FIPA Brochure

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Foreign Investment Promotion Agency of BiHSarajevo, 2007


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FOREWORD

I would like to thank you for taking the time to consider investing in Bosnia and Herzegovina. Thereasons why such investment can benefit your company are outlined on the following pages. The BiHForeign Investment Promotion Agency can assist you make that decision and my team and I are at handto support you during the process.

Bosnia and Herzegovina lies in the very heart of South Eastern Europe, at the crossroads of Europe,

the Middle East and Northern Africa. A country in an accelerated economic transition, BiH is open tobusiness and foreign investment. Locating your business in Bosnia and Herzegovina offers significantcompetitive advantages often more attractive than in other countries of the region including penetra-tion into a wider, regional market.

To find out more about investment opportunities in Bosnia and Herzegovina, to obtain more informationon any of the topics covered by this brochure, or to learn more about our services and support, pleasevisit FIPAs website or contact us directly.

Haris BaiDirector of FIPA BiH


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REVITALISEDAN D FORWARD-LOOKING ECONOMY

Bosnia and Herzegovina started accession negotiations with the EU in November 2005 and wide-rang-ing political, social and economic reforms have already been accomplished. BiHs accelerated eco-nomic reform process has greatly improved the business climate and the country has the fastest growingeconomy in South Eastern Europe.

The economy has grown at a steady pace of 5% per year since 2000, a trend that is expected to bemaintained in the future. This sustained annual increase of GDP, combined with rapidly rising produc-tion levels and export volumes, provides a clear indicator that the economy is in full expansion.

The stability of the konvertibilna marka Bosnia and Herzegovinas currency further contributes to afavourable business climate in the country. The KM is pegged to the Euro with a fixed exchange rate(1 KM = 0, 51 EUR).


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A combination of the Central Bank of BiHs Currency Board and fiscal discipline has kept the underly-ing inflation rate the lowest in the region. In 2005, inflation was 2.9%; high by BiH standards but onlyslightly higher than the one prevailing in Euro-zone (2.2%). The introduction of VAT at the start of 2006passed successfully with inflationary pressures maintained well under control.

The privatisation process of state-owned companies is well underway. An estimated 60% of small com-

panies and more than 30% of the large ones are now privately owned or publicly traded. Bosnia andHerzegovina is accelerating the privatisation process for companies of strategic importance in order toincrease economic growth and enhance the volume of foreign investment.

Additionally, BiH has new, powerful, modern bankruptcy laws that provide a flexible, predictable systemfor maximizing the economic value of companies in financial distress, thus creating potentially valuableopportunities for foreign investors.

Bosnia and Herzegovina has signed a number of free trade agreements with neighbouring countriesand is negotiating its entry into CEFTA and the WTO. Companies operating in the country further ben-efit from the preferential trade regime with the European Union. This agreement allows for all goodsthat fulfil EU standards to be exported to each of the 25 member states without quantitative restrictions,and free of customs or other duties, until the end of 2010. Besides the EU, BiH has preferential exportregimes with countries such as Canada, Japan, Russia, Turkey, and the USA; the full, up-to-date, list isavailable on FIPAs website.

Our message to investors is: the country is open for business and it is a verystrong and dynamic economy

Dirk Reinnerman,

World Bank Country Director for BiH


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ENCOURAGINGAN D SUPPORTING INVESTMENT

The Law on the Policy of Foreign Direct Investments in Bosnia and Herzegovinaensures national treatment offoreign investors, that is, foreign investors have the same rights and obligations as citizens and legalentities of BiH. They can freely employ staff, own real estate and foreign investors can freely repatriatethe proceeds from their investment in the country.

The country has also passed a number of other laws and regulations that simplify setting up a company,

import and export of machinery and equipment, and that streamline financial services or provide fortax breaks when re-investing profits, etc. All of these laws can be obtained from the Foreign InvestmentPromotion Agency in a handy compendium on CD ROM or from FIPAs website.

Free trade zones, with their special regimes, provide further tax and fiscal incentives such as free transferof profit and investment, relief from customs and other tariffs on imports and exports, which can makeinvesting in BiH even more attractive.

Furthermore, Bosnia and Herzegovina has signed agreements on the promotion and protection of in-vestments with a host of countries such as Austria, China, Croatia, Hungary, Italy, Kuwait, Montenegro,The Netherlands, Serbia, and Turkey to name but a few, and the list is still growing. In addition, invest-ment guarantees and political risk insurance are available from the Multilateral Investment GuaranteeAgency, which administers the EU Investment Guarantee Trust for Bosnia and Herzegovina, and from theUS Overseas Private Investment Corporation. Moreover, BiH has signed avoidance of double taxationtreaties with numerous countries.

To obtain the latest up-to-date information on laws and regulations relating to foreign investments, in-

centives, investment agreements and taxation treaties, visit FIPAs website.

With its unique geo-strategic position, Bosnia and Herzegovina is very

attractive for diversied investment

Alexander Petritz,

Hypo Alpe Adria Consultants


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FIPA has made a very signicant contribution to our

operations in BiH and supported foreign investments in BiH.

Nihad Imamovi,

BiH Auto Industry


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FIPA SERVICESAN D SUPPORT

Bosnia and Herzegovina has mandated the Foreign Investment Promotion Agency to facilitate and sup-port foreign direct investment. The Agency offers practical assistance in dealing with government institu-tions, by working directly with investors and, more structurally, by assisting the government in improvingthe legal framework for foreign investments. FIPA will also assist investors to develop contacts with thepublic and private sector.

The factsheets with investment-related indicators, matchmaking and sector studies, elaborated by FIPAsexperts and independent consultants, ensure that investors are fully aware of the opportunities that BiHpresents. Moreover, FIPA works alongside the embassies and diplomatic missions of Bosnia and Herze-govina that can also help you explore investment opportunities in our country.

FIPA provides data, information, analysis and advice on the business and investment environment, including: the legal framework for foreign direct investment investment incentives

economic and business trends

FIPA identifies and presents available investment opportunities: investment projects in the development-phase or ready for implementation companies in the process of privatisation local companies seeking foreign partners

FIPA assists both potential investors and those that have already invested in the country through:

effective networking with both the public and private sector linking with governmental and non-governmental institutions to facilitate investment andbusiness development

cooperation with local, regional and international organisations to promote and enhancethe investment environment

To find out more about FIPAs services, which are all free of charge, visit our website or contact us directly.


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EXPERIENCEDAN D CREATIVE BUSINESSES

Bosnia and Herzegovina has several attractive economic sectors with a long tradition and presence ininternational markets, which offer special advantages and opportunities for doing business.

Foreign investors have recognised that infrastructure, the construction industry, the energy sector, tele-communications, and food and beverages production are attractive for investments, as are manufac-turing of clothing, textile and leather goods, production and processing of metals, and production and

processing of wood.Before highlighting some of these sectors, it is important to point out that investors will benefit most fromthe skilled employees they will find in BiH. Young people, often because of their international experienceand outward look to the world, have the know-how, the drive, and the imagination to develop dynamicbusinesses.

Universal access to education and a large number of universities in Bosnia and Herzegovina generate askilled workforce with experience in manufacturing as well as in management. Look beyond these andyou will find the wealth of creativity and innovativeness in design, communication and media, and inother professional, business and consumer services. The quality and abundance of human capital areprobably the countrys biggest assets.

Bosnia and Herzegovina . . . Good workforce, good customers, good results.

Is anything else important?

Mr. Jean-Francois Le Roch,

Director for Eastern Europe, Group Intermarch


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AUTOMOTIVE INDUSTRYGiven Bosnia and Herzegovinas rich and extensive tradition in the automotive industry, especially inproduction of auto components, BiH companies are renowned as suppliers of quality components. Fordecades, major brands have relied on the skilled workforce of BiH to assemble cars for western markets.The Volkswagen Group has recognised this tradition and Bosnia and Herzegovina is well underway to be-come the Groups supply-base in South Eastern Europe, a market of 120 million consumers. The plant,

located conveniently near Sarajevo, assembles koda and VW vehicles for the VW Group.Prevent Sarajevo manufactures seat covers at two facilities in Zenica and Visoko. The production is pri-marily aimed at the French and German markets. Braking elements intended for export are manufacturedfor Volkswagen and Audi at Jelah.

A study by MIGA conducted in 2006 confirmed that BiH has numerous strengths in the automotive com-ponents industry, notably the availability of skilled labour in engineering and other technical areas, and

well-developed in-house R&D activities that make it competitive with some of Central Europes highestperformers. With ongoing efforts focused on upgrading capacity and quality enhancement, companies in theautomotive cluster are looking for investment partners to expand production into wider international markets.


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Stradivarius and other eminent Italian violinmakers of the 17th and early

18th century personally made several visits to Bosnia and Herzegovina to

select the maple and spruce wood that makes their instruments the most

sought-after violins today ...

FORESTRYAN D WOOD PRODUCTS

Of all the natural resources of Bosnia and Herzegovina, its timber is best known; 50% of the country iscovered in forests that can serve both the furniture and the construction industry. These forests have thepotential to provide nearly 7 million m of roundwood per year on a sustainable basis. Beech, oak, ash,pine and fir as well as more specialised woods such as walnut, apple and cherry, are exported as rawmaterial, half fabricates and finished products.

The abundance of both hard and softwood as well as the low-cost, skilled labour force combined withmanufacture facilities that have capacities for timber and furniture production that exceed domestic de-mand, make this sector export-oriented. Currently, the largest markets for these products are Germanyand Italy but the potential to export to other countries is vast.

Recognizing forestry and the wood sector as particularly attractive, the EBRD coordinated in 2006 astudy to provide detailed analyses of investment opportunities in this sector. This study, which is availableon FIPAs website, identifies an array of the attractive opportunities for foreign and domestic investors

in the wood processing sector.


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AGRICULTUREAN D FOOD PROCESSINGAlthough much of the country is mountainous, there are over 1.5 million hectares of agricultural landin Bosnia and Herzegovina, both for crop growing and livestock rearing. The plains to the south andwest of the Sava River offer ideal conditions for growing wheat, maize and vegetables, and industrialcrops such as flax and hemp. Much of the land is free from chemical fertilizers and the routine use ofpesticides.

All these conditions provide a superb environment for the production of a wide variety of fruit and veg-etables, with a possibility to harvest crops and fruits up to three times a year. A USAID Business Consult-ing Report identified great market potential for the BiH fruit and vegetable producers.

There are an estimated 14 million trees producing plums, pears, apples and other fruits, for exportand fruit-juice production. Given the potential of organic produce and pure water supplies, it is easy tounderstand why international food and drink producers and distributors have recognized the value ofthis sector. The warmer regions in Herzegovina have, for centuries, been the centre of wine production,

tobacco farming and the cultivation of lavender and other aromatic herbs. BiH is also known for itshigh-quality medicinal herbs used in pharmaceutical and cosmetic industries.

Fish farms, family-owned or industrial-size, thrive in the clear, unpolluted rivers that criss-cross the coun-try. Foreign companies have already taken advantage of investment opportunities in the sector, but stillmore remain to be seized.


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The Heidelberg Cement Group has invested

more than 60 million in modern technology

in BiH and an additional 50 million are ear-

marked for further ventures...

This shows our immense condence in the

BiH economy and its potential for sustainablegrowth.

Branimir Muida,

Heidelberg Cement Country Manager


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CONSTRUCTION INDUSTRYBosnia and Herzegovina has always been a major player in the construction world. BiH companies haveacquired a solid reputation in all aspects of construction projects, ranging from design to structural engi-neering, building construction, civil engineering and the production of high-quality building materials.The country abounds in natural resources such as timber, stone, gravel, sand, clay and metal ores. BiHsinternational reputation for quality and reliability, as well as its potential for growth, has been recognised

by companies such as the Heidelberg Cement Group and Alas International (a consortium of Asamer &Hufnagl Group and Alpine Mayreder bau GmbH). There are significant clusters of construction businessesin all major population and commercial centres. They include design and technical consultancies, buildingand civil engineering companies, and building material manufacturers and suppliers.

It is also expected that the sector and thus opportunities for investment will grow even further with theconstruction of the Corridor Vc highway that will connect Budapest with the Adriatic Sea. The highway,a major component of the EUs Trans European Network, is one of the governments highest priorities

and will have a huge impact on the economic development of BiH.


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MININGAN D METAL PROCESSINGExploration, exploitation and processing of natural mineral resources, such as silver, iron, arsenic, bauxite,barite, magnesite, pyrophillite, and gypsum, have a long tradition in Bosnia and Herzegovina. Addition-ally, BiH is the largest producer and exporter of zeolite in Europe. The country also has large deposits ofcoal and limestone, both essential for the metal production industry. There are investment opportunities inmining both to serve local processing industries and electricity generation, and for export. Recently, MittalSteel the worlds largest steel producer acquired Iron Mine Ljubija, and is currently exporting the major-ity of its production to the companys subsidiaries abroad.

BiH has an important aluminium and steel processing industry. The major companies in this sector are Mit-tal Steel Zenica, Aluminij Mostar, Bira Zvornik and Jelingrad Banja Luka. With the exception of AluminijMostar, all of these companies are now in foreign ownership and have been subject to major restructuringthat has transformed them into more productive and export-oriented enterprises.

An independent study of the metal processing industry in Bosnia and Herzegovina conducted in 2006 bythe Vienna Institute for International Economic Studies (wiiw) confirmed the positive outlook for the sector,with many companies planning significant increases in output and employment. Furthermore, two of the

industrys heavyweights Mittal Steel and Aluminij are behind plans to develop a regional cross-bordermeta lprocessing cluster. These developments are expected to have important spill-over effects that implyinteresting prospects ahead both in metal processing and in related sectors and activities.


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ENERGYBosnia and Herzegovina is exploiting its naturally fast-flowing mountain streams and powerful rivers throughthe encouragement of hydroelectric power production.The theoretical potential of hydropower in Bosnia and Herzegovina is calculated at 8000 MW, the technicalpotential 6800 MW and the economic potential 5600 MW. With an installed capacity of 2052 MW (53%of the total electricity generated), hydropower is highly significant in Bosnia and Herzegovina, although its

potential is far from being fully exploited yet (37% of its economic potential).

The potential for investors in construction projects on the Drina and Neretva rivers and in the developmentof up to 100 small hydroelectric power stations on other sites is enormous. BiH, especially its southern part,has been identified as an excellent region for construction of wind generation plants. According to recentresearch conducted by domestic and international experts, wind potential of Bosnia and Herzegovina has a30% higher utility coefficient than the EU average and the highest potential in the Balkan region.

Furthermore, BiH has four major deposits of coal in the Tuzla region, in central Bosnia and Herzegovina, inUgljevik and in the Gacko basin. The four thermal power stations in these areas, operating on domesticallymined coal and lignite, are undergoing a full overhaul.


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The banking sector of Bosnia and Herzegovina is completely developed and

offers the full range of banking services. In conjunction with the Central Bankof BiH, this creates a sound base for the nancial stability of the country.

Kemal Kozari,

Governor of the Central Bank of BiH

BANKINGAN D FINANCIAL SERVICES

Bosnia and Herzegovina is the first country in South Eastern Europe that has completely reformed itsbanking system. Foreign banks have invested significantly. HVB Central Profit Bank, Hypo Alpe-Adria-Bank, Nova Ljubljanska banka, ProCredit Bank, Raiffeisen Bank, Turkish Ziraat Bank, Unicredit Za-grebaka banka BiH, Volksbank, Zepter Commerce Bank are all present in the country. Bosnia BankInternational operates in accordance with islamic banking principles. Currently, according to the Cen-tral Bank of BiH, foreign banks already own four-fifths of the banking sector, ensuring employment for

almost 9,000 people.

One of the leading international credit rating agencies, Moodys Investor Service, upgraded Bosnia andHerzegovinas rating from a positive outlook to a stable outlook in just two years. This more favour-able credit rating for Bosnia and Herzegovina was awarded in light of the economic and institutionaladvances that have taken place since the ratings were first assigned in March 2004.

The introduction of a deposit insurance agency and competition between well-established international

banks in BiH has significantly influenced the growth of savings and lowered interest rates on loans.Meanwhile, the countrys stock exchanges are enjoying a period of impressive growth. Still, the chal-lenge for the future is to expand and diversify the range of financial services and intermediation, andother key segments of the market, such as insurance, creating new niches in the market. These develop-ments will undoubtedly create even more business opportunities.


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www.bhtourism.ba

TOURISM

In Bosnia and Herzegovina different cultures, religions, traditions and architecture co-exist, makingthe country exceptionally beautiful. Tourism is a booming sector and investment opportunities abound:hotels, spas, restaurants, recreational, natural, historical, and cultural attractions. More than a mil-lion tourists visit Meugorje each year and, as hardly a week goes by without another positive ar-ticle in the media, it is easy to understand why international tourist numbers are growing at double-digit rates.

BiH has world-class ski slopes at Mt. Bjelanica, Igman and Jahorina where the 1984 Winter OlympicGames were hosted. The mountains offer attractive and still intact destinations. The national parks andnature reserves of Kozara, Sutjeska with its virgin forests, the Una, Hutovo Blato, Bardaa and Blidinje aresimply breathtaking. Moreover, BiH has tremendous potential for specialized branches of tourism since ithas a lot of unexplored and unexploited destinations where tourists can hike, mountain bike, raft, waterski, kayak, and pursue extreme sports (alpine climbing, scuba diving, paragliding) and eco-tourism.

Bosnia and Herzegovina can cater to what the World Tourism Organisation identified as the fastest grow-ing trend: diverse, off-the-beaten-track destinations beyond the conventional package tours. With its richand uniquely complex historical, cultural, culinary and religious heritage, BiH is not only a very interestingdestination but also a lucrative place to invest.


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... youll be amazed to nd that BiH is one of the most culturally and naturallydiverse lands in all of Europe

Tim Clancy,

Director, Green Visions


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A GREAT PLACE TO WORK... AND TO ENJOY LIFE

Bosnia and Herzegovina is a heart-shaped country located in South Eastern Europe, in the centre of theBalkan Peninsula. With its diverse ethnic make-up, its varied landscapes and climate zones and its longhistory as a place where different cultures meet and merge, Bosnia and Herzegovina is a unique countrywhere for centuries people from all over the world have met and exchanged goods and ideas.

The alpine regions offer skiing opportunities, on the Olympic slopes of Jahorina and Bjelanica and at

the ever-increasing number of resorts crowning the peaks of Bosnia and Herzegovina. The large numberof caves most of them easily accessible, even with children and the pristine forests, interspersed byfast-running crystal-clear streams and brooks, make for fantastic hikes, rafting and fishing adventures.

Food certainly is one of the main reasons why people love Bosnia and Herzegovina. The cooking, likethe country itself, is a blend of east and west. And if you like meat youll love Bosnia and Herzegovina.There is also a large number of international restaurants offering Italian, Viennese, Turkish, Indian orChinese cuisine. Vegetarians should however not despair: the country offers some of the best produce,fresh, untreated and simply delicious

Sarajevo and all larger cities boast a wide range of rented furnished and unfurnished accommodationsfor expatriates and their families, ranging from centrally located apartments to family homes in quietsuburbs. Shopping opportunities range from major international retail chains and big shopping centres,through boutiques, and down to the traditional markets, such as Sarajevos Baarija, where trading be-gan in the 15th century and hasnt stopped since.

Investors who would like to come with their family have

a choice of international schools - from kindergartens toMBA studies.

Bosnia and Herzegovina is a great place to invest, not inthe least because it is a great place to live! The countryslifestyle is deeply rooted in its rich tradition, culture heri-tage and natural beauties, married with the amenities ofthe west.


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I T A L Y

R O M A N I A

ALBAN IA

AUS TR IA

B U L G A R I A

S L O V E N I A

C R O A T I A

H U N G A R Y

B O S N I A

A N D

H E R Z E G O V I N A S E R B I A

MACEDONIA

MONTENEGRO

Sarajevo

I T A L Y


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Country name: Bosnia and HerzegovinaLocation: South Eastern Europe,

borders with Croatia (932km), Montenegro (215km) and Serbia (312km)Land area: 51,209 km2

Population: 3.8 millionReligion: Muslim (44%), Orthodox Christian (32%), Roman Catholic (17%), Others (7%)Capital: Sarajevo (population 400,000)

Other major cities: Banja Luka, Biha, Mostar, Tuzla, Zenica

Administrative structure: Two entities (Federation of BiH and Republika Srpska) and Brko District of BiH

Time: CET (GMT + 1 hour)Currency: KM (Konvertabilna Marka); ISO code BAM; numeric code 977International telephone code: + 387Internet domain: .ba

Now is the time for

Bosnia and Herzegovina


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Supported by the EU

FOREIGN INVESTMENT PROMOTION AGENCYOF BOSNIA AND HERZEGOVINA

Branilaca Sarajeva 21/ III71000 Sarajevo

Bosnia and Herzegovina

Phone: + 387 33 278 080Fax: + 387 33 278 081E-mail: [email protected]

www.fipa.gov.ba

Documents

FIPA Brochure