B&H, Foreign Investment Promotion

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INVESTMENT OPPORTUNITIES IN

BOSNIA AND HERZEGOVINA

Fourth Edition

JULY 2007





TABLE OF CONTENTS

4 Foreword

8 Bosnia and herzegovina – key facts

10 general economic indicators

15 Fdi in bosnia and herzegovina

top investor countries

fdi By sectors

total fdi inflow

18 external trade

20 sarajevo and Banja luka stock exchange

21 why invest in Bosnia and herzegovina

21 environment for investment

22 financial staBility

22 privatization

23 favouraBle legislative treatment

24 free trade zones

25 taxation

26 contriButions

27 tax incentives for foreign investors

28 agreements on avoidance of douBle taxation

28 free trade agreements and preferential export regimes

29 political risk insurance

30 t ypes of companies

31 steps for estaBlishing a Business

32 attractive economic sectors

33 auto-components

34 tourism

36 agriculture and food processing industry

37 ICT

38 wood industry

39 Infrastructure

40 metal industry

40 energy sector

41 fipa support



FOREWORD

Bosnia and Herzegovina (BiH) is a forward-moving

country that has achieved astonishing progress in

improving the business climate. It lies in the very

heart of South Eastern Europe and on the crossroads

between Europe, the Middle East and Northern Af-

rica.

BiH has become an ideal location to invest in, with

numerous investment opportunities in various sec-

tors. BiH’s econom remins one of the fstest growing in Erope, offering potentilinvestors significant opportunities of penetration into a wider regional maret and of

running their business on the world scale, since BiH is the signatory of the Central

European Free Trade Agreement (CEFTA), which provides free access to this con-

sumer maret with 40 million people. BiH also has free trade agreements with the

European Union and Turey, as well as preferential eport regimes with USA, Japan,

Canada, Switzerland, Australia, Norway, New Zealand and Russia.

Therefore, starting a business in Bosnia and Herzegovina means the opportunity ofeporting to a maret of over 1 billion people without paying any customs duties!

Bosnia and Herzegovina has achieved a satisfactory political stability that guaran-

tees security for your capital and your business. The main goal of Bosnia and Herze-

govina is EU membership; BiH is a potential candidate country for EU accession. In

this respect, it is worth mentioning that BiH epects to sign the Stabilization andAssociation Agreement to the EU very soon, which will establish formal contractual

relations between the EU and BiH.



In 2007 we have introduced new incentives that should encourage investors and

contribute to the predictable business environment, such as the Foreign Investors

Support Fund.

The improvement of the business environment in BiH and creation of a favourable cli-mate for foreign investments are the ey features of economic development of BiH.

Constant growth of FDI clearly indicates that foreign investors and businessmen

have already identified many opportunities for maing profit in BiH.

I believe this brochure will help you get better acquainted with the business environ-ment and economic potentials of BiH. In this regard, you can epect full support from

the Council of Ministers of BiH, through its Foreign Investment Promotion Agency

(FIPA) that stands firmly at your disposal in the process of identification and taing

advantage of investment opportunities offered by BiH.

W w y scc i yu innt ru yu busi i ad wi Bosn ad Hzgvi!

Chairman of Council of Ministers of BiH

Dr.NikolaŠpirić,m.p.





Moreover, the rapid growth of the number of foreign investors in BiH every year con-

firms the point as well. Bosnia and Herzegovina welcomes you with open arms and

invites you to come and share the profit and ecitement of doing business in BiH.

Finally, I would lie to point out that the Foreign Investment Promotion Agency (FIPA)provides a wide range of free and confidential services for potential investors, aimed

at attracting, facilitating and supporting foreign direct investments in Bosnia and

Herzegovina, as well as assisting foreign investors to successfully establish and e-

pand their businesses.

S FIPA help y mak yu busi i Bosn ad Hzgvi

scc s!

Director of FIPA BiH

HarisBašić



BOSNIA AND HERZEGOVINA kEY FACTS

Official name:Bosnia and Herzegovina

(locally Bosna i Hercegovina, most commonly abbreviated as BiH)

Capital city: Sarajevo (population 400,000)

Other major cities: Bnj Lk, Bihć, Mostr, Tzl, Zenic

Geographic location:South Eastern Europe, borders with Croatia (932m),

Serbia (312m) and Montenegro (215m).

Area: 51,209 m2

Population: 3.84 million

Religions:Muslim (44%), Orthodo Christian (32%),

Roman Catholic (17%), others (7%)

Ethnic groups: Bosnias, Serbs, Croats and others

Languages: Bosnian, Serbian, Croatian (all official)

Administrative

organisation:

Two entities (Federation of BiH and Republic of Srpsa)

nd Brčko District of BiH

Government structure:

BiH is a parliamentary democracy with a bicameral parliament

(House of Representatives and House of Peoples), three-member

rotating presidency, Council of Ministers, and Constitutional Court

GDP: 10.5 billion EUR (2006)

GDP per capita: 2,731 EUR (2006)

Currency: konvertibilna Mara (BAM-official; kM-common use)



Echange rate: 1 EUR = kM 1.95 (fied echange rate)

Landforms:

A very hilly country with the Dinaric Alps dominating the landscape.

The highest point, Mt. Mglić, rises to 2,387m. Thick forests coveralmost 50% of the land. In the north, along the Sava River valley, a

hilly, fertile plain stretches east to west. The country has 20 m of

coastline in the southwest of the country, providing access to the

Adriatic Sea.

Climate:

Winters can be very cold with a lot of snow, especially in the hills

and mountains. Summers are generally warm and comfortable,

occasionally hot. Cooler temperatures in higher elevations.

Latitude/longitude: 44˚ N, 18˚ E

Time zone: CET (GMT + 1 hour)

Internet domain: .ba

Int. telephone code: +387



GENERAL ECONOMIC INDICATORS

Indicators 1999 2000 2001 2002 2003 2004 2005 2006

Nominal GDP(billion EUR)

4.9 5.5 5.9 6.5 6.9 8.5 9.3 10.5

GDPper capita (EUR)

1,385 1,449 1,561 1,713 1,794 2,219 2,417 2,731

Real GDPgrowth rate (%) 10.0 5.5 4.5 5.5 3.0 6.0 6.7 7.1

Industrial productiongrowth rate (%)

1.6 8.8 12.2 9.2 4.8 9.0 10.0 11.0

Average netwages (EUR)

188 190 209 228 247 258 275 300

Annual inflation rate (%) -0.9 4.8 3.1 0.4 0.6 0.4 2.1 6.1

Annual unemploymentrate (%)

39.3 39.7 40.3 40.9 42.0 43.2 31.1 30.0

Currency reserves(million EUR)

443 522 1,379 1,270 1,428 1,779 2,160 2,787

Trade balance

(billion EUR)

-3.09 -3.00 -3.31 -3.52 -3.67 -3.68 -4.01 -3.41

Population,estimate (in million)

3.73 3.78 3.80 3.83 3.83 3.84 3.84 3.84

Total FDI (mill EUR) 166 159 133 282 338 534 421 556

FDI contributionto GDP (%)

3.4 2.9 2.3 4.3 4.9 6.2 4.5 5.2

Source: Central Bank of BiH, Agency for Statistics of BiH, FIPA



NOMINAL GDP, BILLION EUR

Source: Central Bank of BiH, Agency for Statistics of BiH

4.95.5

1999 2000 2001 2002 2003 2004 2005 2006

5.96.5 6.9

8.59.3

10.5

REAL GDP GROWTH RATE, %

10.0

5.5 5.54.5

3.0

6.0

6.77.1

12.0

10.0

8.0

6.0

4.0

2.0

0

1999 2000 2001 2002 2003 2004 2005 2006

average growth rate

bih: 6.0 %

average growth rate

cee: 4.1 %

Source: Central Bank of BiH, Agency for Statistics of BiH, IMF



Source: Central Bank of BiH, Agency for Statistics of BiH, IMF

25.0

20.0

15.0

10.0

5.0

0

1999 2000 2001 2002 2003 2004 2005 2006 2007-0.9

4.83.1

0.4 0.6 0.4 2.1

23.7bih

central and eastern europe

vat

started

INDUSTRIAL PRODUCTION GROWTH RATE, %

1.6

8.8 9.2

12.2

4.8

10.0

11.0

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

01999 2000 2001 2002 2003 2004 2005 2006 2007

Source: FIPA

average growth rate bih: 9.4 %

9.0

ANNUAL INFLATION RATE, %

6.1

5.0

23.1

19.7

14.9

8.3

6.1 4.8

18.0

Jan-June

4.8

3.0



ANNUAL UNEMPLOYMENT RATE, %

39.3 39.740.940.3

42.0

31.1 30.0

50

45

40

35

30

25

20

15

10

5

0

1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Agency for Statistics of BiH, FIPA

43.2

CURRENCY RESERVES, MILLION EUR

Source: Central Bank of BiH

443 522

1999 2000 2001 2002 2003 2004 2005 2006 2007

1,379 1,2701,428

1,779

2,160

2,787

28.0

3,100





FOREIGN DIRECT INVESTMENT IN BIH

TOP INVESTOR COUNTRIES IN BIH(May 1994 – JuNE 2007)

Total amount 4.05 billion EUR

953.30

732.85

431.35

320.13

228.45

223.37

94.29

63.52

56.70

54.81

892.54

AUSTRIA

SERBIA

CROATIA

SLOVENIA

SWITZERLAND

GERMANY

ITALY

THE NETHERLANDS

UNITED ARAB EMIRATES

TURkEY

million EUR

Source: Central Bank of BiH, FIPA

all other

countries



FOREIGN DIRECT INVESTMENT IN BIH BY SECTORS

(M 1994 – Jne 2007)


Telecommunication,

16.0%

Trade,

9.6%

Non-baning sector,

8.5%Services,

4.9%

Tourism,

1.0%Other,

1.0%

Transport,

0.3%

Manufacturing,

37.7%

Baning,

21.0%




166 159 133

282

338

534

421

556

1,242

1999 2000 2001 2002 2003 2004 2005 2006 2007

TOTAL FDI INFLOW, MILLION EUR

1400

1200

1000

800

600

400

200

0

Jan-June



ExTERNAL TRADE(IN 000 EUR)

2006 2006:2005 2007Jan - June

ExPORTS 2,640,485 136.5 1,464,970

IMPORTS 5,823,197 101.9 3,294,444

BALANCE -3,182,712 -1,829,474

COVERAGE OF IMPORT BY ExPORT 45.3% 44.5%

TOP ExPORTED PRODUCTS

NACE PRODUCT GROUPSSHARE IN TOTAL ExPORT

20062007

Jan-JuneD27 BASIC METALS 23.2 % 23.9 %

D20 WOOD AND WOOD PRODUCTS, ExCEPT FURNITURE 8.0 % 8.3 %

D34 MOTOR VEHICLES, TRAILERS, SEMI-TRAILERS 7.8 % 7.1 %

D36 FURNITURE 7.5 % 7.6 %D28 FABRICATED METAL PRODUCTS,

ExCEPT MACHINERY AND EQUIPMENT 6.4 % 8.3 %

D19 TANNING AND DRESSING OF LEATHER 6.1 % 6.9 %

D15 FOOD AND BEVERAGES 5.2 % 5.0 %

E40 ELECTRICITY SUPPLY 4.9 % 2.6 %

D29 MACHINERY AND EQUIPMENT 4.7 % 5.5 %

D18 WEARING APPAREL; DRESSING AND DYEING OF FUR 4.1 % 3.9 %

TOP IMPORTED PRODUCTS

NACE PRODUCT GROUPSSHARE IN TOTAL IMPORT

20062007

Jan - JuneD15 FOOD AND BEVERAGES 12.4% 10.9 %

D23 COkE, REFINED PETROLEUM PRODUCTS 11.4% 9.2 %

D24 CHEMICALS AND CHEMICALS PRODUCTS 9.3% 9.8 %

D29 MACHINERY AND EQUIPMENT n.e.c 8.0% 9.9 %

D34 MOTOR VEHICLES, TRAILERS, SEMI-TRAILERS 8.0% 8.1 %

D27 BASIC METALS 5.7% 10.6 %

D25 RUBBER AND PLASTIC PRODUCTS 3.5% 3.4 %

D26 OTHER NON-METALIC MINERAL PRODUCTS 3.5% 3.4 %

A01 AGRICULTURE AND CORRESPONDING SERVICES 3.4% 4.4 %

D17 TExTILES 3.3% 3.3 %

Source: Agency for Statistics of BiH



COUNTRY SHARE 2006 SHARE2007

Jan - June

Total 100% 8,463,681 100% 4,759,414

CROATIA 17.3% 1,468,590 17.1% 812,618

GERMANY 12.5% 1,056,941 12.3% 586,921

SERBIA&MONTENEGRO 10.8% 915,207 8.7% 412,372*

ITALY 10.4% 881,098 10.7% 505,069

SLOVENIA 8.8% 748,112 7.6% 362,121

AUSTRIA 4.6% 388,979 4.6% 218,753

HUNGARY 3.4% 285,102 3.5% 165,719

USA 2.4% 207,049 2.0% 96,089

SWITZERLAND 2.2% 186,416 2.1% 102,614

CZECH REPUBLIC 2.2% 186,070 1.9% 90,588

TURkEY 2.0% 169,068 3.9% 186,694

FRANCE 1.8% 150,736 1.9% 90,412

RUSSIA 1.6% 133,969 1.6% 75,913

POLAND 1.4% 117,428 1.2% 57,420

MACEDONIA 0.9% 78,410 0.9% 43,835

TOP 15 82.4% 6,973,175 80.0% 3,807,138

MAJOR FOREIGN TRADE PARTNERS(IN 000 EUR)

* SERBIA

Source: Agency for Statistics of BiH



STOCk ExCHANGE IN

BOSNIA AND HERZEGOVINA

There are two stoc echanges in Bosnia and Herzegovina: Sarajevo Stoc Echange(SASE) and Banja Lua Stoc Echange (BLSE).

Turnover

in million EUR2002 2003 2004 2005 2006

2007Jan-June

Total

SarajevoStoc Echange

21.31 60.79 102.84 283.95 334.75 474.50 1,278.14

Banja LuaStoc Echange

3.57 37.08 51.54 142.19 198.62 220.57 653.57

TOTAL 24.88 97.87 154.38 426.14 533.37 695.07 1,931.71

Source: Sarajevo Stock Exchange and Banja Luka Stock Exchange

Legal entities and natural persons have invested 262 million EUR in securities throughstoc echanges in BiH (not included in total FDI).



WHY INVEST INBOSNIA AND HERZEGOVINA?

1. environment for investment

BiH’s ccelerted Economic Reform Process hs contribted significntl to gretlimproved business climate. As a result, BiH has recorded the fastest growth of businessin all of South Eastern Europe.

The aim of BiH is to eliminate legal and administrative obstacles for doing business inBiH, as well as create the most attractive business environment in the SEE.Introducing Value Added Ta in 2006 enabled the creation of a unique economic spacein BiH.

The main goal of BiH is EU membership. Bosnia and Herzegovina is a potential candidatecountry for EU accession. Formal contractual relations between the EU and Bosnia andHerzegovina will be established through the signing of the Stabilization and Association

Agreement.

Bosnia and Herzegovina has signed the Central European Free Trade Agreement (CEFTA),creating a free trade zone with access to a large consumer maret. It has also started itsprocess of negotiation to join the World Trade Organization.

“Or view on Bosni nd Herzegovin is tht the investment climte hs mch improvedover the last years. The country has open access to European marets, which are veryclose to the country and has very strong human capital and we see the privatizationprocess picing up much speed.So, our message to investors is: the country is open for business and it is a very strong

nd dnmic econom.”

DirkReinnerman,WorldBankCountryManager



2. financial staBility

Bosnia and Herzegovina has the most stable currency in South Eastern Europe, which isdirectly lined to the Euro. The country also has the lowest inflation in the region and asa result there has been a significant inflow of foreign bans - foreign ownership currentlystands at 85% of the baning sector.

BiH ws ssigned B2 credit rting with stble otlook b Mood’s agenc.

“Stble KM nd low infltion re importnt elements for mcroeconomic stbilit nd forcontinuous increase of foreign investments in the country.

The Central Ban of BiH is confident that BiH will receive new improved credit ratingsoon.”

kemal kozaric, Governor of the Central Ban of BiH

3. privatization

In the Federation of BiH, the privatization process is conducted by the Agency for

Privatization in FBiH and by cantonal privatization agencies in accordance with the Lawon Privatization of Enterprises, while in the Republic of Srpsa it is the responsibility ofthe Directorate for Privatization.

State owned capital in the enterprises dealing with generation and distribution ofelectricity, railway traffic, telecommunications, water supply, mining, forestry, publicmedia, games of chance, arms industry and military equipment, and in other enterprisesof strategic importance, is privatized in accordance with this law, but under specialGovernment privatization programs.

Domestic and foreign natural persons and legal entities may be buyers in the privatizationprocess.

Privatization of strategic companies is underway. Privatization of state monopolies:telecoms, energ: tilities – electricit, etc. is expected soon.

For more information see:

Directorate for Privatization of Republic of Srpsa

www.rsprivatizacija.com

Agency for Privatization in Federation of BiH

www.apf.com.ba



4. favouraBle legislative treatment

The Law on the Policy of Foreign Direct Investment, in force since 1998, ensures

national treatment of foreign investors, i.e. foreign investors have the same rights andobligations as defined for the residents of BiH.

In addition, the rights and benefits of foreign investors granted and obligations

imposed by the Law cannot be terminated or overruled by subsequently passed lawsand regulations. If any subsequently passed laws and regulations are more favourablefor the foreign investors, the investors have the right to choose under which regime the

respective foreign investment to be governed.Foreign investors are entitled to open accounts in any commercial ban in do-

mestic or any freely convertible currency on the territory of BiH.

Foreign investors are entitled to freely employ foreign nationals, subject to the

labour and immigration laws in BiH.

Foreign investors are protected against nationalisation, epropriation, requisi-

tion or measures having similar effects; such measures may tae place only in the public

interest in accordance with the applicable laws and regulations and against the pay-ment of an appropriate compensation, i.e. compensation that is adequate, effective andprompt.

Foreign investors may own real estate in BiH and have the same property rights

with respect to real estate as the citizens and legal entities of BiH.

Foreign investors are entitled to transfer abroad, freely and without delay, in

freely convertible currency, any proceeds resulting from their investment in BiH.

There are no restrictions on management of companies with foreign capital. The

founder selects the management him/herself.

Equipment being imported as a part of share capital is eempt from paying cus-

toms duties (this eemption does not refer to passenger vehicles, slot and gamblingmachines).



5. free trade zones

The free zones are part of the customs territory of BiH managed by the founder of thefree zone. There are several free zones in BiH.

Each free zone has the status of legal entity and it acquires legal and business capability

by registration under the Act on Establishing Free Zone in the Court Register.

Free zone founders may be one or more domestic or foreign legal entities registered inBiH. The Council of Ministers of BiH, following a proposal of the Ministry for Foreign

Trade and Economic Relations, gives its consent for the free zone establishment, if

the conditions for establishment are economically justified, i.e. if, on the basis of the

submitted feasibility study on justification of the establishment of the free zone and

other evidence, it can be assessed that the value of goods eported from a free zone

will eceed at least 50% of the total value of manufactured goods leaving the free zone

within a period of 12 months.

The users of free zone do not pay taes and contributions, ecept those related to sala-ries and wages. Investments in the free zone, transfer of profit and transfer of investmentare free of charge.

Customs and tariffs are not paid on imports into the free zone. The import of equipmentthat will be used for manufacturing within the free zone is eempt from paying customs

duties and fees.



TAxATION

The basic taation categories are:

Corporate income ta

Personal income ta

Value Added Ta

Ecises, a special type of sales ta paid on some commodities lie:

oil products, tobacco products, soft drins, alcohol drins, beer, wine and coffee

Wage ta

Social security contributions paid by employers and employees

Property ta

Corporate ta rate is 30% in the Federation of BiH and 10% in the Republic of Srpsa

nd Brčko District.

The ta reform process which will harmonize the ta rates within Bosnia and

Herzegovina is epected to be completed soon.



CONTRIBUTIONS PAID BY

THE EMPLOYER AND THE EMPLOYEE

In Republic of Srpsa, contributions are calculated on the basis of net wage. Net wageimplies the income earned by the employee during regular woring hours, plus someadditional receipts lie vacation allowance, paid sic leave, national holidays, paid leave,overtime and reduced woring time.

In the Federation of BiH there are contributions paid by the employer and those paid bythe employee, on gross wage amount. Gross wage includes net salary earned by regularemployment, plus contributions, taes and participations.

In Brčko District, pension insrnce contribtions re reglted b entit lws.

) Emploee’s Shre:

• FBiH: 17% for pension insrnce, 13% for helth insrnce, 2% for nem-ployment insurance and 5% ta on net wage, 0.50% ta on protection ofnatural disaster (in total: 32% on gross wage and 5.5% on net wage).

• RS: 24% for pension insrnce, 15% for helth insrnce, 1% for nem-ployment insurance, 2% for child protection and 0-15% ta on net wage,depending on total salary (in total: 42-57% on net wage).

• Brčko District: 17% on gross wge for pension insrnce for emploeesfrom the FBiH, and 24 on net wage for employees from the RS; 12% ongross wage for health insurance and 10% ta on net wage (total: 29% ongross wage plus 10% on net wage for employees from the FBiH, and 34%on net wage plus 12% on gross wage for employees from the RS).

b) Emploer’s Shre:

• FBiH: 7% for pension insrnce, 4% for helth insrnce, 0.50% forunemployment insurance (in total: 11.50% on gross wage).

• Brčko District: 7% on gross wge for pension insrnce.• In Repblic of Srpsk no sch contribtions re pid.



INCENTIVES FOR FOREIGN INVESTORS

Foreign Investor Support Fund:

Budget of the Fund for 2007 is 2 million BAM (cca. 1 million EUR)-

Resources of the Fund may be used in order to finance foreign investment projects in-

production, research and development sectors

Evaluation of the projects will be made according to the following criteria:-

Amount of investment-

Number of newly opened vacancies-

Investing in an undeveloped area-

Ecological requirements-

Participation of eport in total sale-

The Law on Corporate Income Ta of FBiH enables the reduction of the ta for a period

of 5 years equal to the percentage of foreign capital invested in the assets of the

company, provided that the foreign capital is greater than 20% of total capital. Thisincentive includes companies with 100% foreign capital investment.

Companies in FBiH investing their taable profits in their own production activities and

apartment building are given a ta relief in the amount of 100% of the invested value,or in the amount of 75% if they invest in other activities of their company.

Investment capital is not subject to taation and investment capital is eempt from the

payment of customs duties and customs fees on investment.

.



AGREEMENTS ON AVOIDANCE OF DOUBLE TAxATION

Bosnia and Herzegovina has signed Agreements on Avoidance of Double Taation,which aim to eliminate the double taation of income or gains arising in one territoryand paid to residents of another territory, with the following countries:

Agreements on Avoidance of Double Taation, which mean that companies only haveto pay ta in their home country, accelerate the flow of investments into the signatorycountries, encourage joint ventures, create more investment opportunities, epedite thetransfer of technology and constitute a legal framewor to bolster economic cooperationand enhance strategic economic partnership.

FREE TRADE AGREEMENTS AND

PREFERENTIAL ExPORT REGIMES

In 2006 Bosnia and Herzegovina signed the Central European Free Trade Agreement(CEFTA) with the following countries:

BiH has also signed a Free Trade Agreement with Turey.

According to the preferential eport regime with the European Union, all goods of BiHorigin that fulfill EU technical-technological standards and conditions, can be imported toall EU countries until the end of 2010 without any quantitative restrictions and withoutpaying customs and other similar duties. BiH has preferential eport regimes with:

BELGIUM CROATIA CZECHREPUBLIC

CHINA CYPRUS DENMARk

EGYPT FINLAND FRANCE GERMANY HUNGARY ITALY

IRAN JORDAN MALAYSIA MOLDOVA NORWAY PAkISTAN

PHILIPPINES POLAND ROMANIA SERBIA ANDMONTENEGRO

SLOVAkIA SLOVENIA

SWEDEN TURkEY UNITEDkINGDOM

UNITED ARABEMIRATES

ALL EU COUNTRIES SWITZERLAND RUSSIA

USA NORWAY JAPAN

AUSTRALIA NEW ZEALAND CANADA

ALBANIA SERBIA MOLDOVA MONTENEGRO

CROATIA MACEDONIA UNMIk/kOSOVO



POLITICAL RISk INSURANCE

Bosnia and Herzegovina has ratified/signed 37 Agreements on Promotion and Protectionof Investments with the following countries:

Initialized, but not signed with: Albania, Libya and United Arab Emirates.

Foreign investors concerned about riss of transfer restrictions, epropriation, warand civil disturbances and denial of justice, can be insured against these riss withthe European Union Investment Guarantee Trust Fund for Bosnia and Herzegovina,administered by the Multilateral Investment Guarantee Agency (MIGA, member of theWorld Ban Group).

BiH is eligible for assistance from the US Overseas Private Investment Corporation(OPIC), which also provides political ris insurance for investors.

AUSTRIA BELGIUM ANDLUxEMBOURG

BELARUS CROATIA CZECHREPUBLIC

CHINA

DENMARk EGYPT FRANCE FINLAND GREECE GERMANY

HUNGARY ITALY IRAN INDIA JORDAN kUWAIT

MACEDONIA LITHUANIA MALAYSIA MOLDOVA NETHERLANDS OPEC FUND

PAkISTAN PORTUGAL QATAR ROMANIA SERBIA ANDMONTENEGRO

SLOVENIA

SWITZERLAND SPAIN SWEDEN TURkEY USA (OPIC) UkRAINE

UNITEDkINGDOM



TYPES OF COMPANIES

The Company Law of the Federation of BiH (Official Gazette of FBiH no. 23/99) and theEnterprise Law of Republic of Srpsa (Official Gazette of RS no. 24/98) regulate the

founding, operation and terminating of businesses in Bosnia and Herzegovina.

TYPES OF

COMPANIES

FEDERATION OF BOSNIA

AND HERZEGOVINAREPUBLIC OF SRPSkA

Unlimited Joint

LiabilityCompany (d.n.o.)

Two or more partners, domestic or

foreign, natural persons only;Founders are liable to use

all their assets, including

personal property;

There are no requirements for minimum or

maimum contributions.

Two or more partners, domestic or

foreign;There are no requirements for minimum or

maimum contributions.

Limited Liability

Company

(d.o.o.)

One or more members;

Minimum initial capital is

2,000 BAM (cca. 1,000 EUR).

From 1 to 30 partners; the number is

not limited in case the shareholders are

compn’s emploees;Minimum initial capital is

2,000 BAM (cca. 1,000 EUR).

Limited

Partnership (.d.)

There must be at least 1 partner with full

liability (including private property) and at

least 1 partner with limited liability, the

liability being limited by the value of the

share agreed upon.

One person at least has unlimited liability

for the company, along with another

partner.

Joint-StocCompany (d.d.)

One or more shareholders;Minimum initial capital is

50,000 BAM (cca. 25,000 EUR).

From 1 to 50 shareholders for companiesincorporated simultaneously and 2

or more shareholders for companies

incorporated successively;

The minimum capital

is 10,000 BAM (cca. 5,000 EUR) for

companies incorporated simultaneously

and 20,000 BAM (cca. 10,000 EUR) for

companies incorporated successively.



STEPS FOR ESTABLISHINGA BUSINESS IN BIH

duration and costs of estaBlishing a Business

The procedure of establishing a business taes 5 days.

The costs are as follows:

Administrative costs: cca. 300 EUR

Lawyer costs: cca. 750 EUR

payment of initial capital

2.step

registration at the ministry of foreign

trade and economic relations of Bih

3.step

registration at the competent court

(municipality court)

4.step

making a company stamp

5.step

opening a Bank account in a

commercial Bank

6.step

registration of the company and staff at

pension and disaBility fund

7.step

oBtain permission for Beginning of activity

8.step

start Business

9.step

estaBlishment contract

(notary)

1.step



ATTRACTIVEECONOMIC SECTORS

auto-components

tourism

agriculture and food processing industry

ict

wood industry

infrastructure

metal industry

energy sector



AUTO-COMPONENTS

30 year eistance of Volswagen production plant in SarajevoVolswagen Sarajevo d.o.o. was founded in 1998. Today it has mied ownership:

VW 58% and Prevent (seat cover producer) 42%

Assembly of Soda (Fabia, Octavia) and VW automobiles (Polo, Golf 5, Passat)

Recovering of Volswagen auto-components supplier chain in BiH and SEE region

(spported b SEED/World Bnk nd GTZ) – aSa Holding/Prevent inititiveEperienced and silled worforce in the sector

Around 80 eisting companies

Production of spare parts and components for all types of vehicles

Prodction of bses – Mostr

Possible integration with VW, Renault, Peugeot, Mercedes suppliers

German MannHummel, world leader in production of filters, successfully privatized the

company Unico Filter

Opening of a new production plant in Srebrenica, privatization of one of the biggest

forges in Balan BNT Travni and construction of a gray mould foundry for the needs ofautomotive industry in Zenica are bright eamples of foreign investment

Prevent Sarajevo manufactures seat covers at two facilities in Zenica and Visoo

Significant amount of foreign capital has been invested in Jajce Alloy Wheels, Beto

International and Cajavec factory

Famos Holding started the production of the first diesel engines licensed under

Mercedes Benz and gears licensed under German ZF

“The aSa PREVENT GROuP is the mjor privte grop in the region, operting in the crindustry of BiH. In 2006, 19 firms were divided into 3 divisions: a car division, production

division and financial division. In 2006, these 19 companies employed more than 3,000people, whose total turnover was around 700 million BAM (cca. 358 million EUR), of whichover 50% was eported to the countries of Western Europe.

The Free Trade Agreements concluded by Bosnia and Herzegovina had a significant impacton the increase of our production capacities. This is particularly true when it comes tothe Agreement with the European Union, since our entire production was eported to theEU maret, i.e. for the well-nown car manufacturers such as Volswagen, Peugeot and

Renlt.” NihadImamović,TeamLeaderoftheBiHAutoIndustry



automotive cluster Bih

Automotive Cluster BiH (ACBiH) was established in 2004

The main objective is to increase the competitiveness of its members which are

companies active in the field of automotive industry

ACBiH acts as a platform and engine for technological innovations, national and

international cooperation, mareting and distribution

ACBiH counts 23 successful companies from BiH, but the number is constantly

increasing

Qlit stndrds – ISO 9001:2000 nd TS 16949

TOURISM

mountain tourism

Sarajevo hosted the xIV Olympic Winter Games in 1984

Mountain resort potentials throughout BiH territory

Winter sport resorts t Jhorin, Bjelšnic, Vlšić, Kpres, Blidinje, Stozer, Trebević

Eisting accommodation capacities mostly located near the popular tourism

destintions sch s Srjevo, Bnj Vrćic, Jhorin, Bjelšnic, KpresInvestment potentils in existing nd new fcilities – e.g. Bjelšnic/Igmn project

Olmpic stle skiing on Srjevo’s Mt. Bjelšnic nd Jhorin re bck in fll

swing

Vlšić Montin ner the ncient town of Trvnik is the best estblished ski centre

in central Bosniakupres and Blidinje nature pars located in the vast wilderness area to the far west

of the country

heritage, religious and cultural tourism

Diverse cultural heritage and rich traditions offering unique eperience to

regional and international visitors

Historic sites located in the vicinity of urban centers

Numerous cultural events with international reputation, e.g. Sarajevo Film

Festival, MESS, Jazz Fest Sarajevo



Bosnia and Herzegovina has for centuries been a place where different

religions and traditions meet and live in harmony

Spiritual monuments of four major religions: Islamic, Catholic,

Orthodo and Judaism

Many religious sites active throughout country with major pilgrimage

destintions sch s: Međgorje, ajvtovic or Tvrdoš Monster

eco tourism

BiH mountains offer still untapped destinations, among most diverse and

attractive in the South Eastern Europe

Areas of unspoiled nature

Ntionl Prk Stjesk (Tjentište) – the oldest ntionl prk in Erope nrtring

the onl Eropen virgin forest - Perćic

Additionally, currently active National Par kozara, two Nature Pars, Hutovo

Blato and Blidinje, and additional nature/national pars in process of formation:

Una, Bjelašnica-Igman-Tresavica

New BH Tourism Logo



AGRICULTURE AND FOOD PROCESSING INDUSTRY

agriculture

Over 1.5 million hectares of agricultural land

Ecellent climate conditions as well as fertile soil and high quality water

Available land and water

Available qualified human resources

Available agronomical and technical support

Close to the European maret

Possibility to grow organic food

Estimated that there are over 14 million trees producing plums, pears, apples

and other fruits

Favourable bilateral agreements for eport of agricultural products with many

countries in the region

food processing industry

Large areas of ecological, unpolluted and cultivable land, clean water springs

and clean air that represent optimal conditions for intensive organic production

Fruit and vegetable products have enormous maret potentials identified by

USAID Business Consulting Report

Import of food products more than one billion USD annually

Available qualified human resources

Available infrastructure

Close to the European maret

Long tradition of worforce in food processing industry

Enough raw material for industry

BiH is a member of IFOAM - International Federation of Organic Agriculture

Movements



INFORMATION AND COMMUNICATIONS TECHNOLOGY

reasons to invest in ict sector

Ambitious plans related to the overall development of BiH, requiring a large-

scale development of ICT infrastructure and ICT sector as whole

BiH long-lasting tradition in ICT sector

Availability of young IT educated worers

Availability of a number of schools and universities with IT education

Availability of a number of small IT companies

Availability of basic ICT infrastructure

Privatization opportunities of strategic ICT companies

main ict projects

BiH Strategy and Action Plan for Information Society Development includes:

Development of ICT infrastructure

Development ICT applications within all segments of society

Widening access to nowledge and ICT literacy

Establishment of favourable environment, accompanied with confidence and

security in the ICT sector

Supporting International and Regional Cooperation to implement this action

plan

Implementation period of 2004 to 2010



WOOD INDUSTRY

Around 53% of BiH territory or around 2.7 million hectares is covered by forests

Average annual volume growth of all forests is around 10.5 million m3 of the cut wood

80.7% of forest lands in BiH are state-owned and have the sustainable potential to provide•nearly 7 million m3 round-wood per year

Only 6% of all BiH forests are not classified as production forests•

Main eport marets are: Western Balans, Australia, EU and SEE•

Investment potential in added value wood products:

In 2006 eport of BiH furniture increased by 104.2% compared with the previous•year, showing amazing growth compared to other sectors in BiH

Eport of all wood sector and furniture in 2006 was 661 million kM•

Veneer, plywood, joinery, parquet and furniture•

The only sector in BiH that has higher eport than import (import covered by eport

by 305% in 2006)

Major foreign investments in this sector are: Standard-Sarajevo, Abonos,

Konjh - Živinice, Sboss, Snic, etc...

Regarding the certification of the forests, three forest management units in BiH have

already been successfully certified according to FSC (Forestry Stewardship Council)

A number of BiH wood processing companies, particularly eport-oriented ones,

have begun the process of certification or have obtained certificates following EUdirectives and standards related to wood products, including:

Quality Management System (QMS) according to ISO 9001 requirements•

Environmental management ISO14001:1996/2004•

CE mrking, etc …•

Wood and Forestry Cluster in Bosnia and Herzegovina counts cca. 200 different

stae holders and 140 companies. Its performance is supported by USAID throughthe project called Cluster Competitiveness Activity



INFRASTRUCTURE

construction of vc corridor “Bdpest-Srjevo-Ploče” s prt of the Eu’s TEN Network. The Eropen

Commission and the international finance institutions have offered full supportto BiH in the realization of the Vc Highway construction project, stating that itis important not only for BiH but also for the European Union

Over 56% of BiH population is situated within the zone of proposed Corridor,

generating app. 63% of GDP

The most importnt trnsport project in BiH – the priorit regrding other

development projects

Chance for tourism development

Accessory structure (gasoline stations, motels etc...)

The railway reconstruction as part of Vc Corridor

Highw Bnj Lk – Grdišk (nder constrction)

Highw Tzl – Oršje connection to Corridor X (Zgreb – Belgrde – athens)

Tzl – Srjevo (rod moderniztion)

Doboj – Tzl – Zvornik (rilw moderniztion)

Two ports on river Sv: Brčko nd Šmc (connection to Dnbe) need

regulation and reconstruction

Epanding of natural gas networ

Pblic – privte prtnershi p is needed

“The Heidelberg Cement Grop invested more thn 60 million EuR in modern technol-ogy in BiH, showing big confidence in BiH economy and its aim to achieve sustainablegrowth.

Our goal is to continue to grow, trying to epand the maret. We want to eep our lead-ing position on the maret, epecting that building of the Corridor Vc should contribute

to or joint efforts.” Branimir Muidza, Heidelberg Cement Country Manager for BiH



METAL INDUSTRYAbundan t reserves of coal, silver, bauite, arsenic, barite, magnesite, pyrophilliteand gypsum

Importnt lminim nd steel processing indstr – the min exporters

The largest producer and eporter of zeolite in Europe

The major companies in this sector are Mittal Steel Zenica, Alumina Factory

Mostr, almin Fctor Birč Zvornik nd Jelšingrd Bnj LkMittl Steel Zenic – prt of arcelorMittl, the world’s leding steel compn –

the largest FDI recorded in BiH

Mechanical engineering sector rated positively according to international

standardsMetal processing companies are available in the privatization process

There are ecellent opportunities for production of value-added products based on

domestic steel and aluminium, such as aluminium profiles, galvanized steel wires,

high quality steel, cranes, tools and household appliances

ENERGY SECTOR

Theoretica

l potential of hydropower is calculated at 8000 MW, technical potential 6800MW and the economic potential 5600 MW

14 hydropower plants with installed capacities up to 2052 MW - room for many more

The potential for investors in construction projects on the Drina and Neretva rivers and in

the development of up to 100 small hydroelectric power stations

4 eisting thermal power stations, operating on domestically mined coal and lignite, are

undergoing a full overhaul

Construction of new thermal power stations is planned

Eporter of energy to the SEE region and Western Europe

Power III project for reconnection of Electric Power System of BiH (enabling commercial

trade with EU power networ)

Privtiztion process of the electric power sstem – opportnities for investment

Renewble Energ Resorces – Wter, Wind, Solr etc.

BiH, especially its southern part, has been identified as an ecellent region for the

construction of wind generation plants

The wind potential of BiH has a 30% higher utility coefficient than the EU average and the

highest potential in the Balan Region

Public-Private Pa rtnership is needed



FIPA SUPPORT

Are you interested in investing in Bosnia and Herzegovina?

FIPA will be pleased to assist you, our services are confidential and free of charge!

Established in 1998, FIPA - Foreign Investment Promotion Agency of Bosnia and Herzegovina isthe main governmental institution supporting foreign direct investment in BiH.

FIPA will help you seize business opportunities in Bosnia and Herzegovina by:

providing current data and information on the Business climate and investment environment:

Advice on the legal framewor concerning Foreign Direct Investment (FDI) in BiH

Macroeconomic data / indicators

Investment incentives

presenting investment opportunities in Bih:Available investment projects

Companies in the process of privatization

BiH companies seeing partners

providing reliaBle assistance, including:

Effective networing with the public and private sectors

Links with governmentl nd non–governmentl instittions

We provide client orientated research & services helping you to mae your

bsiness in Bosni nd Herzegovin “sccess stor”!

foreign investment promotion agency

Branilaca sarajeva 21/iii, 71 000 sarajevo, Bih

phone: + 387 33 278 080, fax: + 387 33 278 081

e-mail: [email protected], weBsite: www.fipa.gov.ba



Documents

B&H, Foreign Investment Promotion