Bosnia and Herzegovina - Foreign investment

Private investment plummeted during the civil war, when UN sanctions were in force. The conclusion of the Dayton Peace Accords in 1995 brought positive changes in the investment climate. In May 1998, a law on foreign direct investment (FDI) was passed and in June 1998, a law on privatization. While privatization of small and medium enterprises made good progress, the state of larger strategic firms has progressed more slowly. As of spring 2002, only 7 of 138 large state-owned enterprises had been sold and only 35% of the economy had been privatized. The largest foreign sale was the Zenica Steel Mill, which became the BH Steel Company in a joint venture with Kuwait Consulting and Investment Company (KCIC) in which both sides put up $60 million (KCIC paid $12 million in 1999 and took over $48 million of debt).

In 1997, only $1 million of FDI flowed into Bosnia and Herzegovina, but this jumped to $54.6 million in 1998 and then to $148.8 million in 1999. A decline occurred in 2001 to $131.5 million (when riots broke out in two Republika Srpska towns over the rebuilding of mosques), but the numbers recovered to $164 million. The overwhelming majority of foreign investment into Bosnia and Herzegovina comes from aid groups and international financial institutions.

From 1994 to 2002, over half (55.5%) of FDI was in manufacturing, thanks primarily to the BH Steel Company venture. Banking has received 16.5% (mainly from Dubai, Austria and Croatia); services, 6.8%; trade, 6.2%; transport, 0.9%; and tourism, 0.7% (although bids were being requested on the Sarajevo Holiday Inn in summer, 2003). The following chart lists the amount of FDI inflow from the leading sources 1994– 2002: Croatia, $124 million; Kuwait, $117 million; Slovenia, $99 million; Germany, $92 million; Austria, $92 million; Serbia and Montenegro, $69 million; Netherlands, $62 million; Switzerland, $48 million.