State Department Warns Future Investors in BiH Due to RS Authorities' Actions, Mentions Milorad Dodik

(Patria) - The State Department, in a report on the investment situation in BiH, with an emphasis on RS, warned of a complicated and insecure system for investors.

Significant Obstacles

The report states that Bosnia and Herzegovina is open to foreign investment, but for it to be successful, investors must overcome significant obstacles such as complex legal regulations, corruption, and non-transparent business procedures...

"The country offers a liberal trade regime, and its simplified tax structure is one of the lowest in the region (17 percent VAT and 10 percent income tax), but employers bear a heavy burden for contributions. More than 500 state-owned enterprises and the public sector are pressuring the private sector," the report states, among other things.

The State Department also touched upon the formation of government in Bosnia and Herzegovina after the General Elections in 2022, noting that the government in RS was formed immediately, while there are still challenges in forming a functional government in the Federation of BiH.

"BiH's complex institutional, political, and territorial structures complicate the country's economic landscape and deter foreign investors," the report adds.

It is also emphasized that tensions have been increased by RS's moves to unconstitutionally take control of state property, as well as threats by the president of that entity, Milorad Dodik, to secede RS from BiH.

"These actions, combined with RS's efforts to form parallel institutions at the entity level, such as the RS Agency for Medicines and Medical Devices, threaten to create legal ambiguities that further complicate the business environment, damage the economy, and hinder investment," the State Department emphasized.

Adequate Analysis

They also state that investors should conduct adequate analysis and due diligence before investing, which includes avoiding exposure to individuals and entities sanctioned by the US and clarifying land ownership rights and the status of sub-national institutions to avoid entanglement in potentially illegal or unconstitutional solutions.

Potential investors are urged to read the statements of the High Representative for BiH, the State Department advises, from which they also touched upon sanctioned individuals in Bosnia and Herzegovina.

"The most prominent among them are the President of RS Milorad Dodik and Integral Inženjering. Other individuals have been sanctioned for war crimes," the report states, as reported by Faktor.ba.

Regarding the economy, it is stated that US investments in BiH are low, and most US companies in BiH are small sales offices focused on selling US goods and services, with minimal long-term investment.

"Bosnia and Herzegovina has a relatively low level of foreign direct investment (FDI). BiH's fragmented government lacks both the capacity and the political will to focus on providing adequate incentives or a good environment for investors.

Between 1994 and 2021, approximately 8.95 billion dollars in foreign direct investment flowed into BiH. The top five historical investors in BiH are Austria, Croatia, Serbia, Slovenia, and Germany.

Together, these countries represent 61 percent of the total FDI stock in BiH," the report states, adding that our BiH is rich in natural resources that offer potential opportunities in energy, agriculture, and tourism.