Bosnia and Herzegovina

Bosnia and Herzegovina is a continental country in southeastern Europe, in the center of the former Yugoslavia. It is a complex multi-ethnic, multi-cultural and multi-religious state. The country has an interesting and eventful history, as well as a magnificent nature rich in resources.

General information

Official name of the state — Bosnia and Herzegovina (BiH). The state occupies an area of ​​51 197 km² (125th in the world). The population is 3,271,572 people (as of 2024).

According to the 2013 census, 50.11% of participants identified themselves as Bosniaks, 30.78% Serbs and 15.43% Croats; by religious affiliation: 50.7% — Muslims, 30.7% — Orthodox, 15.2% — Catholics. The country's constitution provides for freedom of religion.

Also, the Constitution of Bosnia and Herzegovina does not define official languages. The equal status of Bosnian, Serbian and Croatian was confirmed by the Constitutional Court in 2000. In fact, it is one language with minimal differences. The letter uses both Latin and Cyrillic alphabet.

The official currency of the country is the convertible mark.

Sarajevo — largest city and capital of the country. The main political, economic and cultural center of the Federation of Bosnia and Herzegovina. The city is part of the Sarajevo economic macro-region, covering 32 communities (of which 19 are located on the territory of the BiH Federation and 13 in the Republika Srpska). The headquarters of national companies are located here: B&H Airlines, BH Telecom, Railways of the Federation of Bosnia and Herzegovina, Bosnalijek, Energopetrol, BH-Gas, BH Pošta; commercial banks: BOR banka, Bosna bank international, Moja banka, Privredna banka Sarajevo, Vakufska banka and others. The city is home to the Sarajevo Stock Exchange, as well as the Development Bank of the Federation of Bosnia and Herzegovina.

The economic sector in Sarajevo includes the production of food, tobacco products, footwear, building materials, as well as the chemical and textile industries, timber processing, mechanical engineering and metalworking. Timber products, machinery, and paper products are exported. Among the food industry enterprises: Sarajevo Brewery (existing since 1864), Sarajevo Tobacco Factory (since 1880), Klas Bakery and Confectionery Factory (since 1902), Milkos Dairy Factory (since 1953). Pharmaceutical factories Bosnalijek (since 1951) and Farmavita (since 1991).

Before the outbreak of war in 1992, Sarajevo played the role of the “Detroit of the Balkans”, being the largest center of the automotive industry in the Balkans. The Sarajevo Automobile Plant is located here, and after the end of the war, the assembly of Volkswagen and Scaron;koda cars was resumed at the plant. The Sarajevo Motor Plant FAMOS is also located here.

City of Banja Luka — a significant industrial hub, where electronics, textiles, the production of chemical fibers, leather shoes, pulp and paper were developed.

The city of Tuzla is the administrative, cultural, economic and educational center of the Tuzla canton. There are many chemical, food, beverage and heavy industry factories here. Natural resources and rich deposits of mineral and energy raw materials were and are a decisive factor in economic development in this area.

Mostar is considered the unofficial center of the historical region of Herzegovina, is located on the Neretva River and is the fifth most populous city in the country. Aluminum and bauxite are mined here, hydropower and wine production are developed. Mostar is a major transport hub.

In administrative terms, Bosnia and Herzegovina consists of two administrative-territorial entities (entities) — Federation of Bosnia and Herzegovina (FBiH, divided into 10 cantons) and Republika Srpska (PC, divided into 64 municipal districts). There is also the Brcko district — a separate part of the country that does not belong to either the federation or the Republika Srpska.

History, geography, culture, mentality

The territory of Bosnia and Herzegovina is located in the central part of the Balkan Peninsula, at the junction of Eastern and Western civilizations. Thanks to this, she was always the subject of close attention. In ancient times, the present territory was inhabited by Illyrians, Celts and Romans, and upon the arrival of the southern Slavs in the 6th-7th centuries. a new stage has begun in the history of the peoples, descendants of the Slavs, who still live in the same territory.

In the 13th & 14th centuries. the Bans (rulers) and kings of Bosnia expanded the territory, which became the last great medieval kingdom of the South Slavs. Their expansion led to an increase in the country's population, mainly at the expense of the Croats, and after the acquisition of Herzegovina (Hum or Hum Land) the country gained access to the Adriatic.

In 1463, most of the fragmented Bosnia fell under the rule of the Turks; Herzegovina resisted a little longer, but in 1482 both provinces were united by the Turks under a single administration. All of Bosnia and Herzegovina remained under Ottoman rule until 1718, when part of its territory went to the Habsburgs for two decades.

After the conquest by the Turks, the Bosnian Bogomils were converted en masse to Islam.

During the Austro-Hungarian rule of Benjamin von Kalay (1883–1903), the economy of Bosnia and Herzegovina developed intensively. Railways were built, banks were founded, wood processing plants and tobacco factories were opened.

The younger generation of Serbian nationalists wanted to achieve unification with Serbia, using, among other methods, terror. The terrorists, after the failure of a number of assassination attempts on Austro-Hungarian officials, managed to kill Archduke Franz Ferdinand in June 1914. This political assassination in Sarajevo prompted Austria-Hungary to declare war on Serbia and started World War I.

At the end of the First World War, Austria-Hungary collapsed, and Bosnia and Herzegovina became part of the new Kingdom of Serbs, Croats and Slovenes (in 1929 & ndash; 1945 — the Kingdom of Yugoslavia). King Alexander Karadjordjevic, after declaring a royal dictatorship in 1929, divided Bosnia and Herzegovina into several banovinas. In 1939, Yugoslav Prime Minister Dragisa Cvetkovic reached an agreement with Vladko Macek, leader of the Croatian opposition, to create an autonomous province of Croatia. Subsequently, parts of Bosnia and Herzegovina with a Croat majority were incorporated into Croatia.

During World War II, Germany and its allies divided Yugoslavia into several regions, incorporating Bosnia and Herzegovina into the independent state of Croatia.

Post-war Bosnia and Herzegovina had the status of a republic in the Yugoslav federation, created on the Soviet model by Marshal Josip Broz Tito.

In March 1992, Bosnia and Herzegovina declared independence and was recognized by the EU and the USA. Then a brutal civil war began, as a result of which Yugoslavia disintegrated.

In 1995, the government of Bosnia and Herzegovina agreed to recognize the autonomy of the Serb community. In turn, Serbia and Croatia recognized the legal existence of Bosnia and Herzegovina. The negotiations laid the groundwork for an agreement between the three political forces on the final boundaries of the disputed territories. These agreements, called Dayton (after the place of negotiations), were signed in December 1995 in the USA.

In the north and west the country borders with Croatia, in the east and southeast — with Serbia and Montenegro. Has access to the Adriatic Sea. Bosnia and Herzegovina — Mountain country. Most of it is located within the Dinaric Highlands — a complex system of mountain ranges, ridges, intermountain basins and valleys. Forests occupy 41% of BiH's territory. Many minerals are concentrated in the depths of Bosnia and Herzegovina: large deposits of brown coal, iron and manganese ore, bauxite, rock salt, building stone and small deposits of copper, barite, lead, and silver. Mountain rivers have significant hydropower potential.

Bosnia and Herzegovina — one of the most ethnically diverse countries in Europe. Everyone who visited the country for the first time notes the friendliness of the local people.

Bosnians are straightforward and frank, openly expressing their opinions and expressing their feelings. In informal situations, strong language is often used, but not with the intent to offend. The idea of personal space among the inhabitants of the country differs from the Western one — "too close" happens rarely, but “too far” may offend, especially during a conversation. The same can be said about direct eye contact — during a conversation it should be almost constant.

Bosnians have a rather relaxed concept of time — Often events are very delayed, and being late for meetings, even business ones, — this phenomenon is completely normal.

Hospitality and wit are of great importance in Bosnian culture. A person invited to the house of new friends for the first time traditionally brings a small symbolic gift — a box of chocolate, a bouquet of flowers (only odd numbers!), a bottle of wine. Outdoor shoes must be removed in the house. Coffee is always drunk when visiting. According to custom, it is poured three times, and each portion even has a name: “welcome coffee,” “conversation coffee,” and the third portion, “farewell coffee,” politely signals to guests that it is time to say goodbye. When a guest leaves the house, the owner always waits for a while before closing the door. A door slammed immediately after a guest leaves indicates that his visit was unwanted or unpleasant.

Among the numerous cultural, historical and architectural monuments of Bosnia and Herzegovina, the “Old Bridge” certainly stands out. on the Neretva River (XVI century) in Mostar, a bridge on the Drina River in Visegrad (XVI century), included in the UNESCO World Heritage Site. No less important are sacred objects — "stechtsy" — funerary monuments of the early period of the Bosnian state, the Gazihusrefbeja mosque in Sarajevo (XVI century), the Orthodox monastery of Zitomislic in Herzegovina (XIV century), the Franjevac Cathedral in Kraleva Sutjeska (XIV century), "Hagada" — brought in the 16th century. from Spain the holy book of Sephardic Jews. Many of these remarkable cultural monuments of shared heritage suffered significant damage or were almost completely destroyed in the previous war. Thanks to the joint efforts of Bosnia and Herzegovina and the international community, work on their renovation and restoration is being intensively carried out.

Power

Bosnia and Herzegovina's form of government is a parliamentary republic. The Dayton Accords established the position of High Representative, with ultimate authority and sole authority to interpret the Constitution and laws of Bosnia and Herzegovina.

Government bodies at the national level include the Presidium, the Parliamentary Assembly and the Council of Ministers.

The Parliamentary Assembly is a legislative body consisting of two chambers: the House of Representatives and the House of Peoples. The powers of the Parliamentary Assembly are to adopt laws and budgets, approve decisions of the Presidium, and ratify international treaties. The Federation of BiH and the Republika Srpska have their own parliaments, governments and presidents, as well as independent legal systems.

The collective head of state is the Presidium, consisting of three members of the state-forming peoples. The powers of the Presidium include foreign policy issues, the appointment of ambassadors and other international representatives.

Executive power is exercised by the Council of Ministers, the chairman of which is approved by the House of Representatives and appointed by the Presidium.

Economy

Bosnia and Herzegovina is now considered an upper-middle-income country, having achieved excellent results since 1995, when the ethnic conflict that destroyed much of the Bosnian economy and infrastructure, increased unemployment and reduced production, ended.

The IMF estimates GDP growth for the whole of 2023 at 2%. In 2024 and 2025, expected stronger private consumption, underpinned by lower inflation, along with strengthening external demand, is expected to support a modest acceleration in growth, reaching around 3%.

The agricultural sector accounts for 4.8% of the country's GDP and almost 17% of total employment, with the main agricultural products being corn, wheat, barley, fruits, vegetables, livestock and poultry. Bosnia and Herzegovina has approximately 2.2 million hectares of agricultural land (43.2% of the total land area), and most farms are small in size and family owned. The country remains a net importer of food. According to the latest data from the national statistical office, the corn harvest in the Federation of Bosnia amounted to 429,229 tons in 2023, and soybean production reached 15,816 tons.

The industrial sector employs 33.2% of the workforce. Bosnia and Herzegovina mainly produces raw materials such as steel, coal, iron ore, lead, zinc and aluminum. The country has iron ore reserves around Banja Luka and in the Kozara Mountains, bauxite near Mostar, and lignite and coal in the areas around Sarajevo, Zenica, Tuzla and the Kozara Mountains. Zinc, mercury and manganese are present in smaller quantities. In addition, timber is a significant sector and export commodity. Other important manufacturing sectors are mineral and chemical products, machinery, mechanical appliances, textiles and footwear. The total value added of the manufacturing sector is estimated at 14% of GDP.

 The country has significant hydropower potential; there are several hydroelectric power plants and thermal power plants. This makes it possible to export electricity abroad. The largest thermal power plants include Tuzlanskaya, Kakanskaya, Gatskaya and Uglevitskaya. The largest hydroelectric power stations include Chaplinskaya on the Neretva River, Visegradskaya on the Drina, Dubrovnikskaya, jointly with Croatia, Salakovacka, Jablanicka, Trebinje-I on the Trebišnice River.

Recently, the government of Bosnia and Herzegovina has made efforts to revive tourism by attracting visitors and investors to the country's rich cultural sites, as well as magnificent mountains and aquamarine rivers. Sarajevo has a large number of historical, religious and cultural monuments. Currently, Bosnia and Herzegovina is regaining its reputation as a prestigious ski resort; the largest ski resorts are located in Bjelašnica, Igman and Jahorina.

The services sector provides 54.4% of GDP and half of total employment. The most important service sector in the economy is trade, followed by business services, transport and construction. Tourism has grown rapidly in recent years, and although impacted by the pandemic, it has shown resilience, with total tourist arrivals reaching 1.7 million in 2023, up 17.3% on the previous year. In addition, the total number of tourist overnight stays increased by 13.2% to 3.6 million during the same period.

According to the latest data from the European Banking Federation, there are 23 commercial banks operating in the country.

The largest trading partners of Bosnia and Herzegovina are Croatia, Serbia, Italy and Germany.

Business climate

Registering a business in Bosnia and Herzegovina can be expedited if companies hire a local lawyer to guide them through every step of the process. The government has created a single center for registering businesses in the region. This significantly reduced the time required for registration (from 7 to 14 days).

There is no single center in the Federation. Subject, canton and municipal government levels set their own laws and regulations regarding business transactions. It is often difficult to understand all the laws and regulations that may apply to certain types of business activity, given overlapping jurisdictions and the lack of a central source of information. It is therefore essential that foreign investors receive local assistance and advice.

The most common presence of foreign business in the country is representative offices. A representative office is not considered a legal entity and its activities are limited to market research, preparation of contracts or investments, technical cooperation and similar business promotion activities. The BiH Foreign Trade Policy Law regulates the establishment of a representative office. To open a representative office, a company must register in the Register of Representative Offices, which is maintained by the Ministry of Foreign Trade and Economic Affairs of BiH (MoFTER) and the Ministry of Trade of the relevant entity.

The country has ratified 39 agreements on the promotion and protection of investments. Bosnia and Herzegovina is also a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS). BiH has become a candidate for EU accession in 2022 and is in the process of aligning its legislation and regulations with EU requirements in anticipation of the start of the accession process, and is also undergoing the WTO accession process.

Investment climate

Bosnia and Herzegovina is open to foreign investment. The country offers a liberal trade regime, and its simplified tax structure is one of the lowest in the region (17% VAT and 10% flat income tax). It is also rich in natural resources. The best investment opportunities are in the following sectors:

• Agricultural sector products and services related to meat and livestock, processed and fresh fruits and vegetables, alcoholic beverages, grains, mineral water, confectionery, medicinal and aromatic herbs and fisheries. BiH does not produce enough grain for its needs and is heavily dependent on imports. The country does not have domestic production of mineral fertilizers.
• Industrial processing materials to supply the metallurgical industrial sector of BiH, which is an important driver of exports. BiH imports various raw materials and chemicals for industrial processing in several industrial plants located in the country. In addition, small and medium-sized private companies also buy modern computerized equipment and strive to keep up with modern technologies. 
• Energy generation and transmission equipment for the construction and modernization of gasification, renewable energy and electricity distribution projects. BiH has significant renewable energy potential, especially in the field of hydropower and wind power. 
• Telecommunications equipment and services to expand existing networks, including mobile, fixed-line, broadband and eventual transition to 5G. The BiH telecommunications market represents a significant growth opportunity for telecommunications equipment suppliers. The fast-growing cable television sector also provides investment opportunities. 
• Transport Infrastructure Engineering and construction services to upgrade local road, rail and mining infrastructure. The country's road and railway infrastructure, as well as public transport networks in large cities, are underdeveloped.
• Construction equipment to support the commercial construction needs of infrastructure projects. The purchase of construction equipment such as pavers, bulldozers, backhoes, cranes, backhoes and mowing equipment, as well as other road construction equipment, represents a significant opportunity as local highway construction continues.
• Medical equipment for public health systems and private practices, including sophisticated diagnostic equipment. Top sales prospects for foreign medical equipment include cardiovascular diagnostic equipment, non-invasive surgical devices, anesthesia and intensive care equipment, diagnostic imaging (CT, MRI), radiation therapy equipment, ultrasound, urology, laboratory and testing equipment , as well as equipment related to tissue and blood banks. 
• Information technology equipment and services including computer software and IT equipment, as well as supply services to BiH state-owned companies, retailers, financial and telecommunications sectors. In general, the government, private and public companies, and commercial banks are very receptive to computer technology. Local experts predict high spending in the IT/cybersecurity and data protection segments in the coming years. As more customers adopt integrated security and protection product solutions, related services that follow the same model are also in demand. There is growing interest in moving existing systems and services to the cloud.

Business and investment support structures

Bosnia and Herzegovina offers a number of structures and institutions that support business and investment. Here are some of them:

Government structures

Foreign Investment Promotion Agency in Bosnia and Herzegovina (FIPA)

• The main organization involved in attracting foreign investment.
• Provides information and advice to investors.
• Helps in finding business partners and places for investment.

Ministry of Foreign Trade and Economic Relations (MVTEO)

• Responsible for policy in the field of foreign trade and economic cooperation.
• Works to create a favorable investment climate.

Small and Medium Enterprises Development Agency (MSME)

• Supports small and medium businesses.
• Offers various programs and grants for business development.

Financial institutions

Banks

• There are many commercial banks in the country offering loans and other financial services to businesses.
• The Central Bank of Bosnia and Herzegovina regulates the banking sector.

Development funds and investment funds

• There are various national and international funds that offer financing for business development and infrastructure projects.

Chambers of Commerce and Associations

Chamber of Commerce of Bosnia and Herzegovina (FIPA)

• Supports the business community.
• Organizes business forums and exhibitions.

Regional Chambers of Commerce

• Operate in various regions of the country.
• Help local entrepreneurs and investors.

Innovation and technology parks

Technology and innovation centers

• Exist in large cities such as Sarajevo and Banja Luka.
• Supports start-ups and innovative companies.

Business incubators

• Offer support for new companies.
• Help in developing business ideas and attracting investments.

International cooperation

European Bank for Reconstruction and Development (EBRD)

• Provides financing and consulting services.
• Supports infrastructure projects and small businesses.

International donor organizations

• USAID, UNDP and others are also active in the country.
• Offer grants and technical assistance for various projects.

These structures provide comprehensive support for businesses and investors, promoting economic development and attracting foreign investment to Bosnia and Herzegovina.