Market Overview

• Bosnia and Herzegovina (BiH) is a transitional economy and the country is actively pursuing negotiations for accession to the European Union (EU).
• Bosnia and Herzegovina (BiH) has a successful and stable currency board arrangement that fixes the local currency, the fully convertible Bosnian Mark (BAM) to the Euro.  As a result, BAM is one of the most stable currencies in Southeast Europe.
• Per capita GDP in 2007 was approximately USD 3,940, with a total nominal GDP of approximately USD 15.1 billion. The estimated real GDP growth rate for 2007 was 6.8 percent, projected growth for 2008 is 6.0 percent and projected growth for 2009 is around 1.5 percent.  While official unemployment is approximately 40 percent, "unofficial" estimates of unemployment that include the large gray economy are approximately 23 percent.
• Average monthly net salary is USD 510.(November 2008)
• The banking sector has been fully reformed with a significant inflow of foreign banks (mostly Austrian and Italian – foreign ownership currently stands at 85 percent of the banking sector) providing businesses with easier access to capital and to full range of banking services.
• The most prominent foreign investors in BiH are from Austria, Croatia and Slovenia. In 2008, Slovenia was top foreign investor with investments of EUR 180 million, followed by Austria (EUR 151 million) and Croatia (EUR 70.3 million).
• There are over 50 U.S. and U.S.-affiliated companies that have established a full-time presence in the market (for a complete list of U.S. and U.S.-affiliated companies doing business in Bosnia and Herzegovina click here)
• BiH has a fairly large foreign trade deficit with imports 2.4 times greater than exports. The U.S. was in 10^th place in 2008 in terms of the country’s total foreign trade. (Imports from the U.S. in 2008: USD 393 million; Exports to the U.S. in 2008: USD 108 million)
• Population: BiH has about 3.8 million citizens (There has not been a census since before the 1992-95 war.)

Market Challenges

• A multi-tiered and divided two-Entity government (the Federation [FBiH] and the Republika Srpska [RS]) creates a confusing array of regulations, fees, taxation, and standards requirements
• The World Bank estimates that there is an average of 12 procedures taking a total of 54 days to complete registration for a new business
• The myriad of state, entity and municipal administrations creates a heavily bureaucratic system that lacks transparency creating opportunities for corruption. In particular, government and public procurement tenders are not always transparent.
• Weak judicial structures: The legal/judicial system provides no means for quick resolution of commercial disputes since commercial courts do not exist and non-judicial dispute resolution mechanisms are few. 

Market Opportunities

BiH offers rewards to well-prepared and persistent exporters and investors.  BiH is open to foreign investment with national treatment for exporters, and a liberal trade regime.

Although BiH is a small market, it offers good opportunities in the sectors noted below: 

Energy – planned construction and upgrade of the hydro plants, new thermal power plants and electrical power distribution projects

Telecommunications – further privatization of the telecom sector and expansion of existing networks – mobile, fixed line and broadband

Transportation –  the Corridor 5C highway construction project and upgrade of the existing local road infrastructure, substantial railroad infrastructure and machinery upgrade projects 

Construction Equipment – due to the increase in commercial construction needs from the activities listed above

Note: Many projects stem from the involvement and support of  development banks, the World Bank, the European Union and other international donors.  Still regarded as a transition economy, Bosnia and Herzegovina nevertheless sees the long-term goal of EU membership as a catalyst for further economic growth and development.  While not a specific sector, still-to-come privatization of state-owned enterprises will offer significant opportunities.

Market Entry Strategy

There is no single best way to do business in Bosnia and Herzegovina.  New entrants to the market will most likely be displacing/supplanting nearby suppliers, such as from Croatia and Slovenia, as well as dominant EU member country exporters.  Of course, a regional strategy can build on existing trading patterns and customers if the market does not justify a full-time presence. Visiting the country first to develop contacts in your search for the opportunities and to learn about the complex bureaucratic structure is essential.

Sales agents, representatives and distributors all have important roles to play in this market.  Regardless of which channel is selected, sales support and after-sales service are critical.  Financing is a key factor for a Bosnian company making a decision to take on a new U.S. product line.

For a new-to-market company, there is no substitute for a local partner.  Make your selection based on his or her knowledge of the local market – your focus should be to support your partner with the proper training and sales materials. 

Readers interested in more information about market opportunities to be found in BiH are urged to contact the U.S. Embassy Sarajevo. The Economic and Commercial Service Office at the Embassy assists U.S. companies in exporting to Bosnia and Herzegovina by identifying local opportunities for the sale of U.S. products or services, providing counseling on the market, and meeting the advocacy needs of U.S. firms.