Bosnia and Herzegovina

Bosnia and Herzegovina

Once a melting pot for various ethnic groups in Yugoslavia, Bosnia and Herzegovina (B&H) suffered the most with the outburst of ethnic tensions leading to civil war in the 90′. The Dayton peace agreement ended the conflict but also made B&H home to one of the most complicated systems of government. The country is divided into two entities, the Federation of Bosnia and Herzegovina and Republika Srpska. There is also Brčko District, a self-governing administrative unit in the north-east of the country. To make things more complicated, the Federation of Bosnia and Herzegovina is further divided into 10 administrative units called Cantons, which have power to legislate. 

Domestic investments are the main driver for B&H’s economy, mostly financed by the International Monetary Fund, the European Investment Bank, EBRD, German Development Bank and other international financial institutions. Foreign direct investments remain the lowest in the region. In 2016, Bosnia and Hercegovina had FDI inflow worth EUR 274.15 million which made only 1.8% of the national GDP. In the aftermath of the 2008 global recession, the country’s GDP slowed down as well. In 2013, B&H recorded moderate but stable GDP growth of 2.4%, to reach 3% in 2017.

With the ambition to stabilize its economy, the central Government launched budgetary consolidation measures in 2015, combined with stricter tax collection. The measures were supported by the IMF that arranged, in September 2016, a EUR 555 million worth deal with the B&H government to support economic reforms and strict fiscal policy. Compared to other countries in the region, B&H’s public debt is low. At the end of 2016, it made only 39% of the national GDP, compared to 71.9% in Serbia and even 85% in Croatia. The main portion of the public debt is generated through arrangements with international institutional creditors. Low public debt indicates lack of large investment projects, an area that has been picking up as of recently with the plans for several PPP projects. Most recently, at the summit in Trieste, the EU issued a preliminary approval for four major infrastructural projects, including construction of road infrastructure in Zenica region and reconstruction of Brcko port.

B&H journey towards the EU is still on the slow track. The country is still waiting to obtain the status of candidate. The process was held back because up until recently the central B&H government failed to submit answers to the EU questionnaire which is a standard step in the accession process. The process that usually took neighbouring countries around three months to finalize, lasted almost two years for B&H due to political turmoil and complex bureaucratic system. During the visit of the President of the EU commission to Sarajevo at the end of February 2018 the B&H Government officially submitted answers to the questionnaire and it now waits for the candidate status to be approved.  

Private projects originate mainly from the EU Member States and the countries of the former Yugoslavia. In the period between 2005 and 2016 the largest foreign investments came from Austria, Croatia and Serbia. Due to cultural ties to the Arab World, Bosnia and Hercegovina witnessed increased inflow of funds from this region with several projects delivered or underway in the entertainment, hotel and real estate industries. In the recent years the presence of Chinese investors in B&H increased following the New silk road agenda of the Chinese government. Several projects have been delivered or announced, particularly in the energy sector, including construction of Thermal power stations Tuzla 7 and Stanari.

BDK Advokati in Bosnia and Herzegovina

Our B&H journey started in 2006 when our Belgrade office advised the Government of Republika Srpska on the successful privatization sale of Telekom Srpske to Telekom Srbija. We continued advising clients on various projects in that country, such as the financing of the development of the Thermal Power Plant Stanari.

In 2014, with an increasing number of B&H mandates, we opened an office in Banja Luka. The office is fully integrated in the firm, a testament to our one-firm policy.

Our clients in Bosnia are mainly foreign investors. We have been supporting Bulgatabac, which purchased a tobacco factory in Banjaluka in 2013, on their entire B&H operations. We advised British American Tobacco on their acquisition of Fabrika Duvana Sarajevo in 2016 and continue to support them post-closing. We have advised Chinese Sinosure in relation to their export credit insurance projects in both Republika Srspka and the Federation of Bosnia and Herzegovina. A large number of projects our firm advise involve all three countries in which we are present – Serbia, Montenegro and Bosnia and Herzegovina.