Creating an attractive environment for investors is essential to stimulate economic activity and foster sustainable economic growth. This chapter assesses the scope and effectiveness of existing policies and strategies that enhance investment volume and quality. The first sub-dimension, investment policy framework, assesses the robustness of the legal framework for investment, the efficiency of dispute settlement mechanisms, as well as intellectual property rights enforcement and awareness-raising capacity. The second sub-dimension, investment promotion and facilitation, focuses on investment promotion agency structures, investment promotion strategies and investor incentives, all geared towards attracting foreign direct investment. The third sub-dimension, mobilising sustainable investment, explores the strategic framework for sustainable investment governance while also reflecting on the scope of financial and technical support allocated to sustainable investment.
Western Balkans Competitiveness Outlook 2024: Bosnia and Herzegovina
2. Investment policy and promotion
Abstract
Key findings
Bosnia and Herzegovina registered modest further improvements in its performance in the investment dimension (Table 2.1). Since the 2021 CO, the economy’s score has slightly increased to 2.8. Despite these modest advancements, Bosnia and Herzegovina scored low compared to the other WB6 economies.
Table 2.1. Bosnia and Herzegovina’s scores for investment policy and promotion
Dimension |
Sub-dimension |
2018 score |
2021 score |
2024 score |
2024 WB6 average |
---|---|---|---|---|---|
Investment policy and promotion |
1.1: Investment policy framework |
3.6 |
3.9 |
||
1.2: Investment promotion and facilitation |
2.4 |
3.3 |
|||
1.3: Mobilising sustainable investment |
2.2 |
2.8 |
|||
Bosnia and Herzegovina’s overall score |
2.1 |
2.7 |
2.8 |
3.4 |
The key findings are:
While progress in investment policy and promotion has been generally limited at the state level and in the Federation of Bosnia and Herzegovina (FBiH), there have been several important developments in Republika Srpska (RS), including the adoption of the Strategy for Attracting Foreign Investments for the period 2021-27.
While there is no well-established framework for sustainable investment in Bosnia and Herzegovina, the FBiH adopted a 2021-27 Development Strategy, focusing on key drivers for inclusive, innovative, and digital growth.
Despite moderate improvements, there is still scope for aligning alternative dispute resolution mechanisms with the EU acquis.
In August 2023, foundational principles were established for a new model bilateral investment treaty (BIT), featuring standards on investment protection and promotion in agreements.
Efforts to improve the business environment in the economy are ongoing, though they vary in scope across government levels. The FBiH is developing an online company registration system, while RS introduced a wide range of programmes and regulations to improve the investment climate.
The process of company registration remains complex and unharmonised across levels of government, with distinctive procedures, fees and durations across entities.
State of play and key developments
Having dipped slightly in 2020 during the COVID-19 pandemic, foreign direct investment (FDI) inflows to Bosnia and Herzegovina fully recovered to reach a new record of EUR 604 million (USD 661 million) in 2022 (UNCTAD, 2023[1]). In terms of percentage of GDP, however, net inflows remain relatively low, having declined marginally from 2.6% during 2017-19 to 2.5% during 2020-22. On this measure, Bosnia and Herzegovina still ranks last among the WB6 economies, although it compares more favourably to the average among similar “upper middle income” economies, where net inflows averaged 1.8% during the 2020-22 period and the OECD average of 1.4% 2022 (World Bank, 2024[2]). The stock of direct investment amounted to 37% in 2022, the lowest among the Western Balkans and the first time it had fallen below 40% of GDP since 2011 (UNCTAD, 2023[1]). Manufacturing (29% of total FDI stock) and financial services (20%) account for the bulk of FDI, followed by telecommunications and trade (10% each). In terms of the origin of Bosnia and Herzegovina’s stock of inward FDI, the most important economies are Austria (15%), Croatia (15%), Serbia (14%), Slovenia (7%), the United Kingdom (6%), and Germany (6%) (Central Bank of Bosnia and Herzegovina, 2022[3]).
Sub-dimension 1.1: Investment policy framework
Bosnia and Herzegovina’s legal framework for investment activities and business conduct is intricate and lacks clarity. The entities have a high degree of autonomy when regulating investment policies and institutions, and the economy is decentralised. The complexity arises from this decentralisation and the substantial autonomy granted to sub-national entities in establishing their investment policies, regulations and institutions. The situation challenges investors due to potential overlaps or conflicts in these decentralised entities. While the overall framework for attracting FDI is coherent, the nuances in secondary legislation and regulations, as well as transparency, impact business operations and can vary at the entity and canton levels, affecting both local and foreign investors.
Important developments have been made in the legal framework for investment at the entity level. In November 2021, RS adopted the Strategy for Attracting Foreign Investments for the period 2021-27 (Box 2.1), with the 2023-25 Action Plan for the implementation of the strategy adopted in June 2023. In recent years, the government of RS has also introduced a wide range of legislative and regulatory reforms aimed at improving the business and investment climate of the entity. The government has also introduced measures to enhance transparency and stakeholder consultation. In 2022, for example, new Guidelines for consultations in the drafting of regulations and other general acts were adopted. These included measures to promote digitalisation of the process using the “eConsultation” web application. Following reforms to its public-private partnership (PPP) regime in 2020, RS issued new PPP implementation guidelines in 2021. For its part, the FBiH prepared a draft Law on PPPs in November 2021, although it has yet to be implemented. The pending legislation aims to rectify the drawbacks of the previous PPP law, which was characterised by a complex administrative procedure that resulted in the limited implementation of PPP projects.
In Bosnia and Herzegovina, the market is open with limited exceptions to national treatment. The economy’s score on the OECD FDI Regulatory Restrictiveness Index, which evaluates market access and exceptions to national treatment, was 0.037 in 2019, below the OECD average of 0.064. The regulations governing foreign investors in the economy are unlikely to be a significant barrier to attracting investments. While there are some restrictions, particularly in arms production within the military and the media sector, where foreign ownership is capped at 49%, exceeding this limit is possible if the government determines that such investments do not compromise national security. Real estate is another sector with restrictions, as the economy imposes discriminatory limitations on property ownership by foreign legal entities. To acquire property, foreigners must either register as a local company or be citizens of an economy with a reciprocal land ownership agreement. Furthermore, both domestic and foreign investors are prohibited from owning agricultural land in the economy (OECD, 2020[4]).
Box 2.1. RS refines investment strategy with a sustainable development focus
In recent years, the government of RS has developed a coherent and comprehensive strategy for attracting foreign investment, while the forthcoming Sustainable Development Strategy for 2024-30 should ensure that the focus is increasingly on attracting high-quality investment that contributes to the entity’s SDG-linked sustainability objectives.
In November 2021, the government of RS adopted the Strategy for Attracting Foreign Investments to RS for the period 2021-27. The strategy identified priority sectors with development potential: manufacturing, ICT, tourism and energy. It comprises three strategic goals: i) to increase the cumulative FDI inflow (reversing recent outflow trends), ii) to increase the share of FDI in GDP, and iii) to increase the participation of FDI motivated by efficiency enhancement, in line with sustainable development goals. Thus, the alignment of investment strategy with SDG goals is already a high priority.
In March 2023, the government of RS decided to develop a Sustainable Development Strategy for the period 2024-30. Financial support for the strategy’s development is being provided by the United Nations Development Programme (UNDP), the government of the Slovak Republic and the Slovak Development Agency while negotiations take place with other potential donors.
According to the authorities, the strategy will be “the most important document in the field of strategic planning and development management, and will be the basis for the development of all other sectoral and development strategies at the national and local level”. In accordance with the 2021 Law on Strategic Planning, there should be alignment between sectoral strategies as well as between strategies at both entity and local government levels. This suggests that there will be a good degree of alignment between the Strategy for Attracting Foreign Investments and the Sustainable Development Strategy. It is expected, in addition, that the strategy itself, when finalised, will include an important investment component, with a particular focus on “smart growth”.
After the initial phase of the strategy’s preparation was concluded in mid-2023, it was expected that a first series of public economy-wide consultations would be conducted. A second series of public consultations was to take place to afford citizens and stakeholders the opportunity to comment on the draft strategy once completed. It is expected that the final draft strategy will be completed in 2024, at which point it will be submitted to the National Assembly of RS for adoption.
Source: Government of Republika Srpska (2021[5]).
The model treaty is being updated to incorporate contemporary provisions, particularly those concerning the investment-state dispute mechanism, aligning with EU standards and international best practices. The foundational principles for a novel model bilateral investment treaty (BIT) were adopted in August 2023 and contain standards on investment protection in agreements and investment promotion.
Bosnia and Herzegovina’s legal framework provides various avenues for dispute settlement, encompassing alternative dispute resolution mechanisms. The economy has demonstrated a favourable inclination towards arbitration, instilling confidence among foreign investors that they can effectively uphold their rights and contracts in case of a dispute. Within the framework of the EU-funded project “EU support for judicial reforms in BiH”, a working group has been formed comprised of representatives across the different levels of government.1 The main objective of the group is to draft the Alternative Dispute Resolution Strategy in accordance with the EU acquis.
At the entity level, there are additional measures for alternative dispute mechanisms, although their utilisation varies across entities. Within the FBiH, ombudsman services and mediation are commonly employed mechanisms, and their principles, operation, and organisation are regulated by state-level laws. However, since the last assessment, there has been little significant progress in terms of the functioning of the judiciary or, specifically, dispute settlement for commercial matters. The inadequate performance of the judicial system persisted, compromising citizens' ability to fully enjoy their rights (European Commission, 2023[6]). Moreover, enforcing contracts and resolving disputes through the national legal system remains challenging. Additionally, commercial cases involving subject matter unfamiliar to judges, like intellectual property rights, often linger unresolved for extended periods (US State Department, 2023[7]). There is a need for comprehensive judicial reform strategies, as well as resolute commitment and sufficient resources to implement them at both state and entity levels. There also remains scope for aligning alternative dispute resolution mechanisms with EU standards and best practices, as well as proactive efforts to raise awareness of and promote arbitration and mediation as alternatives to judicial proceedings. Consideration should also be given to the elaboration of draft model contractual dispute resolution clauses for commercial contracts (Desic, Nedic and D’Urso, 2021[8]).
Bosnia and Herzegovina has a sound intellectual property rights (IPR) legal framework. However, substantial efforts are needed in enhancing IPR enforcement and co‑ordination. As of now, an intellectual property strategy for the period 2022-26 has not been officially adopted (European Commission, 2023[6]).There is a particular need for strengthening the Law on Patents as well as protections for collective copyright (US State Department, 2023[7]). IPR enforcement and awareness raising remain challenging in Bosnia and Herzegovina. Reflecting in part weaknesses in the judicial system, civil and criminal enforcement of IPR laws remains underdeveloped (European Commission, 2023[6]). While awareness of IPR issues remains low in academic institutions and the private sector, a nascent domestic software industry is starting to broaden the public knowledge base (US State Department, 2023[7]). Implementation of the IPR enforcement strategy is needed, backed by increased resources for, specialised training in, and enhanced co-ordination between, the relevant policy-making and enforcement institutions. There is also a need for increased awareness-raising activities on IPR issues among target stakeholder communities.
Sub-dimension 1.2: Investment promotion and facilitation
Bosnia and Herzegovina’s investment promotion agency structure and strategy is complex and multi-layered, reflecting the economy’s governance structure. The task of promoting investments falls under the jurisdiction of the Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA), a state agency. FIPA’s mission is to attract and enhance foreign investment inflow, support the growth of existing foreign businesses, facilitate public-private sector collaboration, advocate favourable business policies, and promote Bosnia and Herzegovina as an attractive investment destination. The staff count has remained constant at around 30 since 2019. However, the budget has seen an increase, albeit moderate, reaching BAM 1.38 million (EUR 705 000) in 2019, BAM 1.6 million (EUR 818 000) in 2022, and BAM 1.9 million (EUR 971 000) in 2024.
While there have not been significant developments at the state level or in inter-institutional co-ordination mechanisms, the FBiH has put forth draft legislation aimed at fostering the growth of small businesses and entrepreneurial infrastructure. These proposals have been submitted for parliamentary consideration. If approved, the enactment of the Entrepreneurial Infrastructure Bill and the introduction of a new law supporting small business development would establish the foundation for significant budget allocations to SMEs and entrepreneurs, totalling up to 1% of the FBiH’s budget. In parallel, the FBiH advanced the implementation of the one-stop-shop system for business entity registration. This system, established through recent amendments to the Law on Business Companies and the Law on the Registration of Business Entities of the FBiH,2 lays the legal foundation for the institutionalisation of the one-stop-shop system and electronic registration; however, the project has not yet been launched. The entity responsible for the project’s implementation is the Federal Ministry of Justice.
RS has initially solidified the legal framework for its investment promotion agency. In 2021, the enactment of the Law on Amendments to the Law on RS Administration laid the legal groundwork for establishing the RS Directorate for Investments as an autonomous administrative organisation with legal status. Although initially scheduled for 2024, the unit is yet to be established, and budget reallocation suggests potential inconsistencies in the implementation process.
Enhancing investment facilitation services and after-care support activities can alleviate the complexity of the business environment in Bosnia and Herzegovina. However, challenges exist due to varying regulations between entities and among cantons. A good example of such challenges is the divergence across jurisdictions of procedures for starting a business, which is regulated by a national framework law3 in addition to three additional laws for each entity and the district of Brčko.4 The process ranges in cost from BAM 350 (EUR 179) in RS to BAM 2 500 (EUR 1 278) in the FBiH, from 6 steps in RS to 7 steps in FBiH, and 13 steps in the Canton of Sarajevo (EBRD, 2022[9]). While there have not been significant developments in this regard at the state or FBiH level, the government of RS has implemented a programme of administrative streamlining with the aim of simplifying procedures and reducing the cost of doing business (Box 2.2).
The investor incentives system in Bosnia and Herzegovina is intricate and multi-faceted, and primarily administered at the entity level. While there have not been significant developments at the state level, the FBiH introduced new investor incentives, including subsidies for project development, entrepreneurship and crafts, and the survival of traditional crafts. However, most of the support available in FBiH is designed for business support rather than investment attraction.
RS introduced changes to its Investment Incentives Law. First introduced in 2019, the Law was amended in 2020 and again in April 2022. This latter range of amendments was introduced following an analysis of the law’s functioning to streamline procedures for awarding incentives. Among the specific changes was a criterion for entitlement to incentives for direct investments, whereby a minimum amount of investment was introduced as an alternative option to the previously unique criterion that the investment should lead to the employment of at least 100 workers.5 In September 2022, the government issued a “Decree on the procedure of granting incentives for direct investments of special importance”. This Decree takes into account the potential impact of the investment on local economies, covering projects where there is i) employment of at least 100 workers or investments of at least BAM 10 000 000 (EUR 5 100 000) in tangible and intangible assets on the territory of a developed or medium-developed local self-government unit, or ii) employment of at least 50 workers or investments of at least BAM 5 000 000 (EUR 2 500 000) in tangible and intangible assets on the territory of an underdeveloped or significantly underdeveloped local self-government unit (Government of the Republic of Srpska, 2022[10]). The decree makes subsidies available for up to two years through taxes and employee contribution refunds. RS has also adopted several other regulations to provide financial support for introducing digitalisation and new technologies, notably the Law on Incentives and a Decree on the procedure for awarding incentives for SMEs.
Box 2.2. RS reform drive targets improvements in business climate
In April 2021, RS adopted a Decision on the implementation of the Project for Optimisation of Administrative Procedures and Formalities. Reflecting demands from the business community, this had been included as one of the measures in the Program of Economic Reforms of RS for the period 2021-23, with the aim of improving the business environment and increasing the level of investment.
As a first step, the project was to include an analysis of procedures and formalities issued by RS public bodies and authorised entities. For this purpose, the authorities have created a comprehensive electronic database of administrative procedures and formalities for business activities. These primarily consist of formalities registered on the Point of Single Contact for Business portal. One of the key simplifications envisaged by the project relates to obtaining documents ex officio using web services. In addition, parties are no longer obliged to submit decisions on registering business entities or current excerpts.
The April 2021 Decision included an implementation Action Plan and two institutional innovations. Firstly, a Project Management and Monitoring Council was established, consisting of ministers responsible for the areas of economy and finance as well as those responsible for areas in which many procedures and formalities exist. Representatives of the business community also participate. Secondly, an Operational Body for the implementation of the Project was to be established, comprising representatives of competent bodies that conduct administrative procedures and issue formalities, as well as the Secretariat for Administrative and Technical Affairs, comprised of officials of the Ministry of Economy and Entrepreneurship.
Separately, recent years have also seen the adoption of a range of regulatory and legislative measures to improve the business environment. These include, for example, a new Law on Social Entrepreneurship (2021), amendments to the Law on Companies (2023), and a Decision on regulatory impact assessment (2023). In addition, several measures were introduced to reduce tax and non-tax benefits for the economy, namely amendments to the Law on Municipal Taxes (2021) and repeal of the Law on Special Republic Taxes (2022). Together, these abolished the obligation of business entities, legal entities and entrepreneurs to pay an annual tax for displaying a business name. Amendments to the Law on Income Tax (2021) abolished the dividend tax. Amendments to the Law on Contributions (2022) reduced employee contributions from 32.8% to 31%. Finally, amendments to the Law on Agricultural Land (2021) were to enable the construction of agricultural and manufacturing facilities in which processing industry activities were to be carried out; these were exempted from obligations to pay compensation for changing the use of agricultural land for non-agricultural purposes.
Source: Government of Republika Srpska (2021[11]).
Sub-dimension 1.3: Mobilising sustainable investment
The strategic framework and governance for sustainable investment is relatively underdeveloped at the state and entity level. The FBiH has approved the Development Strategy for the period 2021‑27, which emphasises key accelerators aimed at fostering inclusive, innovative, and digital growth and development (Box 2.3). However, The government of RS has taken important steps to mainstream sustainable approaches explicitly linked to its SDG objectives, investment strategy, and related sectoral strategies. The economy’s forthcoming Sustainable Development Strategy is expected to further underpin the commitment to sustainable investment going forward. Similarly, the extent to which financial and technical supports for sustainable investment are provided is more developed in RS than at the level of either the state or FBiH. In the former, these supports address two of the four SDG-linked sustainability objectives, namely i) productivity and innovation and ii) job quality and skills. Moreover, incentives for direct investment in technology are granted based on the condition that the project contributes to sustainable economic growth and employment. However, the sustainable investments sector in the economy is primarily led by international financial institutions (IFIs) and international donors, with minimal involvement from domestic governments in providing incentives.
Box 2.3. Development Strategy of the FBiH 2021-27
In accordance with the Law on Development Planning and Management, the FBiH adopted the Decision on Developing the Development Strategy of the FBiH 2021-27 in April 2022.
Notably, the strategy aligns with the internationally recognised Agenda 2030 and SDGs. The strategy mirrors the priorities outlined in the EU Economic and Investment Plan for the Western Balkans, the Green Agenda for the Western Balkans, and the EU Digital Strategy. It also encompasses measures associated with the S3 Framework (Smart Specialisation Strategy), as recommended by the EU Commission.
The Strategy outlined four main objectives to be achieved by 2027:
accelerated economic growth, which includes improved digitalisation of the economy and support for exports of higher-value products
prosperous and inclusive social development, encompassing improved outcomes of the health sector, boosted education systems
resource-efficient and sustainable development, which includes improved protection of natural resources, air quality and energy efficiency, and incentivised development of rural areas
a transparent, efficient and accountable public sector following the rule of law.
The objectives include 78 measures outlined as goals and priorities. Additionally, an Action Plan has been formulated during the planning process, comprising around 550 potential activities to support the implementation of these 78 measures. The strategy will be implemented via three-year and annual work plans developed by the ministries and institutions of the FBiH. According to the government, full implementation of the strategy will bring about GDP growth of a minimum 9.2%.
The strategy prioritises enhancing the digital infrastructure of small and medium-sized enterprises (SMEs) and fostering industrial clustering. Additionally, it envisages providing SMEs with access to mentoring programmes, facilitated networking, and financial support as key objectives. Moreover, it is the first strategy in the FBiH to focus on enhancing companies' energy efficiency by providing tangible technical and financial support measures. Additionally, it aims to aid in the implementation of energy audits and energy management systems. The strategy also emphasises the promotion of eco‑efficiency through financial instruments. As of early 2024, no evaluation or monitoring reports have been published.
Source: Federation of Bosnia and Herzegovina (2021[12]).
Overview of implementation of Competitiveness Outlook 2021 recommendations
Bosnia and Herzegovina’s progress in implementing the 2021 CO recommendations has been mixed, with moderate advances in improving both the clarity of legal frameworks for foreign investment and the inclusiveness of policy making (Table 2.2). Limited progress was observed in dispute settlement, as the judicial reforms are advancing slower. Nevertheless, there were improvements in the functioning of the judiciary. There is still room for improvement in enforcing IPR and raising awareness. On the entity level, there were some advances in reinforcing the legal framework for sustainable investment, although the process is still in its early stages.
Table 2.2. Bosnia and Herzegovina’s progress on past recommendations for investment policy and promotion
Competitiveness Outlook 2021 recommendations |
Progress status |
Level of progress |
---|---|---|
Improve the clarity and predictability of the legal frameworks for investment, including for foreign investors |
There has been some progress at the state level, with preparation under way for a new model BIT, the adoption of which is pending at the government level. |
Moderate |
Improve the transparency and inclusiveness of policy making |
In 2022, RS issued new Guidelines for consultations in the drafting of regulations. This included measures to promote digitalisation through the “eConsultation” web application. |
Moderate |
Accelerate justice reform efforts, particularly those related to commercial matters, and dedicate more effort to improving the rule of law and easing the process of enforcing contracts |
In recent years, there has been limited improvement in the functionality of the judiciary, particularly regarding the resolution of commercial disputes. Persistent inefficiencies in the judicial system undermine citizens' rights, and there is prevalent selective and non-transparent follow-up in corruption cases. |
Limited |
Promote arbitration as a recognised alternative dispute resolution mechanism |
At the entity level, there are supplementary measures for alternative dispute mechanisms, yet their usage remains limited. |
Limited |
Enforce IP rights and raising IP awareness |
Currently, there is no official adoption timeline for an intellectual property strategy for the period 2022-26. Enhancing the Law on Patents and bolstering protections for collective copyright is a specific requirement. Enforcement and awareness-raising in the realm of intellectual property rights pose challenges in Bosnia and Herzegovina. |
Limited |
Reinforce FIPA’s resources and capacity so that it can effectively fulfil its mandate and establish stronger co-ordination mechanisms to avoid overlaps and conflicts in investment promotion and facilitation activities |
Progress was limited in this respect, as staffing has remained constant since 2019, and the budget was only modestly revised upwards. |
Limited |
Improve investment-facilitating activities, including those related to starting a business |
There has been some progress at the entity level. In light of demands from the business community, a programme of administrative streamlining was introduced as one of the measures of the Program of Economic Reforms of RS for the period 2021-23. One of the key simplifications was the removal of the obligation on parties to submit decisions on the registration of business entities. |
Moderate |
Promote and unify legislation encouraging green investment while increasing transparency through the publication of summary information in one place |
There has been some progress at the entity level. The FBiH prepared a draft Law on PPPs in November 2021, although it has yet to be implemented. Following reforms to its PPP regime in 2020, Republika Srpska issued new PPP implementation guidelines in 2021. Moreover, in February 2023, the entity decided to develop the Sustainable Development Strategy for the period 2024-30, one of the segments of which also refers to sustainable investments, specifically “smart growth.” |
Moderate |
The way forward for investment policy and promotion
Bosnia and Herzegovina continues to lag behind regional peers in its ability to attract investment while reform momentum that had seen important improvements in its attractiveness as an FDI destination appears to have stalled in more recent years. Indeed, several policy recommendations from CO 2021 remain valid due to limited progress in the intervening period. Priorities for reform should, therefore, include the following areas:
Enhance the clarity and predictability of investment-related legal frameworks, especially at the state level and within the FBiH, for both domestic and foreign investors. Essential elements of a robust investment policy involve upholding the rule of law, implementing high‑quality regulations, ensuring transparency, openness, and maintaining integrity. Taking effective measures in these aspects will promote investment and mitigate the challenges associated with conducting business. Well-established institutions with defined mandates will further contribute to sustaining a stable and transparent environment for investors.
Harmonise company registration procedures uniformly across all levels of government and facilitate seamless online registration. Despite moderate advancements in the process, online company registration has not been put into effect across all entities thus far. It is essential to prioritise streamlining and expediting the registration process and improving the coordination between business registers, fostering a more conducive environment for businesses and promoting economic growth.
Intensify initiatives for judicial reform, with a specific focus on commercial cases, and allocate additional resources to enhance the rule of law while facilitating the enforcement of contracts. This entails ensuring judges receive ample resources and proper training to grasp the intricacies of commercial litigation. The effectiveness and autonomy of the judicial systems are essential for fostering a business-friendly atmosphere, instilling confidence, and encouraging investment. A justice system that ensures prompt and effective contract enforcement, along with addressing the backlog of court cases, has the potential to positively influence the investment climate and enhance the productivity and competitiveness of businesses in Bosnia and Herzegovina.
Ensure the enforcement of intellectual property (IP) rights and enhance awareness of IP. This includes prompt adoption of the intellectual property strategy for 2022-26. The institutions responsible for enforcement should receive sufficient staffing and training, and establishing a co-ordinating body is recommended.
Ensure comprehensive integration of SDG-linked sustainable investment objectives into investment promotion strategies and associated implementation plans at all levels of government. This extensive integration is vital for aligning economic development efforts with global sustainability targets and fostering responsible and impactful investment practices. By embedding SDG-linked objectives into planning and execution processes, governments can contribute significantly to promoting environmentally friendly, socially inclusive, and economically sustainable investments (Box 2.4).
Box 2.4. Incorporating sustainability objectives in investment facilitation strategies in Ireland
The Industrial Development Agency in Ireland (IDA) launched the 2021-24 investment promotion and facilitation strategy, incorporating various sustainability objectives.
The IDA's strategic plan for 2021–2024 is structured around five core pillars: growth, transformation, regional development, sustainability, and impact. To attain the goals outlined within each pillar, the strategy outlines specific key metrics, which include:
attracting 800 investments to support the creation of 50 000 jobs and boost economic activity
engaging in 170 research, development, and innovation investments
facilitating 130 training and upskilling investments
advancing regional development through 400 investments
promoting a green recovery through 60 sustainability investments.
The strategy has a strong greening component, which includes specific investment targets aligning with priority Sustainable Development Goals (SDGs), namely SDG 12 (Responsible consumption and production), SDG 13 (Climate action), and SDG 14 (Life below water). The emphasis will be on bolstering sustainability within the existing client base and securing investments in new endeavours related to sustainability. This includes activities focused on climate change mitigation and adaptation, sustainable use and preservation of water and marine resources, transitioning to a circular economy, preventing and controlling pollution, and protecting and restoring biodiversity and ecosystems. The strategy positions IDA to respond to emerging pandemic-accelerated trends. It targets sustainable growth among existing clients through transformative investments in Irish operations, emphasising productivity enhancement through research and development, digitalisation, training, and sustainability. Simultaneously, the strategy remains committed to attracting new leading multinational enterprises to Ireland, ensuring sustained growth, and maximising FDI impact beyond 2024.
Source: Industrial Development Agency of Ireland (2021[13]).
References
[3] Central Bank of Bosnia and Herzegovina (2022), External Sector Statistics, http://statistics.cbbh.ba/Panorama/novaview/SimpleLogin_en_html.aspx (accessed on 14 June 2024).
[8] Desic, A., B. Nedic and L. D’Urso (2021), Promoting Cross-Border Mediation in Resolving Civil and Commercial Disputes in the Western Balkans, https://www.rcc.int/download/docs/2021-09-PCBM_final.pdf/2842f8bce8cd32b2aa1517429f7b9a1a.pdf.
[9] EBRD (2022), Bosnia and Herzegovina Country Diagnostic: Private Investment Challenges and Opportunities 2022, https://www.ebrd.com/where-we-are/bosnia-and-herzegovina/overview.html (accessed on 12 April 2024).
[6] European Commission (2023), Bosnia and Herzegovina 2023 Report, https://neighbourhood-enlargement.ec.europa.eu/system/files/2023-11/SWD_2023_691%20Bosnia%20and%20Herzegovina%20report.pdf.
[12] Federation of Bosnia and Herzegovina (2021), Development Strategy of the Federation of Bosnia and Herzegovina, https://fzzpr.gov.ba/files/Strategije/Strategija%20razvoja%20FBiH%202021.-2027..pdf.
[10] Government of the Republic of Srpska (2022), Regulation on the Procedure for Awarding Incentives for Direct Investments of Special Importance, https://www.akta.ba/legislativa/154095/uredba-o-postupku-dodjele-podsticaja-za-direktna-ulaganja-od-posebnog-znacaja.
[13] Industrial Development Agency of Ireland (2021), Driving Recovery and Sustainable Growth 2021-24, https://www.idaireland.com/getmedia/69a2499c-ac2b-45b7-a342-e57bfb42a2de/IDA_STRATEGY_Draft_15.pdf?ext=.pdf.
[4] OECD (2020), FDI Regulatory Restrictiveness Index (database), http://www.oecd.org/investment/fdiindex.htm (accessed on 1 March 2024).
[11] The Government of Republika Srpska (2021), Decision on Implementation of the Project for Optimization of Administrative Procedures and Formalities Adopted, https://investsrpska.vladars.net/decision-on-implementation-of-the-project-for-optimization-of-administrative-procedures-and-formalities-adopted/.
[5] The Government of Republika Srpska (2021), The Strategy for Attracting Foreign Investments in the Republic of Srpska for the Period 2021–2027, https://investsrpska.vladars.net/the-strategy-for-attracting-foreign-investments-in-the-republic-of-srpska-for-the-period-2021-2027-adopted/.
[1] UNCTAD (2023), UNCTADstat, https://unctadstat.unctad.org/wds/ (accessed on 1 March 2024).
[7] US State Department (2023), 2023 Investment Climate Statements, https://www.state.gov/reports/2023-investment-climate-statements/bosnia-and-herzegovina/.
[2] World Bank (2024), World Development Indicators, DataBank, https://databank.worldbank.org/source/world-development-indicators (accessed on 6 February 2023).
Notes
← 1. Association of Mediators in Bosnia and Herzegovina, representatives of the Ministry of Justice of Bosnia and Herzegovina, the Federal Ministry of Justice, the Ministry of Justice of the Republika Srpska and the Judicial Commission of the Brčko District, as well as the Ombudsman Institution and the Foreign Trade Chamber of BiH.
← 2. The Federation of Bosnia and Herzegovina has officially implemented the Decree for the maintenance of the register of business entities. This decree outlines various responsibilities, including the management of the business entity register, insurance, electronic document collection, conversion of paper documents to electronic format, and other crucial aspects related to register upkeep. Additionally, on 27 February 2024, the government issued a determination designating the competent organisational unit within the Federal Ministry of Justice responsible for ensuring the technical accuracy, maintenance, and prompt delivery of electronic data related to the register's main book and the overall functioning of the registration system. This responsibility has been assigned to the ministry’s Service for General and Joint Affairs.
← 3. Framework Law on the Registration of Business Entities in Bosnia and Herzegovina.
← 4. The Law on Registration of Business Entities in the Federation of Bosnia and Herzegovina; Law on Registration of Business Entities in the Republika Srpska; and Law on Registration of Business Entities in Brcko District.