Bosnia is facing abandonment by its only car manufacturer and one of its biggest investors, Volkswagen, as political obstinacy and obstructionism continue to stunt foreign investment.

The assembling of the new Volkswagen Golf V at a plant near Sarajevo was scheduled to begin in late February, but before the assembly lines could start rolling, the company suspended operations for all its planned Sarajevo-made vehicles.

Volkswagen suddenly found itself embroiled in Bosnian politics, as the Bosnian Council of Ministers rejected the extension of customs-free import of disassembled vehicles. The move came as a surprise for the VW concern, as the Council of Ministers had adopted customs-free import legislation for disassembled vehicles four years ago.

Volkswagen sent a request for an extension of the customs-free regime to the Bosnian government in November but never received a reply.

Amil Hota, a spokesman for Volkswagen in Sarajevo, said the company had interpreted the three-month silence as a rejection of its request.

“The Bosnian government has jeopardized a 250-million-convertible-marks ($156 million) business for the dozens of millions that will be collected by paying customs taxes for the import of disassembled vehicles from Germany,” Hota said.

Volkswagen Sarajevo also was scheduled to start manufacturing an axle part for the Golf in April. For that project, Volkswagen Germany had invested 3.7 million euros in machinery. Volkswagen’s problems began when heavy machinery arrived at the border. The Bosnian State Trade Ministry said the machines could be imported without customs, but the Customs Department of Bosnia’s Federation Entity disagreed.

The two institutions were interpreting the law and regulations differently.

(TOL 02.iv.04)