April 8, 2004
Building a Better Bosnia
How does one launch a stock exchange? Thunderbird Alumnus Almir Begic ‘98, the first CEO and president of the Sarajevo Stock Exchange, shares his insider insights.
Q: What was the social and economic backdrop for launching the Sarajevo Stock Exchange?
Begic: The economy in Bosnia and Herzegovina is still in the postwar recovery phase. Since 1995, local government and the international community have made great efforts to remove the debris of war and the remains of a former socialist economy. This is critical to open Bosnia and Herzegovina to international markets and European integration.
To date, economic reforms have produced economic growth, the most stable currency in the region, near-zero inflation, a rebuilt infrastructure, a developed banking sector, upgraded commercial laws, a reformed judicial system, and improved standards of corporate governance.
But most importantly, as a direct result of a mass privatization, many people of Bosnia and Herzegovina started to own stock in local companies. The people have participated in financial markets before, but a majority of them were never exposed to practical experiences of securities market.
Q: How was the Sarajevo Stock Exchange established?
Begic: Established in 2001 by general managers of eight brokerage houses, the Sarajevo Stock Exchange (SASE) is the second in the history of Bosnia and Herzegovina, and represents a beginning of securities' market for this area. This Exchange was launched by 100 companies, 8 brokerage houses, and support from other exchanges such as the Ljubljana Stock Exchange.
The United States Agency for International Development has played a major part in providing financial and technical support for the creation of the SASE as well as other market institutions.
Q: What challenges did you face?
Begic: At the beginning of the SASE, many local investors were not familiar with the basics of how a stock market functions. A great deal of effort and resources were invested to present the SASE to the public and to educate investors and the local media about the value of a stock exchange.
Another challenge faced was the mindset of local top management. In the beginning, local top management perceived disclosure requirements as a threat instead of an opportunity to educate potential investors about their companies. With constant efforts of the SASE and other market institutions, the local investors and media have made substantial progress in the learning and understanding of market operations, brand identity, market transparency and efficiency.
Q: How is the SASE organized?
Begic: In general, all stock exchanges are similar, if not the same. Major points of differentiation are trade volume and market transparency and liquidity. Some markets have higher trading volume or are more transparent and liquid than others.
We have several different departments including accounting and finance, legal, trading and surveillance, new listings, marketing and media relations, and IT. All duties that my team and I perform daily are also performed by our colleagues across the globe. Those activities are directed towards creating higher levels of market efficiency, market development, trading surveillance, and conducting investigations.
We are currently using an auction-trading system and we are making preparations for switching to continuous trading system that we will be using in the near future.
Q: What is the status of the SASE today?
Begic: Today, the SASE takes great pride of being one of the leading stock exchanges in the region. It has grown to 14 members or brokerage houses and nearly 300 companies, with new companies joining almost every week. We measure our success in terms of various criteria. They include market liquidity and turnover, market attractiveness, increasing number of listings, improvements of the trading system, satisfaction of our clients and members, and profitability of the stock exchange.
The SASE has had a positive effect on the local economy. For example, the SASE has created a completely new investment industry that now employs a substantial number of people. For domestic investors, the SASE offers opportunity to create wealth and, by spending that wealth, to contribute to the expansion of Bosnian economy as a whole. To international investors, the SASE also provides an opportunity for investment diversification.
Q: What is your vision for the SASE?
Begic: On the top of our list is certainly achieving and maintaining the position of a leader in the region, removing the obstacles of cross–border trading; therefore, making our market more attractive as a whole.
Our vision also acknowledges the fact that we are located in a region where a lot of small markets operate. All of the markets in the region have a common goal – integration into a larger market. We have recently finished a project of creating a common information platform called the Stock Exchange Monitor (www.sem-on.net) for 8 regional markets. Today, an investor can log on to this website from any part of the world and get current information on any participating stock exchange. Tomorrow, our goal is to provide investors with an opportunity to trade online in any market through our common platform or to contact a broker from any participating market and place an order in any participating country.
Almir Begic has served as CEO and president of the Sarajevo Stock Exchange since 2002 and can be reached at almirb@global.t-bird.edu. Prior, he was the CFO of Asamer Holding (a cement company), and the vice president of Libero Trade (a distribution company for PepsiCo products). He holds a B.A. in Business Administration from Wesleyan University and MBA in International Management from Thunderbird, The Garvin School of International Management.
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