embassy of bosnia and herzegovina in london

Bosnia & Herzegovina

investing in

2013

Conference Hosts

The conference is supported by

12013 INVESTING IN BoSNIa & HErzEGoVINa

Foreword

i am boTh honoUred and delighted to write a foreword for this report, which accompanies the first UK-Bosnia and Herzegovina

Trade & Investment Forum. The report you are currently reading will offer you an overview of Bosnia and Herzegovina’s economy and of its numerous investment opportunities, but let me also provide you with a brief summary of my country’s development thus far and our visions for the future.

The post-1995 transition period in Bosnia and Herzegovina has been marked by many challenges, including economic reconstruction and institution-building. Nevertheless, we carried out substantial reforms and have successfully overcome these obstacles. Our foreign policy efforts have primarily been focused on the path towards EU and NATO integrations. This, of course, remains our long-term objective and we are well aware that, being a small and open economy, our future prosperity lies in economic cooperation. Bosnia and Herzegovina has experienced the integrating force of regional commerce and that is why we have embarked on a mission to improve trade relations with the rest of the world and to attract new foreign direct investment. The United Kingdom, as an economic and financial powerhouse of Europe and as a confirmed friend of Bosnia and Herzegovina, seems like a perfect place from which to convey this message.

Bosnia and Herzegovina has many rewarding things to offer. For example, when thinking about investing, one should keep in mind that the country has a long tradition in industries such as mining, metal processing, forestry and the automotive industry. As a result of this, our labour force is highly skilled yet comes with competitive wage levels.

Furthermore, Bosnia and Herzegovina’s strategic geographic location, abundance of natural resources and places with enormous tourism potential provide promising opportunities that can satisfy a wide range of investment appetites. And, precisely because of the need to utilise our skilled labour force and natural riches, our administration has been active in creating a favorable investing atmosphere through an accelerated economic reform process. For instance, foreign investors now have the same rights and obligations as the residents of Bosnia and Herzegovina, corporate tax rates are low and equipment imported as a part of an investment is exempt from the payment of customs duties.

Investing in Bosnia and Herzegovina is investing in the entire region of Southeastern Europe. Over the past 15 years, we have signed several important bilateral and regional free trade agreements and, thanks to cultural and linguistic connections, an investment in Bosnia and Herzegovina is in fact a springboard to a large regional market of almost 100 million people (including countries such as Serbia and Turkey).

We understand that macroeconomic stability is often a crucial precondition for new investments and our monetary and fiscal policies reflect this fact. Our currency (the convertible mark or BAM) is pegged to the Euro, which eliminates exchange rate volatility and contributes to extremely low inflation. Moreover, up until 2009, Bosnia and Herzegovina enjoyed an average annual GDP growth of 5%, which meant that the size of its economy doubled in 14 years.

Our vision for the future is clear and sensible. Bosnia and Herzegovina’s place is in the EU with strong regional and global

By HE Dr Zlatko LagumdzijaDeputy Chairman of the Council of Ministers and Minister of Foreign Affairs of Bosnia and Herzegovina

economic ties. The programme of today’s Forum rightly draws attention to our main comparative advantages; namely, energy potential, manufacturing, agriculture and tourism. This also reflects the fact that our development strategy aims to be balanced and diversified, as well as adhering to high environmental and human rights standards. In this respect, let me reiterate our strong commitment to promoting an investment-friendly environment that will attract investors and induce growth.

Finally, I would like to express my gratitude to everyone involved in the organisation and support of this Forum and I wish you all an engaging discussion and fruitful future cooperation.

HE Dr Zlatko Lagumdžija Deputy Chairman of the Council of Ministers and Minister of Foreign Affairs of Bosnia and Herzegovina

Foreword

2 INVESTING IN BoSNIa & HErzEGoVINa 2013

the embassy of bosnia and herzegovina in the United Kingdom is increasingly focused on expanding trade

and investment ties between Bosnia and Herzegovina and the United Kingdom. Our goal is for our excellent bilateral relations to be matched by equally robust bilateral trade and investment. We see increased potential in this area as a result of Bosnia and Herzegovina’s future within the EU and as economic and business climate reforms are implemented.

At this moment the issue of a free visa regime for Bosnia and Herzegovina’s nationals visiting the United Kingdom and the issue of direct flights connecting our two countries are of crucial importance for the realisation of the businesses concluded at this first UK-Bosnia and Herzegovina Trade and Investment Forum.

The BiH Embassy stands ready to assist BiH companies exporting to the UK and indeed UK companies sourcing goods and services from the BiH. We also support

BiH companies or individuals interested in investing in the UK, and assist existing and potential British investors in BH. Thus we will be extremely happy to assist all potential business opportunities resulting from today’s Forum.

If you have any questions or comments, please feel free to contact us either by telephone or by email and we will be pleased to respond. And, of course, we would be more than happy to receive you in the near future in Bosnia and Herzegovina.

We look forward to assisting your company to find opportunities in Bosnia and Herzegovina or here in the United Kingdom.

Mustafa Mujezinović Ambassador of Bosnia and Herzegovina to the Court of St James’s

By Mustafa Mujezinovic Ambassador of Bosnia and Herzegovina to the Court of St James’s

IntroductIon and welcome


Publisher: Chris GerrardContributors: Jonathan Levack, Brian Naughton, Natalia Debczak-Debski, Tom BurnettArt Director: Steven JonesConference Team: Deanne Lintorn, Frazer Lang, Rebecca Isaacs, Alison HamiltonConference Directors: Leon Isaacs, Atam Sandhu, Roger Martin

CorrespondenceDeveloping Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TUemail: [email protected] | web: www.developingmarkets.com | www.sendmoneypacific.org | www.sendmoneyasia.org

DMA acknowledge the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of Bosnia & Herzegovina, the Government of Bosnia & Herzegovina or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher.

Published by Developing Markets Associates Ltd (DMA) Printed by Woodrow Press Picture credits: i-stockphoto.com, Bosnia and Herzegovina Tourism Board, and Bosnia and Herzegovina FIPA.

01020304081016202326293032

Forewordintroductioncontentseconomic overvieweconomic indicatorsagricultureenergy and mineralsinFrastructuremanuFacturingtourismProgramme oF tHe dayour PartnersmaP

contents

© Developing Markets Associates Ltd

Contents


Bosnia and herzegovina is a small yet open economy with a GDP approaching EUR13bn, equivalent to

approximately EUR4,000 per capita. The previously war torn country has largely prospered over the course of the last 18 years. Following the Dayton Peace Agreement, signed in 1995, Bosnia and Herzegovina’s economy has performed impressively. According to the Economist, Bosnia and Herzegovina was the 17th fastest growing economy in the world from 1997 to 2007. Real GDP growth averaged 11.2%, while in the five years between 1996 and 2000 recording 25% growth per annum. Much of the economic damage caused by the conflict was reversed as the country re-established itself as an upper middle-income state.

tHe gloBal Financial crisis and structural cHallenges However, like many countries in the region, the effects of the global economic crisis were acutely felt in Bosnia and Herzegovina. Prevailing economic conditions in a number of key partner states hit the country hard – especially through its close economic links to Western Europe through exports, remittances and capital inflows. Growth dropped from 5.6% in 2008 to -2.9% in 2009. Credit to both households and businesses dried up and foreign direct investment (FDI) suffered, falling from a peak of EUR1.3bn in 2007 to EUR180mn in 2009 – although, significantly, FDI has started to recover again and is

estimated to have totalled EUR350mn in 2012. Subsequent economic growth has remained subdued with the effects of the crisis on Bosnia and Herzegovina still lingering. The International Monetary Fund’s (IMF) latest assessments put growth at 0.7% in 2010, 1.3% in 2011 and 0% in 2012. Now though, the prospects are considerably brighter, with the IMF estimating growth to average between 2% and 4% per annum from 2014 to 2017.

The country’s recent economic woes cannot be put down to the global context alone. Bosnia and Herzegovina suffers from structural challenges that are a legacy of it socialist past and the 1995 peace agreement.. The establishment of the Constitutional and Dayton Peace agreement created two separate political entities: The Federation of Bosnia and

economIc overvIew

Economic Overview by Jonathan Levack


Economic Overview

Herzegovina and the Republic of Srpska. To make the situation even more complex, the larger of the two entities, the Federation of Bosnia and Herzegovina, comprises 10 cantons, each with its own government and constitution. This has two principle effects. First, political deadlock can often result. Following elections in October 2010, a 16-month stalemate lasted before a government could be formed. Second, the political system convoluted. According to Dr Goran Mirascic, a member of the Vice President’s Cabinet, “This political and legal framework has caused the existence of overlapping competences, which negatively affects each sector, mainly the economy.” Furthermore, the World Bank argue that the business environment “is burdened by a large and complex public administration system and layers of administrative approval authorities.”

Multiple layers of governance and a socialist past also result in a sometimes unwieldy public sector. Despite efforts to privatise many public industries and reduce the cost of the public sector, government spending still hovers around 50% of GDP. Much of this spending is concentrated on social welfare rather than capital investment, leaving much needed infrastructure projects unfunded. In fact, according to the World Bank, Bosnia and Herzegovina has proportionally one of the highest public sector wage bills in Europe and Central Asia at over 13% of GDP. This is compounded by significant autonomy in the setting of budgets across the country and a high dependency ratio (the ratio of those typically not in the workforce and those typically in the workforce), which is reflected in the central government’s ability to generate revenue. The onset of the global financial crisis, too, has impacted on government spending as a proportion of GDP and the country’s welfare bill.

The country’s structural challenges are reflected in international competitiveness indexes. The World Bank’s 2013 Ease of Doing Business Report places Bosnia and Herzegovina at 126th of the 185 countries surveyed – a slight improvement on 2012. The report highlights the challenges in need of attention, with the process of establishing a business and enforcing contracts particularly prevalent. On the other hand, the country performs well in terms of access to finance and the registration of property. Also, more

positively, the World Economic Forum’s annual Global Competitiveness Report ranks Bosnia and Herzegovina 88th out of 144 countries assessed in its 2012-13 index, putting it on a par with regional neighbours Moldova and Albania. Indeed, this is a marked improvement on the previous two reports, when the country ranked 100th and 102nd respectively, showing the progress made. Reflecting the country’s relatively well-educated

population, Bosnia and Herzegovina ranks an impressive 48th in terms of health and primary education – the country also performs well in terms of higher education and training as well as innovation. However, the annual index does also note some of the country’s shortcomings. The index ranks the country’s financial market development at a rather disappointing 119th out of 144 and business

“much of the economic damage caused by the conflict was reversed as the country re-established itself as an upper middle-income state


sophistication at 109th. On the plus side, Bosnia and Herzegovina performs comparatively well in Transparency International’s annual Corruption Perceptions Index. Ranked at 72nd of 175, Bosnia and Herzegovina is on a par with Italy, just behind regional neighbour Croatia and some distance ahead of other countries in the region.

Recent instability has intensified the need for foreign support. The IMF agreed to a new two year EUR405mn stand by arrangement (SBA) with Bosnia and Herzegovina in September 2012. According to Costas Christou, the IMF’s mission chief in Bosnia and Herzegovina, “the main aim of the programme is to counter the effects of the Eurozone crisis.” The programme has four key objectives: to improve national policy coordination, maintain fiscal discipline, ensure financial stability and intensify reform efforts. In short, the stand by agreement looks to tackle some of the structural challenges that have plagued the economy in recent years. Initial assessments suggest that the programme is already taking effect: the IMF noted in December 2012 that “Bosnia and Herzegovina’s early performance under the SBA has been encouraging.” Central government spending is expected to fall in 2013, while capital spending is projected to increase. The IMF also expect fiscal consolidation to continue, noting that the 2013 budget is set on conservative estimates and the government’s deficit reduction plan is actually running ahead of schedule. Indeed, current projections anticipate government spending to fall to 47.5% of GDP by 2015.

ricH PotentialDespite a mixed outlook and the structural challenges outlined, Bosnia and Herzegovina does present significant opportunities for investors. The country has long been seen as part of Germany’s “extended workbench”. Industrial clusters exist throughout Bosnia and Herzegovina to service the manufacturing industry in Western Europe. Output from the country’s manufacturing industry is also generally considered of a higher standard than regional competitors. Bosnia and Herzegovina’s automotive sector, for example, has flourished. 90% of production is now exported, with European manufacturers including Volkswagen and Skoda sourcing a wide

variety of parts, from car lights and electronics to alloy wheels, gearboxes and clutches, from Bosnia and Herzegovina. The Economist recently reported that firms in the East of the country are growing at 25-30% a year with more and more European firms shifting production to Bosnia and Herzegovina.

mineralsThe automotive sector is, too, well served by the country’s metal processing sector. The sector is surprisingly large, covering the manufacture of basic metals including iron, steel and alloys and the manufacture of fabricated metal products, such as forging, pressing, rolling, powder metallurgy, treatment and coating of metals and general engineering. Although the sector is dominated by small and medium size enterprises, ArcelorMittal Zenica and Aluminium Mostar hold significant positions – the former being a prime example of successful foreign investment in the country. The mining

of mineral resources has long played an important role in the Bosnian economy too. The country has vast reserves of natural minerals such as coal, bauxite, iron and limestone. In addition, it is estimated that Bosnia has over 653 million tonnes of iron ore deposits as well as significant reserves of chromium, lead, magnesium and zinc.

Financial sectorFor a relatively small economy, Bosnia and Herzegovina is surprisingly open to foreign investment and, in certain sectors, well developed. Take the financial sector. For a country of less than four million people, the financial sector is dominated by banking and is home to 29 commercial banks of which 28 are privately owned, 21 of which are in foreign hands. Indeed, according to the country’s foreign investment promotion agency (FIPA), foreign owned banks account for 95% of total assets, with the five largest accounting

“industrial clusters exist throughout Bosnia and Herzegovina to service the manufacturing industry in Western europe


for 56.3% of total assets. According to 2011 figures, Austrian (42.3%), Italian (23.3%) and Slovenian (14.1%) banks dominate the ownership of the country’s banking sector. While the international nature of the sector encourages stability and business sophistication, a number of the country’s banks are reliant on funding from parent institutions, often in the Eurozone. Instability at home can breed caution in Bosnia and Herzegovina.

agriculture and ForestryBosnia and Herzegovina is blessed with genuine potential due to a natural environment that has long been carefully exploited yet still holds significant prospects for further sustainable growth. Agriculture is a prime example of a sector that should better benefit from the country’s natural assets. Abundant water supply, a temperate climate, fertile soils and close proximity to European markets – all factors that could be better exploited. Importantly, too, land and labour costs compare favourably to many of its Mediterranean neighbours both inside and outside of the EU. Indeed, the World Bank’s recent country programme snapshot highlights that “favourable climate conditions and relatively low prices give the agriculture sector in Bosnia and Herzegovina some comparative

advantages.” However, despite 20% of the population continuing to work in the agricultural sector it accounts for less than 10% of GDP, suggesting there is significant scope for growth. Potential areas for investment include a variety of different types of agribusiness, from cereals and vegetables to livestock farming and fishing. Further efforts to meet stringent EU standards will enable Bosnia and Herzegovina to benefit from its comparative advantages and develop its agricultural sector.

Forestry and wood processing is also rich in potential. 53% of the country is covered in forest, making the country’s forest resources “among the richest in Europe in terms of their extent and variety relative to the size of the country” according to the World Bank. Bosnia and Herzegovina’s forests are home to both hard and soft woods and, according to the country’s foreign investment and promotion agency, “have the sustainable potential to provide nearly seven million cubic metres of round wood per year.” The World Bank now reports this figure could actually be closer to 11 million cubic metres. Currently accounting for just 2.5% of GDP, the sector thus has significant potential for growth. Investment in adequate infrastructure and the introduction of more competitive manufacturing processes will help facilitate such growth.

tourismBosnia and Herzegovina’s abundant natural beauty could not only benefit the agriculture and forestry sectors but also its tourism industry. Indeed, the tourism industry has already recorded strong recent growth. Total arrivals grew by 14% from 2010 to 2012, with just under 750,000 tourists visiting Bosnia and Herzegovina last year. Its attractions are clear. From pristine nature, to historical and cultural heritage across a number of religions including Catholicism, Islam and Judaism, as well as skiing and rafting facilities, the country has the assets to attract different types of tourists with diverse interests. Indeed, Bosnia and Herzegovina has also had recent success in developing cultural events of international repute, including the Sarajevo Film Festival and Sarajevo Jazz Festival. Continued growth is expected, but much of the related tourism infrastructure is in need of upgrading and the sector would benefit from further business expertise to widen the country’s appeal.

inFrastructureUnderpinning the quest to convert potential into reality is the need for wider investment in infrastructure. For example, due to its natural assets, Bosnia and Herzegovina is already a net exporter of electricity. Total installed generation capacity amounts to 4000MW, of which 57% is generated hydroelectrically and 43% thermally. The country also benefits from considerable brown coal and lignite reserves, estimated to be six billion tonnes strong. The government is keen to build on this potential. Sarajevo has also announced a major energy investment programme that has the potential to transform the amount of installed capacity to both meet growing domestic demand and cement the country’s position as a net exporter. Although the full extent of the programme is currently on hold, the government believes that the country has the potential to generate a further 4000MW of hydroelectric power, 3500MW of thermal (largely coal) and 1500MW of wind, all requiring multi-billion euro investment, which, in turn, will require investment in the country’s energy distribution network. Indeed, over the course of the current decade, the World Bank estimates that the country’s energy sector will require investment


of more than EUR4bn – primarily for modernisation, life extension, and new generation facilities for the power generation and coalmining sub-sectors – just to meet growing domestic demand for energy.

Bosnia and Herzegovina’s geographical position should also be a source of strength but, in the words of the US Commercial Service, “road infrastructure is fairly poor and underdeveloped.” The total network consists of more than 22,500km of roads, of which the World Bank estimates only half are in good condition. Bosnia and Herzegovina’s railway network, too, is in need of investment. The country’s 1,042km of track is largely electrified but much is single track and operates at fairly low speeds. Both, therefore, are expected to benefit from investment and upgrades. The Corridor Vc project – part of the Pan-European Corridor – will significantly upgrade links between Hungary, Croatia, Bosnia and Herzegovina and the Adriatic Sea. The total in-country investment is estimated at over EUR2bn. The government is also seeking to upgrade the country’s railways to operate at speeds of up to 160 km/h, which will require the modernisation of tracks, signaling and

fleet. Alongside international funding, the government is considering various financing means to develop the country’s transport infrastructure, including public private partnerships (PPPs) and build-operate-transfer models.

incentivising FdiFollowing a dip in FDI in the wake of the global economic crisis, the central government has been increasingly proactive in its quest to re-attract foreign investment to the country in order to help develop the aforementioned sectors. To this end, the government offers a number of incentives to foreign companies or individuals looking to invest in Bosnia and Herzegovina. For example, the government has established free trade zones, in which companies do not pay VAT or import customs. In addition, foreign investors are free to employ foreign nationals and import any equipment free of duty, should it be part of an initial investment. Corporation tax is also low at just 10%. Importantly, too, will be further anticipated privatisation. Only 30% of larger state-owned companies have so far been privatised, indicating the potential

for further measures. Indeed, according to the foreign investment promotion agency the country “is accelerating the privatisation process for companies of strategic importance in order to increase economic growth and enhance the volume of foreign investment.” Those being touted include state-owned telecommunications providers, power companies and utilities providers.

conclusionBosnia and Herzegovina’s future looks brighter than it has done in the recent past. Following a tough four years, the country is expected to return to growth this year, with the medium term outlook more positive still – the IMF now estimates growth to average between 2% and 4% per annum from 2014 to 2017. Much of this growth will be predicated on the success of cluster industries supplying manufacturing in Western Europe. As such, recent success in the automotive sector, prospects in agriculture, tourism and wood processing as well as much needed investment in infrastructure bode well. The country will continue to remain vulnerable to uncertainty in the Eurozone. But reform efforts, driven by the IMF, and solid growth expectations in Europe’s heartland should allow Bosnia and Herzegovina to perform well. Economic growth may not return to the levels witnessed in the unique climate following the Dayton Accord anytime soon, but investment in Bosnia and Herzegovina should prove profitable for the savvy investor.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Real GDP 6.1 5.6 -2.9 0.7 1.3 0 0.5 2 3.5 4 4

TaBlE 1 GDP GROWTH (%)

Sources: IMF, figures for 2013 onwards are projections.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Current Account Balance (% of GDP)

-10.7 -14.1 -6.3 -5.7 -8.8 -9.9 -9 -7.7 -6.7 -5.7 -5

FDI (€ millions) 1,329 684 180 174 350

TaBlE 2 ExTERNAL SECTOR

Sources: IMF,FIPa

“Bosnia and Herzegovina’s abundant natural beauty could not only benefit the agriculture and forestry sectors but also its tourism industry


CHarT 5 FDI By SECTOR (%, 1994-2010), TOTAL €4.9 BILLION

2%2%

1%1%

37%12%

20%

17%

8%Manufacturing

Banking

Telecoms

Trade

Services

Other financial services

real estate

Transport

Tourism

Source: WTo

CHarT 3 ExPORT DESTINATIONS (2011)

3.7%1.8%

55.6%

14.6%

12.2%

EU (27)

Croatia

Serbia

Montenegro

Turkey

CHarT 4 IMPORT SOURCES (2011)

9.4%

5%

45.4%

14.3%

10.5%

EU (27)

Croatia

Russia

Serbia

China

Source: WTo Source: WTo

CHarT 1 ExPORTS (2011) CHarT 2 IMPORTS (2011)

29.1% 24.8%56.7%

56.1%

13.7% 19.1%

Agricultural Products

Fuel and Mining Products

Manufacturates

Source: WTo Source: WTo

Agricultural Products

Fuel and Mining Products

Manufacturates

Economic Overview


From a macro perspecTive, the agriculture sector in Bosnia and Herzegovina has considerable untapped potential.

In its Agricultural Sector Policy Note for Bosnia and Herzegovina, published in 2010, the World Bank notes that:

Favourable climate conditions and relatively low factor prices give the agriculture sector in Bosnia and Herzegovina (BiH) a clear comparative advantage over other countries. The agricultural season in BiH begins earlier than in most European countries, shipping costs are relatively low, and land and labour prices are more favorable than in other southern European countries. As a result, the country’s agriculture sector should be well positioned to compete on the export markets. Estimates of domestic resource cost (DRC) suggest highly efficient use of resources in the production of a number of crops, as compared with the opportunity

cost of these resources. With yields well below the EU-27 average, BiH’s agriculture sector shows significant growth potential.

The World Bank report also details some of the constraints currently hindering the development of the agriculture sector in BiH, including: the lack of post-harvest facilities for storage and packaging; poor access to affordable finance; market failures such as high input prices and low bargaining power for farmers and other stakeholders; fragmented supply chains and land ownership; institutional constraints such as the absence of EU-compliant regulatory frameworks for food safety; and relatively low levels of investment into public goods, such as market infrastructure and natural resource management.

The report sums up the post-independence, post-civil war situation by concluding that:

“BiH’s agriculture sector is at a turning point. The role of the agri-food sector needs to be defined, either remaining primarily as a source of subsistence for a relatively poor rural population, or evolving into a more competitive sector that can substitute for imports and expand exports. Today’s sector tends to support the former, and developing a more competitive agriculture sector would require a significant shift in agricultural expenditures and policies. Regardless, given the country’s EU accession aspirations, certain reforms will be necessary sooner rather than later.”

Against this backdrop, the government of BiH has been working in concert with the international development community to overhaul its agricultural sector, institute the necessary reforms required to compete in a free market and take the necessary steps to prepare for EU accession. The government has repeatedly highlighted

agrIculture In BosnIa and HerzegovIna

Agriculture by Brian Naughton


the strategic importance of agriculture to the BiH economy, both as a vital source of employment and as a primary way of expanding its exports whilst reducing its reliance on imports. BiH is working with the World Bank on the Agriculture and Rural Development Project, an initiative designed to “strengthen the capacity of its State-level and Entity-level institutions to deliver more effective agricultural services and support programmes as well as to make a substantial contribution to an acceleration of BiH’s eligibility to access support under the European Union Instrument for Pre Accession for Rural Development”. Other actors, such as the Swedish government, through its International Development Cooperation Agency (SIDA), are playing key roles in improving governance and strengthening legal frameworks, as well as helping to improve general competitiveness in the agricultural sector.

overviewBosnia and Herzegovina is rich in natural resources and conditions that create a favourable environment for agricultural production, including: a varied climate (from temperate continental European to Mediterranean); a cheap and skilled labour force; favourable growing conditions for popular export crops; excellent grazing lands for livestock; good conditions for agro-processing; along with geographic proximity to large export markets; a plentiful supply of unutilised land; existing preferential arrangements with the EU for exports; the future promise of accession to the EU; and an underserved, indigenous population that currently relies heavily on imported produce (the value of imported processed food into BiH currently stands at approximately US$1bn per annum and includes many staples that can be produced locally, including wheat, meat, dairy products and fruit juices).

A lack of financial resources necessary for modernisation in all segments of agricultural production is one of the major constraints in the development of this sector. Despite the highly favourable conditions, the huge agricultural potential

Agriculture

is only partially utilised. Although there has been steady growth in production in recent years, levels are significantly below actual potentials and expected results. Nevertheless, the sector is already very important for the local economy; indeed agriculture represents 20% of the total number of people employed.

laBourAgricultural labour is abundant and cheap, particularly when compared to most countries in the EU. In addition, all categories of the workforce (engineers, technicians and skilled workers) required in the food processing industry are available at highly competitive prices. In May 2012, the average monthly net earnings in the agriculture sector was EUR350.

climateBiH is equidistant from the Equator and the Pole, thus the climate is not dominated by a single type of weather. There are neither dry seasons nor harsh and long winters. It can be divided into three climatic regions with more or less sharp boundaries or moderate transition zones:

Northern region

Hilly mountain region

Southern region

The climate is predominantly moderate continental, particularly characteristic for central BiH, while the northern part of the country has a predominantly continental climate. The south of the country has a sub-Mediterranean climate, characterised by long summers and short, mild winters, with more than 200 sunny days and 1,400 l/m2 of precipitation per year.

“The agriculture sector in bosnia and Herzegovina has considerable untapped potential


water resourcesNatural water resources are abundant and ground water is accessible in many places. About 38,719 km2 (75.7%) of the BiH territory drain via the Sava River to the Black Sea, and 12,410km2

(24.3%) drain via the River Neretva to the Adriatic Sea. The boundary between these catchments is obscured at the local level, especially in the South West, where rivers flow through karst areas.

The spatial variation of the hydrological cycle is very characteristic for BiH. For example, the basic annual precipitation in the southern region is 2.5 times greater than in northern region, and twice that in the central region.

In the south, the mostly Mediterranean-type precipitation is between 1,500 and 2,000mm of rain, potential evapotranspiration is 900mm, actual evapotranspiration is 600mm, potential water deficit or irrigation requirement 300mm and potential outflow or surplus from 900 to l,400mm.

The widespread availability of water, when coupled to the soil quality and varying climatic conditions, make for

a perfect environment for agricultural production, both in terms of crop choice and cultivation systems. Key sub-sectors currently being exploited are listed below.

Field croPsNorthern parts of the country and the river valleys are particularly suitable for field crop production, including cereals, industrial crops, vegetables, feed crops and so on. There are also exceptional conditions for intensive commercial livestock farming and fattened meat production, as well as milk production.

medicinal and aromatic PlantsBiH has a long tradition in collecting medicinal and aromatic herbs. The biodiversity of medicinal and aromatic plants and mushrooms in BiH is extremely rich thanks to its favourable geographic position and varying topography, including its vast pastures, different types of forests, and its unspoilt lakes and rivers. Medicinal and aromatic plants have the potential to substantially contribute to the local economy. It is estimated that BiH has over 700 species of aromatic plants, out of which around 200 are exploited.

The annual harvesting currently varies from 1,500 to 9,000 tonnes (depending on demand and climatic conditions). At present, dried plants are generally packed and sold in 25kg sacks but there are also significant opportunities for adding value through agro-processing – for example, in the production of essential oils and herbal supplements such as lemon balm.

HoneyBiH’s high levels of plant biodiversity, coupled with its unpolluted environment, lend themselves to beekeeping and the production of high quality honey as well as other secondary products such as beeswax, royal jelly, pollen and bee venom. There are several varieties of honey produced in BiH, depending on the geographic region. Sage, heather, Jerusalem thorn, Dalmatian laburnum and tangerine honey are produced by the beekeepers from the southern part of BiH, and chestnut, sunflower, alfalfa and acacia honey are produced in the northern part of the country.

Beekeeping accounts for 1% of the total agricultural production in BiH but there is huge scope for the development of this industry; total existing honey production does not even cover the needs of the local market.


Fruit and vine growingThe most convenient fruit-growing regions are the hilly and hilly-mountainous regions and along the rivers (Sava, Bosna, Drina, Una, Neretva, etc.) and the southern, Mediterranean region.

Currently, there are an estimated 14 million trees producing plums, pears, apples and other fruits, for both export markets and to go into fruit juice production. Many parts of BiH are suited to berry and fruit production. Recent yields of apples, pears, cherries, sour cherries, walnuts, olives and raspberries have increased significantly, demonstrating the opportunities for further exploitation.

vegetaBle growingThe soil and climate in BiH are suitable for all types of vegetable production; as well as

cereals such as rye, barley and wheat could be produced in all regions of Bosnia and Herzegovina; along the rivers, on the plains and in the hilly and mountainous regions.

livestock and Forage ProductionBiH is richly endowed with pastures and grazing land, particularly in the central part of the country, with great mountain grasslands that are full of water. A large part of BiH’s agricultural land is suitable for livestock, milk, dairy and meat production, with lots of open grassland and climatic conditions favourable for intensive cattle, sheep and goat farming, as well as for the cultivation of for instance cultivation of silage.

BiH has comparative advantages for animal farming that makes considerable use of grazing land, such as extensively raised veal and beef, as well as meat and dairy products from sheep and goats. In

addition, intensive commercial cattle raised for meat production as well as dairy production can be developed in both flat and hilly regions where there are enough ploughed fields for fodder.

FisH FarmingAn abundance of clear, unpolluted rivers and streams across the country presents huge potential for both small scale and industrial size fish farming. Fish farming is already developed, especially for trout and carp. The most prevalent fish species in the aquaculture sector in BiH are:

Salmonid species – rainbow trout, brown trout and brook trout

Cyprinid species – common carp, grass carp and silver carp

Marine species – European sea bass, gilt-head sea bream and common dentex

Molluscs – Mediterranean mussels and European flat oysters

organic Food ProductionOrganic production in BiH is in the early stages of development and the local organic market is still relatively undeveloped. Limited quantities of organic produce can be found in large supermarkets and in a few specialised stores. Most consumers in BiH consider organic products expensive and believe that most locally produced foods are similar to organic products because of Bosnia’s traditional agricultural practices and its accordingly low levels of chemical use (fertilisers, pesticides, etc.).

The cultivation of organic produce would be highly competitive compared to the cost of production in more developed European countries, so there are opportunities for exporting organic produce to the EU, where the market for organic produce is well developed and there is high demand.

BiH’s average farm size is small; the hilly and mountainous land conditions are generally unsuitable for large-scale cultivation. The small scale of industrial production reduces industrial pollution. The main principles of organic production are based on cultivation and breeding techniques that preserve and improve

Agriculture

“The government has repeatedly highlighted the strategic importance of agriculture to the bih economy


the overall ecological balance, with the goal of achieving optimum relationships in agro-ecosystems between humans, animals, plants and land.

In BiH there is still no law on organic farming production. The international community is playing the main role in organic sector development. Since 2007, Organska Kontrola (OK), the local certification body, is accredited by the International Federation of Organic Agriculture Movements (IFOAM) and OK standards are in use for the certification of organic production in BiH for the sale of organic products both locally and for the export market.

The fact that traditional agricultural practices in BiH have avoided the use of chemical pesticides and artificial fertiliser presents a significant opportunity for the widespread cultivation of high quality organic produce capable of meeting EU standards.

Food ProcessingThe food industry is an important sector in the economy of BiH, both for assuring food security for the country and in terms

of preventing further increases in the negative trade balance of the country. The war-related damages in the agricultural sector amounted to approximately EUR4bn. In some areas of BiH, 70% of the business infrastructure and 60% of the livestock were lost.

Since then, the food processing industry has worked at approximately 10% of its capacity. Currently, the BiH food processing industry consists of companies engaged in the manufacturing or processing of foods and beverages for human consumption, including meat, milk, fruit, vegetables, sugar, oil and tobacco, as well as prepared feeds for animals.

Existing production capacity is limited and insufficient to satisfy even local consumption requirements, making the food processing sub-sector a natural area for further investment, development and enlargement.

timBer and wood ProcessingThe wood processing industry currently accounts for 15% of industrial production and ranges from raw timber all the way up to finished furniture. Timber is BiH’s best known natural resource. BiH has a long tradition in forestry and wood processing, going back to the second half of the 19th Century. Bosnian beech is particularly famous worldwide, due to its high quality. The abundance of both hard and softwood, as well as a competitive and skilled workforce, make this sector attractive for investment, particularly in terms of export-oriented production. Exports currently account for about 11% of total BiH exports. An important next step in the development of this sector is investment into the modernisation of technology and forging stronger connections with supporting industries.

“agricultural labour is abundant and cheap, particularly when compared to most countries in the eU


53% of the country is covered in forests. Growing stock is estimated at about 340 million m3. The annual increment is about 9 million m3, of which 4 million m3 is softwood and 5 million m3 is hardwood. Beech, oak, ash, pine and fir – as well as more specialised woods such as walnut, apple and cherry – are exported as raw timber, half fabricates and finished products.

The success of the wood processing industry in BiH is largely a result of its comparative advantages – abundant raw materials, cheap labour and relatively low investment in production facilities. Almost anything produced in plants around the world can be produced in BiH. Commonly produced items include: all types of furniture (softwood and hardwood, wood-based panels, solid wood, bedding, mattresses, upholstery, etc.); wood constructions – carpentry and joinery products (windows, doors, cabinets); machined products (e.g. tool bodies and handles); prefabricated houses; parquet panels; plywood, veneer, sawn timber, planed and dimension stock; wood containers and packaging – e.g. boxes, pallets and load boards; and decorative and ornamental pieces.

conclusionsIn summary, it would seem that the political will now exists in BiH to push forward rapidly with the necessary transformations to support agricultural development and to implement the reforms that are the prerequisites to EU membership. Foreign direct investment (FDI) is seen as a vital strand in the next phase of the development process across numerous sectors, including agriculture; bringing in not only the much needed investment capital, but also the capacity and expertise required to transform the practices and processes on the ground.

It is clear that a vast amount of latent potential exists within the agriculture sector in BiH, as a result of both the inefficiencies of the command

economy of the former Socialist Federal Republic of yugoslavia and, more recently, because of the negative impacts of the civil war. In the pre-independence era, agriculture in BiH was based on small and largely unprofitable agricultural holdings; hence most of its food was imported. Industry in general was greatly overstaffed, reflecting the inefficiencies of the central planning model. Life behind the Iron Curtain was governed by a different set of economic rules and BiH’s central position within the former yugoslavia meant that, prior to its independence, it had very little international experience or tradition – and many of its inputs and outputs were with other yugoslav republics.

These past constraints, however, present a real opportunity for investors who are able to see beyond the past turmoil and focus on the raw potential of BiH as a

country with abundant natural resources, a cheap and skilled workforce and proximity to major European markets, as well as the future promise of accession to the EU and an under-served local market that currently imports USD$1bn of agricultural produce annually.

There are numerous agricultural sub-sectors that are ripe for FDI, including: the livestock industry (meat, dairy and forage production); the farming and processing of fruits, vegetables and other field crops including cereals; the production of honey and associated products such as royal jelly; the cultivation and processing of medicinal and aromatic plants; fish farming; organic food production; agro-processing; and wood processing.

The ultimate goal for BiH in agricultural terms is to fully capitalise on the opportunity that it has been given by virtue of its location and natural resources to become the “breadbasket” of southeastern Europe; in other words, to become a major exporter of agricultural produce. Given the current transformations underway in support of the modernisation process, highly attractive returns for early investors seem increasingly likely.

Agriculture

“The wood processing industry currently accounts for 15% of industrial production and ranges from raw timber all the way up to finished furniture


energy and mInerals In BosnIa and HerzegovIna

Energy and Minerals by Brian Naughton

Bosnia and Herzegovina’s (BiH) extractive industries – specifically its energy and metal production industries

– are amongst the country’s best performing sectors. As with other sectors such as agriculture, full-scale development has been somewhat hindered by legacy issues relating to BiH’s pre-independence history as part of the former Socialist Federal Republic of yugoslavia, coupled to the negative impacts of the civil war and the subsequent complexities of the post-war political and administrative system. But with ongoing support (both financial and technical) from the international development community – and a keen eye on the goal of accession to the European Union – the country is beginning to make some important breakthroughs, especially those relating to efforts to modernise the legal and regulatory environments that are the precursor to both long term, sustainable socio-economic development and to attracting greater levels of foreign direct investment (FDI).

tHe energy sector

overviewThe energy sector in BiH is widely considered to be its single most important long-term economic asset. The country has abundant natural water resources for hydropower and is the only net exporter of electricity in the Western Balkans. While being one of the most important economic drivers, the energy sector in BiH still offers huge potential opportunities for further development and investment. The country is endowed with significant and diverse indigenous natural energy resources that are still untapped or only partially exploited. These include:

Brown coal and lignite, with estimated reserves of six billion tonnes

Partially exploited hydro potential is estimated at over 6,000 Megawatts

Significant wind energy potential, estimated at 2,000 Megawatts

Raw material resources for bio-mass energy, including approximately 1.5 million m3 of forest

Geo-thermal and solar energy are both viable but have not been sufficiently explored and exploited

Oil and gas – preliminary research surveys have indicated the presence of promising deposits at a number of sites (off-balance sheet reserves are estimated at 50 million tonnes of oil).

According to a paper published by an EU-funded policy resource centre dealing with the coordination of research into policies in the Western Balkan countries (WBC-INCO.NET):

“BiH is the only country in the region with a positive balance of electricity exports, and the eighth country in Europe in terms of


Energy and Minerals

hydropower – just over one third (37%) of the hydropower potential is being used. Also, it is estimated that BiH has the greatest potential for energy production from renewable sources (wind, solar, biomass, and geothermal energy) in the Balkans, and they are 30% higher than the EU average. Moreover, BiH has more than six billion tonnes of coal reserves. After privatisation of the oil industry in the Republic of Srpska and the revitalisation of manufacturing plants, supply of petroleum products is mainly done from domestic capacities, while gas is imported from Russia.”

energy suBsectorsThe BiH energy sector comprises the following main subsectors:

Coal

Electric power

Oil & natural gas

coalCoal is of vital importance to Bosnia and Herzegovina’s economy, since coal fired power plants produce more than 70% of the country’s energy. Having geological reserves of an estimated six billion tonnes of coal, BiH is self-sufficient in thermal coal. Major deposits of lignite and brown coal are sited all around the country. Most of the existing coal mines fuel thermal power plants (TPP). Coal mines situated in Northeast and Central Bosnia serve two TPPs: Kakanj and Tuzla.

Production of coal in Bosnia and Herzegovina in 2011 was 12,778 tonnes. The effective demand of thermal power plants is a regulator of coal production to a major degree since it absorbs around 90% of total coal production. The remaining balance is supplied to industry and for domestic consumption; negligible quantities are exported.

There are opportunities for investment in further coalmines in Kongora (to fuel TPP Duvno), Kotezi (to fuel TPP Bugojno), as well as brown coal mining opportunities in Kamengrad and Miljevina.

electric PowerElectricity is predominantly produced in hydro and thermal power plants.

Currently, the production facilities, with total installed capacities of 4,000MW, exceed the domestic demand, thus the surplus electricity is exported.

oil and natural gasBosnia and Herzegovina is currently dependent on the importation of oil and natural gas. Since independence, approximately USD$150mn has been invested in oil and gas exploration in an effort to achieve greater energy security by reducing dependence on imported fuel. The initial results justify further explorations and indicate that there are realistic possibilities of finding commercially viable deposits. Based on the initial research, oil reserves are estimated to be in the region of 50 million tonnes but are currently listed off-balance sheet.

BiH’s existing oil industry is predominantly related to the processing of imported oil, including the refining of imported crude oil and the production of petroleum products.

BiH’s oil sector has developed significant production capacities, including two refineries fitted with some of the world’s most state-of-the-art technology, but presently only running at partial capacity, including:

Refinery Brod, with a capacity of four million tonnes per year, processes imported crude oil into various products (motor fuels, liquid petroleum gas, bitumen, etc.)

Refinery Modriča, which produces motor oils and various special purpose technical oils for the oil industry and other commercial purposes.

Recently, both Brod and Modriča refineries have been privatised and their full capacity production is expected soon. In addition, BiH has significant storage and transport capacities.

Within BiH’s energy sector, the gas subsector is the least developed. Its development is a high priority strategically – following the shock of the country’s exposure to the Russia-Ukraine Gas Crisis in 2009. Currently, gas is imported over only one pipeline, with a length of 191 km and the projected annual capacities of 1 billion m3.

The demand projections until 2020 amount to between 1.5 and 3 billion m3 of gas, meaning that serious gas sector reform and development is required, including investment into:

The construction of an alternative supply route

Distribution network development

The construction of underground storage silos to improve energy security

The diversification of gas supply sources.

The option of substituting imported natural gas with gas produced by coal gasification is under consideration too.

new Power generation Projects Intending to harness the substantial and diversified energy resource base in BiH, relevant stakeholders have adopted development and investment programmes for the construction of new generation plants, entirely respecting the recommendations from the EU Directive 2003/54.

Significant investments in new power system facilities and the expansion of existing power generation capacities are foreseen by these programmes, with a view to meeting the growing electricity supply deficit within the regional and larger European markets. Investment programmes encompass a number of the development projects, based on coal, hydro and renewable energy sources.

“The energy sector in BiH is widely considered to be its single most important long-term economic asset


There are a total of seven new coal-fired thermal power generation projects, with a potential incremental electricity production capacity of approximately 3,450MW; including both the rehabilitation and expansion of existing facilities and the construction of entirely new coal mines and power generation plants.

Development programmes identified 15 potential new large and small hydropower projects, and four rehabilitation and expansion projects, with potential incremental electricity production capacity of approximately 2,000MW in total. Rehabilitation and expansion projects are foreseen in hydropower plants at Jablanica, Rama, Jajce and Čapljina.

In the river basins of BiH, over 400 potential micro locations have been identified for the construction of mini hydropower plants, enabling a cumulative increase in the electricity production capacity of approximately 1,000MW.

In terms of the potential for wind energy, there are numerous macro and micro locations for wind power plant construction that have been evaluated as advantageous. According to initial pre-feasibility research, the total wind power potential of 18 sites earmarked for development was estimated at 1,030–1,180MW. It was further estimated that possible total production of electrical energy at these locations could amount to 2.4 TWh/year, with the average utilisation factor of about 30%, which represents a high level of productivity, even in European terms. Further research needs to be undertaken to confirm these initial assumptions but, on the face of it, exploiting wind energy seems highly feasible in BiH.

All of the above mentioned power generation projects require significant capital investment, as well as reliable strategic partners.

tHe metal sector

overviewThere is a longstanding tradition of metal processing in BiH. This is not only because of the country’s natural endowment of mineral resources (including iron ore, bauxite, lead, zinc and copper) but also because of its role as an industrial

centre for the production of military, agricultural and automotive equipment in the former yugoslavia; a history that gave it signficant expertise in the metal processing sector.

Like many other parts of the economy, the metal processing sector suffered serious setbacks as a result of the civil war – indeed much of its industrial base did not survive the war. But both the human capital – thanks to the return of many refugees with business skills acquired abroad – and the natural resource base remained intact.

The present day metal processing industry in BiH is once again buoyant and growing, covering ferrous and non-ferrous metal processing; primarily iron and steel, aluminium, lead, zinc and copper. The BiH metal sector has experienced strong export growth over the last decade, especially in aluminium exports.

Export orientation has become the solution for most companies operating in this sector, whilst at the same time trying to reutilise and upgrade their former capacities. In spite of significant imports, the trade balance for the sector is positive.

The metal processing industry has a leading position in terms of the overall value of manufacturing industries in BiH, with a share of 32% in 2009. The vast majority of companies in the metal processing sector are small enterprises (80%) – 15% are medium sized companies and 5% are large companies.

The manufacturers of basic metals are large firms, producing:

Basic iron and steel, ferro-alloys and aluminium

Basic precious and non-ferrous metals

A large range of different products (sheets, bars, tubes, strips, etc.).

Medium-sized and small companies are more specialised and customer-oriented, and characterised by higher levels of metal processing and by the manufacturing of various metal products, such as:

The casting of metals (grey and ductile iron, aluminium, brass, etc.)

The forging, pressing, stamping and roll forming of metal


Treating and coating metals

Precision turning, milling and forming

The manufacturing of pressure vessels – boilers, heat exchangers, condensers, columns, reactors, etc

The manufacturing of steel structures

The manufacturing of components and parts for the automotive industry and other similar industries (e.g. parts for the agricultural equipment industry).

exPort activityThe metal sector recorded 37.8% of BiH’s exports in 2010, making it a vital sector for the country’s economy. The main customers of the metal processing industry are; the industry itself (for both primary and secondary processing), the vehicle and machinery industries, construction, petroleum, gas and electricity (pipes and electrical wiring).

Exports in the period 2005-2010 recorded a maximum in 2008. Due to the global recession, exports dropped in 2009, while 2010 witnessed a substantial recovery.

Human resourcesHuman resources provide a significant comparative advantage for the sustainable development of the metal processing sector in BiH. The country has a qualified, adaptable, innovative and highly motivated labour force. The price of labour in the metal processing industry is competitive compared with the world market prices. Average net monthly wages are EUR300. According to the Agency for Statistics, the metal industry employs 37,500 people – 27.4% of all employees in the manufacturing industry or 5.5% of all employees in the BiH economy. Supporting infrastructure, including the education system, research and development institutions, and design and engineering companies, provide a strong foundation for the rapid development of the sector.

investment oPPortunitiesThe BiH metal sector is operating considerably below its actual potential and expected performance. The existing structure of the metal sector in BiH, characterised by the dominance of small

companies (80%), provides a major opportunity for large companies to invest in the sector ; to integrate existing primary producers and to start their own operations.

Local metal companies are already recognised as reliable partners by existing foreign investors. Privatisation opportunities are available for foreign investors and currently include investment in the following companies:

UNIS – Udružena metalna industrija, Sarajevo – Federation of BiH

Fabrika motora za specijalne namjene, Istočno Sarajevo, Republic of Srpska

Fabrika specijalne transmisije, Istočno Sarajevo, Republic of Srpska

UNIS – Valjaonica hladnovaljane trake, Banja Luka, Republic of Srpska

Čajavec, Banja Luka, Republic of Srpska

wHy invest in tHe metal sector?The BiH metal sector has witnessed a steady and robust production growth rate of over 10% within the past few years, and is the strongest export sector in the BiH economy. The country’s metal sector is one of the most important industrial sectors in the region and its viability as a sound investment is based on the following:

BiH’s long tradition in the metal processing industry

The sector’s well-developed advantages in international markets

An abundance of production facilities and industrial zones

A skilled and cheap labour force

Well-developed production capacities

A natural resource base rich in mineral resources

An export oriented sector (45% of total exports)

No restrictions for foreign partnerships with domestic companies.

Energy and Minerals


InFrastructure In BosnIa and HerzegovIna

Infrastructure by Natalia Debczak-Debski

since The end of The civil war, Bosnia and Herzegovina (BiH) has made great strides in rebuilding its infrastructure network which

was left in severe disrepair. A number of challenges still remain and attracting investors and reliable strategic partners is one of the most important preconditions for continued growth and the successful development of infrastructure in the country. A fully improved infrastructure network will also have a positive impact on a wide range of other sectors of the economy and provide the impetus required to make BiH a fully economically independent nation.

transPortThe country’s transport sector is one of the key sectors in its economy. Furthermore, the favourable geographical position of BiH lends it importance within the wider European transportation

system, especially since the shortest routes linking central Europe with the Adriatic coast run through it. As a result, it is attracting widespread interest from multilaterals and private investors alike.

A number of ambitious projects, adopted by the government and supported by international institutions including the World Bank, European Union and the European Bank for Reconstruction and Development (EBRD) are currently underway. These cover vital links such as roads, railways, aviation, inland waterways and urban transport, and aim to increase the density of high quality transportation facilities within the country.

roadThrough donor assistance, extensive rehabilitation work and repairs of the damages sustained during the civil war were conducted between 1996 and 2003,

with repairs being made to the country’s main roads, bridges and tunnels. Under the Emergency Transport Rehabilitation Project, approximately 2,200km of roads and 58 bridges were repaired, at a cost of around EUR190mn. The Stabilisation Force (SFOR) also provided significant funds for the rehabilitation of the country’s road network.

Today, the road network consists of approximately 22,600km, with 3,788km of main roads, 4,842km of regional roads and 14,000km of local roads. However, European roads, which amount to around 995km, and which cross the country in many sections, do not yet permit desirable traffic flow speeds. In a 2012 report, the Foreign Investment Promotion Agency (FIPA) of BiH stated that large-scale development programmes, reconstructing approximately 850km of main roads as well as constructing new motorways, were currently underway.


Infrastructure

In 2012, the EBRD agreed to support the modernisation of transport infrastructure in BiH with a EUR150mn sovereign-guaranteed loan for the construction of part of the new Banja Luka to Doboj motorway. In conjunction with this investment, the EBRD also agreed to support the preparation of the first public-private partnership project for the main north-south link, the Doboj to Vukosavlje segment of Corridor Vc.

Over 50% of the total population and the economic activity of BiH lie within the zone of influence of the Corridor Vc route, which connects Budapest in Hungary to Ploče in Croatia. Therefore, once completed, Corridor Vc will not only enable the country to be connected to the main European traffic network, but will also accelerate economic growth and enhance the development of other key sectors of the country’s economy including industry and tourism.

railThe country’s rail network consists of 1,042km of track, most of which is electrified and comprises two main strategic lines: the north-south route located on the Pan-European Corridor V and the east-west route, which runs parallel to Corridor x.

In the last few years, BiH has seen a significant increase of railway freight transport volume as a result of improvements made to the railway network and an increase in transport demand. However, the volume of transport of goods and passengers per kilometre of railways remain below the European average, with slow operational speeds and poor signalling, reducing line capacity.

Action is being taken and through a number of development programmes, the country is anticipating the reconstruction and modernisation of its existing railway lines. These projects aim to improve signalisation, increase freight wagons and passenger trains as well as improve broader rail infrastructure to accommodate high-speed rail, which will in turn have a positive impact on job creation and accelerate economic growth.

airBiH has four main airports: Sarajevo, Mostar, Banja Luka and Tuzla. All four

airports are compliant to International Civil Aviation Organization (ICAO) standards and are registered for international air traffic. Over 450,000 passengers pass through Sarajevo airport annually, serving around 90% of the total traffic. Although Mostar, Banja Luka and Tuzla are relatively small, they are continually increasing their numbers of passengers.

Moreover, passenger numbers are set to rise as all airports are undergoing development programmes related to the modernisation and expansion of existing capabilities, including the upgrading of navigation equipment and other facilities such as terminal buildings and runways. In 2010, the EBRD approved a loan worth EUR25mn for the modernisation of Sarajevo International Airport in an effort to help meet growing traffic demands.

inland waterwayThe Sava River, which has two main ports, Šamac and Brčko, is a tributary of the Danube and runs for 333km along the border with Croatia and Serbia. Although reconstruction work has been completed on parts of the river, a number of necessary improvements must still

be undertaken to ensure that the river can play an important role in a growing regional transport network.

Both ports have ambitious development programmes (related to the modernisation and expansion of their existing facilities and capacities) in the pipeline, and aim to become important international industrial zones. With the growing extractive and heavy industries sectors in the country, the ports promise to generate considerable potential for future traffic.

water and water managementThe damage inflicted during the war, insufficient maintenance thereafter and previously inadequate regulatory frameworks have had an adverse effect on BiH’s water management and infrastructure. On average, BiH loses 50% of water due to poor water infrastructure. In some areas, this figure reaches 80%, in contrast to the countries of the European Union, where the losses are only around 10%. Furthermore, access to safe drinking water in the country is also well below European standards: only 60% of the population is connected to public/


municipal water utilities, compared to a 90% average for the EU.

The government is very aware of the need to improve water management and infrastructure – not only to improve the quality of life for members of the population (especially in rural areas) who suffer from a lack of access but also to meet requirements for future compliance with EU environmental legislation. In January 2008, a new law on waters took effect. According to this law, new agencies for water catchment areas have been established, replacing the previous public enterprises.

A number of investments have been made to improve the sector. For example, in 2010, the European Investment Bank (EIB) signed a EUR50mn loan with the Ministry of Agriculture, Forestry and Water Management of Republika Srpska, aimed at the construction and rehabilitation of water supply and sanitation infrastructure in the country.

ictThe ICT sector in BiH is one of its fastest growing, becoming a key driver of economic growth. FIPA has identified that “the challenge ahead for the ICT sector is to gain access to modern and valuable know-how, and this can only be achieved by foreign direct investment (FDI)”.

Although the quality of ICT infrastructure in the country is not yet at the level of EU countries, it is improving year on year. The level of digitalisation in the transmission system is nearly 100% while communication systems are 70% digitalised.

BUSINESS INCENTIVESThe economic reform process in BiH has contributed to a greatly improved business climate which has resulted in the country having one of the fastest business growth levels in South-Eastern Europe (SEE).

• Bosnia and Herzegovina has the most stable currency and the lowest inflation in SEE

• Bosnia and Herzegovina offers Tax and Customs Systems: Investment capital is exempt from paying import customs and customs duties (with the exception of passenger cars, slot and gambling machines)

• The Federation Law on the Corporate Income Tax enables the taxpayer, who in the year for which the corporate income

tax is being determined, has achieved 30% of their total revenue by export to be exempted from the tax payment for that year

• Taxpayers who in the period of five consequent years invest into production in the value of a minimum of BAM20mn, on the territory of the Federation of Bosnia and Herzegovina, will be exempt from the payment of corporate income tax for the period of five years beginning from the first investment year, in which a minimum of BAM4mn must be invested

• Taxpayers who employ more than 50% of disabled persons and persons with special needs for longer than one year will be exempt from the payment of corporate income tax for the year.

The country’s geographical location makes it a perfect base for penetrating markets in the surrounding region including South East Europe and Turkey, with whom it has signed the Central European Free Trade Agreement (CEFTA). Furthermore, with a growing educated labour force the country has a lot to offer to the potential investor in this sector.

conclusionImpressive development has already been achieved in the infrastructure sector – especially when the damage done by the war is considered. Inevitably, challenges remain and there is still a significant gap between potential and performance. The government meanwhile, continues to take steps to ensure that the sector continues to grow; it has actively implemented economic and liberalisation reforms as well as broadly adjusting its legal and regulatory frameworks to European standards, preparing a favourable business environment for further investment in the infrastructure sector. With support from the government and continued financial and technical assistance from international donors, a number of ambitious infrastructure projects are underway or in the pipeline and promise exciting investment opportunities.

Source: Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA)


manuFacturIng In BosnIa and HerzegovIna

Manufacturing by Chris Hindle

As iT emerges from the troubles of the past Bosnia and Herzegovina (BiH) is witnessing the emergence

of high-performing industrial clusters that are helping to raise the country’s profile as an attractive investment destination.

The country has a long and proud manufacturing tradition, which, though severely disrupted and damaged by the war, is once again establishing itself as a key driver of economic growth. Since independence, BiH’s manufacturing sector has attracted the greatest share of foreign direct investment (FDI) – roughly 33% – with investors drawn to the country’s strategic location with access to key markets in central Europe and a skilled, yet relatively low-cost, labour pool.

Despite being outside the EU, many firms already display a high degree of integration with European markets and

the country is often considered part of Germany’s “verlängerte Werkbank” (extended workbench), the hinterland of nearby, low-cost countries from which German firms source parts. As a non-EU member, imports from the country are subject to 8% import duty, yet, few local firms can be heard lobbying for the country’s EU integration process to be accelerated. Some local businesspeople look forward to one day joining the EU and the improvements to governance that this would bring. However, others consider that there are benefits to remaining outsiders and recognise that it

may be the country’s position, beyond the jurisdiction of the EU, which has helped to attract several companies to relocate production to the country in recent years. This notably includes Volkswagon’s decision to relocate production from Slovakia to Sarajevo in 2005.

The average monthly (post-tax) Bosnian salary is EUR421, a fraction of German wages, and employees are considered to work hard for their money. Many factories run 24 hours a day, up to 365 days a year. Wages may be lower still in China and South East Asian countries,

Manufacturing

“The country’s manufacturing base is gradually diversifying, with recent investments in wood-processing, and electronics


but delivery times from BiH to core European markets can be counted in hours and days rather than weeks and the quality of local products is earning a growing reputation.

The country’s manufacturing base is gradually diversifying, with recent investments in wood-processing, and electronics. However, at present manufacturing remains dominated by two subsectors; the automotive industry (and closely linked metal processing businesses) and the manufacturing of textiles, clothing and footwear.

aPParel In recent years, production in textile and clothing and footwear has outperformed the rest of the country’s manufacturing sector. BiH last year exported textiles, leather and footwear goods worth EUR429mn, a year-on-year increase of almost 14%. This is part of a long-term trend of increasing production, despite internal challenges within the industry and the effects of the global economic recession. The number of employees working in the production of textiles, clothing and footwear has risen to almost 25,000 people, from 16,800 in 2006, while a new 20-year plan aims to double the number of workers employed in the sector by 2032.

The government’s draft strategy for developing of the textiles and clothing industry was recently unveiled by the Ministry of Energy, Mining and Industry, after in-depth consultation with the country’s Chamber of Commerce and domestic manufacturers. Erdal Trhulj, Minister of Energy, Mining and Industry expects the action plan to develop well-defined measures to support the industry and build on the country’s longstanding tradition and international reputation for textile manufacturing. Key goals for the plan include the modernisation of production units, the introduction of new technologies and support for deeper integration into global markets.

The strategic importance of the industry lies not only in its potential to become a long-term supply base to European markets but also the employment opportunities it offers. Historically, the industry has been important for encouraging economic growth in underdeveloped areas and providing employment for women. Once again the sector – which is highly diversified and characterised by a large number of small producers, present in almost every municipality – is seen as a means of achieving broad based economic growth across the country.

Despite positive production and export trends, cost reduction and increased automation to improve the consistency

of the product are both priorities for ensuring sustained growth. Investment is essential, though BiH has already displayed its ability to attract companies wishing to relocate closer to their main markets and provide a short product delivery cycle to European retailers. Investments in new ‘greenfield’ projects have been made by a number of firms including Sportek, Kotor Varoš, Dević-Tekstil and Travnik, alongside investment in existing companies such as Sanino, Derventa and Dubikotton. These new partnerships are bringing in new equipment and management know-how, as well as money, to raise the quality of output to meet the requirements of customers and consumers alike.

automotive industrySince the 1950s, Bosnia and Herzegovina has been recognised as an important centre of the European automotive industry, with major brands relying on the country’s skilled workforce to assemble cars for Western markets. Volkswagen began producing vehicles

“since the 1950s, bosnia and Herzegovina has been recognised as an important centre of the european automotive industry


in the country in the 1970s, working alongside established local firms, such as Famos Holdings, which produced under license for the likes of Mercedes Benz and German gears specialist ZF. Strong and diversified supply chains were established while the supporting infrastructure included a well-regarded education system, research and development institutions working in close co-operation with firms and a specialised labour force highly skilled in metalworking, automotive and electrical engineering.

Supply chains and relationships were broken as a result of the war, but the skills never disappeared and, gradually cohesion in the industry is being rebuilt. Successive governments have

championed the re-emergence of the automotive industry and over the past 10 years the industry, which has undergone major restructuring and privatisation, has experienced dynamic development. Over 34 companies are now active in the sector, which is estimated to employee upwards of 6,000 people.

BiH firms are involved across a wide spectrum of the industry producing everything from engine parts and gears, to high-quality metal precision parts; from pumps and filters to textile and leather products for items such as car seats. Auto-components may, at present, be the dominant subsector, but the government wants to develop the whole industry and opportunities for investors exist at all levels of the supply chain.

Several foreign companies have already taken advantage of growth opportunities, taking shares in BiH companies or taking over companies completely. Examples of this trend include TMD Ai becoming a subsidiary of the Slovenian CIMOS-Group and filter manufacturer Unico Filter being taken over by the German market leader Mann-Hummel. Prevent B&H, another subsidiary of a Slovenian group, is now the country’s second biggest company and largest exporter, supplying seat covers to the likes of VW, Renault and Peugeot. Other companies that have received significant amounts of FDI include Jajce Alloy Wheels, Bekto Precisa and ADK.

Typically, firms are strongly export-oriented, exporting on average 90% of production. The majority of exports are to Germany, Italy, Turkey and neighbouring ex-yugoslav countries, though supply chains are now established to over 30 countries worldwide.

To further realise its potential, BiH’s automotive sector requires a significant increase in capital investment in new equipment and technologies and access to new markets. The government hopes that progress can be made through the development of strong strategic partnerships and by attracting large, integrated companies that may be looking to move production, or assembling activity, to a lower cost region.

Cimos TMD is one such company that has benefitted from investment and by becoming part of a larger international entity. The company’s roots in BiH go back as far as 1954, as a producer of farm machinery and later manufacturing parts for the automotive industry. The turning point for the company came in 2001 when it was integrated into Slovenian group Cimos. This marked the start of a period of significant business growth producing parts for turbo compressors and which allowed the BiH subsidiary to grow a substantial international customer base across Europe and the US. The management of Cimos TMD states that human resources have been and remain the core factor in successfully developing its business in BiH and has demonstrated that, with continued investment in knowledge and research, supported by good customer relationship management, BiH companies can be competitive in international markets.

“successive governments have championed the re-emergence of the automotive industry

Manufacturing


tourIsm In BosnIa and HerzegovIna

TourismTourism by Natalia Debczak-Debski

AfTer The TUrmoil of conflict and its aftermath, Bosnia and Herzegovina (BiH) has emerged as a

unique and dynamic destination as travellers realise the full potential of the country. The country bears the imprint of two great empires: first by the Ottoman Turks and then briefly by the Austro-Hungarians, both of whom have undoubtedly influenced the culture and architecture of the land. Its age old churches, stunning mountain landscapes, untouched forests and wild rivers have much to offer travellers looking for adventure and authenticity. With necessary investment into the tourism sector, BiH has the potential to become an all-year-round popular tourist destination.

The tourism sector is primed for development, possessing all the preconditions to play an increasingly

significant role within the country’s economy. However, “in order to do this, it requires a lot of work, from expanding accommodation capacity, improving the availability of our destinations, improving road infrastructure, and the promotion of better quality education of our tourism-hospitality’’, states Federal Minister of Environment and Tourism Branka Đurić.

Tourism in BiH is growing in importance and is a key contributor to the economy. The World Travel & Tourism Council

has reported that the total contribution of travel and tourism to GDP was BAM1,945.1mn in 2011, (7.4% of GDP) and is expected to grow by 6.2% per annum to BAM3,587.7mn (8.2% of GDP) over the coming decade. Furthermore, in 2012, BiH attracted around 750,000 international tourist arrivals, generating BAM952.4mn in visitor exports.

The travel and tourism sector accounted for 21,000 jobs directly in 2011 (1.8% of total employment). By 2022, this number is expected to account for 25,000

“The tourism sector is primed for development, possessing all the preconditions to play an increasingly significant role within the country’s economy


Tourism

jobs directly, an increase of 1.9% per annum over the next 10 years. Moreover, the total contribution of the tourism sector to national employment levels, including the wider effects from investment, the supply chain and induced impacts, is greater. In 2011 the tourism sector was reported to have generated directly and indirectly 76,500 jobs (6.7% of total employment). By 2022 this number is forecast to rise to 93,000 jobs (7.7% of total employment), an increase of 2.0% per annum over the period. The government recognises the importance of tourism as a driving force and expects the sector to become a major source of income in the future and has therefore recognised it as one of the top priorities of an overall national economic development policy.

To ensure continued investment in the tourism sector, the government has made significant efforts to create a more conducive business and investment environment for potential investors. One of the main reasons for investing in the country is its favourable tax system. BiH has VAT rates of 17% and a corporate tax rate of 10%, which are amongst the lowest in the region and Europe.

BiH is also an attractive destination for foreign investors due to its political and

CASE STUDIESProject titleConstruction of Eco-ethnic villageSectorTourism-Real EstateLocationTerritory of the municipality BerkovićiCompany descriptionLocal authorityProject descriptionBuilding an Eco-ethno village in Suzina and Hatelji should raise the level of tourism in the municipality and region, and will give tourists the opportunity to stay in an authentic village from where they can eat the local cuisine and enjoy unspoiled nature. The first phase of the project foresees construction of a new asphalt road to Suzina, with money that will be provided by the RS government. In the second phase, access to Suzina will be completed, with funding for this provided by Handicap International. We are looking for investment for the construction of accommodation and catering facilities in the village. Project status: Business idea.Estimated total investment cost1,200,000KMType of financial investmentJoint venture

Project titleDevelopment of the Tourist Micro Zone Višegradska BanjaSectorTourism-Real EstateLocationMunicipality of VišegradCompany descriptionLocal authorityProject descriptionAvailable resources: Višegradska Banja is a gem of nature, surrounded by a dense pine forest, at 414m above sea level, with a mild continental climate, water (rivers Drina lim, reservoirs, sources of thermal water older than 40,000 years used for healing for 500 years, streams and springs), picturesque hilly areas and Drina canyon, cultural and historical heritage (Mehmed-Paša Sokolović Bridge (under UNESCO protection), Dobrun monastery, gravestone necropolis etc.). Stone from this area was used to build the bridge on the Drina river, and its landcape is also decorated by the endemic variety of fern Vilina Vlas whose name it bears. This place accommodates also thermal water springs and Rehabilitation and Medical Center Vilina Vlas. Project status: Business idea. Estimated total investment costat least EUr3,000,000Type of financial investmentBrownfield

Source: Foreign Investment Promotion Agency of Bosnia and Herzegovina


economic stability as well as favourable geographical position in the heart of South East Europe. The transport sector is undergoing significant improvements through support from the government and international institutions with new and modernised transport links improving domestic travel. The country’s main airport is located in Sarajevo with others in Mostar and Banja Luka. European airlines such as Austrian Airlines, Czech Airlines and Lufthansa operate out of intercontinental hubs such as Vienna, Munich and Istanbul. This year, low cost airline Wizz Air announced for the first time that it will begin operating flights between Tuzla and Malmo, Sweden, from 31 May and between Tuzla and Basel-Mulhouse from 15 June.

Ski and winter tourism already has a long tradition in BiH. The xIV Winter Olympic games were successfully held in 1984 in Sarajevo and perfect pistes can be found in Bjelasnica, Igman and Jahorina. Large investments have already been made to build modern ski lifts and improve accommodation standards, especially in Bjelasnica. With its vast tracks of wild and untouched nature, eco-tourism is also seen as having great development potential and has grown in importance in

recent years. BiH has many national and natural parks. Sutjeska National Park was one of the first parks to be opened in Europe and contains the ancient Perucica Forests and spectacular Maglic Mountains. Canyons, lakes, 23km of Adriatic coastline and sweeping rivers also offer numerous opportunities for the more adventurous traveller. In 2009, the Rafting World Championships were successfully organised on the Vrbas and Tara Rivers.

The long and rich history of BiH, whose wealth of cultural heritage presents a complex mixture of Mediterranean, Byzantine, Ottoman and Central European influences have made this beautiful country a unique attraction for cultural and religious tourism. Two important cultural assets in the country – the Old Bridge in Mostar and the Mehmed Pasa Sokolovic Bridge in Višegrad have been welcomed to the

UNESCO World Heritage list. And, in the last few years BiH has been actively developing its spa tourism which benefits from the country’s rich high-quality thermal and mineral springs; creating a burgeoning health resort industry. There are currently 15 health spas registered as health care institutions.

UNWTO Secretary General Taleb Rifai rightly stated that BiH has all the ingredients for tourism to boom, “Given its rich natural and cultural heritage, its unique mix of cultures and religions, as well as its strategic location close to major European source markets”. There is no doubt that BiH has immense opportunities for the development of tourism. The natural resources which the country enjoys are enviable; and with new investment and continued support from the government, the future is bright for the tourism sector.

“The long and rich history of bosnia and Herzegovina have made this beautiful country a unique attraction for cultural and religious tourism


Programme

Programme oF tHe day

8.00am - 9.00am

Registration and Refreshments

9.00am - 9.10am

Opening AddressAtam Sandhu, Chief Executive, Developing Markets AssociatesHMA Nigel Casey, United Kingdom Ambassador, Bosnia and Herzegovina HE Mustafa Mujezinović, Ambassador, Bosnia and Herzegovina to the United Kingdom

9.10am - 9.30am

Official Welcome HE Dr Zlatko Lagumdžija, Deputy Chairman of the Council of Ministers and Minister for Foreign Affairs, Bosnia and HerzegovinaSir Suma Chakrabarti, President, European Bank for Reconstruction and Development (EBRD)

9.30am – 11.00am

Setting the scene – Investing in Bosnia and HerzegovinaChair – Karen Lumley, MP, Chair, All-Party Parliamentary Group for Bosnia and Herzegovina• Dr Kemal Kozarić, Governor, Central Bank, Bosnia and

Herzegovina• Dr Jasmin Komic, Deputy Prime Minister and Minister for

Science and Technology, Republic of Srpska• Jelica Grujić, Director, Foreign Investment Promotion Agency,

Bosnia and Herzegovina (FIPA)• Mark Arnold, Chief Executive, Sberbank Europe AG• Sonja Sharevska, Director, ArcelorMittal ZenicaQ & A session

11.00am -11.30am

Refreshments break

11.30am – 1.00pm

Investing in Energy and MiningChair – HMA Nigel Casey, UK Ambassador to Bosnia and Herzegovina• Hon Erdal Trhulj, Minister of Energy, Mining and Industry,

Federation of Bosnia and Herzegovina• Elvedin Grabovica, General Manager, Elektroprivreda Sarajevo• Libor Krkoska, Head of Office, European Bank of Reconstruction

and Development (EBRD) • Milenko aković, Deputy Mayor, Prijedor• Enes engić, Director, EnergoinvestQ & A session

1.00pm – 2.00pm

Networking lunch

2.00pm -3.30pm

Investing in Manufacturing, Agriculture, Tourism and ITChair – Patricia Morris, Baroness Morris of Bolton oBE• HE Ermina Salki ević-Dizdarević, Deputy Minister of Foreign

Trade and Economic Relations, Bosnia and Herzegovina • Dr Ismet Kumalić, President, Foreign Trade Chamber, Bosnia

and Herzegovina• Lejla Br kalija, General Secretary, Tourism Associations, Bosnia

and Herzegovina• Belma olaković, Chief Economist, Central Bank, Bosnia and

Herzegovina • Jelena Sarić, Head of Office for Local Economic Development

and Quality Control, Laktasi MunicipalityQ & A session

3.30pm – 4.00pm

Refreshments break

4.00pm – 5.15pm

Investing in Infrastructure Development• Chair – Henry Bellingham, Member of Parliament• Sanjin Halimovic, Minister for Development, Entrepreneurship

and Crafts, Federation of Bosnia and Herzegovina • Enes Karic, Director, Motorways, the Federation of Bosnia and

Herzegovina• Suad Huskić, Mayor, Tešanj • Alma Kadunić, Head, United Kingdom Trade and Investment,

Bosnia and Herzegovina (UKTI)• Robert Knorr, Senior Partner, Mid Europa PartnersQ & A session

5.15pm - 5.30pm

Closing RemarksHE Dr Zlatko Lagumdžija, Deputy Chairman of the Council of Ministers and Minister for Foreign Affairs, Bosnia and Herzegovina

5.30pm-7.00pm

Gala ReceptionGuest speakers, Edin Džeko, Manchester City Football Club & Asmir Begović, Stoke City Football Club

tHe First uk-Bosnia and Herzegovina trade & investment Forum lancaster House, london, 18tH aPril, 2013


our Partners

Energoinvest d.d.-Sarajevo, is a multidisciplinary engineering company with dominant export orientation. We are the leading company in Bosnia and Herzegovina with the scope of activities of design and realisation of complex plants in the country and abroad in the fields of electric power, hydro-civil construction and architecture, automation thermal power and process plants and communication technologies.

Drawing on wide-ranging experience and considerable resources Energoinvest’s business doctrine has been evolving for

more than 60 years, with all efforts being directed to create a portfolio of activities geared towards our clients’ needs and requirements. The ability of Energoinvest to execute complete projects on a turn-key basis on time, has earned the company an unrivalled reputation worlwide.

Key to its success is its partnership work with clients – providing a wide range of services from design, engineering, research and development, technology and know-how transfer, representation and financial management, to delivering total solutions.

In addition a clear strategy, good organisation, and good professionals are crucial to achieving the company’s goals. The company encourages individual qualities and engages employees to a maximum to ensure their capabilities are fully realised.

The Integrated Managment System in Energoinvest is accepted as the key factor of in its successful business policy and it has been implemented within all business functions, processes and activities.

Energoinvest d.d. - Sarajevo

ENERGOINVEST

Mid Europa is the leading independent private equity investment firm focused on CEE, with approximately EUR3.2bn of funds raised and managed since its inception. Mid Europa has successfully

executed transactions in every major market of CEE and has extensive transactional and operational expertise in these countries. We have made seven investments in Bosnia and

Herzegovina, integrating them into what is today Telemach, the leading PayTV operator in the country.

MID EUROPA

With 130 million tonnes of annual production capacity and 245,000 employees across 60 countries, ArcelorMittal is the world’s leading steel and mining company.

We are the leader in all major global steel markets, including automotive, construction, household appliances and packaging, with leading research and development and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. With an industrial presence in more than 22 countries spanning four continents, the company covers all of the key steel markets, from emerging to mature.

Our core philosophy is to produce safe, sustainable steel. In doing so, our top priority is safety and our goal is to be the world’s safest steel and mining company.

We have steelmaking operations in more than 20 countries on four continents, in both developing and developed steel markets. In 2012, we had revenues of US$84.2 billion and crude steel production of 88.2 million tonnes, which represents around 6% of world steel output. Around 35% of our steel is produced in the Americas, 47% in Europe and 18% in other regions, including Kazakhstan, South Africa and Ukraine. ArcelorMittal is number one for market position and market share in North and South America, Western Europe, Eastern Europe and CIS, and Africa.

Our mining business is one of the pillars of ArcelorMittal’s growth strategy. In 2012 we produced 55.9 million tonnes of iron ore and 8.2 million tonnes of coal. Our low-cost iron ore and coal

resources provide security of supply and shelter from raw material price changes. Our mining business also offers substantial scope for profitable expansion, and we have a production target of 84 million tonnes of iron ore by 2015. We currently have mining operations in 10 countries: Algeria, Bosnia & Herzegovina, Brazil, Canada, Kazakhstan, Liberia, Mexico, Russia, Ukraine and the US. Projects are being developed in Australia, Mauritania, Mozambique, Senegal and South Africa.

ArcelorMittal is listed on the stock exchanges of New york (under the trading symbol MT), Amsterdam (MT), Paris (MT), Luxembourg (MT), Barcelona (MTS), Bilbao (MTS), Madrid (MTS) and Valencia (MTS).

ArcelorMittal


Our Partners

Sberbank of Russia is the largest bank in Russia and CIS. The founder and principal shareholder is the Central Bank of Russia, which owns 50% of the Bank’s authorised capital plus one voting share. The rest of the shares are held by international and domestic investors. It is the key lender to the national economy and the biggest deposit taker in Russia.

Established in 1841, Sberbank has grown into a universal commercial bank with diversified businesses. In recent years, however, Sberbank has focused on innovation and modernisation of its

infrastructure and technology as well as invested heavily in the human capabilities. Ultimately, all of the efforts are aimed at shareholder value creation out of having up-to-date banking processes, upgraded branches and effective interactions with clients to offer more customised solutions and improve our operating efficiency.

Furthermore, Sberbank has substantially extended its international presence beyond CIS – Kazakhstan, Ukraine and Belarus – to nine countries of Central and Eastern Europe via Sberbank Europe

AG (formerly Volksbank International) and Turkey via acquisition of DenizBank. The latter was acquired in September 2012 and represents the largest acquisition in Sberbank’s 170-year history. Sberbank also has representative offices in Germany and China, a branch in India and operates Sberbank Switzerland AG.

In Bosnia and Herzegovina, Sberbank has started a significant transformation to continue the professional customer-centric business with the goal of becoming a modern, focused and reliable leader in the banking sector.

Sberbank

Conquiro is an aerial imagery, surveillance and risk mitigation company specialising in the use of Unmanned Aerial Systems (UAS).

Conquiro provides bespoke land and maritime packages mainly for clients overseas, focussing in East and West

Africa, Eastern Europe, Russia and the Middle East. We supply an all-encompassing approach; providing aerial imagery assets, risk mitigation teams, analysts and end-user products allowing customers to formulate an intelligent and cost effective approach to their unique issues.

Conquiro is committed to helping national governments and organisations ensure security against threats such as terrorism, criminality, civil unrest or threats from unstable boarder countries, as well as helping in the development of commercial and environmental activities.

CONQUIRO

Foreign Investment Promotion Agency (FIPA) of Bosnia and Herzegovina is a State Agency established with the mission to:

• Attract and maximise the flow of foreign direct investment into Bosnia and

Herzegovina, and encourage existing foreign investors to further expand and develop their businesses in BiH.

• Facilitate the interaction between public and private sectors, and have an active role in policy advocacy in order

to contribute to continually improving environment for business investment and economic development.

Promote a positive image of Bosnia and Herzegovina as a country that is attractive to foreign investors.

Bosnia and Herzegovina is the heart-shaped land that lies in the heart of southeast Europe. It is here that eastern and western civilizations met, sometimes clashed, but more often enriched and reinforced each other throughout its long and fascinating history.

Bosnia and Herzegovina is a long name for a country just over 50,000 km2 in size.

Bosnia covers the north and centre of the country with its name probably derived from ‘bosana’, an old Indo-European word meaning water, which Bosnia has no shortage of.

The southern region of ancient Hum, ruled by Herceg Stjepan (Duke Stjepan), was later named Herzegovina after the region was conquered by the invading

Bosnia and Herzegovina Tourism Board

Ottomans. Perhaps what is most important for the visitor to know today, though, is that Bosnia and Herzegovinais a stunningly beautiful country with a vast array of landscapes, cultures, traditions and people.

Visit www.bhtourism.ba for more information.

Foreign Investment Promotion Agency (FIPA) of Bosnia and Herzegovina

Sarajevo

Bogatic

Ugljevik

Krstac

Zvornik

Bratunac

Kamenica

Vlasenica

Cerska

Srebrenica

Sokolac

Rogatica

Priboj

Pljevlja

Avtovac

Nevesinje

Stolac

BlagajVrgorac

Medugorje

MetkovicOpuzen

Blato

Kalinovik

Trebinje

CetinjeKotor

PaleHrasnica

Fojnica

Rumboci Prozor

Duvno

MesihovinaVinica

Sinj

Ervenik

Bos.Grahovo

Titov Drvar Sipovo

Bos.Petrovac

Sanica

St. RijekaSanski Most

Krujpa-naVrbasu

Maslovare

Mladikovine

Turbe

Pucarevo

Kiseljak

Prnjavor

Miljanovci

Ivanjska

PrevicDerventa Odzak

Olovo

Jasenjani

JablanicaKonjic

Travnik

Vitez

BosanskaKrupa

BosanskaDubica

Piskavica

Srebrenik

Gacko

Prisoje

Kupres Gornji Vakuf

Doboj

Maglaj

Kladanj

Skender-Vakuf

Jajce

Budva

Bar

Imotski

BosanskiNovi

Breza

Listica

Divulje

Srem.Metrovica

Herceg-Novi

Knin

Vosavka

Hvar

Trogir

Postire

Makarska

LivnoDrnis

Gracac

Trzac

Sturlic

V. Kladusa

Varoska-Rijeka

Kljuc

Glamoc

RaskoPolje

Ljubuski

Kocerin

G. Dreznica

Mrkonjic-Grad

Bileca

Cajnice

VisegradGorazde

Vogoscá

Tarcin

Busovaca

Zepa

OrahovackoPolje

Zepce

Vares

Banovici

Zavidovici

RadusaTeslic

Gracanica Vuckovci

GradacacBrcko

BosanskaGradiska

Korcul

a

Bajina Basta

BanjaKoviljaca

Konjevici

FocaOmis

Bijeljina

Tuzla

Zenica

Vinkovci

Mostar

Dubrovnik

Split

Banja Luka

Prijedor

Loznica

Niksic

Sid

Bac. PalankaN. Gradiska

Sibenik

Podgorica

Sabac

Bihac

Sava

Vrbas

Danube

Sava

Una

Sana

Una

Bosna

Dri

na

Drina

Piva

LakeScutari

A D R I A T I C S E A

Krivaja

Lim

Neretva

Tara

Drina

Spreca

Boka Kotorska

Busko jezero

ˆ

Ramsko jezero

Jablanicko jezero

ˆ

Hvar

Korcula

Lastovo

Mljet

Solta

Mali Drvenik

Veliki Drvenik

Pakleni Otoci

VisSvetac

D

a

l

m

a

t

i

aPeljesacPeninsula

B r a c

Susac

Sipan

Ciovo

Bisevo

Scedro

SERBIA

MONTENEGRO

VOJVODINA

B O S N I A C - C R O A T F E D E R A T I O N

REPUBLIKA SRPSKA

REPUBLIKA SRPSKA

CROATIA

CROATI A

AL

BA

NIA

SERBIA

Map No. 3729 Rev. 6 UNITED NATIONSMarch 2007

Department of Peacekeeping OperationsCartographic Section

The boundaries and names shown and the designations usedon this map do not imply official endorsement or acceptance by the United Nations.0

0 10 20 30 40 50 km

10 20 30 mi

National capital

Town, village

Airport

International boundary

Inter-entity boundary line

Republic boundary

Autonomous province boundary

Main road

Secondary road

Railroad

BOSNIA ANDHERZEGOVINA

BOSNIA AND HERZEGOVINA

Conference Hosts

The conference is supported by

embassy of bosnia and herzegovina in london

Documents