Region of Western Balkan includes 7 countries that have emerged from former Yugoslavia. These countries are Slovenia, Croatia, Bosnia – Herzegovina, Serbia, Montenegro, Macedonia, and the youngest European country – Kosovo. The population of this region is about 20 million people, the smallest country is Montenegro with population about 600.000 people, and the largest is Serbia with population about 7,1 million people.
After the war that took place in that region from 1991 – 95, the region is now very stable and perspective to invest and expand your business. GDP per capita in region vary from 19.576 EUR in Slovenia, to 3.343 EUR in Kosovo.
Bosnia – Herzegovina (short BiH) is a country located in the middle of the Balkan and consists of two entities: Federation of Bosnia – Herzegovina and Republic of Srpska, and self-covering unit so called Brčko district. There are three main nations in BiH: Serbs, Bosnians and Croatians, and 17 National Minorities recognized by law. It borders former Yugoslav countries – Croatia, a European Union member, Serbia and Montenegro. BiH has a good political and economic relation with neighbour countries, as well as with other countries in the region. In 2017 GDB per capita was 4.323 EUR. National currency is Convertible Mark (BAM), the rate exchange with EUR is 1 EUR = 1.95 BAM, and it is fixed.
Right now, the state of economy in BiH is poor due to a bad political situation in country. Politicians from two entities have no interest to improve the situation. Many times, they try to leave different impression, but the European Union estimated in 2016, that the public sector is inefficient, while development of private very slow. Because of all these reasons foreign investments in the country are decreasing since 2007.
Challenges for investors are administrative bureaucracy, slowness of institutions and courts, inconsistent practice of municipalities, different legislation between entities, expensive taxes, absence of subsidies for foreign investors and corruption. According to a report of the European Commission, corruption is very extended and present a major problem in society. There are adopted action plans to fight against corruption, but they are still not implemented in practice.
The main problem for investors present different and inconsistent legislation between entities and district. There are different conditions to establish company and start business in every entity, there are different taxes to pay and you need different time to establish a company. These are the reasons why it is good to check all options before start business in BiH, it is recommended to find out what you will need in the entity you choose to start business. Differences are also in taxes associated with the economy, only VAT tax is the same in the whole country.
However, the general situation is not so bad, there are municipalities which are open for domestic and foreign investors. Some of these municipalities are Tešanj, Goražde, Gračanica, Derventa, Kotor Varoš, Brod, Prijedor, etc. Mayors of this municipalities recognised importance of investments and they try to increase economic growth due to easier administrative procedures, institutions are faster, taxes which must be paid to local municipalities are lower, investors faster receive permissions to start work, etc.
One of the biggest advantages of BiH is cheaper labor, minimal gross salary is 312 EUR. Advantage of doing business in BiH is also favourable tax politics, one of the lowest in Europe – income tax for companies is 10%, VAT tax is 17%, income tax for individuals is 10%. In Federation of BiH income tax for individuals must be paid by workers, but in Republic of Srpska income tax for individuals must be paid by employer. If the owner of the company is individual and pays corporate income to itself there is no need to pay any taxes, but if the owner of the company is another company and pays corporate income to itself there must be 5% of tax paid. There are some estimates that the investment in BiH pays off within three years.
Advantages of Bosnia – Herzegovina
BiH has signed many agreements of free-trade and economic cooperation with many countries. Important international agreements are:
- Free-trade agreement with countries of central Europe
- Free-trade agreement with Turkey
- Free-trade agreement with EFTA
- Stabilization and Association Agreement with EU
- Preferential trade agreement with Islamic Republic of Iran
- Bilateral agreements on the promotion and reciprocal protection of investments, signed with 39 countries
- Agreement on trade and economic cooperation signed with 9 countries (Egypt, India, Qatar, China, Pakistan, Poland, Romania, Russia, Switzerland, Turkey)
Investment opportunities in Bosnia – Herzegovina
BiH is export-oriented country. Most of the exports are furniture, wood and wooden products, footwear, mineral fuels and oils, metal products, energy, machinery and textiles. In 2017 wood industry export has increased by 9,2%, compared to 2016. Wood industry in BiH has a long and positive tradition, but there is still room for improvement, because there is no protected trademark, and there should be more investment in marketing, which can increase export even more. Goal of the leaders in wood industry is to protect trademarks and to increase product capacities.
Also, BiH has a very good developed energy production, in 2015 was tenth country in the world by the amount of produced energy from renewable resources. There are many domestic and foreign investors in this sector of economy, and also electricity companies from both entities. At the moment there is big interest of Chinese companies to invest in energy production. There will be some investments in building Block 7 of thermal power plant in Tuzla, which will be built by Chinese consortium, building thermal power plant in Gacko by company in property of Republic of Srpska and Chinese company, there is also interest of Germain – Chinese consortium to built construction of hot water pipeline Kakanj – Sarajevo. This year first windmill for electricity start to work, and there are also planned new projects to build this kind of power plants. Also, companies from Germany, Austria, Italy, Slovenia, etc, move their production in BiH. In that cases products are intended for export. Investors see good earnings in moving their production because BiH is known as tax haven in this part of Europe, with cheaper labour and good relations with Turkey, Qatar and other Muslim countries.
We offer you a wide range of services when entering the BiH market. Please, use the promo code "PROMO-NEW-MARKETS" in all correspondence with us and you will receive a 5% discount when ordering the services of Borli Ltd.
In Borli Ltd company from Slovenia, we can provide you with information about interesting areas for investment in Bosnia and Herzegovina, we can establish for you a company in BiH, or we can connect you with our business partners in BiH market. Please, contact Mrs Natalija Tokanović for more information, e-mail: and enter the promo code "PROMO-NEW-MARKETS" into the subject of your e-mail.
Natalija Tokanović, LL.M.
A lawyer Natalija Tokanović is the director of Borli Ltd with years of experience in legal services and working in a law firm. She specializes in commercial law in the areas of Serbia and Bosnia and Herzegovina, where she has a large number of business contacts.
She advises clients on entering the market of Serbia or Bosnia and Herzegovina, helps in establishing contacts in new markets, prepares and coordinates contracts, offers, general conditions, helps or advises when opening companies or branches in those countries, and directs customers to partner law offices, etc.