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 2006 was approximately USD 3,180, with a total nominal GDP of approximately USD 12.7 billion. The estimated real GDP growth rate for 2007 was 5.8 percent, and projected growth for 2008 is around 6 percent.  While official unemployment is approximately 40 percent, "unofficial" estimates of unemployment that include the large gray economy are approximately 18-22 percent.  Such a large informal sector could mean GDP is 30-40 percent higher and the unemployment rate 20 percent lower than official figures indicate. (World bank 2006 est.)
• Average monthly net salary is USD 495.(November 2007)
• The banking sector has been fully reformed with a significant inflow of foreign banks (mostly Austrian, Croatian, and Turkish – 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
• 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 visit http://www.buyusa.gov/bosniaandherzegovina/en/28.html )
• BiH has a fairly large foreign trade deficit with imports 3 times greater than exports. The U.S. was in 11^th place in 2007 in terms of the country’s total foreign trade
• 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
• Business regulations and administrative procedures: Opportunities for corruption abound, thereby increasing the cost of doing business. In particular, public procurement tenders are not always transparent. 
• Weak judicial structures: BiH’s legal/judicial system provides no means for quick resolution of commercial disputes
• It is strongly recommended that U.S. companies engage locally knowledgeable people to assist in business operations in BiH or contact the U.S. Embassy in Sarajevo for assistance
• The Commercial Service Office at the U.S. 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

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 is in force with average duties of about six percent.  

Although BiH is a small market, it offers good opportunities in the sectors noted below.  Many projects stem from the involvement and support of the multilateral development banks, the U.S. Agency for International Development (USAID), 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 driver to further economic growth and development.  While not a specific sector, still-to-come privatization of state-owned entities will offer significant opportunities.

Energy – planned construction and upgrade of the hydro plants, new thermal power plants and electrical distribution projects will, when completed, enable Bosnia to become a significant net exporter of power to the region.

Transportation – an air traffic control project, substantial rail projects and key highway completion will increase movement of people and goods within BiH and enhance regional linkages.

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

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

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.

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.