Corruption, Judiciary, Taxes and Remnants of Socialism Drive Investors Away from BiH!

Bosnia and Herzegovina still has major problems attracting foreign investors, as they face a series of obstacles ranging from corruption, weak judiciary, complicated and non-transparent procedures to poor laws and infrastructure, according to the latest report of the US State Department on the investment climate in BiH for 2014, reports the Bosnian news agency Patria (NAP).

- The political environment in BiH, together with the pressures of the global crisis, has halted many key reforms – the report states.

Corruption, as they point out from Washington, is dominant in many political and economic institutions in BiH and a key reason why American companies do not come to BiH.

- Corruption deters foreign investment, prevents economic growth and development, distorts prices and undermines the rule of law. American companies must be cautious, assess the business climate and have an effective program to prevent corruption. The complicated administrative system in BiH is not transparent and opens opportunities for corruption. There are many levels of government that seek „payment for services“ – say from the State Department describing the situation in BiH.

According to their statements, bribery for permits, especially construction permits, or any other types of processes, is common.

Also, the US administration warns about high state levies on potential investors and companies in BiH. They highlight the costs of payroll contributions, which are 69 percent of salary in the Federation of BiH and 52 percent in the Republika Srpska.

- Labor and pension insurance laws are an obstacle to investments. The workforce in BiH is somewhat cheaper than in the West and there are more and more people with university degrees. However, in many sectors such as construction, information technology and healthcare, there has been a decline in expertise in the last decade. The reason for this is the lack of education, jobs and the departure of experts – the report states.

In addition, Washington considers that collective agreements, a remnant of the socialist system, are an obstacle to investors, and that taxes for workers are high, which is why the gray economy is growing, NAP reports.