Back from the brink
June 01, 1998
by Teresa Acklin
War-torn and battered, Bosnia- Herzegovina coordinates efforts to revamp its cereal processing and milling industry.
By Eric Schroeder, Assistant editor
The Dayton Accord, negotiated in Dayton, Ohio, U.S., in November 1995, brought an end to years of fighting and began what many hope will be years of peace in Bosnia-Herzegovina. With the signing of the Accord, anticipation of restarting the economy triggered coordinated reconstruction efforts, and the cereal processing and milling industry, which suffered severe damage as a result of the war, was among the first to begin its comeback.
The peace agreement, which was signed in Paris in December 1995 by the presidents of Bosnia, Croatia and Serbia, retained Bosnia's borders and created a joint multi-ethnic and democratic government. Also created as a result of the Accord was a joint Muslim-Croat Federation and the Bosnian Serb Republika Srpska (RS). These two groups each have assumed control over roughly one-half of the territory in Bosnia-Herzegovina and are part of the reconstruction program to mend the battered region.
The reconstruction projects have encountered several obstacles over the past few years. Since the conclusion of the war, unemployment has risen to astronomical heights, with a 40% to 50% unemployment rate in the Federation. The situation in the RS area has not been much better, as inflation has climbed to more than 30% while the growth rate has been flat.
Prior to the onset of the war in 1992, the region was home to 18 modern flour milling facilities with a total installed milling capacity of 1,380 tonnes of wheat per day. But as the situation in Bosnia-Herzegovina worsened, the number of functioning mills decreased as well.
Only milling facilities located close to adequate wheat stocks were able to operate with some degree of efficiency. All other mills, because of lack of access to grain silos and railcar stations, were forced to shut down until transportation opportunities were once again viable.
The possibilities of acquiring wheat and delivering flour and bread to and from sources farther than a couple of kilometers away were drastically reduced. Many millers considered the constant risk of being bombed or hijacked as not worth the trouble required to get mill products out. As a result, many of the major milling facilities simply ceased operations, shutting their doors and hoping for a quick end to the war.
As the war dragged on, the country's infrastructure sustained heavy losses, and many mills became targets of enemy fire, resulting in millions of U.S. dollars in damage to milling plants and the equipment vital to the wheat flour production process. With no transportation, power or means of access to replacement parts, the milling industry, in general, came to a halt.
Another side effect associated with the war in Bosnia was that much of the skilled labor force was lost, initially to the military. After the fighting ended, many workers, unable to return to their jobs because of economic and social disruptions, left the region entirely.
Since 1992, the flour milling industry in what is now Bosnia-Herzegovina has fallen from a solid industry capable of supporting the region's 3.2 million people to an industry struggling to fulfill the needs of roughly one-half that number. The problems surrounding the flour milling industry are numerous, but with the many projects under way, the sector is edging closer to a full recovery.
Experiencing A Revival.
The signing of the Dayton Accord signaled an end to the bitter fighting that ravaged Bosnia-Herzegovina for much of the early 1990s, and the agreement also drew attention to the need for realistic changes if the region was to recover from the war.
In a move designed to rehabilitate the cereal processing industry in Bosnia-Herzegovina, the United Nations Industrial Development Organization (UNIDO) developed a program consisting of several projects intended to stabilize the industry. The objective, carried out in conjunction with the World Food Programme (W.F.P.) and other organizations, is “to carry out the highest priority technical cooperation activities for the rehabilitation and improvement of the cereal industry in Bosnia and Herzegovina.”
Technical training, development of products for mass feeding programs, improvement of prepackaged products for wide distribution and the installation of new model bakeries are areas of concern that have been or will be addressed through UNIDO's program.
During the war, the W.F.P. and other relief agencies were active in delivering flour and bread supplies to the region's besieged citizenry. As soon as conditions allowed, the W.F.P. activated selected flour mills by providing wheat. The five largest mills, accounting for 55% of Bosnia-Herzegovina's total mill capacity, were the first to receive wheat donations. Currently, 10 mills are receiving W.F.P. wheat donations.
The W.F.P. then examined the largest flour mills in the country to determine the condition of the facilities and what could be done to improve production. By April 1997, 10 of the region's original 18 mills, with a total installed daily capacity of 1,045 tonnes, were considered “operational,” although not all were producing flour. An 11th mill, a 60-tonne-per-day facility in Zenica, began operations after the war, and a 12th mill, located in Brcko, resumed operations in March with a 45-tonne-per-day capacity.
One of the main problems currently facing the milling industry is the lack of experienced workers, which restricts capacity utilization. Much of the skilled labor was forced into the military during the war, taking a majority of the younger skilled millers away from the flour milling industry.
With the conclusion of the war, many of the surviving younger workers did not return to the industry because jobs were either unavailable or offered insufficient pay. As a result, the milling industry in Bosnia-Herzegovina lacks an adequate number of experienced managers, and many are close to retirement.
Industry studies have shown that up to 50% of skilled labor at the managerial level has left the Bosnia-Herzegovina region and is not expected to return. Not only have some of the younger millers left the area, but so have some of the brightest and best trained millers.
Statistics from a 1997 study done by UNIDO showed that four flour mills, with a daily capacity totaling 610 tonnes, operated with a total of only 29 milling personnel, whereas 56 would be required to provide staffing for optimum capacity utilization. One mill, a 120-tonne per day facility in Bihac, operated with only two trained millers.
Of the 29 total millers, roughly 25% were over the age of 55. The concern is not that the mill managers are too old to run the production process, but rather, that without young, experienced millers learning the trade, the industry as a whole will suffer in the future.
As a means of alleviating the labor shortage, UNIDO designed a program to educate young millers in the required skills. In a study done by a UNIDO Project Team, it was determined that in order to assure an adequate number of trained millers by 2000, it would be necessary to train about 15 people a year for the next three years.
Under the recommendation, international experts would offer training seminars and lectures on advanced milling techniques, quality control, economics, distribution, marketing, hygiene and safety and management controls, with the Association of Flour Millers in Bosnia organizing course content and selecting participants and locations. The most qualified students would be sent for advanced training at mills and milling schools in other countries.
UNIDO officials estimated the cost of the training program at about U.S.$90,000, to be funded by international donors and/or the private sector. To date, no donor funding has been reported for the program, but private investment in the milling industry reportedly is increasing, and training programs are presumed to be a high priority.
Many of the highest expenses after the war were related to the replacement and maintenance of milling and transportation infrastructure and equipment. In some cases, entire production facilities needed to be rebuilt because of damage from bomb attacks or gunfire.
During the middle of the fighting, upkeep of milling equipment took a back seat to distribution of products. And trucks and railcars used to transport grain between farmers and millers received little attention in terms of regular maintenance, with many vehicles being driven until they were beyond repair.
Understandably, little thought was given to future repercussions, with millers placing their emphasis on surviving day to day. The constant threat of having vehicles and equipment stolen or destroyed was enough of a distraction to keep many mills from making deliveries. Instead of sending wheat and flour out by truck or railcar to be confiscated, many mills chose to just close down and keep equipment from being damaged.
For those people willing to deliver flour products, there was little chance of obtaining spare parts for vehicles if and when anything went wrong, especially when considering that most companies were suffering financial setbacks that limited their maintenance budgets. To make matters worse, power was unavailable throughout much of this time, and water was used on a limited basis only.
The after-effects facing the industry in terms of repair time and money were enormous. Replacement parts for older vehicles were either not available or were not economically feasible in relation to rebuilding a modern milling industry. As a result, many mills are being forced to either rent expensive vehicles to transport their products or to purchase new, high cost equipment to replace older, rundown equipment.
Rebuilding structural damage to the mills themselves has been handled with a greater degree of success. Large and small mills alike have been surprisingly quick to rebuild to their previous standards, with workers dedicating time to replacing roofing, fitting new windows and clearing the areas that had been littered with debris.
Not all mills were able to make such quick recoveries though. The Zelengora flour mill in Ustikolina with milling capacity of 120 tonnes per day was devastated during the war, and in another mill, machinery was removed. Several other flour mills, although considered operational, are not in use.
UNIDO teams visited most of these flour mills to get a better understanding of the time and money involved in rehabilitating the industry. Although it has taken time, the rebuilding process in Bosnia-Herzegovina is well under way.
Another project undertaken by UNIDO involves the addition of micronutrients in the flour fortification process. Prior to the war, it was unusual for any of the flour mills in Bosnia-Herzegovina to add any vitamins or minerals to wheat flour.
Throughout the course of the war, however, it became customary for the nations that were donating wheat flour to Bosnia-Herzegovina to add vitamins and minerals to fortify the flour. Because supplies of flour-based foods were short, a large percentage of the products were sent to schools to feed the children.
With little food, the people of the region depended on what little nutritional intake they could get. The World Health Organization advised UNIDO to add the nutrients so as to benefit the vulnerable population.
UNIDO officials see the flour fortification project as a way for people whose incomes remain inadequate to receive a healthy diet based on bread and pastas, which have become much more important components of Bosnian diets since the war. UNIDO officials think that with the right marketability, flour millers in Bosnia-Herzegovina could stress the added quality aspects of their flour and thereby sell it on a larger scale.
The majority of the mills in Bosnia-Herzegovina do not produce wheat flour with the added vitamins and minerals. No law requires the addition of vitamins and minerals, and at this point officials think that it is not economically sensible to build expensive machinery capable of processing the nutrients. Low incomes and a high level of unemployment have made it necessary to cut costs in the milling facilities, thereby effectively eliminating any immediate plans to improve products.
Perhaps the best way to analyze the progress being made by rehabilitation efforts in Bosnia-Herzegovina is to compare production and employment figures from baking and milling companies in 1996-97 with figures from before the war. In addition, further analysis of donations and programs established by outside organizations shows that the cereal processing industry is not content to remain stagnant.
Two of the larger baking companies in Bosnia-Herzegovina are trying to rebound. Klas, the largest milling and baking company with 65,000 tonnes of grain silo space and 8,800 tonnes of other goods storage, suffered an estimated U.S.$4.8 million in damages during the war.
With a total of 805 workers, Klas hoped to achieve U.S.$28.7 million in production during 1997, compared with U.S.$41 million in 1991. Klas also plans to build a maize mill and a country-wide chain of small and medium sized bakeries.
Sprind d.d. is another example of a large bakery that has been radically altered as a result of the war. After employing 480 workers before the war, Sprind employs only 79 today. But with a loan from the World Bank to purchase equipment, Sprind's sales in 1997 totaled U.S.$7.21 million, compared with 1996 sales of U.S.$1.2 million.
In another move, the government of Japan provided a tunnel oven valued at U.S.$200,000 to a bakery in Sarajevo as a means of assuring stable bread production for the city. The oven, which is capable of baking 2,200 loaves per hour, is seen as an invaluable resource capable of replacing some of the equipment that had been over-used during the war.
The W.F.P. has also been involved with rehabilitation efforts. Beginning in May 1997, the W.F.P. developed a plan assessing the amount of food aid needed in the region. As part of the plan, the W.F.P. focused much of its attention on the elderly, single parent families, refugees and others who had suffered hardships since the fighting ended. Success in these endeavors has led the W.F.P. to channel its resources towards creating employment opportunities and social revival in the form of quick-action, small-scale rehabilitation activities.
In March, W.F.P. officials were on hand to inaugurate a milling agreement between W.F.P. and the Zitopromet mill in Brcko. As part of the agreement, the Zitopromet mill received 2,000 tonnes of wheat to be milled into flour. Because of its daily milling capacity of 45 tonnes and location in northern Bosnia, the mill is considered an ideal facility for distributing wheat flour to beneficiaries in the Federation and the RS.
Through the efforts of the W.F.P., 6,700 tonnes of food have been allocated for rehabilitation activities for the next 12 months. A complete phase-out of W.F.P. activities is expected in 1999, at which point the government of Bosnia-Herzegovina will resume integrating the beneficiaries into its social welfare programs.