BOSNIA AND HERZEGOVINA

Flag Description: A wide medium blue vertical band on the fly side with a yellow isosceles triangle abutting the band and the top of the flag; the remainder of the flag is medium blue with seven full five-pointed white stars and two half stars top and bottom along the hypotenuse of the triangle; the triangle approximates the shape of the country and its three points stand for the constituent peoples - Bosniaks, Croats, and Serbs; the stars represent Europe and are meant to be continuous (thus the half stars at top and bottom); the colors (white, blue, and yellow) are often associated with neutrality and peace, and traditionally are linked with Bosnia

 

Country profile

Location

Bosnia and Herzegovina make up a triangular-shaped republic, on the Balkan peninsula. The Bosnian region in the north is mountainous and covered with thick forests. The Herzegovina region in the south is largely rugged, flat farmland. It has a narrow coastline without natural harbors stretching 13 mi (20 km) along the Adriatic Sea

Area:

total: 51,197 sq km
country comparison to the world: 129
land: 51,187 sq km Flag Description
water: 10 sq km

Land boundaries:

total: 1,543 km
border countries: Croatia 956 km, Montenegro 242 km, Serbia 345 km

Coastline:20 km

Climate:hot summers and cold winters; areas of high elevation have short, cool summers and long, severe winters; mild, rainy winters along coast

Terrain: mountains and valleys

Ethnic groups:

Bosniak 48%, Serb 37.1%, Croat 14.3%, other 0.6% (2000)
note: Bosniak has replaced Muslim as an ethnic term in part to avoid confusion with the religious term Muslim - an adherent of Islam

Languages:

Bosnian (official), Croatian (official), Serbian (official)

Religions:

Muslim 40%, Orthodox 31%, Roman Catholic 15%, other 14%

Population:

3,871,643 (July 2014 est.)
country comparison to the world: 129

Age structure:

0-14 years: 13.7% (male 272,812/female 256,152)
15-24 years: 12.7% (male 255,074/female 238,428)
25-54 years: 46.7% (male 906,265/female 899,870)
55-64 years: 13.7% (male 253,045/female 276,769)
65 years and over: 13.3% (male 199,515/female 313,713) (2014 est.)

The 1995 Dayton Agreement ended three years of war in the former Yugoslavia and finalized Bosnia and Herzegovina’s independence. The presidency rotates among three elected members every eight months inside a four-year term. Under a loose central government, two separate entities exist: the Republika Srpska (Serbian) and the Federation of Bosnia and Herzegovina (Muslim/Croat). The European Union signed a Stabilization and Association Agreement with Bosnia and Herzegovina in 2008. Bosnia also received a NATO Membership Action Plan in 2010 and is one of four official candidates to join NATO. The country is one of Europe’s poorest. Agriculture is inefficient. There has been some privatization, but much of the industrial sector is also inefficient. Corruption is widespread. An institutionally weak central government has made implementation of economic reforms difficult.

Bosnia and Herzegovina - financial assistance from the European Union

The Instrument of Pre-Accession Funds, called IPA, is a funding mechanism of the EU, which includes candidate and potential candidate countries like Bosnia and Herzegovina.

Funding allocation for 2013: €47.26 million
• Bosnia and Herzegovina has access to:
   - IPA Component I (Transition Assistance and Institution Building)
   - IPA Component II (Cross-Border Cooperation).

This assistance is managed by the EU Delegation in Bosnia and Herzegovina.
• EU assistance focuses on:
   - Improving the capacity and efficiency of public administration.
   - Strengthening the rule of law by helping the country reform its justice sector and fight organised crime and corruption.
   - Supporting social and economic development.

 

Bosnia and Herzegovina’s business climate (from http://www.heritage.org/, https://www.cia.gov/ and http://www.doingbusiness.org/ )
Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals, energy, textiles and furniture as well as on remittances and foreign aid. A highly decentralized government hampers economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment. The interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar. With an uneasy peace in place, output recovered in 1996-99 but slowed in 2000-02 and picked up again during 2003-08, when GDP growth exceeded 5% per year. However, the country declined in 2009 reflecting local effects of the global economic crisis. GDP growth contracted again in 2012, but posted a small gain in 2013. Foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM) - the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has remained stable. Bosnia's private sector is growing slowly, but foreign investment has dropped sharply since 2007. Government spending - including transfer payments - remains high, at roughly 40% of GDP, because of redundant government offices at the state, entity and municipal level. Privatization of state enterprises has been slow, particularly in the Federation, where political division between ethnically-based political parties makes agreement on economic policy more difficult. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a steady source of revenue for the government and helped rein in gray-market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization (WTO) membership; and securing economic growth by fostering a dynamic, competitive private sector. In 2009, Bosnia and Herzegovina was granted an International Monetary Fund (IMF) stand-by arrangement, necessitated by sharply increased social spending and a fiscal crisis exacerbated by the global economic downturn. Disbursement of IMF aid was suspended in 2011 after a parliamentary deadlock left Bosnia without a state-level government for over a year. The IMF concluded a new stand-by arrangement with Bosnia in October 2012 which aims to improve national policy coordination, continue fiscal contraction, improve crisis preparedness, and create an environment conducive to private sector development.

 

GDP (purchasing power parity):

$32.16 billion (2013 est.)
country comparison to the world: 112
$31.9 billion (2012 est.)
$32.26 billion (2011 est.)
note: data are in 2013 US dollars

GDP (official exchange rate):

$18.87 billion (2013 est.)

GDP - real growth rate:

0.8% (2013 est.)
country comparison to the world: 178
-1.1% (2012 est.)
1% (2011 est.)

GDP - per capita (PPP):

$8,300 (2013 est.)
country comparison to the world: 131
$8,200 (2012 est.)
$8,300 (2011 est.)
note: data are in 2013 US dollars

Gross national saving:

8.6% of GDP (2013 est.)
country comparison to the world: 142
6.3% of GDP (2012 est.)
6.4% of GDP (2011 est.)

GDP - composition, by end use:

household consumption: 82.1%
government consumption: 22.1%
investment in fixed capital: 17.7%
investment in inventories: 1.5%
exports of goods and services: 29%
imports of goods and services: -52.4%
(2012 est.)

GDP - composition, by sector of origin:

agriculture: 8.1%
industry: 26.4%
services: 65.5% (2013 est.)

Agriculture - products: wheat, corn, fruits, vegetables; livestock

Industries:

steel, coal, iron ore, lead, zinc, manganese, bauxite, aluminum, motor vehicle assembly, textiles, tobacco products, wooden furniture, ammunition, domestic appliances, oil refining

Industrial production growth rate:

11.7% (2013 est.)
country comparison to the world: 8

Labor force:

1.49 million (2012 est.)
country comparison to the world: 129

Labor force - by occupation:

agriculture: 18.9%
industry: 29.8%
services: 51.3% (2013)

Unemployment rate:

44.3% (2013 est.)
country comparison to the world: 193
44.1% (2012 est.)
note: official rate; actual rate is lower as many technically unemployed persons work in the gray economy

Population below poverty line:

18.6% (2007 est.)

Household income or consumption by percentage share:

lowest 10%: 2.7%
highest 10%: 27.3% (2007)

Distribution of family income - Gini index:

36.2 (2007)
country comparison to the world: 87

Budget:

revenues: $7.691 billion
expenditures: $7.497 billion (2013 est.)

Taxes and other revenues:

40.8% of GDP (2013 est.)
country comparison to the world: 34

Budget surplus (+) or deficit (-):

1% of GDP (2013 est.)
country comparison to the world: 28

Public debt:

45.9% of GDP (2013 est.)
country comparison to the world: 78
42.9% of GDP (2012 est.)

Fiscal year:

calendar year

Types of business entity in Bosnia and Herzegovina
• d.d.(dioničko društvo): ≈ plc (UK) ≈ AG (Germany)
• a.d.(akcionarsko društvo): ≈ plc (UK) ≈ AG (Germany)
• d.n.o.(društvo s neograničenom solidarnom odgovornošću): ≈ general partnership
• d.o.o.(društvo s ograničenom odgovornošću): ≈ Ltd. (UK) ≈ GmbH (Germany)
• k.d.(komanditno društvo): ≈ limited partnership
• s.p. (samostalni preduzetnik): ≈ Sole proprietorship (UK)

 

Business Reforms in Bosnia and Herzegovina

2014:
Paying Taxes:
Bosnia and Herzegovina introduced a penalty for failure to employ the required minimum number of people in special categories—though it also temporarily abolished the forestry tax.

2013:
Registering Property:
Bosnia and Herzegovina made it easier to transfer property between companies by computerizing the commercial registry.

Getting Credit:
Bosnia and Herzegovina made access to credit information more difficult by stopping the private credit bureau’s collection of credit information on individuals.

Paying Taxes:
Bosnia and Herzegovina eased the administrative burden of filing and paying social security contributions by implementing electronic filing and payment systems.

2012:
Starting a Business:
Bosnia and Herzegovina made starting a business easier by replacing the required utilization permit with a simple notification of commencement of activities and by streamlining the process for obtaining a tax identification number.

Dealing with Construction Permits:
Bosnia and Herzegovina made dealing with construction permits easier by fully digitizing and revamping its land registry and cadastre.

2011:
Registering Property:
Bosnia and Herzegovina reduced delays in property registration at the land registry in Sarajevo.

Paying Taxes:
Bosnia and Herzegovina simplified its labor tax processes, reduced employer contribution rates for social security and abolished its payroll tax.

2010:
Dealing with Construction Permits:
Bosnia and Herzegovina improved its building permitting system by reducing the time to register a new building at the courts and land cadastre.

2009:
Dealing with Construction Permits:
An administrative reform in obtaining cadastre and land book registry led to overall time reduction by 171 days. Costs for new telephone connection was reduced by Telecom provider by BAM 15.

Registering Property:
The computerization of files at the Land Registry in Sarajevo has sped the process of registration. As a result, the time to register a title now ranges between 1 month and 6 months, down from 308.

Paying Taxes:
Corporate income tax rate has been reduced from 30% to 10%, effective 1 January 2008. Profit distribution (including dividends) is now tax-exempt. Tax losses can now be carried forward for 5 years.

Resolving Insolvency:
Bosnia and Herzegovina strengthened professional requirements for trustees.

2008:
Trading Across Borders:
BH eased trade due to implementation of a comprehensive customs reforms project involving the enacting of a new customs law and establishing a new customs administration. In addition, an EDI system has been implemented.

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