In the 2000s, the Bosnian Government took a series of measures to attract FDI, which resulted in a record amount of FDI in 2007; unfortunately, the global economic crisis triggered by the Covid-19 pandemic led to a decline in FDI inflows in recent years. Nevertheless, according to UNCTAD's 2022 World Investment Report FDI inflows were above the pre-pandemic level and amounted to USD 519 million in 2021, up from USD 395 million in the previous year. Meanwhile, the total stock of FDI was estimated at USD 9.4 billion, around 42.3% of GDP. Based on data from the Central Bank of Bosnia and Herzegovina, the Federation of B&H participates in total FDI with 62.8%, the Republic of Srpska accounts for 34.4% and Brčko District for 0.9%. The largest share of FDI stock is held by Austria (EUR 1.5 billion), followed by Croatia (EUR 1.4 billion), Serbia (EUR 1.2 billion) and Slovenia (EUR 0.6 billion). European countries are still the most important investors in the country, accounting for 63% of the total stock. Out of total foreign direct investments, 36% are concentrated in the manufacturing sector (primary, industrial and electricity production), followed by the banking sector (23%), trade (13%) and telecommunications (12% - data CBBH).
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 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. There have been no significant privatization programs in the recent past. The country ranks 70th out of 132 in the 2022 Global Innovation Index and 110th out of 180 in the Corruption Perception Index.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||429||587||661|
|FDI Stock (million USD)||9,672||9,432||9,323|
|Number of Greenfield Investments*||13||11||19|
|Value of Greenfield Investments (million USD)||451||348||657|
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.
The country's strong points include:
Bosnia and Herzegovina still has a number of weak points:
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.
Restrictions applicable to domestic investment on account of public order, public health and protection of the environment are equally applied to foreign investment.
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Latest Update: September 2023