the signs all point to "serious sustainability." Bosnia's GDP has tripled in the last decade. Exports, including steel and timber, are up by 50 percent. The government has successfully privatized banks. Foreign direct investment has tripled since 1999 to €750 million in 2004--and the trend is fast accelerating upward. Unlike neighboring Croatia and Serbia, also part of the former Yugoslavia, Bosnia has practically no external debt. At 2 percent, inflation is lower than Britain's. "I think boardrooms would be well advised to have a look at Bosnia," says Dirk Reinermann, the World Bank's country director.

It's been a long time since boardrooms bothered with Bosnia, a country roughly the size of Denmark with a population of 4 million. The fighting that raged from 1992 to 1995 killed 200,000 people, made refugees of 2 million more and destroyed almost 90 percent of the country's infrastructure. War damage totaled more than $60 billion--a magnitude of collapse not seen in Europe since World War II. Bosnia's three main ethnic groups (Roman Catholic Croats, Orthodox Serbs and Muslim Bosnians, more commonly known as Bosniaks) turned on each other savagely, despite decades of intermarriage and living peaceably together. Rape, torture, mass killings--Bosnia was a Balkan slaughterhouse, ending only with the U.S.- brokered 1995 Dayton peace accords. That agreement became the country's constitution and set up two quasi-autonomous "entities"--the Republika Srpska (usually referred to as the RS) and the Federation, a shaky alliance between Bosnia's Croats and Muslims. A weak national government is overseen by a U.N.-appointed High Representative.

As those awkward arrangements suggest, Bosnia's troubles are hardly over. In the central and southeastern parts of the country, Muslim schoolchildren are segregated from Catholic kids in 52 schools. (When administrators in one such district tried to integrate a school playground, they received so many threatening phone calls that they scrapped the plan.) In the RS, whose population is 90 percent Serb, there have been rumblings of holding a referendum on independence. (With United Nations negotiations underway in Vienna on Kosovo's independence, this isn't an entirely idle threat.) Even beer drinking can still become political. In north-central Vitez, whether you order a pint of Bosnian-brewed Sarajevska or a Croatian Karlovacko depends on which part of town you live in. With 20 percent of the country's population living below the poverty line, those in rural areas barely scrape out a living. Drug trafficking, organized crime and illegal logging are epidemic. Membership in NATO will remain a pipe dream until war criminals Radovan Karadic and Ratko Mladic, who may be hiding in the RS, are arrested.

Nonetheless, by the end of the year, Bosnia is expected to sign the Stabilization and Association Agreement, a big step toward EU eligibility. For most of the past decade, each of its factions had their own courts, customs and tax services; now the federal government has taken control. Three years ago, according to a Western diplomat, "Serbs would have laughed you out of the room if you told them they'd be serving in an integrated army." Today, they're doing just that. In June, Bosnia was awarded control of its airspace for the first time in more than a decade.