In all of the CEE countries 3G coverage has been constantly increasing and it most often exceeds 50% of the population.
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"In my opinion PMR is an excellent company and I would have no hesitation in recommending their services. [...]"
Commercial Director, Leading cartonboard merchant
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We are a member of the Strategic and Competitive Intelligence Professionals (SCIP)
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We are a member of the European Association of Opinion and Marketing Research Professionals ESOMAR.
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| Why to enter this market? |
- Stable currency, pegged to the euro for years
- Lowest inflation in the region for years
- Accelerated privatisation programme
- Favourable legislative treatment of investors
- 10% corporate tax
- Available workforce
- Established foreign investors support fund
- Tax exemptions
- Free trade zones
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Business and economic environment
Apart from Macedonia, Bosnia and Herzegovina was the least affluent republic in the Yugoslav Federation. For the most part, agriculture has been in private hands, but farms have been small and inefficient, and food has traditionally been a net import for the country. Industry is still greatly overstaffed, reflecting the legacy of the centrally-planned economy. However, considerable progress has been made since peace was re-established. Because of the country’s strict currency board regime, which links the convertible mark (Konvertibilna Marka - BAM) to the Euro, inflation has remained low. Privatisation has been slow, and unemployment remains at a very high level. The introduction of a value-added tax (VAT) in 2006 increased the government’s tax revenues and resulted in a budget surplus but also caused a substantial increase in inflation. In addition, Bosnia and Herzegovina offers a 10% corporate income tax rate, which is one of the lowest in CEE.
The country is a net importer, and its trade balance for 2010 reached -9% of GDP. This is expected to remain at a similar level over the next few years. It must also be emphasised that exports from Bosnia are growing much more rapidly than imports. The former increased by 15.3% year on year in 2010, and the latter by only 6.5%, which changed the export/import ratio from 43% in 2009 to 54% in 2010.
Most export commodities are metals, clothing and wood products, whereas major import commodities include machinery and equipment, chemicals, fuels and food. Bosnia and Herzegovina’s major trading partners are Italy, Croatia, Germany, Austria, Slovenia and Hungary.
The 2008 FDI level reached approximately EUR 0.7bn, which corresponded to 5.5% of GDP, with manufacturing and banking among the most popular industries in which to invest. The most attractive areas of Bosnia’s economy are:
- Agriculture, and fruit and vegetable production in particular
- Automotive components
- Financial services
- Construction – in terms of services and the production of materials
- Energy – and hydroelectric in particular
- Mining
- Forestry – 50% of the land is forested
- Tourism (the country hosted the Winter Olympics in 1984)
- Metal processing
After 6% average growth between 2004 and 2008, the Bosnian economy went into recession in 2009 and GDP contracted by 3.1%, echoing the global slowdown in demand and the volatility on the markets. Growth picked up again in 2010, supported by a strong increase in exports, and the economy increased by a modest 0.5%. However, domestic demand remains weak; the data points to a negligible increase in consumption and a fall in investment levels in comparison with 2009.
Inflation continues to afflict Bosnia: after a reduction in 2007, to 1.5% from 6.1% the year before, it rose again by 7.4% in 2008. However, as a result of the recession, inflation fell significantly, to -0.4%, in 2009 and remained low (2.4%) in 2010, whereas for 2011 it is expected to remain relatively unchanged.
The unemployment rate reached almost 40.3% in 2008, a major accomplishment, as this represented a reduction of almost one-tenth in comparison with 2007. However, the economic crisis brought another surge in unemployment, which reached 44.2% in 2009 and 43.1% in 2010. This is estimated to have led to a 2% increase in the poverty rate, from 14% in 2007 to 16% in 2010. Despite the fact that unemployment remains a major macroeconomic problem for Bosnia and Herzegovina, it should be noted that the country has a significant shadow economy and that the number of jobless people is, in reality, much lower.
Bosnia and Herzegovina’s foremost economic priorities are: faster EU integration by concluding a Stabilisation and Association Agreement (SAA); a stronger fiscal system; public administration reform; World Trade Organisation (WTO) membership; and the securing of economic growth by fostering a dynamic, competitive private sector.
Social environment
Bosnia and Herzegovina’s variety of ethnic groups and strong religious beliefs leads to many domestic tensions between three groups in particular: Bosnians (approximately 40%), Serbs (approximately 30%) and Croats (approximately 20%). This also means that there are few censuses or surveys showing the size and nature of Bosnia’ population. It is estimated that there are 4 million people, a reduction of almost 10% in comparison with 1991, when the last census was carried out. The country - like all former Yugoslav republics - suffered a substantial population shift which is almost impossible to measure. Many people emigrated from Bosnia to Western and Central & Eastern Europe. Primary and secondary education take 13 years in all, after which students can enrol at a university.
Infrastructure and technological environment
The Bosnian communications market was completely liberated four years ago. After that, both fixed-line operators and broadband services rapidly covered the entire country.
The telephone network is in need of modernisation and expansion. In 2010, there were 1,441,000 internet users, representing a penetration rate of 31.2%. Conversely, there were over 3.2 million mobile phone users and 998,600 fixed lines at the end of 2009. The mobile phone penetration rate therefore reached 86% in 2009.
Many urban areas are below average in terms of with services in comparison with other former Yugoslav republics. There are around 21,846 km of roadways in total (including 11,424 km of paved and 10,422 km of unpaved roads). The Sava River, adjacent to the northern border, is open to shipping, but use is still limited because of a disagreement with neighbouring countries. Bosnia also has a network of 608 km of railways, on which traffic is managed by the two separate companies – one for Bosnia and Herzegovina and one for Republika Srpska.
The country has significant resources of brown coal which are used mostly for the production of electricity. The other important resource is hydroelectric energy, which accounted for 44% of total output in 2006. Interestingly, Bosnia is also an exporter of electricity – in 2006, 15% of total production was sold to foreign customers.
Political environment
Bosnia and Herzegovina is a multiparty republic with a bicameral Parliamentary Assembly which consists of the National House of Representatives and the House of the People (Dom Naroda). The Chair of the Presidency of Bosnia and Herzegovina rotates among three members (Bosnian, Serb and Croat), each elected for an 8-month term within their 4-year term as a member. The three members of the Presidency are elected directly by popular vote.
Bosnia consists of two entities, Republika Srpska and the Federation of Bosnia and Herzegovina, which are politically independent. Political tensions are still rife between these two, and this has unfortunate consequences for Bosnia’s efforts to become an EU member. For example, in September Republika Srpska withdrew from a state electricity network agreement. Bosnia and Herzegovina is also a candidate for NATO membership and a founding member of the Mediterranean Union (established in July, 2008).
The political and administrative structure has several divisions and hierarchies. The most important is the division into RS and FOBH. Next is the division into cantons in the Federation of Bosnia and Herzegovina only, along with municipalities, and four cities: Sarajevo, Mostar, Banja Luka and East Sarajevo. The cities have administrative power which surpasses that of the municipalities and but is subject to that of the cantons. There is also the District of Brcko in the north, officially governed by both main entities, but unofficially autonomous.
General data
Area: 51,129 sq km
Population: 3m (2010)
Capital: Sarajevo
Languages: Bosnian, Croatian and Serbian
Ethnic groups: Bosnians, Serbs and Croats (in order of population numbers)
National boundaries: Croatia (932 km), Montenegro (249 km), Serbia (357 km)
Major economic indicators
| |
2007 |
2008 |
2009 |
2010 |
2011f |
| GDP (EUR bn) |
11.1 |
11.112.5 |
12.3 |
12.8 |
12.5 |
| Population (m) |
3.8 |
3.9 |
3.9 |
3.9 |
4.6 |
| GDP per capita (EUR) |
2876 |
3253 |
3187 |
3032 |
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| GDP (constant prices y-o-y %) |
6.8 |
5.8 |
-3.1 |
0.5 |
3 |
| Exports, real, y-o-y (%) |
2.8 |
6.7 |
-16.2 |
15.3 |
7.4 |
| Imports, real, y-o-y (%) |
20.2 |
17.5 |
-23.2 |
6.5 |
5.3 |
| CPI (average, y-o-y %) |
1.5 |
7.4 |
-0.4 |
2.4 |
2.5 |
| Monthly wage, nominal (EUR) |
488 |
568 |
570 |
578 |
578 |
| Unemployment rate (%) |
44 |
40.3 |
44.2 |
43.1 |
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| Net FDI (EUR bn) |
1.5 |
0.7 |
0.2 |
0.4 |
|
| FDI % GDP |
13.8 |
5.5 |
1.7 |
3.3 |
|
| FX reserves (EUR bn) |
3.4 |
3.2 |
2.6 |
3 |
|
| Exchange rate to USD AVG |
1.43 |
1.33 |
1.51 |
1.49 |
1.5 |
| Exchange rate to EUR AVG |
1.96 |
1.96 |
1.96 |
1.96 |
1.96 |
Last update: Q1 2011
Useful data
Currency: Euro-pegged Convertible Mark – BAM or KM (common use)
Exchange rate: 1 BAM 1 = EUR 0.51 (2010)
Time zone: UTC+1 (CET), in summer UTC+2(CEST)
Area code: +387
If you would like to find out more on the Bosnian market opportunities please do not hesitate to contact us directly:
phone: (48 12) 292 22 50
faks (48 12) 292 22 99
e-mail: info@pmrconsulting.com
PMR Business Solutions in Bosnia and Herzegovina
Market reports Bosnia and Herzegovina
To purchase or find detailed information on PMR Publications reports covering the general economy, construction, retail, pharmaceutical, and ICT sectors in Bosnia and Herzegovina.
If you are looking for greater detail trust our research and consulting divisions to carry out projects tailored to your business needs.
Consulting in Bosnia and Herzegovina
PMR Consulting offers a wide range of consulting services in Central and Eastern Europe for foreign companies interested in the region. The typical projects include: competitive intelligence, sourcing, strategic advisory, consulting at foreign direct investments and mergers & acquisitions.
Market research in Bosnia and Herzegovina
PMR Research offers a full array of qualitative and quantitative research methodologies, providing services such as customer satisfaction studies, brand awareness and brand image research, distribution and competition studies, segmentation and sector analyses.
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