Bosnia & Herzegovina remains open for business, despite political instability – caused by increasing secessionist tendencies – and slowing reforms, according to DMB Legal Managing Partner Dina Durakovic.
"Bosnia & Herzegovina is a rather complex country in terms of administrative structure, with two separate administrative entities: the Republika Srpska and the Federation of Bosnia and Herzegovina and the autonomous Brcko District," Durakovic begins. "All of these constituent parts have their own legislative systems and executive powers. Currently, state-level institutions are facing challenges due to the decision-making blockade by representatives of one of the entities, Republika Srpska, meaning that passing laws on the state level is nearly impossible and executive powers are not functioning properly."
According to Durakovic, such instability affects undertaking the potential reforms, due to the inability to pass any new legislation. "We do have some important reforms in progress," she reports. "We all started strongly relying on digital technologies everywhere, during the COVID-19 pandemic, yet we still do not have implemented legislation required for the use of e-signatures. The absence of such legislation hinders further developments in this area and creates many challenges," she says. "However, the private sector, including financial institutions, manages to find a way by introducing various smart solutions to promote the digitalization of processes."
"Another reform that we are looking forward to is related to tax and contributions in the Federation of Bosnia and Herzegovina," she adds. "The taxes and contributions payable in relation to salaries are rather high, and their reduction would have a significant impact on businesses."
As for the business sector, Durakovic points out that "the political instability, coupled with the COVID-19 pandemic, has impacted direct foreign investments, which are crucial for the development of Bosnia & Herzegovina." Still, she says that since the third quarter of 2021 the country has witnessed economic growth and increased M&A activity. "This is mostly a result of the fact that we have learned how to live with the pandemic and political instability in the country," she notes.
"In particular, we have seen increased activity in the IT and mining sectors. Like the recent Orion deal – a fund specializing in investments in the base and precious metals mining sector – one of the largest investments in the past ten years, in the Vares mining project, owned by London-based publicly-traded company Adriatic Metals," Durakovic says. "Their total investment in Bosnia & Herzegovina is evaluated to be above USD 240 million, which is the largest single investment in this sector to date. It is a significant deal not only for the Vares project but for the country's whole economy," she notes.
"Additionally, we had a number of M&A transactions in the IT sector, which is a growing field in the entire country and the region, where local firms compete successfully. Generally, the whole last year has proved that our economy, despite facing significant challenges, is a resilient one, attracting significant attention from foreign investors," she concludes.