Inversió estrangera directa (IED) a Bòsnia i Hercegovina

FDI in Figures

In the 2000s, the Bosnian Government took a series of measures to attract FDI, which resulted in the record amount of FDI in 2007; unfortunately, the global economic crisis triggered by the Covid-19 pandemic led to a decline in FDI inflows. According to UNCTAD's 2021 World Investment Report, FDI inflows amounted to USD 371 million in 2020, down from USD 400 million in the previous year. The total stock of FDI was estimated at USD 9.4 billion in 2020. The largest investors in Bosnia and Herzegovina are Austria, Croatia, Serbia, Slovenia and the Netherlands. The sectors that attract the most foreign investments in the country are manufacturing, banking, telecommunications and trade (Central Bank of Bosnia and Herzegovina). According to preliminary data by the Central Bank, in the first semester of 2021, FDI inflows increased by 66.2% year-on-year, totalling EUR 391.7 million. In the same period, the main investing countries were Croatia (EUR 110.6 million), Russia (EUR 76.0 million), Slovenia (EUR 59.7 million) and Austria (EUR 51.3 million). In terms of sectors, the highest FDI were recorded in financial service activities (except insurance and pension funding – EUR 93.2 million), retail trade (EUR 89.6 million), and manufacture of coke and refined petroleum products (EUR 76.0 million).

Bosnia and Herzegovina can offer investors low levels of corporate taxation, several well-developed industrial zones, a solid banking sector and its strategic location. Major problems facing foreign investors include a lack of transparency of procedures and weak judicial structures, as well as the dual nature of the state. Furthermore, complex labour and pension laws as well as the lack of a single economic space also hinder investment. Excluding some exceptions (defence industry and some areas of publishing and media, electric power transmission), foreign investors are entitled to invest in any sector of the economy in the same form and under the same conditions as those defined for residents. Bosnia and Herzegovina ranks 90th (out of 190 economies) in World Bank's latest Doing Business report, one spot down from the previous edition.

What to consider if you invest in Bosnia and Herzegovina

Strong Points

The country's strong points include:

• High tourism and energy potential
• A strategic location halfway between western and eastern Europe
• Excellent integration into the global economy with regional and bilateral free trade agreements, IMF financial assistance and stabilisation agreements with the EU
• One of the most stable currencies in the region, reinforced by a low rate of inflation and a currency directly linked to the euro
• A well-developed banking sector
• An abundance of industrial zones
• Low level of corporate taxation
• Foreign currency reserves covering more than six months of imports
• Supportive legal environment

Weak Points

Bosnia and Herzegovina still has a number of weak points:

• A structurally weak economy based on low value-added production and high dependence on its exports to eastern European countries (these countries account for more than half of the country's exports)
• The unemployment rate is high (16.85% in 2020, World Bank) and the poverty rate of the population is higher than the regional average
• A complex legal and regulatory framework with a country divided into two government entities, which thus considerably slows down the implementation of necessary reforms
• Very high external debt (16.6 billion in 2019 - World Bank, latest data available)
• A lack of transparency in commercial procedures, in particular in regard to public tenders
• High emigration and high youth unemployment (33.8% in 2019 - World Bank, latest data available)

Government Measures to Motivate or Restrict FDI

Bosnia and Herzegovina has made significant efforts to open its economy to foreign investors. The main initiatives include a State Foreign Investment Policy Law, the establishment of a foreign investors' support fund and a uniform trade and customs policy.

The main provisions established by the Government include :

• Equal treatment of foreign and national investors
• The establishment of free trade zones
• Investor protection by prohibiting nationalisation or expropriation of property
• The ability for foreign investors to freely employ foreign nationals
• Foreign investors are allowed to, freely and without any delay, transfer overseas to the freely convertible currency the profits made following their investment in Bosnia and Herzegovina

These measures are reinforced by the country's bid for EU and WTO membership, which mandate that the country makes these changes. The reforms imposed by these institutions aim to improve the business environment by standardising and simplifying, in particular, the legal and fiscal framework.

Bilateral investment conventions signed by Bosnia and Herzegovina

Bosnia and Herzegovina has ratified 42 bilateral taxation treaties. A list of them can be found on the Bosnia and Herzegovina page of the UNCTAD Investment Policy Hub.