Ajka Fotografija copyBY: M.Sc. Ajka Baru?i?, Institute for Youth Development KULT


Proposals, or more precisely demands, of BiH business owners to move the deadline for paying VAT from the 10th to the last day of the month, and reduce the daily interest rate are being acknowledged. Adopted. Finally, after 11 years of the seemingly immutable Law on VAT, business owners in BiH will have more time to fulfil this burdensome but inevitable obligation. This is the promise of Mr Denis Zvizdi?, Chairman of the Council of Ministers of BiH, made in the beginning of September.


He stated that these demands were justified and will certainly improve the business environment in BiH, because moving the deadline for paying VAT will improve the liquidity of businesses, and reduced penalty fees will significantly cut expenses and make business operations easier. More than 30 000 business owners who supported the initiative to amend this law are looking to the Indirect Taxation Authority and the Council of Ministers of BiH. Waiting for their stamp of approval. Waiting for the official procedure to be completed.                                                                                                          


Unfortunately, the process is very slow. Too slow for business owners. They’re asked to be patient. All they can do is wait. Waiting is a lifestyle for BiH citizens. Waiting on reforms. The Reform Agenda. With “mid-term and long-term” results, according to the government.  Waiting for a better tomorrow. But what about a better today? We know who’s the most impatient group in Bosnia. The ones standing in line in front of embassies. Who’s crossing the border. Young people. The youth of Bosnia and Herzegovina. More precisely, BiH emigrants.


A recent survey conducted by the Institute for Youth Development KULT yielded surprising results: youth’s most frequently cited reason for leaving the country was the bleak future that they did not see improving soon. The next most frequent reason is their dissatisfaction with the political situation, corruption, dissatisfaction with the education system, and the preoccupation with nationality, religion and war. Unemployment comes in at number 6. Their expectations for their destination country include: a better future, better education and healthcare system, security, a more regulated system, better quality of life and more opportunities for employment. Those who are preparing to leave are mostly afraid they will miss their family and friends.


What are youth in BiH waiting for, or, more precisely, what are they refusing to wait for any longer? Many things. One of them is the still to be adopted Employment Strategy of BiH 2016-2020, and it’s already the end of 2017. They’re tired of waiting for the promised program to support first employment and self-employment funded through the World Bank. These funds are on hold because entity governments are still trying to meet the required conditions. They are waiting for the Youth Strategy 2016-2020, which has been written but not been adopted. They are waiting for the official list of in-demand professions so they know which faculty to enrol in. They are waiting for more budget funds for their needs. Better conditions for launching their businesses. Jobs. They’re waiting for the government’s commitment. Sincere, proven, visible and honest.


During the recently held America-Bosnia Foundations, representatives of the NGO sector shared their view and assessment of the reforms done by now. They showed their displeasure. They pointed out that statistical data do not necessarily reflect better quality of everyday life in BiH. It was also jokingly said that judging by the implementation dynamic the Reform Agenda 2015-2018 should be called the Reform Agenda 2015-2050.


 

The Institute for Youth Development KULT issued the third edition of the newsletter of the Network for creating a better business environment in BiH, titled “Economic Reforms Are Not Optional”.


The Newsletter presents the Initiative to amend the Law on VAT and an analysis of budget incentives for the economy in BiH in 2015, with proposed measures for improving the award process.


It also offers an overview of the Business Forums held across BiH, and the answers to the question of whether the Governing Committee of the ITA (Indirect Taxation Authority) has an analysis of effects that the introduction of the VAT cash accounting scheme would have on the budget. 


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The Newsletter is part of the initiative “BH Business Site” implemented by the Institute for Youth Development KULT and intended to contribute to solving systemic problems in the employment sector. It involves a wide array of stakeholders from the business, public and civil sector and the media, acting as a whole in an active, functional network with regional representation – the Network for improving the business environment in BiH. This Network’s intention is to use reasonable and evidence-based advocacy efforts to shape legislation in a way that fosters a better business environment by improving the quality and funding of SME support programs, improving the allocation process for various budget incentives to boost the economy, introducing tax breaks and incentivizing employees to hire new staff by funding salary contributions.


The Network is open to all interested parties who believe they can contribute to creating a better business environment and jobs in BiH.


Download the Newsletter (in Bosnian): here


 

Ajka Fotografija copy copyBY: Mr.Sc. Ajka Baru?i?, Institute for Youth Development KULT


September of 2017 could be the crucial month for many BiH entrepreneurs. It could be remembered as the worst or the best month of the year. Entrepreneurs are waiting for the parliamentary discussion on the amendments to the Law on VAT. The Indirect Taxation Authority prepared the amendments intended to align the Law with EU legislation, thus fulfilling one of the obligations on our path to accession. The changes include raising the threshold for entering the VAT system from 50,000 to 100,000. This would certainly be a welcome change to small business owners, who would not have to pay VAT.


But what about the request made by 30,000 business owners in BiH, who want the deadline for paying VAT to be extended to the last day of the month?!


What about their request to lower the penalty interest rates from 0,04% to 0,02%?!


Judging by public statements made by representatives of the Indirect Taxation Authority, these requests will not be met. Why? We still don’t know, because the last MP question, sent at the beginning of June of this year, remains unanswered. We’re still waiting to hear what experts have to say. VAT cannot be treated as a political issue, although some do so in their public statements. VAT is an economic issue. Anything concerning the economy must be treated as strictly economic issue. The Parliamentary Assembly of BiH will make the final decision, but that decision should be based on analyses, projections and proposals put forward by experts in government institutions.


In September, the Governing Committee with have a chance to consider suggestions made by BiH business owners, while considering the proposed amendments. Needless to say, the business owners are fairly optimistic. Earlier this year, their proposal to introduce the VAT cash accounting scheme for businesses with turnovers under 1 million BAM was rejected. Their subsequent proposals were more modest. They asked the state to wait for their VAT at least until the end of the month. They wanted just a little bit more time, to make it easier for them. If modesty is a virtue, will their more modest requests be met with understanding? Are business owners worth a little help so they can survive and thrive? The answer should be yes. We mustn’t forget that the budget depends on the goods and services they produce. That every year brings a new record total VAT payment. I help you and you help me, is what they say. So when will the state help the economy?


In European countries the deadline for paying VAT is longer than in BiH: 12th day of the month for the previous month in Sweden and Finland, 14th in Bulgaria, 15th in Austria, Montenegro, Luxembourg and Serbia, 16th in Italy, 20th in Belgium, Estonia, Croatia, Latvia and Spain, 24th in France, 25th in the Czech Republic, Lithuania, Poland, Romania and Slovakia, 28th in Denmark, and last day of the month in Greece and Slovenia. The tax period for calculating and paying VAT is longer than one month in some countries, which makes it easier for business owners. For instance: 10th day of the months for the previous quarter in Germany, 20th in Hungary, 23rd in Ireland for the previous two months, last day of the month after the end of the quarter in the UK and the Netherlands, 40th day after the end of the quarter in Cyprus, 45th day after the end of the quarter in Malta, etc.


September brought us fall. But it may yet bring us something more. 


 

Every year the media shows us farmers destroying their milk, raspberries, taking to the streets, protesting, fighting for their rights. They have announced protests this year as well, since they have not received the incentives they are owed for as far back as 2014. They are asking for payments for 2015, part of 2016, and the second quarter of 2017.


Should they wait? More importantly, can they afford to?


According to the results of the Analysis of budget incentives for the economy in BiH in 2015, with proposed measures to improve the award process, conducted by the Institute for Youth Development KULT, in 2015 agriculture received more than 84 million in incentives, and the entire economy was boosted with 211 million BAM. Is 84 million BAM a year enough to develop agriculture?


Incentives for agriculture are decreasing every year. In 2015, they were cut by 92 million BAM compared to 2013 and 63 million compared to 2014!


40% of the total amount of funds allocated for developing the economy was injected into agriculture, which makes this branch the most supported one when it comes to budget incentives. 80% of the funds were grants and 20% were loans. 


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Why is agriculture in trouble and what can we do?


The only branch more profitable than agriculture in BiH is real estate trade, and a single employee in agriculture generates 94,000 BAM every year.


Agriculture is important for the GDP as well, considering the fact that it comprises 4.2% of the GDP with 1.8% of employed persons in FBiH, and 9.3% of the GDP in Republika Srpska. Still, the productivity in agriculture is unsatisfactory compared to the productivity of this sector in EU countries and our neighboring countries. This is one the reasons why domestic agricultural products are not competitive on the market. Boosting productivity is necessary for improving the competitiveness of domestic product home and abroad, keep existing job and generate new ones, and increase economic growth. Since agricultural products are not competitive in prices, nor in terms of certificates vouching for the level of quality demanded by EU countries where domestic products could be sold, the sales of BiH products is hindered, which puts our farmers in a difficult situation.


The situation is more difficult when incentives are late, which they are – even several years late. Since this is not the case in EU countries, imported products become more competitive.


Problems faced by BiH farmers include: unregulated land, technological outdatedness compared to the EU and other competitors, untilled fertile land, lack of organization among farmers which prevents them from procuring cheaper raw materials and improves their chances of better wholesale prices, no channels for launching farming products, no quality certification, irregular incentive payments, etc. Alliance of berry farmers state that “the state incentive system in BiH is very specific since we have local, cantonal and entity incentives, and they’re not aligned. You’re always at the mercy of someone else, and you depend on the good will of these levels of governments, which often do not recognize the importance of investing in a particular area. We need a strategy for incentivizing agriculture.”


The only way of giving farmers a better future, is for the government to invest in technologies and certifying product quality, training farmers and helping them organize to enable cheaper procurement of raw material and more secure placement of products at reasonable prices, regular payments of incentives, etc. All of this should be listed in an obligatory state-level strategy for developing agriculture, in order to ensure easier access to EU funds. BiH farmers themselves, whose numbers are increasingly dwindling, are calling for this to happen.


Many BiH farmers live off their work, and those who decide not to live off the land make the brave and proactive decision to live outside of BiH.


Where are funds being invested?


The majority of funds were invested in dairy cattle – 38%, and 12.5% was invested in other activities (including sheep and goat farming, procuring mechanical equipment, supporting farmers’ associations, procuring greenhouses, cattle vaccination, etc.). 8% was invested in poultry and grain farming and, the least amount of funds – less than 1% - was invested in viticulture and water management. Bee keeping, fishing and forestry received less than 2% of the funds. According to BiH entrepreneurs, fruit production is the most promising branch of agriculture, and only 7.5% of the total amount is invested in this branch. Dairy cattle and poultry farming are deemed as particularly promising sub-branches. The importance of incentives is reflected in the fact that the most incentivized branch – diary cattle – is the most developed one.


 

Although tourism is often touted as one of the most promising sectors in BiH, that could bringn BiH significant profit and generate jobs of the unemployed, the government is not following through with actual investments in tourism.


Through budget incentives, all branches of the economy were given slightly over 211 million BAM in 2016, with 4 million of those funds going to tourism. This data was presented in the Analysis of budget incentives for the economy of BiH in 2015, conducted by the Institute for Youth Development KULT.


The amount of invested funds is certainly cause for concern, and this situation is further exacerbated by the fact that they are 1.5 million lower compared to the year before that.


Tourism, one of the most promising branches, is being given the least funds of all other branches of the economy included in the analysis (entrepreneurship and crafts development, energy sector, services, industry and agriculture).


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3,737,478.00 BAM (90,45%) of the funds invested in tourism in 2015 were grants and 394.718,00 (9,55%) were loans. The most funded sub-branch was sports tourism, followed by tourist infrastructure, receptive and spa tourism, protected areas and cultural and historical tourism.


If the state listened to the voices of BiH entrepreneurs, they would know that village tourism, which received only 3% of the funds, is the most promising sub-branch. Only 1% was invested in ecological tourism, sea tourism, congress and health tourism.


Meagre funds were given to branches that, according to the Federal Ministry of Environment and Tourism, should be developed as a comparative advantage of BiH. These include health tourism, spa, conference, mountain, sports, hunting and fishing and ecological tourism.


In 2014, this Ministry invested 1,250,000 BAM in village, cultural and historical tourism and the promotion and dissemination of information about tourism. In 2013 they invested 650,000 BAM. The Ministry did not fill out the Institute’s questionnaire for 2015. Although health and spa tourism are recognised as branches that need investments, the Federal Ministry did not invest in them in 2013 and 2014.


According to the Strategy for tourism development 2008-2018 in FBiH, the priority sub-branches are cultural, ethnic and health tourism, and health tourism and spa tourism are one of the key things Republika Srpska can offer to foreign tourists, according to the competent ministry of this entity.


In 2015, the Ministry of Tourism and Trade of Republika Srpska invested 714,000 BAM in different types of tourism, including village (rural), mountain, adventure, sports, cultural and historical, spa, receptive and event tourism, promotion and dissemination of information about tourism, and tourist infrastructure. Although identifies as the key sub-branch, health tourism did not receive investments in 2015. In Republika Srpska, the priority sub-branches of tourism, according to the Strategy for tourism development of RS 2010-2020 are village, transit, religious, urban and spa tourism.


The experiences of those who received funding, in this case from the Transfer for tourism development of the Federal Ministry of Environment and Tourism are not negative, but they noted that they were required to send a lot of unimportant documents that take a long time to collect and cost a minimum of 150 BAM.


Do these investments and the government’s lack of care contribute to painting BiH as an undesirable tourist destination?


According to the 2017 Travel and Tourism Competitiveness Report by the World Economic Forum, BiH was ranked 113 out of 136 countries. In BiH, a little less than 22,000 persons work in transportation and tourism, and in terms of prioritising travel and tourism BiH ranks at 111, and the government of BiH was ranked as 123 in terms of their prioritising of this sector, and 124th in terms of budget incentives for tourism.


Judging by the competitiveness of BiH tourism to road to developing tourisms and generating jobs will be arduous, but it should not be neglected because every new job, considering the current situation in BiH, is a cause for celebration. 


 

Ajka Fotografija copyBY: M.Sc. Ajka Baru?i?, Institute for Youth Development KULT


The majority of the BiH public may not be aware that the EU - Western Balkans Youth Forum was held last month, at the same time as the Western Balkans Summit in Trieste. The European Commission purposefully scheduled the event so that young and «older» leaders meet at the same place at the same time. They also ensured that youth send their conclusions to the participants of the Summit. By doing so, the European Commission allowed youth to tell the authorities about their needs, demands and suggestions.


They did well to make this communication official, following the necessary procedure. EU procedure, so it's «on the record» and not said by a young person caught walking down Ferhadija by a TV crew. But the government and politicians would do well to listen to these voices. However, the question remains of how much of this the governments will take under consideration. Will some of the proposals, even just one, will be implemented? Will the next summit of leaders and youth conference see them proudly present some measurable result? In the case of Bosnia and Herzegovina, there is heavy skepticism. Changes in our country are usually slow, they come too late or started off on the wrong foot and missed their intended goal. This is especially true when it comes to youth. Always in the shadow, marginalized or manipulated by politicians and in election campaigns. 


One group of proposals and conclusions from the forum concerned youth entrepreneurship. It was said that the process of promoting and integrating entrepreneurial skills as key competencies in all parts of the education system, and build the capacities of all stakeholders participating in these processes. It was also noted that young entrepreneurs should be included in existing entrepreneurial associations and chambers of economy in their countries, so they can contribute to the design, implementation and assessment of the impact of youth entrepreneurship policies. Also noted was the need to find more diverse ways of providing financial and professional support to youth businesses, and the necessity of offering continuous programs and measuring results so that each new program can build on previous ones. 


In Western Europe a lot of things are very nicely regulated when it comes to youth launching and managing their businesses. That's why youth aren't afraid to venture into business. The system supports them whether they succeed or fail. They have flexibility and incentives. They are not constricted by rigid, strict and unyielding rules. Like they are in BiH. How could a young person, a potential entrepreneur, not fear the launch of their own business when older business owners scare them by simply truthfully describing the difficult conditions they operate under, struggling to survive on the market, and the government's harsh rules. For instance, business owners in BiH have to pay the state the VAT they are due by the 10th day of the month, regardless of whether or not they collected payment for their goods and services. They have to pay with money they don't have.


European countries offer more generous deadlines: by the 12th day of the month in Sweden and Finland, 14th in Bulgaria, 15th in Austria, Montenegro and Luxemburg, 16th in Italy, 20th in Belgium, Estonia, Croatia, Latvia and Spain, 24th in France, 25 in the Czech Republic, Lithuania, Poland and Romania, 28th in Denmark, and last day of the month in Greece and Slovenia. The tax period for calculating and paying VAT is longer than one month in some countries, making it easier for business owners to pay their taxes: by the 20th day of the month after the end of the quarter in Hungary, by the 23rd day for previous two months in Ireland, by the last day of the month after the end of the quarter in the United Kingdom and the Netherlands, by the 40th day after the end of the quarter in Cyprus, 45th in Malta, etc.


Regardless of scepticism regarding the effects of EU accession on Western Balkans countries, why not treat it as a reason and opportunity to finally do something for youth, youth entrepreneurship and employment?!


 

The Federal Ministry of Development, Entrepreneurship and Crafts published the list of potential 2016 Current Fund grantees based on a Public Call for selecting grantees for 2016.


Over 1,000 applications were submitted for the Public Call, with 456 applications that fulfilled the Public Call criteria.


According to the list of potential grantees, the incentives should be awarded to innovators, traditional and old crafts, small and medium-sized enterprises, applications to promote institutional entrepreneurial infrastructure, incentives for projects financed by the EU and other foreign donors, chambers and educational institutions and for technical coordination.


The support was provided to over 100 newly established businesses, for incentives to women and youth entrepreneurship. 


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The Call was published on May 18, 2016, and publicly presented at a joint press conference of the Federal Ministry of Development, Entrepreneurship and Crafts and the Institute for Youth Development KULT.


The Institute for Youth Development KULT participated in the preparation of the Public Call, particularly in the section for improving the criteria referring to youth and women projects and newly established enterprises and provided support to the Ministry in promoting the Public Call and informing entrepreneurs, primarily on the manners of applying for the Call. The news about the Public Call reached around 15,000 people via the website of the Institute for Youth Development KULT.


The Ministry is allocating around 4 million BAM for realizing the Public Call, i.e. for support and aid to the economy.


The ranking lists of the 2016 Current Transfer grantees and all additional information about the Call are available at the website of the Ministry www.fmrpo.gov.ba.


 

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