In the market, in the market: Bosnia and
Bosnia and Herzegovina competes aggressively with other Balkan countries to attract foreign investment.
BOSNIA-HERZEGOVINA: VITAL STATISTICS
Location: Southeastern Europe
Neighbors: Croatia, Serbia, Montenegro
Capital city: Sarajevo
Population (2021): 3,268,196
Official language: Bosnian, Serbian and Croatian
GDP per capita (2019): $ 6,108.50
GDP growth (2020): -0.4%
Inflation (2019): 0.6% and more
Motto: Convertible mark of Bosnia and Herzegovina; pegged to the euro, limiting monetary policy
Investment Promotion Agency: Foreign Investment Promotion Agency
Investment incentives available? Reduction of the corporate tax rate in certain circumstances; exemption from import duties on most capital goods; free trade zones
Ease of doing business ranking (2019): 90
Ranking of the corruption perception index (2020): 111
Political risks: Political instability
Security risks: Criminality; risk of unmarked landmines and unexploded bombs in rural areas
Government very keen to attract FDI
Numerous reform efforts to improve the business climate
Membership of the World Trade Organization
Awaiting EU candidate status
Large industrial park for IT companies planned in Sarajevo
Rich in natural resources – potential opportunities in energy, agriculture, timber and tourism
Slow judicial system, with complex legal and regulatory frameworks
Poor protection of property rights
Long and arduous process to start a new business and obtain permits
Sources: AM Best’s Country Risk Report Bosnia and Herzegovina, Coface, Government of Canada Global Travel Advisory, International Monetary Fund, Reuters, Transparency International, US Department of State, World Bank, World Population Review
For more information, see Global financeBosnia and Herzegovina Economic Report data page.
At the end of the 20th century, Bosnia and Herzegovina (also known as Bosnia and Herzegovina or simply Bosnia) was among the fallout after the breakup of communist Yugoslavia, gaining its independent status only after violent conflict.
Today, every element of the former Yugoslavia and the wider Soviet sphere falls somewhere in the spectrum between the communist command economy and the Western market economy, and they compete for direct investment. foreigners (IDE). Serbia, Montenegro and Romania, to name just three, have higher GDP per capita than Bosnia, giving them a competitive advantage.
Bosnia and Herzegovina continues to transition to the right end of this spectrum and embraces market principles, even though “we are still a long way from a full-fledged capitalist market economy like the United States or the rest of the world.” Europe, ”says Professor Faruk Hadžić. of Macroeconomics at the School of Science and Technology, University of Sarajevo.
The country’s trade treaties with the European Union, Turkey and other countries, combined with its central location, put more than 600 million potential clients within about a day’s drive, according to the Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA-BH). Foreign investment is roughly evenly split between greenfield and brownfield projects, with FDI inflows concentrated in manufacturing, banking, telecommunications and commerce. Bosnia has attracted multinationals such as Volkswagen and McDonald’s; high-end brands such as Gucci; and banks such as UniCredit in Italy and Ziraat Finance Group in Turkey.
A draw can be equal opportunities. “Foreign investors have the same rights and obligations as national entities,” says Nina Pobrić, head of the Investment Promotion Department of FIPA-BH. “There is no difference between a business owned by foreigners or by citizens.” The 10% corporate tax rate in Bosnia is lower than 15% in Serbia or 16% in Romania, and taxes can be reduced with additional breaks depending on the value of the investment and the number of employees involved.
Additionally, Bosnia has at least 550 state-owned enterprises, according to the World Bank, many of which are losing money, draining the nation of 5% of GDP annually. Some may be candidates for buyout by private investors, although the US State Department warned in a 2020 investment climate report: “Historically, the process of privatization in [Bosnia] has resulted in economic losses due to corruption. The country is also suffering from a talent drain, as young skilled workers seek opportunities elsewhere, according to the World Bank.
Still, while it takes around 80 days to register a new business in Sarajevo, small towns outside the capital will be happy to jump through the hoops to attract new businesses. “[A] the municipality will do everything for you if you have an idea and the money to invest, ”says Hadžić. “They will do anything to create a business in their municipality.”