Page 24 - DMA Bosnia & Herzegovina Report 2013

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Investing In Bosnia & Herzegovina
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.
The 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 Incentives
The 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
• 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 andTurkey, with whom it has
signed the Central European Free Trade
Agreement (CEFTA). Fur thermore, with
a growing educated labour force the
country has a lot to offer to the potential
investor in this sector.
Impressive 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.
Foreign Investment Promotion Agency of Bosnia and Herzegovina (FIPA)