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BOSNIA AND HERZEGOVINA

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Content

INTRODUCTION

Building the Foundations for Long-Term •

Stability 3

Bosnia and Herzegovina’s Fact File 4•

BUSINESS & INVESTMENT OPPORTUNITIES

Wide-Range of Business and Investment •

Opportunities 6

Hypo Alpe-Adria-Bank 7•

TRANSPORT

Crucial Need to Upgrade Infrastructure 8•

The Public Company of the Republic of Srpska •

Roads 9

The Public Company of the Republic of Srpska •

Motorways 10

Director: Lieve Luyten

Offi ce Manager: Samira Darghal

Project Coordinators: Katryn FlackNarcisa Ciurariu

Editorial: Emily Emerson-Le Moing

Production Coordinator: Kathleen Jansen

Design: Martine VandervoortCarine ThaensJohny VerstegenWalter VrankenDirk Van Bun

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Bosnia and Herzegovina

Miljacka river

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Content

Rich and Diverse Culture, Landscapes and Economic Growth PotentialBosnia and Herzegovina, a heart-shaped republic on the Balkan Peninsula in South-eastern Europe, is an ancient land which has forged a free market economy and an independent democratic government.

Rich cultural heritage

The land that is now Bosnia and Herzegovina was known as Illyricum in ancient times and was successively part of the Roman, Byzantine, Ottoman and Austro-Hungarian empires. A true crossroads between East and West, Bosnia and Herzegovina has been enriched by these different cultures. Bosnia and Herzegovina is a long name for a country that measures just over 50,000 sq km. Bosnia, in the northern portion and centre of the country, has rich resources of water, and its name is believed to have derived from the Indo-European word for water, “bosana”. The southern part of the country, once known as Hum, was ruled by Herceg Stjepan before the Ottoman conquest and later named Herzegovina.

Introduction

Natural beauty and exceptional diversity

What is probably most important for today’s visitors, though, is that Bosnia and Herzegovina is a stunningly beautiful country with a vast array of landscapes, cultures, traditions and people, all of whom pride themselves on their hospitality. Bosnia and Herzegovina has both Mediter-ranean and Alpine climates and landscapes, a combination which has given it some of Europe’s richest flora and fauna. Much of the country is mountainous. The long chain of the Southern Alps – the Dinaric Alps – stretches from Northwest Slovenia through the heart of Bosnia and Herzegovina into Montenegro, and the highest and wildest section of this mountain range is in Herzegovina.

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BOSINIA AND HERZEGOVINA

ECONOMY

GDP (purchasing power parity): €21.10 billion 2008 est.

($29.76 billion)

GDP per capita (PPP): €4,608 2008 est. ($6,500)

GDP - composition by sector: agriculture: 10.2% industry: 23.9%services: 66% (2006 est.)

Labour Force: 1.863 million (2007)

Labour Force by occupation: agriculture: 19.8% industry: 32.6% services: 47.6%

Unemployment rate: 29% (2007 est.)

Budget: revenues: €6,037 billion ($8.516 billionexpenditures: €6,286 billion 2008 est. ($8.867 billion)

FOREIGN TRADE

Export - commodities: Metals, clothing, wood products

Export - partners: Croatia 20.7%; Slovenia 16.7%,

Italy 16.7%, Germany 13%, Austria 10.3%, Hungary 4.8% (2008)

Imports - commodities: Machinery and equipment, chemicals, fuels, foodstuffs

Imports - partners: Croatia 24.6%, Slovenia 12.7%, Germany 12.3%, Italy 10.5%, Hungary 6.6%, Turkey 6.5%, Austria 6.3% (2008)

Country name: Bosnia and Herzegovina

Area: 51,197 sq km

Location: Southeastern Europe, bordering the Adriatic Sea and Croatia

Climate: Hot summers and cold winters; areas of high elevation have short, cool summers and long, severe winters; mild, rainy winters along coast

Population: 4,613,414 (July 2009 est.)

Language: Bosnian, Croatian, Serbian

Capital: Sarajevo

Religion: Muslim 40%, Orthodox 31%, Roman Catholic 15%, other 14%

Currency: BAM (Bosnia-Herzegovina convertible mark)

Time difference: UTC +1

Independence: 1 March 1992

National Day: 25 November

GOVERNMENT

Government type: Emerging federal democratic republic

Chief of state: Chairman of the Presidency Zeljko Komsic

Head of government: Chairman of the Council of Ministers Nikola Spiric (since 11 January 2007)

Cabinet: Council of Ministers nominated by the council chairman; approved by the National House of Representatives

Elections: The three members of the presidency are elected by popular vote for a four-year term; the chairmanship rotates every eight months and resumes where it left off following each national election; election last held 1 October 2006, the Chairman of the Council of Ministers is appointed by the presidency and confi rmed by the National House of Repre-sentatives

Constitution: The Dayton Peace Accords, signed 14 December 1995 in Paris, included a new constitution now in force; note - each of the entities also has its own constitution

Legal sytem: Based on civil law system; has not accepted compulsory ICJ jurisdiction

Suffrage: 18 years of age, 16 if employed, universal

Bosnia and Herzegovina’s Fact File

© sxc.hu

5

Central Bosnia has both mountains and green, rolling hills covered with conifer forests and lined with countless freshwater streams and rivers.

In parts of Northern Bosnia are fertile plains extending from Hungary and Croatia, while parts of the northwest of the country are filled with deep limestone caves and underground rivers, which, along with the low limestone valleys of the south, form the biggest karst field in the world.

Varied climate and culture

The southern part of the country has a Mediterranean climate with warm, sunny, dry weather and very mild winters. In the northern parts of the country, the weather is similar to that of Central Europe: hot summers, cool springs and autumns, and cold winters with consider-able snowfall. The Mediterranean and continental climates meet in the middle of the country, creating one of the most diverse eco-systems in Europe. Bosnia and Herzegovina’s mountains have a climate of their own; in the high Dinarics, which reach above 1,700 m in places, the winters are extremely cold. This varied climate has given Bosnia and Herzegovina special tourism appeal, since sun-seeking visitors can bask on beaches along the Adriatic Coast while skiers can revel in the pristine powder of mountain slopes.

Bosnia and Herzegovina is also culturally diverse. There are three official languages: Bosnian, Croatian, and Serbian, although they are almost identical; the differences among them are similar to those between American and British English. Bosnian/Croatian/Serbian is a Slavic language, in the same family as Russian but distinctly different. In the Republika Srpska, many signs are in Cyrillic, while in the Federation only the Latin alphabet is used. English is commonly spoken in most cities around the country thanks to the influx of foreigners as well as the fact that English is taught in schools and most of the country’s young people speak it.

Bosnia and Herzegovina’s population, which totals an estimated 3.8 million people, is made up of three ethnic groups: Bosniaks (who made up 48% of the population in 2000 and are mainly Muslims); Serbs (37.1%, and mainly Orthodox), and Croats (14.3%, and mainly Catholic), with other groups making up 0.6% of the total population. Despite their different religious and/or ethnic backgrounds, local people’s languages, traditions and culture are more similar than different.

Post-war growth

Bosnia and Herzegovina has been united under a democratic government since the Dayton Peace Accords in 1995, and the economy has been steadily growing ever since. The national currency, the konvert-ibilna marka (convertible mark, or BAM), introduced in 1998, is pegged to the euro, and confidence in the currency and the banking sector has increased. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007 and aims to join the EU.

Today, Bosnia and Herzegovina is focusing on cutting back its bureaucracy, privatising its public companies, and attracting foreign investments. Its strategic economic growth plan relies on wood processing, agriculture, tourism, steel, mining, services, textiles and construction materials. The greatest resources of Bosnia and Herzegovina are its great forests and abundant sources of water. To protect this natural heritage and also provide jobs for its people, the government aims to develop eco-tourism, small and medium-sized enterprises, and agricultural enterprises, particularly small-scale organic agriculture.

Bosnia-Herzegovina convertible mark

Introduction

66

Wide Range of Business and Investment OpportunitiesBosnia and Herzegovina offers exceptional business and

investment opportunities in a wide range of sectors, and

regulations ensure the transparency of the investment

process as well as tax advantages and protection of

foreign investors’ interests. Bosnia and Herzegovina

has signed the Central European Free Trade Agreement

(CEFTA), is negotiating membership in the World Trade

Organisation, and enjoys a preferential trade regime

with the EU as well as with a number of other countries,

including the US, Canada, Japan, Russia and Turkey.

Privatisation, new bankruptcy laws

The government is currently accelerating the privati-sation process for companies of strategic importance and has established new bankruptcy laws to create more potentially valuable opportunities for foreign investors. Special business and industrial parks are being developed to serve as the ideal base for investors.

The Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA) provides up-to-date information on business opportunities and has singled out a number of sectors which offer high-potential investment prospects.

Agriculture and food

Bosnia and Herzegovina has around 1.5 million hectares of agricultural land and has great potential to produce and process all types of agricultural products, including organic fruits and vegetables, wine, herbs, grains, farmed fi sh and others. Automotive industry

Bosnia and Herzegovina has a strong reputation for supplying automotive components and for vehicle assembly. Its advantages include skilled labour and well-developed in-house research and development activities.

BOSNIA AND HERZEGOVINA

Banking and fi nancial services

As the fi rst country in South Eastern Europe to completely reform its banking system, Bosnia and Herzegovina has attracted signifi cant investment by foreign banks, which now account for 73% of the banking sector. There are signifi cant opportunities in expanding and diversifying the range of fi nancial services, including insurance and Islamic services.

Construction Industry

Local construction companies excel in design, structural engineering, building construction, civil engineering and the production of high-quality building materials which make use of the country’s resources of timber, stone, gravel, sand, clay and metal ores. The construc-tion of the European Corridor to connect Budapest to the Adriatic will create even more opportunities for the construction sector.

Energy

Bosnia and Herzegovina has signifi cant hydropower potential, estimated at 8000 megawatts, and also welcomes investments in renewable energy projects. The country also has considerable reserves of brown coal, lignite and peat as well as deposits of oil and gas.

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Forestry and wood products

With 50% of its land area covered in forests, Bosnia and Herzegovina has tremendous potential in these sectors and already exports significant quantities of timber and furniture to the EU. A European Bank for Reconstruc-tion and Development study of opportunities in the wood processing sector is available on the FIPA web site.

Information and communications technology

The ICT sector is one of the mainstays of the national economy, and privatisation is creating even more opportunities for investors. Bosnia and Herzegovina has implemented the latest ICT technologies and its transmission system is almost fully-digitalised. It has a skilled, multilingual ICT labour force, and opportuni-ties abound for ICT integrated solutions providers and transnational telecommunications and public utility ICT services providers.

Mining and metal processing

Bosnia and Herzegovina has significant deposits of silver, iron, arsenic, bauxite, barite, magnesite, pyrophillite, coal, limestone and gypsum and is Europe’s largest producer and exporter of zeolite. Mining to serve local industry and energy production as well as aluminium and steel processing offer attractive investment opportunities.

Tourism

Bosnia and Herzegovina has great natural beauty, a number of historic landmarks, world-class ski slopes, and extensive opportunities for cultural and ecotourism. The government has targeted tourism as a key growth sector. Foreign investors will find a wealth of opportuni-ties in Bosnia and Herzegovina.

Hypo Alpe-Adria-Bank Banking Group a Pioneer in Local Business SectorHypo Alpe-Adria-Bank entered the Bosnia and Herzegovina market in 2001 with operations in Mostar and Banja Luka and has grown to become a key player in the country’s economy.

Commenting on the bank’s success story, Petar Jurcic, Director General of Hypo Alpe-Adria-Bank d.d., says, “What modern clients want from their bank is the utmost flexibility and a new business framework for making their ideas come true, and that is exactly what Hypo Alpe-Adria-Bank offers its customers.” To keep its competitive edge in Bosnia and Herzegovina, Hypo Alpe-Adria-Bank aims to continue to “grow, expand our products and services range, and act as a pioneer in the local business sector,” Petar Jurcic says.

The bank has made a long-term commitment to Bosnia and Herzegovina, which it views as having excellent potential, particularly in such sectors as energy, wood products, tourism and ecological production. Hypo Alpe-Adria-Bank is a strong supporter of the country’s small and medium-sized enterprises.

The bank will continue to help provide the foundations for Bosnia and Herzegovina’s ongoing development. Petar Jurcic says, “Along with other major players, we shall continue helping and positively shaping the economy of Bosnia and Herzegovina.”

Hypo Alpe-Adria-Bank d.d.Kneza Branimira 2b - 88000 Mostar, BiH

Tel: +387 (0) 36 444 200 - Fax: +387 (0) 36 444 235bank.bih@hypo-alpe-adria.com

www.hypo-alpe-adria.ba

Petar Jurcic, Director General

Business & Investment Opportunities

88

Crucial Need to Upgrade InfrastructureWhile overcoming the effects of years of war and proving to the interna-tional community that it is committed to developing a thriving, corruption free economy, the government of the Republic of Srpska is focusing on developing the republic’s infra-structure, which must be upgraded to support continued development. Such efforts are overseen by the Ministry of Telecommunications and Transport; the Republic Directorate for Civil Aviation and the Directorate for Building, Managing and Maintaining Motorways are under the ministry’s jurisdiction.

Nedeljko Cubrilovic, Minister of Telecommunica-tions and Transport of the Republic of Srpska

Nedeljko Cubrilovic, Minister of Transport and Communications of the Republic of Srpska, explains that one of the federation’s most important projects at present is the construction of a new 400 km highway budgeted at around €300 million. Existing roads are also being upgraded and the government is seeking EU support for the modernisation of the rail network, including its rolling stock.

“We will need to invest several hundreds of millions of euros, which we are obtaining through bank loans and from the support of certain governments,” Nedeljko Cubrilovic explains. Bosnia and Herzegovina has received support for its infrastructure projects from the EU, the European Bank for Reconstruction and Development, and other international sources.

“The government is also upgrading the Republic of Srpska’s air transport system through expanding the existing airport at Banja Luka and making plans for a new airport in Trebinje,” the minister explains.

Fully liberalised telecommunications sector

The telecommunications sector, which has been fully liberalised, is also the target of significant investment. “The sector includes the privatised Telecom Srpska as well as BH Telecom and HT Eronet.

The sector overall is obtaining good results in both subscriber growth and revenues,” Nedeljko Cubrilovic points out. In a related effort, the government is working to upgrade the postal service and to make it a member of the inter-national postal services network.

Nedeljko Cubrilovic urges the international community to take a more positive view of Bosnia and Herzegovina and to take into account the significant progress that has already been made in a difficult transition period. He says, “Other countries which have been in the EU for quite a lot longer are also having problems like the ones we are facing here. As for corruption, we did not have it in the past and are working to get rid of it. What is clear, however, is that our country’s infrastructure is poor, and that is what we need to work on.

BOSNIA AND HERZEGOVINA

9

Public Company “Republic of Srpska Roads”

Public Company Upgrading Srpska’s Road InfrastructureThe Public Company of the Republic of Srpska Roads (JP Putevi RS) is responsible for developing and maintaining high-quality road infrastructure throughout the Republic. The company is involved in maintenance and upgrading of existing roads as well as the con-struction of new roads other than motorways, which are handled by a separate state fi rm.

According to Mladen Lazendic, Director, JP Putevi RS is in charge of around 4,200 km of existing roads, some of them built up to 30 years ago and requiring signifi cant upgrades. The company is using some €80 million in funding from the EU, the European Bank for Reconstruction and Development, and the World Bank to rehabilitate around 1,100 km of main roads in a project that began last year and is set for completion in 2011.

While the Republic of Srpska’s road network is in relatively good condition, especially given the fact that the civil war ended only 15 years ago, Mladen Lazendic says that more fi nancial support is needed for upgrades to the republic’s road infrastructure. He says, “We have one very important road from Foca to the Montenegrin border, which is a key trade route that is very important for the Republic of Srpska and for Bosnia and Herzegovina as a whole. We are now looking for a loan to support work on that road,

Mladen Lazendic, Director

which is currently in bad condition and impassable for heavy trucks.” He estimates the costs for this project at around €75 million.

Major construction and upgrades in the works

JP Putevi RS is also supported by government funds, although it receives less federal support than its counterpart company in Bosnia and Herzegovina because the republic has a separate structure. JP Putevi RS will receive some €100 million in state- funding for projects that will include 200 km of new roads, a new 200 m bridge, a main road from Foca to Hum in the eastern part of the republic (at a cost of around €35 million), a 2,100 m tunnel, and other projects. For road maintenance alone, the company has a budget of €30 million. Mladen Lazendic points out that the Republic of Srpska has around 700 bridges and 100 tunnels that require upgrades.

Mladen Lazendic welcomes the chance to counter some negative press that the Republic of Srpska and Bosnia and Herzegovina as a whole have received for corruption and ineffi ciency. He explains, “We can prove that our company is working effi ciently, since we are closely overseen by the banks and funding organisations that have provided our fi nancing, and we make regular reports to them about our progress. Our roads are much better than they were, and we are working to European standards concerning our maintenance activities.”

Public Company “Republic of Srpska Roads”

10 Vase Pelagica St.78000 Banja Luka, BiHTel: +387 (0) 51 309 061Fax: +387 (0) 51 308 316

info@putevirs.comwww.putevirs.com

Transport

JP Putevi RS is looking into partnering with the private contractors to achieve its goals. Mladen Lazendic explains, “We want to do even more, and will probably work with the private sector through individual contracts.” To potential international partners and investors, Mladen Lazendic concludes, “Our company is well organised and we have a staff of 64 highly-trained people, including engineers, who are committed to doing things right.”

1010

Public Company “Republic of Srpska Motorways”

Bringing Motorways to the Republic of SrpskaJP Autoputevi Republike Srpske (PC Republic of Srpska Motorways) is in charge of planning, construc-tion, maintenance and management of the republic’s motorways. The public enterprise, which began operating this year, is starting practically from scratch since the republic has only six km of motorways at present, with 27 km under construction and an additional 400 km of motorways planned. “We are looking for fi nancing for construction of the 400 km of motorways in fi ve phases. Two phases can begin next year, with another three in the next few years,” says Dusan Topic, Acting Director.

JP Autoputevi was created as a separate entity from the Public Company Republic of Srpska Roads, which handles all non-motorway roads for the republic, and now all motorway projects are being transferred to the new company. JP Autoputevi has received around €50 in funding from the government and €100 million from the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) for the motorway projects already completed or under construction.

Now the company is seeking fi nancing and partners for the remaining 400 km of motorways to be built. “One idea is to give concessions for this project, whose total cost is almost €3 billion,” Dusan Topic says. The government is currently in negotiations with interna-tional fi rms concerning awarding these concessions, but has not yet fi nalised a deal and welcomes contacts from potential partners.

Current projects closely overseen by EBRD and EIB

Dusan Topic points out that the motorway projects already completed or under construction in the Republic of Srpska to date have been closely overseen by the EBRD and the EIB. He says, “We have some

Dusan Topic, Acting Director

experience with those banks, and more importantly these banks have experience with us. We are now in fi nal negotiations with the EBRD for another loan agreement for a motorway interchange to connect with existing motorways. We are talking about a €21 million EBRD loan plus €5 million EC grant.”

JP Autoputevi aims to play a key role in demonstrating that companies in Bosnia and Herzegovina, and specifi -cally in the Republic of Srpska, can do high-quality work which meets EU standards. “The problem in regional infrastructure companies in general is not corruption but rather a need for experience, quality, and technical support. In the end, the only way we can receive the European funding we need to complete projects and start new ones is to do high-quality work, so that is our main target. Quality is our focus,” Dusan Topic concludes.

Public Company “Republic of Srpska Motorways”22 Veselina Masleše St.78000 Banja Luka, BiHTel: +387 (0) 51 233 670Fax: +387 (0) 51 233 700

www.autoputevirs.com

BOSNIA AND HERZEGOVINA

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