In Sarajevo last week, the European Commissioner for Enlargement Negotiations, Johannes Hahn, once again called on Bosnia and Herzegovina to improve its business climate. This is a necessity for this country, which is facing a major brain drain.
The European Commission's 2018 report on the country estimates that, the business climate "has slightly improved, but the overall level is still very low". According to a survey of its members conducted by the Foreign Investors Council (FIC), 48% of respondents believe that the business and economic climate did not change between 2017 and 2018, 23% believe it has improved and 29% believe it has worsened. According to Jasmin Hošo, CEO of Tondach Bih and economist, the country has a negative image abroad, it is a “crisis model”.
However, 84% of FIC members would recommend Bosnia and Herzegovina as a destination for investment and business.
Attracting investment
According to the Commissioner, the country must continue its socio-economic reforms, in order to be more attractive to foreign companies, but also so that potential entrepreneurs are willing to take risks and start their own business.
Because, like the other countries of the Western Balkans, Bosnia and Herzegovina is facing a significant brain drain. “This is the biggest crisis we are facing”, said Sanja Miovčić, Executive Director of the FIC, adding that it is difficult to find a skilled workforce.
While the country's growth rate is expected to be 3.5% this year, according to Bosnian Trade Minister Mirko Šarović, only a 5% growth would stop the brain drain phenomenon.
To achieve such growth, the country must attract more foreign direct investment (FDI). “In order to have more investment, you have to be more competitive”, the minister said in an interview with three media, including EUROPE, adding that this also includes a better image of the country, “which must be stable, secure and predictable in terms of investments”.
“We must work to remove all obstacles and do more to convince countries to invest in Bosnia”, said Mr. Šarović “Bosnia is a country that needs investment and where investors can make a profit”, he argued.
In 2016, FDI accounted for 1.6% of gross domestic product. In that year, they amounted to €246.6 million, of which €228.6 million came from the EU. However, according to the Commission, foreign and domestic investment is “under-dimensioned, reflecting a poor business climate and high political uncertainty”.
The Foreign Investors Council survey also reveals that 77% of its members consider the business climate to be “unpredictable, which is not a positive indicator for foreign investors”. They highlight in particular unpredictable tax policy, unequal treatment of inspection authorities and political instability.
According to the European Commission, the quality of fiscal governance is poor, as is the level of public investment. In addition, little progress has been made in terms of non-tariff barriers.
Ms Miovčić also pointed to the lengthy procedures for registering a business or also the complex procedures that can take “literally years” or a tax system that, while advantageous, is extremely complex and not harmonised across the country.
For example, according to Nada Zubčević, who has created antibacterial toilets, registering a patent is expensive and time-consuming. “The country in no way supports inventors”, she regretted, recalling that patents and scientific research represented only 0.2% of GDP, compared to an EU average of 2.5%.
According to the Commission, the quality of fiscal governance is poor, as is the level of public investment. In addition, little progress has been made in terms of non-tariff barriers.
Fighting youth unemployment
In order to avoid brain drain, the country must also do more in terms of education. While unemployment reached 25% of the population in 2016, youth unemployment reached 54.3%. “Politicians must be more concerned about the fears of young people. Much more can be done than has been done so far," said the Minister. "If the country does not change its approach to fast high growth sectors such as IT, people will continue to leave the country”, warned, during a meeting, Aleksandra Kuljanin, who created the association "IT girls”.
For Mr Hahn, it is necessary to have a better match between youth training and market needs. “Children are facing an outdated education, which is not in line with technologies, new developments”, explained Ms Kuljanin.
The country is slowly but surely developing a computer industry (IT). “We want to promote the IT industry. We want to work with government and institutions to give more people the opportunity to study in this field”, said Edin Deljkić, President and Chairman of the Board of Bit Alliance and CEO of Klika.ba. According to him, jobs are not filled in this field due to a lack of candidates. “In the IT industry, there is a huge demand, but people don't study IT. That's why we're trying to educate young people”, he said.
And while it is complicated to change education in the country, which has 13 different ministers of education, Mr Deljkić has managed to convince some authorities to introduce an IT curriculum in schools. “I don't think the government doesn't have the will. There is a lack of understanding, but when you go to the authorities [...] they have the will”, to change things, he added.
However, bringing in investors and changing school curricula will not be enough. For Mr Deljkić, “there are two groups of people leaving the country: those who do not have the opportunity to find jobs here, but there are also those who leave, not only to find a better job, but also for a better quality of life”. He denounced the quality of social security, which the EU is asking to improve, and the environmental problems affecting the country. And corruption remains high. “Corruption must be eradicated from our society. The priority is public corruption", acknowledged Bosnian Trade Minister Mirko Šarović, also calling for the privatisation of state-owned companies.
“People don't believe in the system, there's no support, they don't believe in the people who represent them”, added Ms. Kuljanin. According to her, “young people don’t believe in anything in this country and have no reason for it”. She added: "We have intelligent people, when you give them the ground to develop their ideas, the sky is the limit". (Original version in French by Camille-Cerise Gessant)