The economy of Bosnia and Herzegovina is coping well with the consequences of the pandemic so far and, in terms of the impact on GDP, the country is among the least affected economies in the region. The main reason is Bosnia and Herzegovina’s lower dependence on tourism compared to some of its neighbors. An important role was also played by the fact that a large part of export industries, such as engineering and furniture, managed to return to foreign markets after the shock associated with the first wave of the pandemic.
On the other hand, the weakness at the moment is represented by the large role of the metallurgical and chemical industries, which are still struggling with the consequences of the pandemic. The expanding auto parts industry was also hit hard. Domestic demand, especially for consumer goods, fell as a result of the pandemic. However, it will continue to be held by public investments in large infrastructure projects financed by international banks and foreign donors, which continue even in times of epidemiological restrictions.
Measures to support the economy are taken in a decentralized manner by the governments of individual entities and cantons, in accordance with the constitutional arrangement of the country. The total volume of aid provided in 2020 represented about 2% of GDP. Initially, support for companies mainly took the form of subsidies for social contributions and salaries. In a later phase, it focused more on targeted subsidies to companies in affected sectors or loan guarantees. The moratorium on bank loan repayments also proved to be successful.
The advantage of Bosnia and Herzegovina is consolidated public finances and a stable banking sector. Even so, the country’s budgetary possibilities are limited, and the ability to provide support to companies in 2021 will largely depend on loans from international institutions. The deteriorating situation of companies in some sectors leads to tendencies towards protectionist measures. Preferential treatment for domestic companies in public contracts was extended until June 2021. The government of Bosnia and Herzegovina is also discussing the imposition of tariffs on meat imports from the EU. Both of these measures are in conflict with the obligations of Bosnia and Herzegovina arising from the Association Agreement with the EU.
Post-COVID-19 opportunities for foreign exporters
Mining, mining and oil industry
According to allcountrylist, the mining industry remains one of the promising fields for Czech exporters. Lignite and black coal mining is a strategic sector for Bosnia and Herzegovina. The sale of coal is ensured in thermal power plants, which, like mines, are owned by state companies. Mine equipment is largely obsolete. Mining operations need new mining machines, transport equipment and modern control systems. However, investments are still very limited and are hindered by a lack of funds and the inefficient functioning of the entire industry. In the future, the restructuring of the mining industry could free up funds for investments in prospective mining operations, but its early realization is unlikely.
In addition to coal, the natural wealth of Bosnia and Herzegovina also includes deposits of non-ferrous metals and limestone. This area could attract more private investment in the future and therefore demand for mining equipment and related services. Oil and gas extraction could become a new important sector in Bosnia and Herzegovina in the future. The ongoing tender for mining concessions has been delayed by half a year due to the covid-19 pandemic, the start of exploration can be expected in 2022. In the case of the subsequent start of commercial mining, it is possible to expect investments in the infrastructure for the transportation, processing and storage of oil and natural gas.
International development banks such as the EBRD and the EIB invest extensively in Bosnia and Herzegovina in projects aimed at strengthening energy efficiency and developing renewable energy sources. Czech companies can apply their know-how in projects of central district heating, cogeneration electricity production or biomass use. The goal of Bosnia and Herzegovina is to achieve a 40% share of renewable sources in the energy mix. In addition to the great potential of hydro, wind and solar energy, Bosnia and Herzegovina has an untapped biomass potential for the production of heat and electricity, which could consume waste biomass from the wood processing industry and agriculture.
Energy production from conventional sources also remains an attractive sector for Czech exporters. Bosnia and Herzegovina is the largest exporter of electricity in the Western Balkans and 60% of electricity production is produced in thermal power plants. The construction of extensive new capacities is planned. The construction of a new block of the power plant in Tuzla is in the initial phase. Other blocks are planned in Ugljevik, Gack and Banović, but the preparation of the projects is dragging on. Chinese companies are to participate in the financing and implementation of most of the new power plants. The revitalization and desulfurization of the existing blocks Kakanj 7 and Tuzla 6 are also to take place in the near future.
The covid-19 pandemic gave new impetus to e-commerce. Internet shopping has not yet become widespread, but the restrictions on retail have forced merchants to look for new forms of sales. Technical conditions in the form of internet availability and the prevalence of digital technology are favorable in Bosnia and Herzegovina. However, in addition to the conservative attitude of consumers, the less widespread use of payment cards has so far represented a certain obstacle, although this service is commonly available. Although the range of online sales has expanded slightly over the past year, it remains limited for now. Smaller companies often do not have a professional e-shop (e.g. sales via social networks), or its quality is low. Therefore, it is possible to expect that the Internet sales industry will continue to develop.
The digitization of small and medium-sized manufacturing enterprises in export sectors is also an important topic. Digitization of production and internal processes is a condition for these companies to compete in the EU market. It is possible to expect new projects also in the field of digitization of state administration, which is still at a low level. With the support of the World Bank and other donors, e-government development strategies have been prepared, but progress is still slow. There is growing interest in the topic of smart cities and intelligent traffic management. Development in this area is strongly supported by the United Nations Development Program (UNDP), but projects are also financed from other sources. The domestic sector of IT services is also developing promisingly. There is an increase in local startups and foreign investors who are establishing centers for the provision of IT and other shared business services in Bosnia and Herzegovina.
The furniture industry was hit hard by the disruption to international trade in the first months of the pandemic. However, local producers managed to quickly restore supply-customer chains or find alternative markets (including an increase in exports to the Czech Republic), and this industry could thus continue the dynamic development of previous years. In 2020, the production of the wood processing industry (including raw wood) represented 15% of the total export of Bosnia and Herzegovina.
The local furniture industry can rely on the tradition of furniture production as well as domestic sources of wood – forests cover 60% of the territory. Local manufacturers realize their sales in different price segments, from production for multinational retail chains to custom production for luxury designer stores in markets with high purchasing power. The growing demand for local production requires the expansion or modernization of production capacities through the purchase of machinery and technical equipment for primary and secondary wood processing. There is also room for mechanization during timber extraction, which takes place in difficult terrain conditions, and modern handling and transport equipment can be used here.
Agricultural and food industry
Bosnia and Herzegovina has considerable potential for development, especially in animal production, which accounts for more than three quarters of the total agricultural production. Czech companies are successful in the field of selling breeding cattle and thus participate in improving the genetic quality of local breeding. The development of domestic production will also require investment in modern equipment and automated solutions for cowsheds. An important prerequisite in this regard are changes to the existing farming model, based mainly on small family farms, and the concentration of agricultural production into larger units. Meat processing plants also need to invest in the automation of slaughter and packaging lines and waste management solutions. The opening of the EU market for the import of meat from Bosnia and Herzegovina, which is currently being negotiated, could give an impetus to the further development of cattle breeding.
Opportunities in Bosnia and Herzegovina also exist in poultry technology. Poultry production is concentrated in larger enterprises and successful in the field of export abroad (the opening of the EU market in 2019 had a significant benefit in this regard). The development of dairy production also has potential. Milk production is increasing, but the production of dairy products with higher added value is still limited, and cheese or sweetened dairy products are largely imported from abroad.
- Contacts to Czech embassies in the territory
- Practical telephone numbers (emergency services, police, firefighters, information lines, etc.)
- Important Internet links and contacts
Contacts at the embassies of the Czech Republic in the territory
Embassy of the Czech Republic in Bosnia and Herzegovina
Franjevačka 13, 71 000 Sarajevo
Tel.: (+387) 33 587 050
E-mail: [email protected]
- “Viječnica” tram stop (lines 1, 2, 3, 5)
- trolley bus stop “Trg Austria” (lines 101, 103, 104)
- from Sarajevo airport, the best transport is by taxi, the price is up to 30 BAM
Working hours: Monday-Thursday 8:00-17:00, Friday 8:00-14:30
PaulTrade Foreign Office in Podgorica (Montenegro)
Visariona Borilovića 15, 81000 Podgorica, Montenegro
Tel.:: (+382) 69 334 521 (Head of Foreign Office Izudin Gušmirović)
E-mail: [email protected] P
Partner of the Czech Business Support/PROPEA program in Bosnia and Herzegovina
dmb consulting Kralja Tvrtko 6, 71 000 Sarajevo
Tel.: +387 33 204 138 (Dina Duraković, director of dmb consulting)
E-mail: [email protected]
Communication in English and Bosnian/Croatian/Serbian language.
Information about the MFA Czech Business Support / PROPEA program
Information about services provided within the Czech Business Support / PROPEA program in Bosnia and Herzegovina
Practical telephone numbers (emergency services, police, firemen, information lines, etc.)
- International phone code: +387
- Police: 122
- Firefighters: 123
- Emergency service: 124
- Civil protection (e.g. mountain service assistance – contact the local civil protection center): 121
- Taxi service in Sarajevo:
- 033 1515 (Sarajevo taxi)
- 033 663 555 (Zuti taxi)
- 033 760 600 (Red Taxi)
- Towing service: 1282 (Sarajevo), 1285 (Banja Luka), 1288 (Mostar)
The single EU emergency number (line 112) is not in operation in BA.
Important web links and contacts
Central institutions of Bosnia and Herzegovina:
- BiH Presidency (collective head of state): www.predsjednistvobih.ba
- Parliament of Bosnia and Herzegovina: www.parlament.ba
- Council of Ministers (Government): www.vijeceministara.ba
- Ministry of Foreign Affairs: www.mvp.gov.ba
- Ministry of Foreign Trade and Economic Relations: www.mvteo.gov.ba
- Ministry of Transport and Communications: www.mkt.gov.ba
- Ministry for Human Rights and Refugees: www.mhrr.gov.ba
- Ministry of Finance: www.mft.gov.ba
- Ministry of Security: www.msb.gov.ba
- Ministry of Civil Affairs: www.mcp.gov.ba
- Ministry of Justice: www.mpr.gov.ba
- Ministry of Defense: www.mod.gov.ba
- Directorate for European Integration: www.dei.gov.ba
- Office for Indirect Taxation (Administrator of VAT and Customs): www.uino.gov.ba
- Agency for the promotion of foreign investments: www.fipa.gov.ba
- Agency for Statistics: www.bhas.ba
- Chamber of Foreign Trade: Vanjskotrgovinska komora BiH: https://www.komorabih.ba/
Institutions of the Federation of Bosnia and Herzegovina (FBaH) entity:
- President of FBaH: www.predsjednikfbih.gov.ba
- FBaH Government www.fbihvlada.gov.ba
- FBaH Parliament: www.parlamentfbih.gov.ba
- Ministry of Transport and Communications FBaH: www.fmpik.gov.ba
- Ministry of Energy, Mining and Industry FBaH: www.fmeri.gov.ba
- FBaH Ministry of Trade: www.fmt.gov.ba
- Ministry of Agriculture, Water Management and Forestry FBaH: www.fmpvs.gov.ba
- Ministry of Development, Business and Crafts FBaH: www.fmrpo.gov.ba
- FBaH Chamber of Commerce: www.kfbih.com
Institutions of the entity Republika Srpska (RS):
- President of the RS: www.predsjednikrs.net
- Government of the RS (portal for all ministries of the RS): www.vladars.net
- National Assembly of the RS: www.narodnaskupstinars.net
- RS Chamber of Commerce: www.komorars.ba