Bosnia and Herzegovina's central bank governor is an unlikely Bosnian. He doesn't speak any of the country's three languages. He doesn't particularly identify with any of the three ethnic groups, or hold grudges against the other ones. Even his name, Peter Nicholl, is not typically Balkan. Yet a card-carrying Bosnian he is. As of 2002, Nicholl took Bosnian citizenship, to comply with a law decreeing that the central bank governor had to be a local. It was, he says, "an honour".
And in some ways, the people of Bosnia and Herzegovina have come to think of the sprightly, New Zealand-born central bank governor as one of their own. As one banker says: "Peter is not only the most prominent foreigner in BH, he's the most hands-on. He thinks like a local – he doesn't just pass policy. He implements it. He stands by his decisions, and takes responsibility for them."
Nicholl happily admits that before taking on the job of BH central bank governor in November 1997 he had very little experience of Balkan politics. "I think it's an advantage. I try to do things just as if I were in New Zealand." He began his career by working for 22 years at the New Zealand central bank, including five years as deputy governor. He then took a two-year position on the board of the World Bank, representing New Zealand.
When that assignment finished, he stayed on in Washington, working at the IMF. He was asked by the IMF if he would consider taking on the job of Bosnia's mood of pragmatism and compromise in the BH government. "Within 18 months, you will see that this thing is going to happen faster than everyone thought possible," he says. "They'll have neighbours that are already part of Europe, and will see the enormous resources going into these countries. And they will begin to see themselves as Europeans. It's a fairly recent phenomenon that Bosnians believe they could be part of Europe. [EU commissioner for external relations] Chris Patten and Paddy Ashdown have worked hard to sell this idea to the population. And it changes their central bank governor, which a law dictated could not held by a Bosnian for six years, for political reasons.
Nicholl accepted, he says, because he had never been a governor, and it was a challenge. "It was symptomatic of the disunity of that period that when I was appointed, I had three separate meetings with the three different prime ministers. It wasn't just the fact that I hadn't worked with them before. They hadn't worked with each other. When I began, there were four different currencies being used, and the only currency they all used was the Deutschmark."
His new employers were also unused to international central banking norms. "I had to reinforce three or four times in the first couple of years what independence meant," he says. "They didn't seem to expect the central bank to act independently, so I had to threaten to leave a couple of times."
Banking sector lifted
Since those confusing early days, Nicholl has made a lot of progress with the banking sector, which stands out as one of the most positive features of the economy. He is proud of his work, for example, with the payments system. Previously, it used three different systems, all of which were highly politicized. It now uses one. He also established a currency board, under which the marka was originally pegged to the Deutschmark (it is now pegged to the euro). This has made the marka stable and brought annual inflation down to 1.7%, the lowest rate in central and eastern Europe.
Marianne Kager, chief economist at Bank Austria, says: "The successful monetary stabilization with the help of the currency outlook. Hitherto, they'd put all their confidence in the US. And as I pointed out to them, that's great, but you're not going to become our fifty-first state. Your future's in Europe."
Accession to the EU may answer the question of what happens to the OHR. Some think-tanks, including the European Stability Initiative, say the country is now at a stage where it needs to be in control of its own government. Knaus at the ESI says: "BH needs economic reforms, and you can't impose that by decree. The biggest problem in BH is precisely this authoritarian way of board, implying a fixed exchange rate to the euro, represents the most important achievement in economic reforms."
Nicholl has also overseen the privatization of much of the banking sector, so that 75% of it is now in foreign hands. He is working hard "actively looking for FDI" in other sectors. He's helped set up an FDI agency, the foreign investment promotion agency, and has also been on several roadshows to Vienna and Washington. However, he admits that the country is in danger of lagging behind other CEE countries in FDI, and that the current account deficit is still a problem. It stands at 40% of GDP, as the country has an underdeveloped export sector, and relies on imports for consumer goods.
He took Bosnian citizenship in 2002, when he agreed to extend his term as central bank governor until 2005. In his remaining months in the job, he says, he wants to bring banking supervision under the central bank's control, establish a securities market, and get a sovereign credit rating. At the end of the year, Kemal Kozaric will take over as governor.
Nicholl says he enjoys living in BH. He says Sarajevo is a very safe place, with a crime rate comparable to Switzerland's. He adds: "You still can't go walking in the hills because of the mines. But you don't see many UN soldiers around any more, and if they are there, they are shopping." He moved to Sarajevo with his wife, who is also an economist. "For the first year she was my main adviser. She has now opened a restaurant in Sarajevo." For those who want to sample her cooking, the restaurant is called Seasons. Reservations on 061- 18 13 20.