Avatar photo

Edward Ferguson

British Ambassador to Bosnia and Herzegovina

Part of UK in Bosnia and Herzegovina

8th February 2016

A recipe for economic success

A lot of people ask me why there aren’t more British businesses investing in Bosnia and Herzegovina. They’re usually surprised to hear that, in fact, there are already quite a lot. Our British Business Club has over 120 corporate members, big and small.

I would love to see more British companies trading here. But the truth is that BiH is, at the moment, a tough sell. While some of the firms already here are very successful, that success has often been hard-won. And many other companies that show an initial interest in BiH ultimately decide to invest their money elsewhere.

On 22 February, the EBRD will host its annual Western Balkans Investment Summit in London. Prime Minister Zvizdić will represent BiH, along with seven other Prime Ministers from the region. It’s a great opportunity to send a message to British and other investors that BiH is open for business. But what do they most want to hear?

The Reform Agenda provides a roadmap for creating a more stable and dynamic economy in BiH, and making it a more attractive destination for both foreign and domestic investors, small and medium-sized companies and entrepreneurs. This is essential, but it’s just the starting point. In a competitive and fast-moving global economy, no country can afford to stand still. Having spoken to many UK and local investors over the past year, this is my own 6-point recipe for economic success:

  • Political stability. Investors are, for the most part, risk-averse. So it is essential that countries send a message of long-term political stability. That’s another reason why talk of illegal referendums or secession is so counter-productive. It puts off investors. And by UK standards, the daily political discourse in BiH is dominated by extreme views, with a focus on division and difference. British companies simply don’t care whether their workers are Serb, Croat, Bosniak, Jew, male, female, black, white, gay or straight. They care about skills. So they want to hear that BiH is ready to put its divided past behind it, and to focus more on efficiency than ethnicity.
  • Rule of Law. There is a crisis in the rule of law in BiH, with politicians on all sides criticising, pressuring and undermining the State judicial institutions. This must stop. Yes, reforms are needed, at all levels, to enhance the political independence and effectiveness of the justice system. But reforms must be carried out soberly and responsibly, and in line with European standards. For example, the system for settling commercial disputes is in a terrible state. I know British companies that have been waiting for years for their case even to be considered. And corruption too remains a major barrier to investment. It is illegal for a British company to pay bribes, anywhere in the world. If found out, they can be prosecuted under UK law. So investors want to see real evidence of the so-called “battle against corruption”. A battle implies casualties, and there are still far too few of those.
  • Connectivity. I spend a lot of my time driving on poor-quality roads to different parts of the country. Major investment is needed to upgrade and to build new roads and railways, to reduce travel time inside BiH, and to link BiH more closely to the region and wider Europe. Better transport links will bring more tourists and investors, and will put BiH in a stronger position to become part of Europe’s extended supply chain. There is a lot of European money on offer but, to access this cash, BiH needs urgently to confirm its priorities in a national transport strategy, and to raise its own funds through an increase in excise duties on fuel.
  • Digital. The economy of the future will be as much digital as it is physical. You have a lot of well-educated, multilingual young people, and there are already some fantastic IT companies here which are proving the potential of this exciting sector. But employers tell me that, too often, your education system produces graduates who are stronger on theory than practice. Radical educational reform could help BiH to get ahead of the global economy, by prioritising practical problem-solving and digital skills. That’s how to grab the attention of the many companies who are now looking to re-locate their businesses back from Asia to Europe. And how to stimulate a new entrepreneurial spirit, which this country desperately needs.
  • Efficiency. BiH should declare war on bureaucracy. This is where the Reform Agenda can really make a difference, by cutting out red tape and reducing the costs of doing business, through more flexible labour laws and a reduced tax burden on employers. Other countries in the region are working hard to improve their competitiveness, and BiH has fallen behind. My Embassy is doing its bit to help. With the World Bank, we are working in Sarajevo and East Sarajevo to make it much easier to set up new businesses, and we hope that this will result in an improved ranking for BiH in the annual ‘Doing Business’ survey. And we hope too to help establish a system where new businesses anywhere in BiH can register themselves online, in just one day.
  • Risk-sharing. The global economy is highly competitive. To grow, you must be bold and imaginative. Many countries have already understood that, to attract employers and investment, they need to share the risk and the costs. So governments are increasingly making land and buildings available for free, on the understanding that they will, over time, see a return on their investment. BiH needs to look at the whole system of incentives for investors. A good example is the €10 per passenger surcharge at Sarajevo airport. This offers a guaranteed income, but it puts off cheap flight operators. By taking a risk, and scrapping this fee, BiH could transform the tourism and business climate by opening up direct flights to Europe’s major capital cities.

What do you think? Does this sound right? And what do you think are the major opportunities and challenges for BiH within a fast-moving global economy?

3 comments on “A recipe for economic success

  1. Your Excellency,

    Thank you for your article. I cannot fault any of the points you have put forward. In fact it gives me a small hope to know that Bosnia-Herzegovina is only 6 steps away from being known as Switzerland number 2…

    Point 7.

    I take liberty in assuming that you are well aware of what is going on in the country. A dark force with so much hate is operating within the country while the population is a prisoner of the Dayton Accords. The Peace Agreement served its purpose, it was designed to stop the war, but this framework is an obstruction to progress. People of Bosnia-Herzegovina are apprehensive and need help to put things right and see the light at the end of a long tunnel. The light would obviate the dark. I would like to think the dark forces would abscond…

  2. Dear Ambassador,

    the six points make sense, but in BiH something “big” has to happen to accomplish these things because some points are simply directly in conflict with the interests of the ruling BiH politicians:

    – Political stability
    Most BiH politicians need instability and the position of a “national savior who defends them from the enemies” to cover up their tremendous incompetence and corruption. Many control the media in their areas and feed the masses with hate and fear. Mr. Dodik – not the only but the main and worst populist – is virtually every day spreading his hate in the media. This is the only way he can camouflage the catastrophic conditions so far.

    -Bureaucracy
    Why should the politicians declare war on bureaucracy when this is a major source of their power? The political parties give away the major public jobs to their friends, family and party members, creating a “party elite” that controls major positions in every sector in the country. This creates huge possibilities to exhaust public money into their own wallets. The jobs are given away by corruption instead of by education and knowledge. This “nepotism economy” is by nature inefficient and it will always be in their interest to create more public jobs which they can “give away” or “sell” to loyalists.

    – Rule of law
    It´s self-explanatory why this is against the interest of the corrupt elite. The criticizing, pressuring and undermining by politicians won´t just stop like that because it´s our wish. The – mostly – very corrupt politicians have naturally no interest in an independent law system where they would be the target no.1. The law is in big part controlled by political parties – foremost in the RS. It´s logical that they have no interest to change that, knowing that they likely would end up in jail in a just system.

    The problem is not that there is just some corruption, it´s more like a “state mafia” at the top of the system. The international community needs to put way more pressure on politicians and end this corrupt system if they don´t want major instability in this region in the near future. Of course one can say that the people have to change that by themselves through elections. But there are weak alternatives to the corrupt parties and the controlled media has too much influence on people, who are still very vulnerable to populists hate-speech. It´s very easy for the corrupt elite to play their game on the grounds of the Dayton Peace agreement, the agreement is totally encouraging this failing system and the politicians are thankful for that, being able to accumulate wealth beyond imagination.

    Nothing will change just like that, but your positive intent is still appreciated.

    Regards,
    Al

  3. Dear mr Ferguson,
    your blog should be inserted in ‘Constitution of BiH’ 100%.
    From your mouth to God ears.
    I hope in ears our politicians…
    Good luck with us!

Comments are closed.