Bosnia and Herzegovina flag Bosnia and Herzegovina: Investing in Bosnia and Herzegovina

Foreign direct investment (FDI) in Bosnia and Herzegovina

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI inflows to the Federation reached USD 661 million in 2022, up by 12.6% year-on-year and above the levels recorded before the pandemic. Meanwhile, the total stock of FDI was estimated at USD 9.3 billion (-1.2% on the year), around 36.6% of GDP. According to Central Bank data, as of December 2022, the Federation of Bosnia and Herzegovina accounted for 64.5% of the total FDI, amounting to EUR 5,755 million. The Republic of Srpska contributed 34.4% of the total FDI, equivalent to EUR 3,065 million, while the Brčko District constituted 1.1% of the total FDI, totaling EUR 101 million. Concerning the FDI stock by country, Austria, Croatia, and Serbia lead with EUR 1.4 billion, EUR 1.3 billion, and EUR 1.2 billion respectively. Slovenia, the United Kingdom, and Germany follow with investments exceeding EUR 500 million each: EUR 668 million, EUR 562 million, and EUR 553 million respectively. European countries remain the key investors in Bosnia and Herzegovina, with investments from EU-27 countries representing 59.4% of total FDI at EUR 5.3 billion. Of the total foreign direct investments, 37.7% have been allocated to production (primary, industrial, and electricity production), with the banking sector following closely at 19.6%. Trade accounts for 14.3% of investments, while telecommunications captures 11.4% (data Foreign Investment Promotion Agency).

Bosnia and Herzegovina can offer investors low levels of corporate taxation, several well-developed industrial zones, a solid banking sector, and its strategic location. The country is richly endowed with natural resources, providing potential opportunities in energy (hydro, wind, solar, along with traditional thermal), agriculture, timber, and tourism. 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 and weak protection of property rights. Furthermore, complex labor and pension laws as well as the lack of a single economic space also hinder investment, and the business regulations and administrative procedures impacting companies vary across each of the Federation's ten cantons. Excluding some exceptions (defense 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. The Federation ranks 77th among the 132 economies on the Global Innovation Index 2023 and 67th out of 184 countries on the latest Index of Economic Freedom.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 429587661
FDI Stock (million USD) 9,6729,4329,323
Number of Greenfield Investments* 131119
Value of Greenfield Investments (million USD) 451348657

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Bosnia and Herzegovina Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 3.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.8 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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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.

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Latest Update: April 2024