Bosnia and Herzegovina
Bosnia and Herzegovina (BiH) is open to foreign investment, but investors must overcome endemic corruption, complex legal and regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and a weak judicial system to succeed. Economic reforms to complete the transition from a socialist past to a market-oriented future have proceeded slowly and the country has a relatively low level of foreign direct investment (FDI). According to the BiH Central Bank, FDI in BiH in the first nine months of 2019 amounted to USD 505 million. Total FDI in 2018 amounted to USD 458 million. According to the World Bank’s 2020 Ease of Doing Business Report, BiH is among the least attractive business environments in Southeast Europe, with a ranking of 90 out of 190 global economies. The WB report ranks BiH particularly low for its lengthy and arduous processes to start a new business and obtain construction permits, both issues which have impacted American companies. Before the COVID19 pandemic, BiH’s economic growth was expected to gain speed in 2020 before reaching 4 percent in 2021, backed mainly by consumption and to some extent by public investment. BiH’s economy expanded by an estimated 3.0 percent in 2019, with domestic demand remaining the dominant growth driver.
U.S. investment in BiH is low due to the small market size, relatively low-income levels, distance from the United States, challenging business climate, and the lack of investment opportunities. Most U.S. companies in BiH are represented by small sales offices that are concentrated on selling U.S. goods and services, with minimal longer-term investments in BiH. U.S. companies with offices in BiH include major multinational companies and market leaders in their respective sectors, such as Coca-Cola, Microsoft, Cisco, Oracle, Pfizer, McDonalds, Marriott, Caterpillar, Johnson&Johnson, FedEx, UPS, Philip Morris, KPMG, Price WaterHouse Coopers and others. Nonetheless, BiH offers business opportunities to well-prepared and persistent exporters and investors. Companies who have managed to overcome the challenges of establishing a presence in BiH have often made a return on their investment over time. A major U.S. investment fund was able to enter the market with a regional investment in 2014 and exit its majority position in 2019 with a good return. There is an active international community and many reform efforts to improve the business climate as BiH pursues eventual European Union membership. The country is open to foreign investment and offers a liberal trade regime and simplified tax structure (17 percent VAT and 10 percent flat income tax). BiH is actively pursuing World Trade Organization membership and hopes to join that organization in the near future. It is also richly endowed with natural resources, providing potential opportunities in energy (hydro and thermal power plants), agriculture, timber, and tourism. The best business opportunities for U.S. exporters to BiH include energy generation and transmission equipment, telecommunication and IT equipment and services, transport infrastructure and equipment, engineering and construction services, medical equipment, and raw materials and chemicals for industrial processing. In 2019, U.S. exports to BiH totaled USD 394 million, a 3.6 percent increase from 2018, and held a 3.4 percent share of total BiH imports. BiH exports to the United States in 2019 totaled $30.5 million. U.S. exports to BiH are primarily in the areas of raw materials for industrial processing, food and agricultural products, machinery and transport equipment, and mineral fuels.
|TI Corruption Perceptions Index||2019||101 of 180||www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2020||90 of 190||www.doingbusiness.org/rankings|
|Global Innovation Index||2019||77 of 128||https://www.globalinnovationindex.org/
|U.S. FDI in BiH||2019||$9 million|| https://apps.bea.gov/international/
|World Bank GNI per capita||2018||$5,740||http://data.worldbank.org/indicator/