Bosnia and Herzegovina Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

The European Union is BA’s most important trading partner. In 2020, trade with the EU accounted for 64% of BA’s total trade turnover. The EU is a key market for BA’s export-oriented economy. From BA’s point of view, the balance of mutual trade has been negative for a long time. However, since the start of the COVID-19 pandemic, BA has managed to reduce this deficit thanks to an increase in exports to the EU. Companies from BA successfully returned to the EU market and international supply chains after the initial economic shock subsided.

  • Allcountrylist: Overview of major industries in Bosnia and Herzegovina, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 5,890.50 6,060.40 6,313.30 5,537.40 6,843.50
Imports into the EU (million EUR) 4,231.00 4,678.30 4,378.90 4,060.20 5,834.20
Balance with the EU (million EUR) -1,659.5 -1,382.1 -1,934.4 -1,477.1 -1,009.3

Source: European Commission

Trade relations with the Czech Republic

The BA market is not large, but it has a significant place in the context of the Western Balkans region. BA represents a traditional market for some branches of Czech exports, such as mining and energy engineering. BA has a tradition of industrial production (e.g. metallurgical, engineering or woodworking industries) and the importance of local companies in the supply chains of Czech industry will probably continue to grow. Imports from BA to the Czech Republic are increasing, and local producers are successfully joining global value chains through cooperation with Czech customers. The automotive industry plays a large role in mutual trade, specifically the export of passenger cars from the Czech Republic and the import of automotive parts from BA. For this reason, the effects of the COVID-19 pandemic, which hit the industry hard, were very significantly reflected in the trade statistics. The trade relations of the Czech Republic with BA were affected by the pandemic with greater intensity than BA’s trade with most other EU countries. However, the negative balance of the Czech Republic’s trade with BA in 2021 was also significantly contributed to by the inclusion of international trade in electricity (also thanks to the increase in its price), which to a large extent represents a statistical fiction.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 3.9 3.9 4.2 3.5 3.9
Imports to the Czech Republic (billion CZK) 2.5 3.2 3.3 2.8 4.3
Balance with the Czech Republic (billion CZK) -1.4 -0.7 -0.9 -0.7 0.3

Source: CZSO

Trade relations with countries outside the EU

From countries outside the EU, the most important trade partners are the countries of the CEFTA regional association and Turkey (imports from China are also important). Even within the BA region, since the beginning of the COVID-19 pandemic, it has successfully increased its exports. On the contrary, the trade deficit deepened in the relationship with Turkey.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) -475.5 44.1 ON ON 314.3
Imports to countries outside the EU (million EUR) 4,676.5 5,208.8 5,086.4 4,299.5 5000.2
Balance with non-EU countries (million EUR) -5,152.0 -5 164.7 ON ON -4,685.8

Source: EIU, Eurostat

Foreign direct investment

According to the BA Foreign Investment Promotion Agency (FIPA), the total value of foreign direct investment in Bosnia and Herzegovina was about EUR 7.7 billion at the end of 2020. Preliminary data from the Central Bank of BA shows that in 2021, BA saw an inflow of foreign investment worth about EUR 445 million, which would represent an increase of 22% compared to 2020 and the best result since the international financial crisis of 2007-2008. however, in a regional comparison, the total volume of direct foreign investment in relation to the size of the economy is rather smaller (according to UNCTAD, 48.3% of GDP in 2020). The largest number of foreign investments are directed to manufacturing sectors (e.g. building materials industry, metallurgical industry, food industry, chemical and pharmaceutical industry) and banking. The most investments come from Austria (billion EUR), Croatia (billion EUR) and Serbia (1, EUR 1 billion). The investment environment in BA is assessed as complex and difficult to predict. The problem is a confusing legal system, low quality of state administration, high level of corruption or outdated labor law. Qualified cheap labor, proximity to the EU and low direct and indirect taxes are rated as advantages of the BA market.

According to Czech National Bank statistics, the total value of Czech investments in BA in 2020 was EUR million. Several subsidiaries of Czech companies operate in the country, namely in the field of environmental services (DEKONTA, GEOtest), shared services (STORSEN) and financial services (APS Finance). Other Czech-owned subsidiaries are engaged in the sale of pharmaceuticals (ZENTIVA, PRO.MED.CS) and transport infrastructure (AŽD Praha, OHL ŽS). In the future, it could be interesting to invest in sectors that are already connected by supplier-customer relations with Czech industry (e.g. automotive parts, engineering) and in the service sector (ICT, shared services).

FTAs and treaties

Treaties with the EU

Trade relations between the EU and BA are governed by the Stabilization and Association Agreement from 2008, which entered into force in 2015. Based on the agreement, a free trade zone between the EU and BA was gradually created. Thus, a zero customs rate is applied to a large part of goods from the EU.

Contracts with the Czech Republic

The Czech Republic concluded an Investment Protection Agreement (2002), a Double Taxation Avoidance Agreement (2007) and an Economic Cooperation Agreement (2010) with BA. In addition, the Road Transport Agreement (2013) was concluded. Thus, the Czech Republic and BA have contractually regulated all areas of relations important from the point of view of the development of economic cooperation.

The Treaty on Social Security was signed in 2021 and the ratification process is currently underway in both countries. The treaty places social security relations on a new legal basis corresponding to European and international standards. However, the scope of rights and obligations of employees and entrepreneurs when operating in the other country is similar to that in the still valid treaty from 1957.

Developmental cooperation

Bosnia and Herzegovina is one of the five program countries of the Czech Republic’s foreign development cooperation. In 2019, activities worth CZK 6million were implemented under the responsibility of the Czech Development Agency in BA. The program of bilateral development cooperation between the Czech Republic and BA for the years 2018 – 2023 establishes three priority areas:

  • Economic growth (increasing the share of energy production from renewable sources in selected geographic areas of Bosnia and Herzegovina with suitable conditions)
  • Sustainable management of natural resources (improvement of protection, use and development of water resources, water quality, restoration of water resources, elimination of pollution, increase in availability of quality drinking water, management of waste water, including systemic measures)
  • Proper democratic governance (creating effective, accountable and transparent institutions at all levels of public administration)

In addition to the so-called programmatic cooperation, the Czech Republic also applies other instruments of development cooperation in BA. Czech companies can, for example, use the Czech Development Agency’s B2B program designed to support business plans with a positive development impact. BA is also one of the countries where projects are implemented within the framework of the partnership between the Czech Republic and the United Nations Development Program (UNDP) for the United Nations Sustainable Development Goals (SDGs). The so-called The Challenge Fund, which the Czech Republic finances as part of this partnership, is aimed at supporting the implementation of the SDGs in BA through the transfer of know-how of the private and non-governmental sector from the Czech Republic. Czech companies can submit project proposals to regularly published calls for proposals. As part of the Expertise on Demand program, internships for Czech experts in BA institutions are then made possible.

For their investments in Bosnia and Herzegovina, which contribute to the sustainable development of the country, Czech companies can also use bank guarantees granted by the National Development Bank as part of the ZRS Guarantee program.

Prospective fields of study (MOP)

Mining, mining and oil industry

Opportunities for Czech companies exist especially in the field of equipment for coal mining. Mining operations need new mining machines, transport equipment and modern control systems. Oil and gas extraction could become a new important sector in BA in the future.

Energy industry

The construction of several new thermal power plants is planned. The existing Tuzla 6 and Kakanj 7 blocks are being prepared for the implementation of their desulfurization. In the field of renewable resources, the use of biomass for central heating has great potential, and the construction of a number of hydroelectric power plants is also planned.

Furniture industry

The growing demand for the production of the local furniture industry requires the expansion or modernization of production capacities through the purchase of machines and technical equipment for primary and secondary wood processing. Other opportunities exist in the supply of logging equipment suitable for working in difficult terrain.

ICT

Opportunities are opening up in connection with the need for digitization of corporate processes of export-oriented small and medium-sized companies, as well as plans for digitization in the field of state administration. There is a growing interest in digital solutions in the field of intelligent traffic management and smart cities.

Entertainment and leisure

BA has great potential for the development of winter sports, however, the retail offer of sports and ski equipment and clothing is limited. It is possible to expect investments in the development of sports infrastructure.

Agricultural and food industry

Investments in the modernization and automation of livestock breeding and the modernization of production lines in the food industry are needed.

Details on prospective fields can be found in the current Map of field opportunities.

Bosnia and Herzegovina Trade