Although foreign investor confidence in Bosnia and Herzegovina (BiH) has been growing in recent years, a series of reforms are necessary to attract more substantial foreign investments in the future.

“Based on our experience in engaging with foreign investors, it is evident that there is confidence in investing in BiH, as indicated by the increase in foreign investments since 2021,” stated the Foreign Investment Promotion Agency (FIPA) in an interview with FENA.

The agency highlighted that most investment growth has been seen through reinvestments and additional funding from existing foreign investors successfully operating in BiH.

However, FIPA emphasized the need for several reforms to improve business activities in BiH, such as simplifying procedures for starting businesses, obtaining construction permits, and connecting to electricity grids.

Foreign investors often cite complex administration and corruption as significant obstacles. The U.S. State Department report notes that while Bosnia and Herzegovina is open to foreign investments, investors face considerable challenges, including endemic corruption, complex legal frameworks, and non-transparent business procedures.

“Bosnia and Herzegovina faces issues highlighted in the State Department report. However, FIPA representatives are in contact with investors to help remove these obstacles, aiming to attract foreign investments to BiH,” FIPA officials stated.

They underscored the need for cooperation and engagement from all levels of government to improve the business climate in BiH. Effective reforms would likely lead to job creation and higher employment rates, positively impacting the overall economy of BiH.

Regarding direct investments from the U.S., FIPA reported that, according to the Central Bank of BiH, direct investments from the U.S. amounted to 71.6 million KM (36.6 million EUR) as of December 31, 2022. The U.S. ranks twentieth on the list of significant investors in Bosnia and Herzegovina, with a 0.41% share in total direct investments (17.4 billion KM).

FIPA clarified that significant American investments are often made through European companies owned by U.S. entities, making the importance of U.S. investments greater than the registered share. They hope to see an increase in U.S.-registered investments in BiH in the coming period.

Foreign investors have traditionally invested the most in the financial sector, telecommunications, and wholesale trade. According to the Central Bank of BiH, the most significant investments were in financial services (3.42 billion KM), telecommunications (1.75 billion KM), and wholesale trade (1.68 billion KM), accounting for nearly 40% of foreign investments.

Interest in renewable energy sources has also been noted, with significant investments announced in this sector. Preliminary data for January to September 2023 confirms the continuation of positive investment trends from previous years.

FIPA reported several ongoing and upcoming projects, including Mahle Electric Drives Bosnia in Laktaši, GS-RAMA in Prozor-Rama, Porsche BH in Blažuj, ASTA Bosnia in Cazin, PMP Jelšingrad-FMG in Gradiška, and BH Magnezij & Minerali in Kupres. There are also substantial reinvestments from companies like Natron-Hayat in Maglaj.

In the first quarter of 2024, net financial liabilities for direct investments amounted to 509.40 million KM, a 4% increase compared to the same period in 2023. Reinvested earnings remain significant, accounting for 60.4% of the total amount.

The Central Bank of BiH reported net financial liabilities for direct investments in 2023 amounted to 1.7 billion KM, with reinvested earnings estimated at 957.3 million KM, representing 56.0% of the total amount.

Preliminary data for 2023 shows a 15.8% increase in direct foreign investments compared to the previous year, indicating continued growth and confidence from foreign investors in Bosnia and Herzegovina.