Bosnia & Herzegovina is going through the gravest political crisis since the end of the war in 1995, according to Prebanic & Jusufbasic-Goloman Partner Arela Jusufbasic-Goloman, but it is registering a stable financial sector and an increase M&A activity.
"Political parties, analysts, and international organizations largely agree that the political situation is very tough in Bosnia & Herzegovina," Jusufbasic-Goloman explains. "Namely, the Republic of Srpska, one of the entities of Bosnia and Herzegovina, is pushing to cut ties with the central government by adopting decisions to achieve full autonomy. Such actions are considered a violation of the 1995 Dayton Peace Accords," she says. "Corruption remains another one of the most widespread problems at all levels of government. This problem has been acknowledged by the international community as well, however, we have not seen any results so far."
"In addition, in Bosnia & Herzegovina, one of the most controversial issues is carrying out long-overdue reforms regarding the state electoral system," Jusufbasic-Goloman notes. "The reform is crucial for the upcoming 2022 general elections, that will shape the democratic development of the country. However, despite the lengthy negotiations, no progress has been achieved in improving the electoral legislative framework so far. The legislation needs to be in line with the European standards, and to ensure transparency on political party financing," she adds.
"In the meantime, the Parliamentary Assembly of Bosnia & Herzegovina was blocked for political reasons, leading to a legislative backlog, therefore, we don’t have many updates in that sphere," Jusufbasic-Goloman explains.
According to Jusufbasic-Goloman, a political crisis, together with the COVID-19 related hurdles, has a major influence on the country’s social and economic life. "Recently, food, accommodation, transport, and electricity prices have been increasing. Many investors are currently considering how to enter the local market, taking into account the sensitive political environment," she points out. "Accordingly, the political situation has an impact on investors. While the inflation rate is not significantly high at the moment, it might still negatively affect the future," she says. According to her, considering these factors, there are not many sources for optimism.
"In terms of legal market activities, M&A has been increasingly active in the past few months. It includes not only large deals but also ones with a rather lower value," Jusufbasic-Goloman notes. "Our firm participated in one of them, related to DuluxGroup's acquisition of JUB Group in Slovenia. The value of this cross-border deal was EUR 194 million and involved many jurisdictions, including the Adriatic region, UK, Australia, and Japan."
"At the same time, currently, the financial sector remains stable and we also witness increased investment activities, however, next year’s election and further results of the political crisis will decide the main trends for the market and economic growth," she concludes.