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Doing Business in Bosnia and Herzegovina: Starting a business

Doing Business in Bosnia and Herzegovina: Starting a business

Establishing a business varies by countries across the world. In some countries, this process can be time-consuming and an extremely burdensome for investors. It can be said that Bosnia and Herzegovina, to some extent, can be one of them. In this article, I will try to give you a brief explanation about starting a business in Bosnia and Herzegovina and the influence of the international investments within the country.

As I mentioned in my previous article, due to the sub-national levels of government, certain administrative processes can be significantly time-consuming. For instance, obtaining a construction permit can take up to as long as one year. According to “The World Bank Doing Business” report, in Sarajevo, The World Bank approximates that in order to complete registration of a new company, there is an average of 12 processes which takes up to 67 days to finish. However, the Republica Srpska found a one-stopshop which makes business registration faster within the entity. This, of course, decreases the required procedures significantly and the time in registering a business in the RS is down to approximately one-two weeks. On the other hand, there might be possibilities to expedite the registration process in Bosnia and Herzegovina. If you get to retain a local lawyer to follow up at each step of the process, you might speed up the processes and not face the tiresome burdens. As mentioned before, the sub-national levels of government such as entity, cantonal and municipal create regulations and laws that affect businesses and cause redundant and unstable procedures which foster corruption. With that being said, it could be difficult to understand all the regulations and laws that may apply to certain business operations and the lack of certain information sources. That is why it is highly important that foreign investors get local advice and assistance.
Related: Doing Business in Bosnia and Herzegovina: Overview
When it comes to the Legal Forms of Companies in BiH, there are 4 types of forms such as:

*Limited Liability Company

A number of partners: One or more persons.

Capital (max/min): Minimum BAM 1,000

Shareholders and liability: Liability is limited to the amount contributed.

*Joint-Stock Company

A number of partners: One or more shareholders.

Capital (max/min): Minimum BAM 4,000,000.

Shareholders and liability: Liability is limited to the amount contributed.

*Unlimited Joint Liability Company

A number of partners: Two or more.

Capital (max/min): No minimum capital.

Shareholders and liability: Founders are liable to use all their assets, including

personal property.

*Limited Partnership

A number of partners: Minimum two.

Capital (max/min): No minimum capital.

Shareholders and liability: There must be at least 1 partner with full liability

(including private property) and at least 1 partner with limited liability.

 

There is also the Representative Office as a legal form of companies. It is not considered a legal entity and is therefore not allowed to carry any commercial activities within the country. In order to open a representative office, the company has to register with the Registry of Representative Offices run by the by the BiH Ministry of Foreign Trade and Economic Affairs (MoFTER).

When it comes to the international investments in Bosnia and Herzegovina, in the 2000s, the Bosnian Government did take a series part of measures to attract FDI (Foreign Direct Investment), which resulted in the record amount FDI totaling EUR 1.8 million in 2007 (11.5 % of the GDP) (UNCTAD). According to the FDI figures between 1994 to 2016, the largest investors in Bosnia and Herzegovina are Austria (EUR 1.28 billion), Croatia (EUR 1.14 billion), Serbia (EUR 1.1 billion), Slovenia (EUR 486 million) and Russia (417 million) (Central Bank of Bosnia and Herzegovina).

Related: Doing Business in Azerbaijan: Legal Presence

 

The country has some strong points about why investors choose to invest in Bosnia and Herzegovina. It can be said that the country has incredible natural resources and beauties which can be very attractive for investors. However, its strategic location, as well as an abundance of industrial zones with available production facilities, have a great 3 influence in investing. In addition to that, Bosnia and Herzegovina is a candidate for the European Union, the NATO and as well as the World Trade Organization. The country has signed the Central European Free Trade Agreement (CEFTA) which helped create a free trade zone with access to a large consumer market. Furthermore, within the South East Europe, Bosnia and Herzegovina has the most stable currency which is directly pegged to the Euro (1 Euro = 1.9558 KM). Last but not least, it is critically important to mention that the country also has highly educated and price competitive labor force which encourages foreign investors.

As we can see, there are many reasons why investing in Bosnia and Herzegovina is an attractive option for foreign companies. Although there are some strong points about investing in BiH, there are also some weak points that need to be mentioned. For instance, as we mentioned earlier, a complex regulatory and legal framework which causes burdens within a bureaucracy, the existence of two governmental entities within the divided country might also be troublesome for foreign investors. When combined with the weak judicial structure and a lack of transparency in business procedures, for those who are interested in investing in the heart of Balkans should keep those facts in mind and take the necessary steps with the help of the local assistance. No matter what kind of difficulties the country may have, it has a great potential ahead with its young and educated population.

 

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