FIC Newsletter 2014.06 CoverFIC NEWS 3 FIC NEWS 2014 INTRODUCTION Dear colleagues, partners, ladies and gentlemen, It is a great pleasure to present the third edition of the Foreign

FIC NEWSNovember 2013 - May 2014

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FIC News Publisher:FIC – Foreign Investors Council

Editing: Bojana Škrobić Omerović Executive Director

Tea Kajan Assistant

Lector:FIC Office

Design:Ekrem Kapić

DTP:Proprint, Sarajevo

Number of Copies: 200 pieces

FICFra Anđela Zvizdovića 1/B11,71 000 Sarajevo, BiHTelephone: +387 33 295-880, Fax: +387 33 [email protected], www.fic.ba

FIC News

- Foreign Investors Council formed the Committee for Labour Law

- Meeting with ITA BiH representatives

- The Federal Government adopted the Draft Law on Income Tax

- Conference “Economic Challenges and Opportunities in SEE”

- Sarajevo Business Forum 2014

FIC Presents

- GAZPROM network of petrol stations in Bosnia and Herzegovina

- Volkswagen Sarajevo

- Bosna Bank International (BBI)

INTERVIEW with ...

- Dr. Renzo Daviddi, Deputy Head of EU Delegation to

Bosnia and Herzegovina (BiH)-

FIC Members activities

- CFO Conference - financial director positions in BiH

- Presentation of the EBRD's Transition Report for 2013

- The construction of the TCK administrative building began

Adopted legislation

- Bosnia and Herzegovina,

- Federation of Bosnia and Herzegovina

- Republic of Srpska

White Book

- Presentation of the White Book - guidelines on how the government can

implement reforms and improve the business climate in the country-

BiH economic ovreview

- Economic Report – April 2014

Content Highlights

VSI NOVOSTI Izdavač:VSI – Vijeće stranih investitora

Uredništvo: Bojana Škrobić Omerović izvršni direktor

Tea Kajan asistent

Lektor:Ured VSI

Dizajn:Ekrem Kapić

DTP:Proprint, Sarajevo

Tiraž: 200 komada

VSIFra Anđela Zvizdovića 1/B11,71 000 Sarajevo, BiHTel/Fax: +387 33 295-880, Fax: +387 33 [email protected], www.fic.ba

2021-24

12-15

17-18

15-17

10-12

4-10VSI Novosti

- Vijeće stranih investitora formiralo Komitet za radno pravo

- Sastanak sa predstavnicima UINO BiH

- Federalna Vlada usvojila nacrt Zakona o porezu na dobit

- Konferencija „Privredni izazovi i šanse u Jugoistočoj Evropi“

- Sarajevo Business Forum 2014

VSI Predstavlja

- GAZPROM mreža benzinskih stanica u Bosni i Hercegovini

- Volkswagen Sarajevo

- Bosna Bank International (BBI)

INTERVJU sa...

- Dr. Renzo Daviddi, zamjenik šefa Delegacije Evropske unije (EU) u

Bosni i Hercegovini-

Aktivnosti članova VSI

- CFO konferencija - Stavovi finansijskih direktora u BiH

- Prezentacija EBRD-ovog izvještaja o tranziciji za 2013. godinu

- Počela gradnja administrativne zgrade TCK - HeidelbergCement

Usvojena legislativa

- Bosna i Hercegovina

- Federacija Bosne i Hercegovine

- Republika Srpska

Bijela knjiga

- Prezentacija Bijele knjige - smjernice kako vlast može sprovesti reforme i

poboljšati poslovnu klimu u zemlji-

Ekonomski pregled za BiH

- Ekonomski izvještaj – April 2014.

Iz sadržaja

3FIC NEWS

FIC NEWS 2014

INTRODUCTION

Dear colleagues, partners, ladies andgentlemen,

It is a great pleasure to presentthe third edition of the Foreign In-vestors Council’s newsletter. As

before, in our semi-annual newsletter,you can find information about our ac-tivities that have marked the past pe-riod and an overview of the adoptedlegislation and economic indicators forthe period of November 2013 - May of2014.By giving my review of the state ofeconomic indicators in the second halfof the 2013 I can conclude that therewere no significant changes in macro-economic trends. The increased volumeof industrial production and deflation-ary pressures in the country still donot contribute to the strengthening ofdomestic demand through an increasein the welfare of the population.The real sector is still characterized bythe growth of industrial production,but also by an increase of the admin-istrative unemployment rate, whichindicates that the growth in industrialproduction is likely a reflection ofgreater engagement of the existingworkforce and more efficient use ofavailable technological potential.When it comes to financing new in-vestment projects in the country, in-dicators point to a continuation trendof the deleveraging of banks and re-liance on domestic sources of funding.The fact is that in recent years invest-ment in BiH was mainly based on thereinvestment of investors alreadypresent in our country, and that po-tential foreign and domestic investorsare losing their will when you perceivethe overall situation, starting with thelack of political and legal certainty, thelack of a single economic market, thevast and inefficient administrative ap-paratus.Unfortunately, in BiH there are stillmany obstacles and shortcomings.First of all the organization and func-tioning of the country is very complex,I think we are all aware of our eco-nomic and legal divisions, political andother differences, inconsistencies in

regulations and the application of anumber of administrative proceduresat various levels of government. Evenwhen good legal solutions do exist,sometimes or often they are not im-plemented in practice and both for-eign and local investors and entrepre-neurs, but citizens also, face problemswith the institutions because of theircomplexity and inadequate bureau-cracy apparatus hinders the imple-mentation of projects.Also, when we talk about regulationsand issues linked to them, we currentlyhave no harmonized regulations onthe territory of BiH and those regula-tions are not in line with legislation ofthe EU and neighbouring countries.When exporting or importing of goodsand services, there are frequent occa-sions when the institution in charge ofaccreditation/certification of certainproducts are not effective, and thebiggest problem arises for exporters,or manufacturing companies, which infact should largely maintain the devel-opment of BiH economy. On the otherhand, the import of goods and serv-ices that are not properly certified ina manner that is prescribed is allowedthus endangering the domestic econ-omy as well as the ordinary citizen asa consumer. As a country that has anegative foreign trade balance, thisaspect should be especially important.

Let's not forget that BiH resources arein abundance, but to be able to realizethe potentials of the BiH economy andcreate a positive atmosphere, it isnecessary to significantly improve theefficiency of public administration andboldly go in reform. All in all, administrative reforms, sta-ble legal system - a state which willprotect any investment through in-struments of strong legal and politicalsystems are the main obstacles thatmust be overcome in BiH.In the end, our message is clear - re-duce the inefficiency of public admin-istration, facilitate the procedures forobtaining various permits, providecertificates to exporters, create the in-dustrial zone where an investor canbegin work immediately without wast-ing time and money, encourage rein-vestment and exports - the capital willstart flowing on its own.After the reforms, which are essentialto this country, only then we can ex-pect major investments, greater in-vestment interest and until then,however, we have to first of all ensurethat existing investors are satisfied,because in fact they are the best ad-vertisement for the potential of thiscountry.Again, I recommend this news editionof FIC Newsletter, which will give youa clear picture of the way the ForeignInvestors Council BiH lobbied to im-prove the business climate.

Sincerely,

Branimir Muidža

President of FIC BiH

Word of FIC PresidentWord of FIC President

Branimir Muidža, President of FIC BiH

FIC Newsletter 2014.06 eng_Layout 1 13.6.2014 13:14 Page 3

4 FIC NEWS

As part of the roundtable,entitled "Private equity in RS- status and perspectives" in

Banja Luka , the employers' asso-ciations RS stated that the unsta-ble political climate, inefficientsocial dialogue, demanding regu-latory framework, inflexible labourlaws, corruption, shadow economyand educational maladjustmentsystems to labour market needssubstantial are the biggest obsta-cles to the development of thebusiness environment in the RS.Predrag Zgonjanin, the Presidentof the Employers Union, on thisoccasion, stated that the em-ployer’s RS faced a very difficultand complicated year, but in the

future they intend to participateeffectively in the changing busi-ness environment."Our goal is that as a responsiblesocial partner and the most pro-ductive part of the communityoffer solutions that can signifi-cantly improve the business envi-ronment , but also to show thatthe RS institutions have to sup-port the implementation of theessential and most important re-form in the Republic of Srpska",said Zgonjanin.From the Union of Association ofEmployers acknowledge what RSGovernment achieved which ena-bled the registration of the compa-ny for only three days and the re-turn of the Tax threshold to 200 KM.Zeljka Cvijanovic, RS Prime Min-ister, who attended the meetingstated:"It is very important that we havemade steps to relieve the econ-omy. Again we introduced thenon-taxable portion of wages, aswell as difiscalization for small

businesses, which will certainly besignificant. We've done the wholerange of legal solutions that ac-company these measures, but Iam aware that there are still manybusiness requirements in whichwe operate, "said Cvijanović.She added that the RS this yearwas not going to raise taxes, andthat is the fact one of the few inthe region, and added that thereis institutional support for every-thing that runs the business com-munity.The audience was addressed aswell by Mr. Stevan Dimitrijevic,on behalf of Foreign InvestorsCouncil, who presented the issuesdetermined by the White Book2012-13. n

Union of Associations of Employers of RS, unveiled a planUnion of Associations of Employers of RS, unveiled a planto improve the conditions of the local business climateto improve the conditions of the local business climateto RS governmental officialsto RS governmental officials

FIC NEWS

In accordance with FIC’s workplan for the 2014, the FICBoard of Directors passed a

decision to form a new committeewithin the FIC structure. Accord-ingly, on October 24th 2013 theconstituting session of the FIC’snew Committee for Labour Lawwas held, the structure and theconcept of this Committee will beidentical to the existing Commit-tee for taxes which has been ac-tive within the Foreign InvestorsCouncil BiH for several years. At the constituting session of theCommittee, the members haveestablished a framework plan ofaction of the Committee which

will primarily target the following:- Work on implementing the rec-

ommendations from the WhiteBook 2012-13;

- Establishing a formal coopera-tion with the relevant institu-tions in the fields of labour andemployment relations;

- Providing practical assistance toFIC members in overcoming thespecific obstacles they face inthis field;

- Distribution of relevant docu-ments and information aboutthe labour legislation;

- Organizing trainings and otherforms of education related tochanges of labour regulations

and their practical application.The first step in the work of thisCommittee will be establishingformal cooperation with the entityministries of labour, namely theFederal Ministry of Labour andSocial Policy and the Ministry ofLabour and War Veterans and Dis-abled Persons' Protection of theRepublic of Srpska and initiationof joint activities in the field ofharmonization of entity labourregulations.Also, one of the goals implies in-clusion of Committee’s membersinto work groups for adopting andamending the labour legislation atthe entity ministries. n

Foreign Investors Council formed the Committee for Labour LawForeign Investors Council formed the Committee for Labour Law


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FIC NEWS 2014

The meeting was organizedin Banja Luka, on November29, 2013 among represen-

tatives Indirect Taxation Authority(ITA) and Foreign InvestmentPromotion Agency (FIPA) BoD rep-resentatives.At the meeting on behalf of FIC,was present Ms. Bojana Skrobic -Omerovic, executive director of FIC. During the meeting, discussionwas directed to:- problems related to the delay in

VAT refunds, with the sugges-tion to facilitate the proceduresand shorten deadlines for VATrefund;

- problems related to the pay-ment of appropriate fees thatare often duplicated, includingtaxes on temporary admission;

- issues related to VAT refunds topersons who have establishedoperations in Bosnia and Herze-govina;

- not obliged opinions by ITA offi-cials;

- problems of retroactive pay-ments on the existing excisegoods after an increase in ex-cise rates;

- problems related to the calcula-tion and payment obligationsrelated to the customs declara-tion of goods.

It was pointed out that the FIC, inits annual publication "WhiteBook" perceived problems of for-eign investors in BiH, emphasizingalso a problems but recommend-ing solutions for overcoming theseproblems.

The above problems can be di-vided into non-existence of cer-tain problems of legal regulationand problems in the application ofcertain laws and bylaws.The conclusion of this meetingwas that ITA will start workingcloser with business communitytrying to help to overcome all theissues facing while doing businessand to help to attract more in-vestments in order to have stablebudget. n

FIC NEWS

Meeting with ITA BiH representativesMeeting with ITA BiH representatives

On Tuesday, February 11,2014 representatives ofthe new FIC Committee

for Labour Law held a first officialmeeting in Banja Luka with rep-resentatives of Ministry of Labour,War Veterans and Disabled Per-sons’ Protection of Republic ofSrpska.During the meeting, the FIC rep-resentatives presented issuestackled in the White Book 2012-13, which Ministry of Labour, WarVeterans and Disabled Persons’Protection of RS has accepted and

agreed that all of mentioned is-sues will be solved; even so,some of them are already inte-grated into to the new RS LabourLaw Draft. We agreed that coop-eration between FIC and this Min-istry should start with theorganization of the panel discus-sion between companies and in-stitutions entitled for labour lawissues on RS and FBiH level, in-cluding harmonization of legisla-tion among BiH entities.Also, minister Petar Djokic, un-derlined that cooperation and

partnership between RS and com-panies is essential in order to pro-vide better business environmentand satisfied the investors. n

FIC Committee for Labour Law visited the Ministry ofFIC Committee for Labour Law visited the Ministry ofLabour, War Veterans and Disabled Persons’ ProtectionLabour, War Veterans and Disabled Persons’ Protectionof Republic of Srpskaof Republic of Srpska


6 FIC NEWS

FIC NEWS

The Federal government at thesession held on 6th March2014 defined a new Draft Law

on Income Tax.One of the reasons for passingthe new law was an introductionof the new methods for determin-ing the transfer prices whichoccur in transactions between as-sociated persons, which differfrom the prices which would havebeen achieved if transactions oc-curred between persons that arenot associated and the prices onthe market. All methods for de-termining transfer prices are reg-ulated by the OECD model.The lack of current law reflected inan unequal taxation of subsidiaries/business units of legal entitiesfrom the two entities and BrckoDistrict BiH, so that the subsidi-aries/business units of legal enti-ties from the Republic of Srpskaand Brcko District were exempt

from paying tax on income derivedfrom the operations in the FBiH,while these benefits were not provi-ded for the subsidiaries/businessunits of legal entities from the FBiH.Some provisions of the new lawwere amended on the basis ofproposals and suggestions madeby the Employers' Association, theForeign Investors Council, Cham-ber of Commerce, Tax Adminis-tration of FBiH, financial instituti-ons, IMF, IFC, during the draftingof this legislation. The new draftlaw provides amendme-nts to theprovisions related to exemptionsfor exports and new investments.Participating in consultative groupat the Federal Ministry of Finance(FMF), which is responsible forthe preparation of proposals foramendments to the tax and fiscallegislation in the Federation, mem-bers of the FIC unanimously de-manded not to reversed or other-

wise impair the rights related topayment of income tax for exportcompanies and companies thatinvest in the production, as it de-fined in the current Law on In-come Tax of FBiH.We emphasize that the FIC didnot support the proposals to com-pletely abolish the existing ex-emptions for exports and newinvestment, because we are con-vinced that such a solution is notin accordance with the principle ofunburdening the economy andcreating a favourable businessenvironment, but on the contrary,the elimination of existing exemp-tions to existing economic entitiesled in a worse position, and des-timulate new investors, especiallybecause the exemptions for in-vestment in productive activityand new jobs are already avail-able in the Republic of Srpska andBrcko District. n

The Federal Government adopted the Draft Law on Income TaxThe Federal Government adopted the Draft Law on Income Tax

The Ministry of Economy andEnergy of the Federal Re-public of Germany (BMWi)

and the German DevelopmentBank (KfW) organized the confer-ence entitled "The Economy Chal-lenges and Opportunities in South-east Europe" in order to encour-age companies in this part of Eu-rope, German, and other foreigninvestors and to highlight eco-nomic circumstances and oppor-tunities in Southeast Europe."There are sectors in which BiHcan be competitive in the EU mar-ket. There are investors who areinterested in investing, and thereare institutions that are interestedto facilitate this, however, theproblem is the environment itself,legal, political, and institutionalenvironment in which there is noprogress and which prevents thisprocess," said Renzo Daviddi,Deputy Head of the EU Delegationin BiH, adding that it is necessary

to ensure certain conditions forinvestors to come.Thus, according to Daviddi andother participants of the confer-ence, it is necessary to speed upthe procedure for starting a busi-ness, for example, in Macedoniathe process takes two days, andin Bosnia and Herzegovina severalmonths. The problem is also tax-ation and investors interested in aneasy way of hiring and firing work-ers, as well as the security of con-tracts, especially in the private sector.Helge Tolksdorf, Director of theOffice for the EU Enlargement inthe BMWi, pointed out that anumber of German companies areinterested in cooperation withcompanies from BiH, but it is nec-essary to resolve many adminis-trative problems and ensure areliable legal framework."When we talk about investment,the BiH authorities and entrepre-neurs must convince investors not

to go to China or Croatia, but tocome to BiH and it is the only wayto attract more investment," saidTolksdorf.German Development Bank hasbeen active in BiH for manyyears, in particular, in the wordsof Christoph Tiskens the Directorof KfW for the SEE and Turkey, inthe energy sector, the private sec-tor incentives, and investments insmaller BiH towns."So far we have invested about300 million Euros to BiH and theplan is to invest around 350 mil-lion Euros in the next two to threeyears" said Tiskens adding thatthe goal of the KfW is to providea stimulus to the energy sectorand to strengthen the economy.In capacity of panellists the Pres-ident of FIC Mr. Branimir Muidžaand board member of the FIC Mr.Libor Krkoška, Head of the EBRDoffice in Bosnia and Herzegovinaaddressed the audience. n

Conference “Economic Challenges and Opportunities in SEE”Conference “Economic Challenges and Opportunities in SEE”


7FIC NEWS

FIC NEWS 2014

On March 18th 2014, in thepremises of the Public Pro-curement Agency BiH (here-

inafter: “Agency”) in Sarajevo themeeting between the representa-tives of the Agency, the ForeignInvestors Council (hereinafter:“FIC”), and the Cooperation Coun-cil which operates as a part of FICtook place.In the opening section, Mrs. Bo-jana Škrobić – Omerović, FIC Ex-ecutive Director, who initiated themeeting, greeted the audienceand expressed her gratitude tothe representatives of the Agencyfor recognizing the importance ofcooperation between the Agencyand companies, and introducedthe themes of the meeting.The following themes were dis-cussed during the meeting:- lack of transparency and com-

plicated procedures when ap-plying for public tenders;

- existing legal framework; - difficulties in the process of ap-

plying for public tenders; - the inadequacy of the criteria

for selection of bidders, partic-ularly in relation to the bidderswho are foreign entities;

- increasing costs of the appealproceedings, especially at theexpense of small and mediumenterprises.

A representative of the AgencyMr. Admir Ćebić stressed the con-

tinuous readiness of the Agencyto cooperate with entrepreneursas they are direct participants ofthe public procurement proce-dures, with the aim of optimal ap-plication of the Public ProcurementLaw in BiH (hereinafter: “PPL”)and its implementing regulations.Representatives of FIC membersbriefly presented the problemsthat the bidders commonly en-counter in practice which aremostly related to the implemen-tation of the Public ProcurementLaw by the contracting authori-ties. They pointed out that someof the main problems are the in-sufficient definition of documen-tation which foreign bidders useto prove they meet the qualifica-tion requirement, unequal appli-cation of existing regulations,different interpretation of the reg-ulations due to ignorance or lackof experience of contracting au-thorities, and occasionally, delib-erate avoidance of the properapplication of the regulations incertain cases.When it comes to the lack oftransparency of the procedure,the Agency has taken the appro-priate steps with the aim ofstrengthening the transparency,and as the result of those stepsemerged the obligation for thecontracting authority to publishon their website the request to

participate in negotiation proce-dure, which has not been thepractice so far. The Agency con-siders that the transparency ofthe procurement procedure hasbeen further enhanced by thenew law.Mr. Ćebić also informed the audi-ence present that the new Law onPublic Procurement is already inthe procedure and being read bythe BiH Parliamentary Assemblyand it is their opinion that the lawshould be adopted by May 2014.In cooperation with the Agencyrepresentatives, the FIC will takethe following concrete steps inorder to eliminate mentioned ob-stacles in the area of public pro-curement:1.In cooperation with the member

embassies of the FIC Councilfor Cooperation, FIC will write aletter of urgency and forward itto the Council of Ministers ofBosnia and Herzegovina, inorder to speed up the processof opening the branch offices ofthe procurement review body inMostar and Banja Luka.

2.In the coming period FIC andthe Public Procurement Agencywill organize a panel discussionwith FIC members and theAgency where the representa-tives of Procurement ReviewBody will be invited to jointlyopen a dialogue on the topic ofprocedures and their applica-tion on the field of public pro-curement. The event is plannedfor June or September 2014. n

FIC NEWS

Meeting with the representatives of the Public ProcurementMeeting with the representatives of the Public ProcurementAgency BiHAgency BiH


8 FIC NEWS

FIC NEWS

Electronic register of permits(E Register) is a centralizeddatabase of administrative pro-

cedures within the competence ofadministrative authorities, publishedon the websites of administrationorgans and intended for generalpublic. The formation of this type ofservice aims to provide citizens andbusinessmen with transparent in-sight into the implementation of ad-ministrative procedures, as well asfaster and easier access to informa-tion about procedures for obtainingpermits under the jurisdiction of ad-ministrative bodies.

Accessing E Register

Through an easy access to the ERegister businessmen would have acomplete insight into all elements ofobtaining permits they are inter-ested in: the required documentsand their costs, information on howand where to obtain the necessarydocuments and the time frame inwhich the administration needs toaddress the request. On the samesite there are also accompanyingforms which the party should fill outand send along with supportingdocuments as a requirement for re-solving the matter. The establish-ment of this service makes it moretransparent, easier, faster, andcheaper to obtain the necessarypermits, certificates, and licensesfor legal entities and the public.

Efficient administration –

economy relief

The efficiency of the E register is di-rectly related to its regular updat-ing. With the aim of strengtheningthe efficiency of administration,process improvement, and eco-nomic development in general,every E register should contain thelatest and most precise informationon permits, licenses, and certifi-cates, including the contact detailsof the competent authorities. Anyinstitution which wants to createbetter conditions to attract in-vestors and accelerate economic

development of their environment,should provide that its E Register isupdated with the latest informationabout permissions, in order not tomake mistakes and slow down theprocess in any administrative pro-cedure, and provide a contact per-son responsible for specific tasks.The practice shows that E Registersof permits are extremely well vis-ited, there is a great interest in per-mits and, in order to speed up theprocess, regular updating is of verygreat importance.

Faster, easier, and cheaper

Gathering the necessary documen-tation is the first step in the processof obtaining any permit or startinga business. Prior to the establish-ment of E register days and weekswere required to gather all the nec-essary information, forms, and doc-uments. All this is now available ina single place where the realizationof idea is just a small trip away - tothe Internet portal of administrativebodies to familiarize yourself withwhat you need to get the necessarypermit. Mitigating circumstance isthe fact that a large number of doc-uments, the municipalities/citiesneed to obtain in the line of dutywhich shortens the time and cheap-ens the registration.Creating a register and simplifica-tion of procedures at all levels ofgovernment in Bosnia and Herze-govina, in the last five years, hasresulted in a 15.86 million KM of di-rect savings for the companies, andover 4,000 businesses benefit fromthe simplification of procedures inthe process of starting a business,which confirms the importance of ERegister for the economy and thecitizens and the constant need forupdates. Electronic registers of per-mits are the results of regulatoryreforms that governments at all lev-els in Bosnia and Herzegovina carriedout in collaboration with the Inter-national Finance Corporation (IFC, amember of the World Bank Group)and the Kingdom of Sweden. n

WEB LINKS:The Council Of Ministers of Bosnia andHerzegovina, Ministry of Foreign Trade andEconomic Relations of Bosnia and Herze-govinahttp://rap.mvteo.gov.ba/egfVwOdlukaJe-dinice.aspx

The Government of the Republic of SrpskaMinistry of Economic Relations and Re-gional Cooperationhttp://www.regodobrenja.net/

The Government of the Federation of Bos-nia and Herzegovinahttp://www.fbihvlada.gov.ba/bosanski/ereg/index.php

Tuzlanski Canton http://195.222.57.146/egfVwOdlukaJe-dinice.aspx

Una-Sana Canton http://www.vladausk.ba/v2/IFC.php

Zenica-Doboj Canton http://80.65.74.245:10080/eregistar/egfVwOdlukaJedinice.aspx

Tuzla Municipalityhttp://80.65.71.100/eregistar/egfVwOd-lukaJedinice.aspx

The City of Bijeljinahttp://sobijeljina.zapto.org:81/ifc/egfV-wOdlukaJedinice.aspx

Bosanska Krupa Municipalityhttp://92.36.225.164:90/lokacija/egfV-wOdlukaJedinice.aspx

Novi Grad Municipalityhttp://www.opstina-novigrad.com/

Bihać Municipalityhttp://www.bihac.org/ap.php

The City of Banja Lukahttp://www.banjaluka.rs.ba/asbl/services/

Novo Sarajevo Municipalityhttp://www.novosarajevo.ba/stream/servis/

Goražde Municipality http://www.gorazde.ba/index.php?op-tion=com_weblinks&view=categories&Itemid=95

Modriča Municipality http://www.modrica.ba/zahtjevi.html

Široki Brijeg Municipalityhttp://www.sirokibrijeg.ba/registar_pos-tupaka/

Zvornik Municipalityhttp://www.opstina-zvornik.org/index2.php?option=com_wrapper&view=wrap-per&Itemid=233

The City of Dobojhttp://opstinadoboj.no-ip.org:8050/ifc/egfVwDelatnostWeblist.aspx

Tešanj Municipality http://opcina-tesanj.no-ip.biz:9333/ifc/egfVwOdlukaJedinice.aspx

Teslić Municipalityhttp://109.105.201.94/eregistar/egfV-wOdlukaJedinice.aspx

Easier way of obtaining permits in BiH - E RegisterEasier way of obtaining permits in BiH - E Register


9FIC NEWS

FIC NEWS 2014

In March 2014 in cooperationwith Karanovic / Nikolic, FICorganized a two-day panel

discussion on "The termination ofthe employment contract by theemployer" in Teslic. The aim of this panel was to ob-serve the problems and dilemmasin the practical application of thelaws and bylaws related to thetermination of the employment bythe employer, through the shareddialogue between the state insti-tutions accountable for the legalemployment relations and thereal sector and to jointly articu-late conclusions about the direc-

tion the new legislation in thisfield should take and ways of itsimplementation.At this event the representativesof the Federal Ministry of Labourand Social Policy, Ministry ofLabour, War Veterans and Dis-abled Persons’ Protection of Re-public of Srpska, judges of themunicipal and cantonal court inSarajevo, judges of the basic anddistrict court in Banja Luka, aswell as head labour inspectors inthe Federation and the Republic ofSrpska, and more 30 representa-tives of foreign companies, mem-bers of FIC, actively participatedas panellists. Mr. Stevan Dimirtijević, FIC boardmember opened the panel andexpressed his appreciation to allinstitutions and companies thathave shown interest to be part ofthis important dialogue."We hope that this dialogue be-tween the business communityand institutional representativeswill in the future be the basis for

the reform process in BiH, inorder to establish a better busi-ness climate for all companiespresent in BiH," said Dimitrijević.Assistant Federal Minister ofLabour and Social Affairs, Ms.Džana Kadribegović and Mr. RajkoKličković, Head of the Departmentof Labour and Employment of theMinistry of Labour, War Veteransand Disabled Persons’ Protectionof Republic of Srpska gave anoverview of provisions of entityLabour Law which regulates thefield of termination of the employ-ment contract and pointed to dif-ferences which exist between theentity labour regulations.During the discussion, all repre-sentatives of the courts and in-spectorates from both entitieswere very active in responding tocontroversial issues to companyrepresentatives / FIC members,which resulted in defining con-crete conclusions that will facili-tate the future operations of com-panies. n

On May 14th 2014 a two-day,Fifth International Invest-ment Conference of the Sara-

jevo Business Forum (SBF), has begun. The forum brought together a num-ber of eminent personalities fromthe fields of business and the econ-omy of Bosnia and Herzegovina, theWestern Balkans region, and theworld, as well as representatives ofthe world's largest investment funds.Director of the BBI Bank and organ-izer of the SBF Amer Bukvić in hisopening speech said that the Forumhas become one of the major busi-ness events in the region and he of-ficially declared it open.He pointed out that, after lengthypreparations, the Forum will publishmore than 110 projects in various

sectors, mostly from the agricul-tural sector, and that more than 600participants from Bosnia and Herze-govina, the region and the world re-sponded to the open call.Chairman of the BiH Presidency,Bakir Izetbegović during his speechsaid that Bosnia and Herzegovina isworking on opening 100,000 newjobs in the upcoming years. He saidthat the country possesses an edu-cated and cheap labour force andestablished companies, as well asthat the BiH legislation in the fieldof labour and employment is gener-ally aligned with international stan-dards.Speaking of challenges, Izetbegovićsaid that Bosnia and Herzegovinashould facilitate visa regime to-

wards a number of countries, espe-cially the Gulf states, establish amore efficient judicial system inhandling commercial disputes andfocus attention to local and foreigninvestors, because great resourcesof public companies are still beingunused at the accounts of commer-cial banks.President of the Islamic Develop-ment Bank Group Ahmad Mohamed

Sarajevo Business Forum 2014Sarajevo Business Forum 2014

FIC NEWS

In cooperation with Karanovic/Nikolic, FIC organized a two-In cooperation with Karanovic/Nikolic, FIC organized a two-day panel discussion in the field of labour law legislationday panel discussion in the field of labour law legislation


10 FIC NEWS

Ali, during his opening speech, po-inted out that the SBF „is graduallybecoming one of the most impor-tant events that represent a uniqueopportunity for investment."He said that the investment is ex-tremely important for sustainabledevelopment, adding that Bosniaand Herzegovina and the countriesof Southeast Europe have madegreat efforts to attract foreign in-vestment. Noting that countries inthe region have the potential for de-velopment of halal and organic pro-duction, Ali said that during the SBFparticipants will look back at fourregional themes: agriculture, en-ergy, infrastructure, constructionand tourism.A former member of the BiH Presi-dency and one of the founders ofthe Forum, Haris Silajdžić, said hewas proud of the Forum and thankedeveryone for coming and said that

Bosnia and Herzegovina, in spite ofall the difficulties, is good state forinvestors. Chairman of the Councilof Ministers Vjekoslav Bevanda saidthe region is characterized by acomplementary economy, which in-creases the possibilities of regionalcooperation. He took the opportu-nity to send a message to all in-vestors to experience this region asa place where profits is made throughthe investments.During SBF a Memorandum of Un-derstanding which was founded on

the principle of BBI Economic Cor-poration was signed and the signa-tories have undertaken to worktogether to realize the large numberof projects. The memorandum wassigned by representatives of the Is-lamic Development Bank Group,BBI Bank, the company Hassam AlOthaim and Al Meera.Sarajevo Business Forum is a plat-form for regional cooperation andjoint presentation of the potential ofthe region of Southeast Europe toinfluential business and politicalleaders from around the world.Forum will again, as in previousyears, act on the basis of success-fully defined parameters from theconference in Davos.During the past four years, the SBFhas hosted more than a thousandinvestors from more than 30 coun-tries and more than 300 projectshave been presented. n

FIC NEWS

By taking over the retail net-work of OMV BH doo, acompany NIS Gasprom

Neft put into service 28 gasolinestations under the brand GAZ-PROM in Bosnia and Herzegovina.On the territory of the Republic ofSrpska eight service stations oper-ating under the brand NIS Petrol.By the end of the 2013 the totalinvestment in the network ofGazprom and NIS Petrol in Bosniaand Herzegovina will be in amountof 90 million euros and opened 36service stations.On this way it is established thesecure sales channel of motor fuel- quality Euro 5, which are pro-duced in the refinery in Pancevo.Premium network of petrol sta-tions GAZPROM offers consumers

fuel and lubricants of high quality,as well as a wide range of addi-tional products. This form of sta-tions anticipates the existence ofshops, restaurants and cafes. Cus-tomers may use wireless internet,car wash and playground as well.Besides Bosnia and Herzegovina,a large project development ofnew premium network of petrolstations GAZPROM spreads inSerbia, Bulgaria and Romania. Bythe end of the 2015, more than250 service stations will be builtin the Balkans, including 40 onthe territory of Bosnia and Herze-govina, where it is expected thatthe network of petrol stationsGAZPROM occupy about 15 per-cent of the retail fuel market inthis country.

Additional information:

NIS is one of the largest verticallyintegrated oil and gas company ofSouth Eastern Europe. Basic di-

rections of activity are research,production and sale of oil and gas,as well as the traffic of petroleumproducts. "Gaspromneft" owns56.15 % of shares of NIS, while29.88 % of shares of NIS ownedby the Republic of Serbia. NIS inSerbia owns the refinery with twoorganizational parts - in Pancevoand Novi Sad, with a total capac-ity of 7 million tons of oil per year,as well as gas refinery in Elemir.The volume of NIS production is1.7 million tons of probation oilper year. Retail network of com-panies includes more than 500gas stations and warehouses inthe countries of the Balkan re-gion. NIS operates in several Eu-ropean countries - Serbia, Hungary,Romania, Bosnia and Herzegov-ina, Montenegro, Croatia, Bul-garia, Macedonia and participa-ting in construction projects onthe territory of Angola. n

GAZPROM network of petrol stations in Bosnia and HerzegovinaGAZPROM network of petrol stations in Bosnia and Herzegovina

FIC PRESENTS


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FIC NEWS 2014

History

TAS (Tvornica Automobila Sara-jevo) was established in 1970 incooperation between VolkswagenAG and UNIS, with Volkswagenholding a 49% stake and UNIS51%. CKD assembly of the Volk-swagen Beetle started in Sarajevoin 1972, followed by CKD assem-bly of the GOLF and Jetta in 1976and the Caddy in 1982. 1989 wasa record year for the Sarajevoplant, with a total of 3,500 em-ployees assembling 37,000 vehi-cles. Fallowing the war years, theSarajevo plant was recommis-sioned in 1998. Since 2001, Volk-swagen AG has held a stake of58% and joint venture Preventhas held a 42% stake in the plant. SKD assembly of Volkswagen,Skoda and Audi models started in1998 and continued until 2008. In2009, the EcoCarrier small elec-tric van was produced in cooper-ation with the German companyEcoCraft.

Plant

The plant of Volkswagen Sarajevod.o.o. has a total surface area of157,000 square meters, including22,300 square meters of produc-tion area in use and 36,700 squaremeters of unused production area.

Production

Volkswagen Sarajevo producescomponents that are installed onmany different engines and mod-els of Group brands. The mainproducts of the plant include stubaxle, ring gears, wheel hubs andwheel flanges. In 2011, the plantproduced about 2.4 million stubaxles, 1.0 million ring gears and0.6 million wheel hubs and wheelflanges. In addition the plant pro-duces intake pipes, exhaust si-lencers, swirl chambers, machineparts and reservoir, tubes, cur-rently to customers' specifica-tions. Sarajevo has also developed con-tainer production capabilities andnow manufactures a wide rangeof universal and special contain-ers tailored to customers' require-ments. One of the special contai-ners produced is a push trolley

with tilting system developed bythe engineers of Volkswagen Sara-jevo. A patent for this invention ispending.

Environment

With its „Think Blue Factory“ ini-tiative, the Volkswagen brand hasset itself clear targets for the en-vironmentally sustainable posi-tioning of all its plants. By 2018,the aim is to reduce the environ-mental impact of all Volkswagenplants by 25 percent. Specifically,this means 25 % lower energyand water consumption, wastevolumes and emissions at allplants. In January 2009, Volkswa-gen Sarajevo was one of the firstcompanies in the metal-workingindustry of Bosnia and Herzegov-ina to be awarded an environ-mental permit. This is a manda-tory certificate that demonstratesthat companies operate in accor-dance with the environmental reg-ulations laid down by the state. In2011 Volkswagen Sarajevo re-ceived an ISO 14001 Certificatefor its environmental managementsystem in November 2012. n

Volkswagen SarajevoVolkswagen Sarajevo

Bosnia Bank International (BBI)is the first and only bank inBiH and the region which

operates in accordance with theprinciples of Islamic banking. It wasfounded on October 19th 2000with its headquarters in Sarajevo.The founders of BBI are the Isla-mic Development Bank (Saudi Ara-bia), with shareholding of 45.46%,Dubai Islamic Bank (UAE) withthe initial share of 27.27% andAbu Dhabi Islamic Bank (UAE) with

the initial share of 27, 27%). Bankswhich have established BBI wererewarded the ranking of AAA(triple A) by the world’s largestbank ranking organization, and thisrank is awarded only to the bestand safest financial institutions.Although in BiH there is no legalframework for the operation ofthe bank in accordance with Is-lamic principles, BBI has investedgreat efforts and made substituteproducts, so that now it offers allproducts and services as conven-tional banks, which are not inconflict with either Islamic or locallegislation. Today, BBI operateswith 23 branch offices across the

country. By developing a businessnetwork and opening branch of-fices across BiH, we have givenaccess to affordable financial linesto greater number of citizens andthereby increasing the marketshare of BBI bank. BBI Bank joinedthe rank of banks with the largestnumber of ATM machines in thecountry and this is ensured by ini-tiating the formation of the "BHATM network."Since 2010, BBI Bank has beenorganizing Sarajevo Business Fo-rum, an international investmentconference where local entrepre-neurs have the opportunity to meetand implement business coopera-

Bosna Bank International (BBI) Bosna Bank International (BBI)

FIC PRESENTS


12 FIC NEWS

FIC PRESENTS

tion with investors from aroundthe world.BiH has great potential for growthin agriculture, tourism, energy,telecommunications and BBI as asocially responsible bank seeks tocontribute to the economy of Bos-nia and Herzegovina and providefavourable means of financing. Itshould be noted that the Turkishfinancial line, which provided ex-istence for over 1,000 returneefamilies, through the financing ofthe economy opened more than1,700 jobs as well as the line ofthe World Bank, intended forsmall and medium enterprises.During the global economic andfinancial crisis, commercial bankswere under severe pressure fromcustomers. However, banks whosebusiness is in line with Islamicprinciples have not felt the nega-tive effects of the world crisis. The

reason for this is that behind allthe transactions of the banks thereare real values.BBI bank as an institution whichoperates in accordance with Is-lamic principles and offers secu-rity and trust to its clients in thisperiod recorded a growth in thenumber of service users.

BBI Bank as a recognizable

brand in the business develop-

ment and society as a whole

- Since 2010 till today, every yearBBI organizes the Sarajevo Busi-ness Forum, the largest interna-tional investment conference inmodern Bosnia and Herzegovina.

- BBI is the first bank which es-tablished a VIP Business Club,for clients/companies for mak-ing business connections andestablishing links with foreignmarkets.

- BBI in cooperation with the Uni-versity of Bolton UK initiatedthe establishment of the Centrefor Islamic Economics, Bankingand Finance at the Faculty ofEconomics in Sarajevo.

- BBI has established its traininghouse called BBI Academy, whichorganizes staff training througha variety of internal and exter-nal seminars and workshops.

- BBI is one of the investors inBBI Centre.

- BBI is the only bank in Bosniaand Herzegovina that offerszakat and hajj savings.

- In cooperation with its partnersBBI, each year, donates aboutone million convertible marksfor over 500 students have lostone or both parents as well asfor particularly successful stu-dents from Bosnia and Herze-govina. n

INTERVIEW with...

Can you tell us more about thecurrent economic programs of theEU Delegation in Bosnia and Herze-govina?A number of new initiatives in keyareas have been launched in thepast few months. They are allsummarised in the Conclusions ofthe EU Foreign Affairs Council pub-lished on 14th April. Clearly thereis a broadening of the EU agendaand engagement in Bosnia and

Herzegovina. First and foremost weneed to see progress on the econ-omy. Lack of economic growth isone of the reasons behind the jus-tified protests we have seen overrecent months. That is why we willsupport a forum and a dialogue onthe economy which will help toidentify the key areas for urgentaction to spur the creation of jobs.The European Commission willtake forward initiatives to improve

economic governance, strengthencompetitiveness and stimulate eco-nomic growth. We have already launched thejoint working group on implement-ing all EU funds from IPA 2007 –2013. This has already made somegood progress. In addition abroadening of the Structured Dia-logue on Justice is expected sothat it will cover other rule of lawissues in addition to justice, in-

Dr. Renzo Daviddi, Deputy Head of EU Delegation toDr. Renzo Daviddi, Deputy Head of EU Delegation toBosnia and Herzegovina (BiH)Bosnia and Herzegovina (BiH)

RECOGNITIONS AND AWARDS

In recognition for its contribution to the development of business and society as a whole BBI has received pres-tigious awards such as the "Superbrand" for the 2010 and 2013/2014, "most preferred employer in the financialsector" for the 2011, 2012 and 2013, in the 2014 it is among the top three most desirable employers in thisfield. The Bank is the recipient of "Acknowledgements of Sarajevo" from the 2012. Director of the Bank, AmerBukvić, is the winner of "Personality of the Year 2010" by the choice of readers daily newspaper "San", "BestManager in BiH banking sector and South-Eastern Europe in 2011", "Medallion of the City of Sarajevo" in the2011, the Charter international League of Humanists "Aurelio Peccei" in the 2012In 2013 the director of BBIwas awarded the International Islamic University of Malaysia (IIUM) recognition in the category of "InternationalBanking". That same year, Tun. Dr. Mahathir Mohamad, the fourth Prime Minister of Malaysia, on behalf of theFoundation "Perdana Leadership" presented the awards to the most successful entrepreneurs of BiH. Recognitionin the field of banking, Dr Mahathir presented to Amer Bukvic.


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FIC NEWS 2014

INTERVIEW with...

cluding anti-corruption. Taken to-gether, this is a significant widen-ing of EU engagement.All that said, the essential condi-tions for BiH to move closer to theEU will not change. As the Conclu-sions said, the ‘Sejdic and Finci’judgment needs to be implementedand an efficient EU co-ordinationmechanism to enable BiH to speakto the EU with one voice remainsof high importance.

Will your future efforts, in terms ofhelping BiH through IPA funds andother instruments of technical as-sistance, be more focused on as-sisting BiH in overcoming its econo-mic problems?IPA funds will continue to be avail-able across the sectors jointlyidentified by BiH and the EU as theones requiring financial support.These range from social develop-ment to justice and many others.Reform across all the identifiedsectors will help the BiH economydirectly or indirectly. The total budget planned for IPA II(2014-20120) for all the Enlarge-ment countries is EUR 11.7 billion.Bosnia and Herzegovina wouldstand to get hundreds of millionsof euros from this total amount –if it can agree on co-ordination anddevelop appropriate strategies touse the money. IPA II preparationsfor BiH are still at the beginning,however we think BiH should notmiss this next major opportunity.The EU granted over 600 millionEUR to Bosnia and Herzegovinathrough the Instrument of Pre-Ac-cession (IPA) alone and more thanthree billion EUR were allocated tothe country through various pro-grammes in the past 20 years.Currently, we have projects in theamount of 210 million euro, whichare under implementation but notyet finalised and we were talkingabout 150 million euro which havenot yet been contracted. What is needed now is strong po-litical leadership as well as moreownership and responsiveness incarrying out the various projectsfor the benefit of the citizens and

the European integration of Bosniaand Herzegovina.

Are there mechanisms in the EUwhich allow the control over thefunds approved for implementa-tion of projects in BiH?Yes, the EU keeps a close eye onthe use of EU funding and projectprogress. The EU Delegation toBosnia and Herzegovina is respon-sible for procuring and contractingprojects financed from EU Instru-ment of Pre-Accession Assistance(IPA). Once the projects are ongo-ing we monitor the implementa-tion and progress of the projectsjointly with our BiH counterparts.For example we have the IPA Mon-itoring Committee that meets reg-ularly. IPA Monitoring Committeeis a joint meeting between Euro-pean Union and Bosnia and Herze-govina that gives the BiH institu-tions the possibility to exerciseownership of the assistance and todemonstrate the achievementsmade or problems encountered.The purpose of the meeting is thatthe assistance under IPA is bettertargeted and focused on results inorder to help Bosnia and Herze-govina on the European Integra-tion path.In addition projects have their in-dividual Steering Committee meet-ings, which are attended by allproject parties and that discussthe progress of the particular proj-ect. In addition to audit, the Euro-pean Commission engages regularlyalso outside assessors to scrutinisethe implementation of EU-fundedprojects.

Do you believe that BiH can func-tion as integral economic spaceand, in your opinion, which are the

key priorities for the recovery ofBiH economy?BiH has to function as an integraleconomic space if it wants to jointhe EU—it's that simple.Much ef-fort has been invested so far withthe ultimate goal of creation andfunctioning of a single economicspace in BiH. The Constitutionalsetup of the country allows for alllevels of government to developpolicies that they think will con-tribute to economic prosperitywhich in itself is a good thing. But the main challenge for all of-fice holders and decision makers isthat all existing as well as futurepolicies should be sufficiently co-ordinated in order to achieve opti-mal effects, otherwise policies andactions of an administrative levelmay prove to be inconsistent withthe policies of another administra-tive level. This can lead to seriouschallenges in terms of establishingand functioning of a single eco-nomic space. For example, segre-gated registration procedures forbusinesses and other restrictionsthat divide the economic spacewould be immediately in breach ofthe Stabilisation and AssociationAgreement should it come intoforce. And this is more than an EUrequirement: local businesses andpotential foreign investors alsowant this to happen as a matter ofurgency. The single internal market be-tween Member States is one of themain achievements of the EU thatserves as a base for economicprosperity of the Member Statesand for an increased level of socialcohesion within the EU. Currently,Bosnia and Herzegovina facesmany economic challenges thatstand in the way of progress andwider economic integration and weneed to reduce them. As regards the priorities for eco-nomic recovery, they are wellknown and there is widespreadagreement on them: first is labourmarket restrictions and taxes andthe detrimental effects these haveon employment; second is a busi-ness environment (with vast regu-


14 FIC NEWS

lation and unseen fees and taxes)that deters investment; third isthe overhang of state-owned andbadly privatised enterprises thatuse up resources without makingan adequate contribution to eco-nomic activity; and fourth is a so-cial welfare system that is expe-nsive but that does not help thepeople who truly need it. Runningthrough all of this is a level of cor-ruption and privilege that excludesmany (especially, young) peoplefrom access to opportunity andjobs. Just to remind you that un-employment rate of young peopleis close to 60%. So please be surethat the problem of unemploymentstands out from the rest and it isnecessary to decisively addressthis problem. Only coordinated ap-proach undertaken by all levels ofgovernment, in collaboration withother partners such as employers,who are not necessarily domestic,financial institutions as well asrepresentatives of the wider inter-national community, can effec-tively contribute to solving thispressing problem. Again I repeat,harmonized business conditionsthroughout the country as well asequal treatment of all economicactors are certainly one of thebasic prerequisites for achievingthis objective.

What are you experiences with theBiH authorities? Did BiH authori-ties show understanding and ac-ceptance of the EU economic pro-grams for BiH?We see it in the issue of coordina-tion of EU affairs, which is one ofthe greatest challenges for anycountry aspiring to join the EU. ForBosnia and Herzegovina this chal-lenge is even bigger due to itscomplex institutional architecture. As stated in the Commission's2013 Progress Report, BiH needsto address the issue of an effectivecoordination mechanism betweenvarious levels of government forthe transposition, implementationand enforcement of EU laws, as amatter of priority, in order to beable to speak with the EU with one

voice and to benefit the EU finan-cial assistance. The complicateddecision-making process has hadnegative impact on the overall re-forms and progress of the countrytowards the EU.Better internal coordination is vitalfor the dialogue and cooperationbetween the EU and Bosnia andHerzegovina. Several meetings ofEU-BiH subcommittees on issuessuch as trade, customs and taxa-tion or state aid, competition andinternal market legislation couldnot be held due to internal dis-agreement on the side of Bosniaand Herzegovina. That underminesthe functioning of the InterimAgreement which is the contrac-tual basis of our relations. What is needed is shared politicalwill to find mutually agreeable andefficient solutions for a technicallydemanding EU accession process.

In your opinion what are the eco-nomic benefits of BiH?A good answer to this question re-quires taking a look at Bosnia andHerzegovina through a longer pe-riod of time. First I would refer toa period over the last 20 years andif we compare the situation thenand now, we can rightly say thateconomic position and standard ofliving of citizens today is at a muchhigher level than before. However,if we look at the state of the econ-omy and the quality of life of theaverage citizen over the last sev-eral years, again, it appears rightto say expected progress is ab-sent. A clear manifestation of thisis certainly the recent wave ofprotests where citizens from all so-cial categories publicly expresseddissatisfaction with the current sit-uation and the unclear prospectsfor change for the better. Analytically speaking, one of themain causes of this situation is thelack of economic topics at the topof the political agenda. I say polit-ical because it is the predominantinfluence of the public sector whichis one of the main differencescompared to other market econ-omy based on democratic princi-

ples. Increased level of foreign ex-change with higher export growthis a clear indication of the greaterdegree of openness and integrityof BiH economy in a broader con-text. The EU certainly was and stillis the most important foreign tradepartner of BiH which, I want toemphasize, is not result of a polit-ical decision but a relationship ofentrepreneurs based on economicprinciples of access to free market. In order for trade and overall eco-nomic exchange to run smoothly,much effort was needed and is stillrequired to build the so-called softinfrastructure with the aim ofstrengthening confidence and bet-ter integration of BiH economy inthe system of international eco-nomic relations.

In your opinion what is necessaryto make BiH more competitive,economically stabile, and interest-ing for investors? What are the ne-cessary economic and politicalreforms that Bosnia and Herzegov-ina should undertake on its pathtowards the EU?We try to make sure that the EU-BiH relationship is a partnership onan equal basis within which thereis an open information exchange,joint design and conduct of previ-ously agreed activities within thegiven deadlines. Long-term actionplans of the EU and other businessand financial institutions are pre-dominantly economic in characteraimed at overcoming obstacles ofeither political character that standin the way of economic progress.After all, at the end of the day, thestandard of living of the citizens isthe best indicator of performanceof all activities undertaken andwhat really counts. We have ap-proached this with the inclusion ofall social groups in order to exploitthe potential that this country has.Because only open and effectivecommunication between govern-ment and citizens, primarily, andthe legislature, business commu-nity and employees are the foun-dation of social and economicdevelopment based on democratic

INTERVIEW with...


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FIC NEWS 2014

principles that we in the EU care-fully nurtured and further improved.

What is your message for the for-eign enterprises present in BiH?Foreign investors are an integralpart of economic and social realityof the country. Their influence insome cases does not correspondto the level of their economic sig-nificance. However, they representa stable element of the economicsystem It is welcome that theyhave decided to come to BiH andbring modern technology andthereby invest in production ca-pacity, distribution channels, pro-motional activities. In the end theyare able to achieve satisfactory fi-nancial results. A large number oflocal enterprises and entrepre-neurs are associated with the ac-tivities of foreign companies whichcontribute to increased level ofcross-border trade and the overallquality of the BiH economy. Inorder to enhance operations of ex-isting and to facilitate arrival ofnew foreign investors, it is neces-sary to further focus efforts oncreating a favorable economic en-vironment for business, work on

removing administrative and fi-nancial burdens reflected throughgrowing fiscal and para-fiscal leviesand provide equal treatment for alleconomic actors, regardless if it isforeign or domestic companies,throughout the country.Therefore my main hope for for-eign investors is that they will per-severe in a difficult business climateand help us to achieve reforms.The EU puts the highest priority oninvestment (and jobs) and we arehere to help in any way possible.Please continue to let us know inwhat way you think we can help toincrease foreign investment andmake it easier and more rewarding.

How do you perceive the coopera-tion with the Foreign InvestorsCouncil BiH?The Foreign Investors Council is anextremely valuable asset in BiHand its White Book is a significantresource in identifying the prob-lems faced by business and plan-ning the reform agenda. We havehad excellent cooperation with theFIC over the years and, if any-thing, need to work in ever closerharmony in order to advance the

reform agenda. Socially responsi-ble management of the FIC mem-bers is to be applauded and I wantto congratulate them on this occa-sion.

In addition to political issues,where does BiH stand in terms ofmeeting other requirements on itspath towards the EU? Is there anychance to catch up with counties inthe region? It is obvious that Bosnia and Herz-egovina is currently lagging behindother countries in the region, butwith strong political will the coun-try can catch up. In recent monthsit has become visible that the po-litical system in Bosnia and Herze-govina must become more respon-sive to the citizens' agenda de-manding more job opportunities,more efficient justice and no cor-ruption. Looking at current devel-opments in other parts of Europeit is essential for Bosnia and Her-zegovina to progress on the Euro-pean path with determination inorder to become part of a Unionwhich not only stands for moreprosperity but is also a space offreedom, justice and security. n

INTERVIEW with...

On March 6th 2014, in Sa-rajevo, Deloitte organizedthe first CFO Conference

in BiH, which was aimed at pro-viding the business communitywith an objective overview of thekey factors of economic progressin BiH and in the wider region.In the first part of the conferenceMs. Sabina Softić, a partner atDeloitte in Sarajevo, presentedthe results of Deloitte's researchon attitudes of financial directorsin Bosnia and Herzegovina andCentral Europe, which Deloittehas been carrying out for fouryears, twice a year. Presenting thedata that were obtained in the re-

search she said that CFOs in BiHbelieve that their priorities thisyear must be to reduce costs andincrease revenues in existing andnew markets and improve liquid-ity.Softić said that this research inBiH is a part of the project whichis being implemented in 13 coun-tries in Central Europe and it in-cluded around 600 directors andboard members of the compa-nies, while in the study, whichwas conducted in November andDecember 2013, participatedaround 100 people in BiH."Sixty-three percent of subjectsrated the overall level of external

financial and economic uncertaintyfaced by their companies high orhigher than normal, while 75 per-cent of subjects, however, believethat it is not time to enter intogreater balance risks. Unemploy-ment is another area where thenegative trend is expected," saidSoftić.She pointed out that research hasshown that in Bosnia and Herze-govina almost half of the sur-veyed financial directors do notexpect any changes in the financecoefficients in their companies.Speaking of research for CentralEurope, Softić stressed that mostfinancial directors considered that

FIC MEMBER'S ACTIVITIES

CFO Conference - financial director positions in BiHCFO Conference - financial director positions in BiH


16 FIC NEWS

it was not the time to engage ingreater balance risks, while onlythe directors from Lithuania con-sidered they should take advan-tage of their potential for growth.Also the three main priorities ofthe financial directors of the coun-tries of Central Europe are: thedesire for growth, the desire forstability, and a desire for a morefavourable cost. These directors,according to a survey, are muchmore optimistic about the prospectsof their own companies in thenext six months from the expec-tations related to GDP growth inthe countries they come from.As noted, CFOs of Central Europedo not expect a shortage of talent

among people in financial func-tions. The conference was openedby Alastair Teare, Deloitte's man-aging director for Central Europe.Within the conference the paneldiscussion on changing role of the

CFO in modern organizations washeld with the active participationof Deloitte's financial experts anddirectors of some of the largestand most successful companies inBosnia and Herzegovina. n

At the headquarters of theCentral Bank of Bosnia andHerzegovina (CBBiH), on

February 13th 2014 the presenta-tion of European Bank for Recon-struction and Development's (EBRD)report on transition for 2013 washeld. This is an annual report onprogress in reforms and economicdevelopment in 34 countries inwhich the EBRD operates, rangingfrom Central Europe to CentralAsia and the countries of thesouthern and eastern Mediter-ranean. The report contains infor-mation on key economic develop-ments in Bosnia and Herzegovinaduring the past year and reviewsfuture challenges of transition - in

Bosnia and Herzegovina and inthe wider region.Peter Sanfey, deputy director forstrategy and policy at the EBRDand Libor Krkoska, head of theEBRD Office in BiH presented thetransition report for the 2013 andEBRD's investments and activitiesin Bosnia and Herzegovina.Also, the presentation was at-tended by the Governor of theCBBH, dr. Kemal Kozarić and mem-bers of the Board of the CBBH,IMF Resident Representative inBiH Ruben Atoyan, and many guestsfrom the business community andinstitutions in BiH. During the pres-entation, representatives of theEBRD expressed their satisfaction

with the information that in BiHthere is less than two percent ofcredit with the problems in theservice, and that the percentageof unused credits has been re-duced from 53.1% to 40%. Also,they stated that 200 million Euroswas invested in private sectorprojects in BiH. It was explainedthat in the next few years theEBRD will be focused on the ex-pansion of the private sector andthat this institution is particularlyinterested in the involvement inthe promotion of renewable en-ergy and improvement of energyefficiency in the private sectorThe CBBH Governor, dr. KemalKozarić, in his presentation em-phasized great importance of theEBRD as the most important insti-tutional investors in BiH. EBRDfunded more than 100 projects,with a net value of business ofthis bank in BiH amounting to 1.6billion Euros and the total value offunded projects 3.6 billion Euros. "It is well known that the EBRDplays a crucial role in financingCorridor Vc, as well as a numberof projects in the financial sector.They also provide support tobanking and micro-credit institu-tions“, stated Kozarić. n


Presentation of the EBRD's Transition Report for 2013Presentation of the EBRD's Transition Report for 2013


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FIC NEWS 2014

The construction of the TCK administrative building beganThe construction of the TCK administrative building began

In the presence of the Execu-tive Director for Finance andEconomic Affairs, Zehra Obra-

lija, and Executive Director of Pro-duction and Technical Issues, Izu-din Neimarlija, during the first daysof the 2014 digging and buildingconcrete foundations for the newadministrative business buildingstarted.After 35 years of successful busi-ness and production Cement Fac-tory Kakanj has grown into arecognizable and strong domesticbrand. All these years after priva-tization, it has evolved and grown-guided by the vision of plannedinvestments, trying at all times tobe responsible and utterly decentneighbour and business partner.After intensive investments in fa-cilities in order for the production

to be at a level that meets thehighest European and world stan-dards of quality and environmen-tal protection, it was decided thatthe new administrative buildingwhich would also meet those stan-dards needs to be built. Prelimi-nary design was done by architec-tural studio "nonstop" and theirmajor references were Immpor-tane Centre in Sarajevo and AltaShopping Centre in Sarajevo. Inaddition to modern offices, em-ployees will have at their disposala modern decorated restaurantand spacious landscaped ter-races. It is worth mentioning thatin one part of the building one ofthe most intriguing products ofHeidelbergCement - transparentconcrete will be incorporated,which is the first such case in the

Balkans. A little less than twothousand square meters of officespace on four floors are beingbuilt and organized according tothe latest standards of environ-mental protection and energy ef-ficiency. According to the managerof building maintenance, ElvedinHadzić, depending on weather con-ditions, the completion of thisproject can be expected at theend of the 2014. n


ADOPTED LEGISLATION IN BiH

BIH OFFICIAL GAZETTE

BiH Council of Ministers

- Ordinance on amendments to theOrdinance on the hygiene of food ofanimal origin (BiH Official Gazette28/14)

BiH Ministry of Finance and

Treasury

- Order on the payment account foradministrative fees (BiH Official Ga-zette 19/14)

BiH Indirect Taxation Authority

- Guidance on sample uptake ofgoods in the customs procedure(BiH Official Gazette 05/14)

- Guidance on the use of blank drawnbill in the customs procedure internalprocessing based on subcontractingwork (BiH Official Gazette 16/14)

- Guidance on the destruction anddisposal of customs goods (BiH Of-ficial Gazette 26/14)

BiH Commission for Accounting

and Auditing

- Decision on the conditions for obtai-

ning accounting profession in BiH(BiH Official Gazette 07/14)

State Electricity Regulatory Com-

mission

- The decision on issuing licenses forinternational trade in electricity (BiHOfficial Gazette 26/14)

Communications Regulatory

Agency

- Code of amending the Code of Com-mercial Communications (BiH Offi-cial Gazette 30/14)

BiH Veterinary Office

- Decision on the adoption of officialsampling for dairies approved andproposed for export to the EuropeanUnion in 2014 and the plan for officialcontrols of milk and dairy productsfor export to the European Union in2014 (BiH Official Gazette 21/14)

BiH Foreign Trade Chamber

- Decision on membership fees for theForeign Trade Chamber of Bosniaand Herzegovina for 2014 (BiH Offi-cial Gazette 29/14)

OFFICIAL GAZETTE OF THE FEDERATION BOSNIA AND

HERZEGOVINA

FBiH Parliament

- The Law on Amendments to the Lawon renewable energy and efficiencycogeneration (Official Gazette of FBiH05/14)

FBiH Government

- Regulation on the procedure, crite-ria, form and content of the applica-tion for issuing energy permits forconstruction of new and reconstruc-tion of existing production plants(Official Gazette of FBiH 27/14)

FBiH Ministry of Finances

- Instruction on repealing the instruc-tions on how to manage accounting,financial reporting and annual ac-counts for the development and in-vestment projects (Official Gazetteof FBiH 01/14)

- Ordinance on issuing the residencecertificates (Official Gazette of FBiH15/14)

*Laws and by-laws of the relevant importance for foreign investors in BiH for the period January – May 2014.


18 FIC NEWS

ADOPTED LEGISLATION IN BiH

FBiH Ministry of Environment and

Tourism

- Regulations on monitoring emis-sions of pollutants into the air (Offi-cial Gazette of FBiH 09/14)

FBiH Ministry of Agriculture,

Water Management, and

Forestry

- Instruction establishing the generaland specific hygiene requirementsand the organization of official con-trols for products and facilities thatare approved for export of milk anddairy products to the EU market (Of-ficial Gazette of FBiH 08/14)

- Ordinance amending the Ordinanceon the manner and conditions ofrealization of financial support bythe Model of production stimulus(Official Gazette of FBiH 07/14)

FBiH Banking Agency

- Decision amending the Decision onprovisional measures for reprogram-ming the credit obligations of physi-cal persons and legal entities inbanks (Official Gazette of FBiH 01/14)

- Instructions for licensing and otherFBA approvals - consolidated text(Official Gazette of FBiH 01/14)

- Decision on amendments to the De-cision on the unique manner of cal-culation and disclosure of effectiveinterest rates on loans and deposits(Official Gazette of FBiH 23/14)

- Decision on amendments to the De-cision on minimum standards fordocumenting banks' credit activities(Official Gazette of FBiH 23/14)

- Decision on the conditions and met-hods of procedures of banks, micro-credit organizations and leasingcompanies upon receiving customercomplaint (Official Gazette of FBiH23/14)

- Decision on the conditions and met-hods of complying with a request torelease the guarantor from liabilityguarantees (Official Gazette of FBiH23/14)

- Decision on the conditions for theevaluation and documentation ofcredit standing (Official Gazette ofFBiH 23/14)

FBiH Securities Commission

- Ordinance amending the Ordinanceon the content, deadlines and for-mat of reports of investment funds,management companies and depo-sitary banks (Official Gazette of FBiH22/14)

FBiH Association of Employers

- Collective agreement for the branchof finance for the territory of the Fe-deration of Bosnia and Herzegovina(Official Gazette of FBiH 29/14)

OFFICIAL GAZETTE OF THE REPUBLIC OF SRPSKA

RS National Assembly

- The Law on the unified system ofmultilateral compensation and ces-sion (RS Official Gazette 20/14)

- The Law on Amendments to the Fo-reign Exchange Law (RS Official Ga-zette 20/14)

- The Law on Amendments to the Lawon Advocacy of Republic of Srpska(RS Official Gazette 20/14)

- The Law on Amendments to the Lawon Notaries (RS Official Gazette 20/14)

RS Government

- Regulation on the classification ofactivities of the Republic of Srpska(RS Official Gazette 08/14)

RS Ministry of Finances

- Ordinance on the conditions and themanner of implementing measuresof confiscation of objects (RS OfficialGazette 11/14)

- Ordinance amending the Ordinanceon the application of the Law on Per-sonal Income Tax (RS Official Ga-zette 22/14)

RS Ministry of Industry, Energy,

and Mining

- Regulations on the performance ofthe surface mining work (RS OfficialGazette 07/14)

- Regulation on technical standardsfor the design, construction, opera-tion and maintenance of gas boilers(RS Official Gazette 07/14)

- Ordinance on the conditions and me-thod of establishing business zones

(RS Official Gazette 23/14)- Regulation on the methodology of

estimating the cost of supply of energyservices (RS Official Gazette 28/14)

- Regulations on the procedure for ap-proval of detailed geological investi-gations (RS Official Gazette 28/14)

- Regulations on the procedure for is-suing and revoking licenses for geo-logical exploration, form of thelicense, management and publica-tion of the register of licenses (RSOfficial Gazette 28/14)

RS Securities Commission

- Ordinance amending the Ordinanceon trading securities (RS Official Ga-zette 1014)

RS Banking Agency

- Decision on minimum standards formanagement of outsourcing (RS Of-ficial Gazette 01/14)

- Decision on minimum standards formanagement of information sy-stems in banks (RS Official Gazette01/14)

- Decision amending the Decision onprovisional measures for reprogram-ming the credit obligations of physi-cal persons and legal entities inbanks (RS Official Gazette 01/14)

- Decision on amendments to the De-cision on minimum standards formarket risk management in banks(RS Official Gazette 01/14)

- Decision on amendments to the De-cision on minimum standards forcredit risk management and classi-fication of banks' assets (RS OfficialGazette 01/14)

RS Regulatory Commission for

Energy

- Ordinance on issuing a guaranteefor the origin of electricity (RS Offi-cial Gazette 01/14)

Union of Associations of

Employers of the Republic of

Srpska

- The Decision on cancellation of theGeneral Collective Agreement ("Of-ficial Gazette of the Republic of Sr-pska", No. 40/10) (Official Gazetteof RS 01/14) n


19FIC NEWS

FIC NEWS 2014

DELOITTE TAX ALERT

Decision of the Governing Board

of the Indirect Taxation Autho-

rity of BiH regarding excise du-

ties on cigarettes for 2014

In November 2013, the Govern-ing Board of the Indirect TaxationAuthority of BiH has adopted theDecision on Establishing of Spe-cific and Minimum Excise Duty oncigarettes for 2014.The proportional excise duty of 42% on retail selling price of ciga-rettes remains unchanged. Thespecial excise duty which waspayable on 1,000 cigarettes in theamount of 37.50 BAM was in-creased to 45.00 BAM / for pack-ages containing 20 pieces ofcigarettes, the excise duty was in-creased from 0.75 BAM to 0.90BAM. If the calculated excise duty islower than the minimum exciseduty, minimum excise duty shallapply. The minimum excise dutyin the amount of 91.00 BAM for1,000 cigarettes was increased to104.50 BAM / for packages con-taining 20 pieces of cigarettes,the excise duty was increasedfrom 1.82 BAM to 2.09 BAM. Taxpayers and other cigarette re-tailers are obliged to create in-ventory lists of cigarettes as of1st January 2014, submit the liststo the Indirect Taxation Authorityand pay the difference betweenexcise duties calculated and ex-cise duty already paid until the10th January 2014. n

Amendments to the Law on Indi-

rect Taxation Procedure

The House of Peoples of the Parli-amentary Assembly of Bosnia andHerzegovina has adopted last weekAmendments to the Law on Indi-rect Taxation Procedure (here-inafter “the Law”). According to the Law, followingprovisions have been amended:- The enforced penalty procedure

fee will be reduced from 10% to5%;

- The daily penalty interest ratewill be reduced from 0.06% to0.04;

- The Indirect Taxation Authorityof BiH will be entitled to publiclyannounce taxpayers that haveunsettled liabilities related tovalue added tax, customs andexcise duty. n

Decision on consent for ratifica-

tion of the Convention between

the Council of Ministers of Bosnia

and Herzegovina and the Govern-

ment of the Republic of Macedo-

nia on avoidance of double

taxation with respect to taxes on

income and capital

Decision on consent for ratifica-tion of the Convention betweenthe Council of Ministers of Bosniaand Herzegovina and the Govern-ment of the Republic of Macedoniaon avoidance of double taxationwith respect to taxes on incomeand capital (hereinafter „DTT“)has been published in the OfficialGazette of BiH – InternationalAgreements, no. 5/14 dated on20th March 2014.According to information obtainedfrom the BiH Ministry of Financeand Treasury, the DTT should bepublished in the Official Gazette ofBiH during this year, whereby itshould apply as of the 1 January2015. n

Amendments to the Law on

Personal Income Tax of

Republika Srpska

Amendments to the Law on Per-sonal Income Tax of RepublikaSrpska were published on 8th De-cember 2013 in the Official Ga-zette of Republika Srpska no.107, and became effective as of1st February 2014. Significantamendments are as follows:The following allowances shallapply: - annual personal allowance in

the amount of BAM 2,400, i.e.BAM 200 per month;

- allowance for each dependentimmediate family member inthe amount of BAM 900 annu-ally;

- allowance for interest paid onthe housing loan, and

- allowance for voluntary pensioninsurance paid during the year,but not exceeding the annualamount of BAM 1,200. n

Rulebook on the issuance of

Residency certificate

Rulebook on the issuance of thecertificate of residency (“Rule-book”) has been published in theOfficial Gazette of the Federationof Bosnia and Herzegovina; no.15/14 dated 26th February 2014and has entered into force on27th February 2014. With the aimof claiming rights of physical per-sons and legal entities as perDouble Taxation Treaties, thisrulebook prescribes procedures,issuance and the form of the cer-tificate of residency in the Feder-ation of Bosnia and Herzegovina.Rulebook also prescribes certifica-tion of the certificates of resi-dency in other contracting states.Residency status in the Federa-tion of Bosnia and Herzegovina isproven by means of the certificateof residency on the POR-1 form,which is issued and certified bythe competent organisational unitof the Tax Administration of theFederation of Bosnia and Herze-govina based on the legal entity’sregistered seat or physical per-son’s place of residency. Certifi-cate of residency is issued on thebasis of a submitted written re-quest together with documenta-tion that is prescribed by theRulebook.Residency status in other contra-cting states, non-resident provesby means of the certificate of res-idency, which is issued and certi-fied by the competent authority ofthe other contracting state. Rule-book prescribes that the certifi-cate of residency in the othercontracting state is submitted atthe time of first payment to non-resident, and every six monthsfor physical persons, or every 12months for legal entities in caseof more than one payment to thesame non-resident. n


20 FIC NEWS

WHITE BOOK

On November 22 2013, For-eign Investors Council (FIC)presented the fourth edi-

tion of its publication, White Bookfor 2012/13, to the governmentand international officials in BiH.The presentation the White Bookfor 2012/13 highlighted key ob-stacles to investment in BiH whileoffering a number of recommen-dations on how to remove admin-istrative barriers that hinder theoperations of foreign and domes-tic companies, in the sense ofbeing active in order to improvethe legal and regulatory frame-work in BiH.The purpose of the White Book is tosuggest the authorities of Bosniaand Herzegovina priority econo-mic and legal reforms in order toaddress the key barriers to invest-

ment. The White Book for 2012/13 includes nine areas: businessregistration, environmental andconstruction permits, taxes, en-ergy efficiency, judiciary, employ-ment legislation, concessions, andexport.Members of the FIC have identifieda list open issues and proposedsolutions which could be imple-mented in the next 18 months."Foreign Investors Council pro-poses reforms beneficial to coun-try and investors, as well as allcitizens. FDI represents one ofthe most important instrumentsof economic growth and develop-ment and positive examples andexperiences of our member com-panies indicate that we are thebest possible business ambassa-dors of BiH. However, in order torealize the potential of the BiHeconomy and create a positive at-mosphere, it is necessary to sig-nificantly improve the efficiency ofpublic administration and boldlyset off into reform," said the Pres-ident of the FIC, Mr. Branimir Muidža.Apart from Muidža, the audiencewas also addressed by Haris Aba-spahić, on behalf of the Office of

the Prime Minister of FBiH, MateBandur, on behalf of the Office ofthe Chairman of the Council ofMinisters, Head of EU Delegationto BiH Ambassador HE PeterSorensen, Mission Director of theUSAID, David Barth, Governor ofthe Central Bank of BiH, dr. KemalKozarić, Federal Minister of Devel-opment, Entrepreneurship andCrafts, Sanjin Halimović and prof.Anto Domazet representative ofHouse of Representatives of theParliamentary Assembly of BiH. n

Presentation of the White Book 2012-13 - guidelines onPresentation of the White Book 2012-13 - guidelines onhow the Government can implement reforms and imhow the Government can implement reforms and im--prove the business climate in the countryprove the business climate in the country


21FIC NEWS

FIC NEWS 2014

Gross Domestic Products

(GDP)

In February 2014 the State Agencyfor Statistics has published thequarterly estimates of B&H GDP

for period Q1-Q3 2013, accordingto which the real GDP growth ratesoared by 1.9% yoy slightlyhigher than we initially expected.Out of nineteen section activitiescovered by the GDP release, four-teen sections registered upbeatand only five were in recessionduring mentioned period. In linewith our expectations, the stron-gest growth was registered in in-dustrial categories of “Electricity,gas, steam and air condition sup-ply” (10.53% yoy) and “Manufac-turing” (9.67% yoy). Respectableupbeat also came from the “Agri-culture” (5.23% yoy), “Financialand insurance activities” (2.53%yoy) and “Administrative and sup-port service activities” (2.97% yoy).It also should be pointed out thatthe construction sector registeredincrease by 1.73% yoy over thesame period, marking the firstpositive growth rate in five years.The largest percentage declinewas registered in the section“Mining and quarrying” by 6.9%

yoy. However, for the overalleconomy the most significant fallrefers to “Wholesale/retail sales”(-2.5% yoy) which is the largestcategory within the GDP struc-

ture. Hence, our base-line sce-nario regarding the key drivers ofthe economic growth proved to bepointing to the right direction, asindustry and construction becomethe main engines of the economicrecovery. We now just have towait for the official figures for thewhole year 2013 (mid-2014) tosee the magnitude of such eco-nomic recovery. Giving themacroeconomic figures for thewhole year that we use in ourGDP forecasts, we expect thatfull-year real GDP growth rate willremain at level of 1.9% yoy.

Industrial production and

construction sector

In 2013 saw much stronger up-turn than expected, once againbeing the major force behind theeconomic revival. The upturn wasparticularly strong in final quarterof 2013 with expansion rate of8% yoy. Looking at the periodfrom the beginning of the year, in-dustrial production in 2013 went

up by 6.7% yoy driven by “Manu-facturing” (+9.5% yoy) and“Electricity, gas and water supply”(+5.6% yoy) while only “Miningand quarrying” posted negativegrowth rate by 4.0% yoy. Towhich extent the industrial statis-tics is vital for the overall econ-omy can be seen just be empha-sizing two facts: Industry accountsto around 18% of B&H GDP while26% of total employees in B&Hrefer to industry. Therefore, ourpositive economic outlook for 2014is especially reliant on expectedcontinuation of upward drift in in-dustrial growth. The industrial ac-tivity started the year on a rightfoot with +3.9% yoy expansionrate in January 2014 and recov-ery has now stretched to the 14thconsecutive month. For the wholeyear, we reckon on positivegrowth rate around +4.5% yoy.The usually gloomy outlook forthe construction sector (whichhas been stuck in recession since2009) finally brightened some-what in the previous year. Moreproactive approach in the CorridorVC construction provided positiveimpulses for the overall construc-tion statistics. Therefore, value ofconstruction works in FederationB&H 2013 went up by 4.5% yoy(fueled by the civil engineering+14.2%), while value of performedconstruction works in Republic ofSrpska registered increase by0.8% yoy. As for 2014 we expectto see even more vigorous dy-namics in the construction sectoras in 2013, giving the announcedcontinuation of the infrastructureworks in both B&H entities.

Export remains the strongest

boost to B&H economy

The previous year was anotherreminder of the fact that B&H re-covery is still exclusively exportdriven. Moreover, increase of in-dustrial production (which mostly

BiH ECONOMIC OVERVIEW

Economic Report – April 2014 Economic Report – April 2014

Source: Bosnia and Herzegovina: Quarterly Economic Report - Q1 2014

Key GDP categories (% yoy)


22 FIC NEWS


pushed real GDP up to 1.9% yoy),can solely be owed to increasingexternal demand for B&H goods.Therefore, looking at the expen-diture side of the GDP perform-ance, positive economic momentumcan only be attributable to tradebalance. According to the officialdata published by the StateAgency for Statistics, the exportof goods in the previous year reg-istered an increase by 6.6% yoyup to BAM 8.38 bn which is thehighest nominal value of exportsince the Agency has been track-ing B&H’s trade balance (2003).On the other hand, the import ofgoods saw a decline by 0.5% yoyin previous year with a nominalvalue of BAM 15.17 bn. Conse-quently, the trade deficit in 2013fell to BAM 6.79 bn (-8.2% yoy)while export/import coveragecame up to 55.2% compared to51.5% in 2012.

In previous year B&H

registered first deflation

since 2009

The previous year was also char-acterized by the downward trendin inflation pressure which conse-quently led to the first annual de-flation since 2009. Explicitly, from+1.3% yoy inflation rate in Janu-ary 2013, the consumer priceindex has gradually deceleratedduring the course of the year,

falling to deflationary territory inAugust 2013. Consequently, thefull-year consumer price indexsettled at -0.1% marking the firstdeflation since the start of the fi-nancial crisis back in 2009. Themain factor behind the relaxingprice pressure in 2013 were de-celerating food and transportprices, reflecting the internationalprice developments. These two

categories account for almost 50%of B&H consumer price index.“Food and non-alcoholic bever-ages” (around 35% of CPI) in 12months of 2013 remained flat at0.0% yoy. “Transport” prices werenegative during most of 2013 and

consequently posted overall neg-ative reading of -1.1% yoy. Theprice decreases were also recor-ded in categories: “Clothing andfootwear” (-9.0% yoy) and “Health”(-1.7% yoy). On other hand, theonly category with reported note-worthy increase in prices was “Al-cohol and tobacco products”(+6.4% yoy in 2013) as a resultof the new hike of excise tax ontobacco products – effective fromthe beginning of 2013. All in all,the deceleration of the CPI during2013 reflects two noteworthytrends in economy. On a positivenote it reflects the stabilization ofthe prices on world markets (oiland food) which was the mainforce behind moderate inflationpressure in 2010-2012. However,it also clearly reflects extremelyweak private consumption thatstill struggles to emerge out ofthe negative territory in which ithas been stuck for almost fouryears. Deflation has continued in2014 with a negative reading of1.5% yoy in the first two monthsof 2014. However, we see no con-

dition for deflation to remain con-tained for the full-year as wereckon on several internal and ex-ternal factors to push CPI back inpositive territory (low statisticsbase, slow recovery of domesticconsumption, rising pressure from

Trade balance of B&H

Key CPI categories (% yoy)


23FIC NEWS

FIC NEWS 2014


the international markets – oil,gas).

Labour market

The labour market statistics is stillthe most burdening indicator ofB&H economic framework. At theend of 2013, the official unem-ployment rate remained at a highlevel of 44.5% (unchanged fromend-2012) with 554k unemployedpersons. Labour market sheddinghas continued during 2013 inmost of key real sector categoriessuch as Construction, Retail/Whole-sale, Mining and Quarrying andElectricity production. On theother hand, the average numberof employed persons in Manufac-turing remained unchanged com-pared to 2012, which can beunderlined as the most positivefragment of last year’s labourmarket statistics. Only gains inemployment were registered inthe Public sector and minor serv-ice categories. The depressedlabour market can also be illus-trated by the fact that as of De-cember 2013 the ratio of workersto pensioners stands at impermis-sibly low level of 1.07. Worryinglabour market figures also col-lared the beginning of 2014 asthe official unemployment rate in-creased further up to 44.6% inJanuary 2014. Statistics on sala-ries additionally darkened thelabor market picture. In the pre-vious year the average net salarywas BAM 827 which is 2.25 timeslower compared to per capita in-debtedness (retail loans percapita). Highest average net wagerefers to Financial sector (BAM1,336) and lowest to Construction(BAM 532). According to the LaborForce Survey (LFS) (conducted inApril 2013), the unemploymentrate of B&H is much tolerable at27.5%, but still represents thethird largest unemployment ratein Europe (right after Greece andthe FYR Macedonia) while youthunemployment is especially atalarming levels (at 59.1% in 2013).Hence, given the expected revival

in 2014 we anticipate that unem-ployment rate will decline to26.5% in this year, marking thelowest unemployment rate in fiveyears.

Net inflow of FDIs accounts

to 1.9% of GDP

Second semester of 2013 wasparticularly gloomy in terms ofFDIs with only BAM 52.7 mn ofFDIs (net value). Hence, for thewhole year net inflow of FDIs to-talled BAM 507.1 mn (-5.1% yoy)marking the lowest level of FDIssince 2009 (detailed sector andcountry statistics on FDIs are stillnot available). Moreover, the netinflow of FDIs as % of estimatedGDP for 2013 accounts to a trivial1.9%. The net inflow of other in-

vestments also declined in 2013(-14.8% yoy) to BAM 1.16 bn.Regarding the portfolio invest-ments there was outflow of capi-tal in amount of BAM 132.5 mn.Thus, given the surplus on the neterrors and omissions account(BAM 365.2 mn), the overall bal-ance of payments came into sur-plus territory of BAM 792 mn(reserve assets). Hence, the in-crease of reserve assets was re-flected in the increase of invest-ments in securities (BAM 792 mn)and increase in monetary gold(BAM 77.2 mn) while at the sametime a decrease was registered indeposits and holding of foreignexchange funds (BAM -116.9 mn)and other reserve assets (BAM -43.3 mn). n

C/A categories (in BAM bn)

C/A deficit and net FDIs


24 FIC NEWS

BiH ECONOMIC OVERVIEW*

Source: Raiffeisen Bank Bosnia and Herzegovina: Quarterly Economic Report - Q1 2014

Bosnia and Herzegovina 2009 2010 2011 2012 2013e 2014f 2015f

Nominal GDP (EUR bn) 12,4 12,7 13,1 13,1 13,5 13,9 14,8

Real GDP (% yoy) -2,8 0,7 1,0 -1,1 1,9 1,5 3,5

GDP per capita (EUR) 3222 3298 3418 3415 3561 3661 3891

GDP per capita (EUR at PPP) 7400 7500 7500 7450 7550 7700 7900

Household consumption (real, % yoy) -4,6 0,1 -0,3 -0,8 -0,5 0,4 1,5

Gross fixed capital formation (real % yoy) -27,8 -15,9 15,8 3,5 3,5 9.0 15,5

Industrial output (% yoy) -3.3 1,6 5,6 -5,2 6,7 4,5 6,0

Producer prices (avg,% yoy) -3,2 0,9 3,7 1,9 -1,8 2,3 2,4

Consumer prices (avg,% yoy) -0,4 2,1 3,7 2,1 -0,1 1,5 2,2

Average gross wages (LCY, % yoy) 9,2 2,4 6,8 2,2 0,5 3,5 4,0

Unemployment rate (avg,%) 24,1 27,2 27,6 28,0 27,5 26,5 24,5

General budget balance (% of GDP) -4,4 -2,5 -1,3 -2,0 -1,5 -1,0 -1,0

Public debt (% of GDP) 35,1 38,3 38,9 39,7 41,5 39,6 38,5

Trade balance (% of GDP) -28,2 -26,3 -28,4 -28,8 -25,7 -26,5 -27,5

Current account balance (% of GDP) -6,6 -5,5 -9,5 -9,7 -5,4 -8,2 -10,2

Net foreign direct investment (% of GDP) 1,4 1,5 2,1 3,5 1,9 5,0 6,1

Official FX reserves (EUR bn) 3,2 3,3 3,3 3,3 3,6 3,7 4,0

Gross foreign debt (% of GDP) 53,8 57,5 67,0 63,3 62,2 62,0 60,3

EUR/LCY (avg) 1,96 1,96 1,96 1,96 1,96 1,96 1,96

USD/LCY (avg) 1,40 1,47 1,41 1,52 1,47 1,45 1,47

EVENTS WITH FIC MEMBERS PRESENCE

The events attended by FIC members

(November 2013. – May 2014.)Content Place and time

CEFTA Week Sarajevo - organizer: MoFTER and

CEFTA

CEFTA Week in Sarajevo brought together all the re-

levant actors in the business and political life of Bo-

snia and Herzegovina and the themes were: the

business environment and challenges exporters from

Bosnia - ED had a presentation of the FIC activities

Sarajevo, November 2013

Presentation of the "White Book" for the

2012/13 - the organizer: Foreign Investors

Council BiH

Official event of promotion/presentation of the

most important written product of the FIC - the

White Book 2012/13

Sarajevo, November 2014

Promotion of the first edition of the "White

Book" of the FIC Croatia Participation the FIC office representative Zagreb, November 2013

International Economic Forum - Corporate gover-

nance in BiH

President of FIC presented the FIC Association, the

White Book and the business environment in BiHDubrovnik, December 2013

Meeting of the FIPA BoardDiscussion on FIPA's internal activities and the bu-

siness environment in BiH Sarajevo, December 2013

Round table on the subject: "Private equity-state

and prospects" organized by the Union of Asso-

ciations of Employers of the Republic of Srpska

Members of the FIC Board presented the WB

2012/13Banja Luka, December 2013


25FIC NEWS

FIC NEWS 2014




Working Group for taxes at the Ministry of Financeof FBiH

Para-fiscal burdens and fees in FBiH Sarajevo, December 2013

AHK annual business eventAssembly and corporate entertainment - participa-tion the FIC members

Sarajevo, December 2013

FBiH Association of Employers - Roundtable Law onEnterprises in the Federation - Challenges in imple-mentation and necessary reforms

Discussion with companies and representatives ofbusiness associations in BiH. FIC company mem-bers were involved


Meeting with representatives of BOSCH and AHK Topics: business cooperation Sarajevo, December 2013

Roundtable: Public procurement in BiH - UPFBIHand NGO Account

Discussion of procedures and proposals for theamendment of the Law on Public Procurement, thepresence of representatives of the FIC Office


OHR and the FIC initiatives for members/compa-nies related to the Instruction of the FBiH Govern-ment, which prevents "free circulation of goodsbetween markets of FBiH and RS"

Online discussion of the FIC members about thisissue


Meeting with USAID Sida GOLD Project chief ofthe private sector, Aida Soko

Talk about cooperation between the FIC and USAIDon the development of companies in the local com-munity BiH

Sarajevo, January 2014

UPF Session: FIC presented the White Book2012/13

Presentation of the White Book to the representa-tives of the business community in the FBiH


Deloitte and FIC Conference Development of small and medium enterprises in BiH Sarajevo, January 2014

Debate "Jobs in BiH" organized by the World Bankand the BiH Council of Ministers

FIC members participated in the event Sarajevo, January 2014

FIPA Board Meeting The plan for next year Sarajevo, January 2014

The Cooperation Council (CC) regular meeting Discussion on public procurement Sarajevo, January 2014

Meeting with representatives of SDC in BiHTalk about labour law relations, as well as the is-sues presented in the White Book


Established cooperation with MOFTER regardingamendments to the Law on Foreign Direct Invest-ment in BiH

FIC members become part of the working group that

will be consulted on the issue of changes in laws and

regulations relevant to foreign investment in MOFTER


FIC Committee on Labour Law, meetingTalk about the activities of the Committee for 2014- preparation of training on a specific topic

Sarajevo, February 2014

USAID Sida GOLD Project and the Municipality ofNovi Grad Sarajevo meeting

Talk about investments and cooperation with localcommunities


Chamber of Commerce KS, GOLD, Deloitte andFIC working lunch

Discussion about the problems faced by foreign in-vestors


Meeting with staff of the Ministry of Labour andSocial Policy of RS

The White Book recommendations - future coope-ration of the RS Government and FIC, harmoniza-tion of regulations

Banja Luka, February 2014

Meeting with representatives of the commercialdepartment of Polish Embassy

Talk about obtaining permits and complication ofBiH administration


Austria Business Club FIC members as guests Sarajevo, February 2014

Meeting with representatives of the Novi Grad/Municipal Council

Discussion of construction permissions and proce-dures, based on the recommendations from theWhite Book


Presentation of the EBRD Transition Report for 2013 FIC members attended Sarajevo, February 2014

Meeting with a representative of the economic de-partment of USA Embassy in BiH

Discussion on FIC activities Sarajevo, February 2014

Meeting with representatives of BBI Sarajevo Bu-siness Forum 2014

Cooperation established between the BBI forumand FIC


Meeting with Messer BH - Topic: Public Procure-ment

Discussion about the problems of companies rela-ted to public procurement procedures

Sarajevo February 2014


26 FIC NEWS




FIC members meeting/Indirect taxes in BiHMeeting audit firms / FIC members on the subjectof indirect taxes in BiH


Forming an official FIC Committee for obtainingwork permits

The official formation of the Committee within theFIC Office that will work on issuing permits for se-veral areas - online activity


Meeting with representatives of the Ministry ofLabour and Social Protection of FBiH

Discussion of priorities and recommendations fromthe White Book 2012/13 in the area of labour law


CFO Conference - Financial Directors' attitudes inBosnia and Herzegovina - organizer Deloitte

FIC members participated Sarajevo, March 2014

Meeting of the companies/FIC members with re-presentatives of the economic department of theU.S. Embassy in BiH

Discussion on the cooperation of the local commu-nity with foreign companies and the obstacles theyface

Tuzla, March 2014

Economic opportunities and challenges in SEE -Conference / organizer AHK

FIC President, Branimir Muidža, panellist. FICmembers attended

Sarajevo, March 2014

Consultation with the business community / FICmembers and the EU Delegation in BiH

Consultation with the business community/FICmembers and the EU Delegation in BiH


Meeting with the Chairman of the Cabinet of Coun-cil of Ministers of Bosnia and Herzegovina, EugenŠušak

Talk about the support of the Council of Ministers,FIC activities, and the implementation of the re-commendations from the White Book 2012/13,which is the responsibility of the state ministries


FIC Board meetingDiscussion on the current activities and FIC plansfor the period of next 6 months


Meeting with representatives of UNCTADTopics of discussion: Creating a legal and institu-tional framework for investing in BiH


UK Business Club reception FIC members present – companies’ networking Sarajevo, March 2014

Meeting with representatives of the Public Procu-rement Agency of Bosnia and Herzegovina

Topic: new amendments to the Law on Public Pro-curement in BiH Topic


The panel on the subject of termination of em-ployment by the employer organized by FIC

Panel discussion with employers / companies andinstitutions from both entities in charge of labourissues and legal issues

Teslić, March 2014

Meeting with representatives of the EU depart-ment of labour legal relations

Topic: recommendations from the White Book con-cerning labour-legal relations and future coopera-tion

Sarajevo, April 2014

Meeting with an advisor of the BiH Minister of Fi-nance and Treasury, Miroslav Tomić

Talk about the future cooperation between FIC andthe ministry, as well as support to the preparationof activities related to indirect taxation in BiH


Assembly of the FBiH Employers Association FIC members participated Sarajevo, April 2014

AmCham and GOLD roundtable discussion on "Theflow of foreign investments in BiH and review of thebusiness climate"

FIC members participated Sarajevo, April 2014

Meeting of the MOFTER working group on the topicof amendments to the Law on foreign direct invest-ment - restrictions on investments in the media

Representatives of the FIC Office participated Sarajevo, April 2014

Meeting with Assistant Minister of Environmentand Tourism, Mladen Rudež

The theme of the meeting: recommendations fromthe WB 2012/13 - sections environmental licenseand future cooperation


Meeting with a representative of the Associationof Employers' FBiH, Seid Fijuljanin

Future cooperation between FIC and AEFBiH Sarajevo, April 2014

Presentation of the key recommendations fromthe White Book 2012/13 at the session of theCommittee for Economy and Finance of FBiH Par-liament

Presentation of recommendations and discussionon the adoption of laws on business registrationand business enterprises on an expedited basis


Meeting with the IFC representativesE register and removing obstacles in obtaining per-mits in BiH



27FIC NEWS

FIC NEWS 2014

OUR ACTIVITIES AND ACCOMPLISHMENTS

WHITE BOOK

The White Book is a publica-tion produced on an annualbasis by the FIC. Its pur-

pose is to provide BiH authoritieswith a prioritized agenda of re-forms in order to address key ob-stacles for investments. The FIC

has published four editions of theWhite Book. It is the most rele-vant written product of the FIC.Also, represents an official docu-ment recognized by BH govern-ments as a platform for reformprocess in BiH. n

Companies/members are main force of the Foreign Investors Council. Therefore, we do everything to maketheir voice is heard.


28 FIC NEWS


Documents

FIC Newsletter 2014.06 CoverFIC NEWS 3 FIC NEWS 2014 INTRODUCTION Dear colleagues, partners, ladies and gentlemen, It is a great pleasure to present the third edition of the Foreign