All the countries of the Western Balkans still have problems with corruption, which is an obstacle to direct foreign investments, according to the report on the Investment Climate published by the State Department on July 27th.
In recent years, the investment climate in Serbia has “modestly” improved, although, as stated, the large political influence on the economy is a concern.
Corruption in Montenegro is most widespread in the public procurement sector, while the complex institutional, political and territorial structures of Bosnia and Herzegovina (BiH) complicate the country’s economic climate and deter foreign investors.
In BiH, it is necessary to overcome endemic corruption
BiH is open to foreign investment, but for this to happen, investors must overcome significant challenges such as endemic corruption, complicated laws and government structures.
At the same time, it is pointed out that the problem is non-transparent business procedures, insufficient protection of property rights and a weak judicial system that is under the influence of ethno-nationalist parties.
“BiH has a relatively low level of foreign direct investment (FDI). The fragmented government in BiH has neither the capacity nor the political will to devote itself to providing adequate incentives or a good environment for investors,” it was said in the report.
It is emphasized that more than 500 state-owned enterprises are crowding out the private sector.
“The complex institutional, political and territorial structures of BiH complicate the country’s economic climate and deter foreign investors,” the report says.
There are high ethnic tensions at play as ethno-nationalist parties struggle to secure or maintain control over certain institutions. In this context, institutions at the state level have made little progress in implementing the necessary reforms to strengthen the business environment.
The moves by the Republika Srpska (RS) entity to unconstitutionally take control of state property and threats by RS President Milorad Dodik to separate the RS from BiH also increased tensions.
“These actions, combined with the efforts of the RS to form parallel institutions at the entity level, (such as the Agency for Medicines and Medical Equipment of the RS), threaten to create legal ambiguities and hinder investments. Investors should pay attention.”
Between 1994 and 2021, about 8.95 billion dollars of direct foreign investments poured into BiH.
American investments in BiH are low, and the first five countries that invest in BiH are Austria, Croatia, Serbia, Slovenia and Germany, Radio Slobodna Evropa reports.