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. FDI in 2018 increased by 11.5% compared to 2017 and amounted to EUR 487 million, the highest annual amount since 2009. In 2019, FDI amounted to EUR 357 million, 26.6% lower compared to 2018. According to the preliminary data of the Central Bank of Bosnia and Herzegovina for the first nine months of 2020 presented by the Foreign Investment Promotion Agency of Bosnia in FDI Position and Performance, FDI inflow in Bosnia and Herzegovina decreased by 34% compared to the same period of 2019.
According to the report under Article IV consultation with Bosnia and Herzegovina issued on 8 February 2021, pre-pandemic, Bosnia and Herzegovina’s economy was growing, but slower than in other countries in Eastern Europe.
B&H journey towards the EU is still on the slow track. The country is still waiting to obtain the status of candidate. In May 2019, the Commission adopted its Opinion and accompanying analytical report on Bosnia and Herzegovina’s EU membership application, identifying 14 key priorities for Bosnia and Herzegovina to fulfil in order to be recommended for the opening of accession negotiations, in the areas of democracy /functionality, the rule of law, fundamental rights, and public administration reform. In its conclusions from December 2019, the EU Council invited the Commission to focus its annual reports on Bosnia and Herzegovina, starting with the one in 2020, on the implementation of the key priorities from the Opinion.
One of the largest infrastructure project planned under the Development and Investments Program of Bosnia and Herzegovina for 2021-2023 is construction of a highway from Sarajevo to Višegrad and the border with Serbia (value approx. EUR 920 million).
Private projects originate mainly from the EU Member States and the countries of the former Yugoslavia. In the period between 2005 and 2020 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.
Bosnia and Herzegovina deals with multiple challenges in the energy sector in terms of efficient switching to green energy due to complex state regulation, different entity policies and inherited practice of thermal power on coal. Based on the recommendations of the Energy Community and EU, Bosnia and Herzegovina is preparing an integrated energy and climate plan for the period 2021-2030.
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, British American Tobacco acquisition of the assets of Fabrika Duhana Sarajevo, acquisition of Telemach by BC Partners, acquisition of Ledo Frozen Food Portfolio by Nomad Foods.
Our office in Banja Luka is fully integrated in the firm, a testament to our one-firm policy.
Our clients in B&H are mainly foreign investors. Our focus is on cross-border deals and in particular those with regional dimension. A large number of projects our firm advise involve all three countries in which we are present – Serbia, Montenegro and Bosnia and Herzegovina.