Released : Nov 25, 2005 1:43 AM

BOSNIA : Bosnia's leaders have marked a decade of peace by pledging to overhaul their ethnically divided state, but the road to lasting reconciliation could still be barred by lingering bitterness, suspicion and the overweening ambition of sectarian politicians.

Senior Bosnian Serbs, Croats and Muslims gathered in Washington this week to remember a decade since the Dayton accords ended the 1992-95 war and, under the gaze of top US officials, they pledged to build a politically unified Bosnia.

But after hearing them condemn fugitive war criminals, vow to rewrite the country's constitution and streamline their cumbersome government, Washington's diplomats told the Bosnians that concrete changes were vital for their troubled state.

"These are encouraging words, and now they must lead to serious action," said Secretary of State Condoleezza Rice. "There can be no more excuses and no more delays - 10 years is long enough."

The Dayton accords divided Bosnia into Serb-run Republika Srpska and a Muslim-Croat federation, so-called entities linked by a clumsy presidential system and weak administration that made provision for more than 100 ministerial posts.

Though 60,000 international peacekeepers deployed to Bosnia after the war have been scaled back to about 7,000 troops, political and economic change has been arduous.

After much wrangling - and sometimes robust prompting from the international High Representative for Bosnia, Paddy Ashdown - politicians from the two entities have agreed to largely unify their tax systems next year and unite their armies by 2008.

After months of fierce opposition from Bosnian Serbs, an agreement to reform Bosnia's police force has also been agreed in principle, prompting the EU to begin initial talks today on the long road to EU membership.

But while violence is now rare between Bosnia's communities, few Serbs, Croats or Muslims show any desire to live together as they did before 1992, when Serbs opposed Bosnia's declaration of independence from Yugoslavia by laying siege to Sarajevo.

What is more, fears are still fanned by nationalist Croat and Muslim politicians who dream of dominating a united Bosnia, and by hardline Serbs who claim their neighbours and the western powers are determined to annihilate them.

"If it is possible to increase the efficiency of Bosnia-Herzegovina's administration, we have nothing against it," the vice-president of the ruling nationalist Serb Democratic Party, Mladen Bosic, said recently.

"But we will never accept the abolition of Republika Srpska." Europe's worst bloodshed since the second World War killed some 200,000 people, made 2.2 million homeless and left Bosnia's economy in ruins.

Despite receiving some 5 billion in foreign aid, about 40 per cent of Bosnians are unemployed and 18 per cent of its four million people live in poverty.

Those who have jobs take home an average monthly salary of about 250, prompting more than a third of young Bosnians to express a desire to leave their ravaged homeland.

Reforms aimed at hauling Bosnia towards the EU are expected to help encourage investment - even though membership may be a decade away - but the country's ethnic divisions only multiply the difficulty of acquiring the permits needed to start a business.

The maze of bureaucracy also allows corruption to flourish, feeding into a network of crime that enmeshes Bosnia and makes it a major route for the trafficking of drugs, weapons and people towards the West.

That network also feeds the coffers of a cabal of politicians, security officials and criminals who are believed to be shielding suspected war criminals like Radovan Karadzic, the wartime Bosnian Serb president wanted by the UN court at The Hague.

Flanked by US officials in Washington this week, Bosnian Serb leaders made a rare public condemnation of Mr Karadzic and his military ally, Gen Ratko Mladic, saying they would finally be captured if they persisted in refusing to surrender.

But Balkan analysts fear Bosnia's progress could also be derailed by rising tension over the future of Kosovo, the province in Serbia whose mostly Albanian residents want independence but which Belgrade vows never to relinquish.

"Recognising the international independence of Kosovo. . . would spark a chain of dramatic tremors in the Balkan region," Serbia-Montenegro's foreign minister, Vuk Draskovic, said yesterday, shortly after Serbia's president had suggested dividing the region along ethnic lines.

All parties agree on one thing: the difficulty of crafting a new constitution and political framework for Bosnia that will satisfy the country's Serbs, Croats and Muslims.

As Dan Fried, a top State Department official, said in Washington this week as the Bosnians signed the broadest agreement possible: "We decided not to get into specifics - or else the whole thing would fall apart."