As the political stumbling over questions that are of practically no use for the BiH citizens continues, BiH economy loses its required support and possibility to open new jobs.
Lack of job vacancies is acknowledged as number one question in the field of employment in Bosnia and Herzegovina. The public sector is overburdened, and weak domestic economy in the current business ambience lacks capacity to significantly expand and employ new workforce. Direct foreign investments have not recorded any serious growth in years. Enterpreneurship and self-employment are underdeveloped.
There is five times less medium and small enterpreneurships (MSE) in BiH per capita than is the European average. In FBiH, for example, for every 10,000 citizens, according to the official reports, there is 90 subject of MSE, while in Slovenia there are 568, in Hungary there are 750, and in the EU 500 on average. BiH records an extremely small number of newly founded enterpreneurships (start-ups) in comparison to the neighbouring countries. The latest research from 2014 (Bisnode BH) suggests that the number of such enterpreneurships decreased significantly in our country – for 70% in comparison to 2013, from 8446 to 2536. Plummeting of newly founded enterpreneurships is recorded in general. According to data by the FBiH Tax Department published by ekapija.ba portal, the total number of newly founded enterpreneurships in 2014 in FBiH was 2,209 in comparison to 2,385 firms that were founded in 2013, which is a drop of 176. For the same period, the number of open businesses dropped from 4,671 to 4,344 (for 327), while the number of closed businesses increased from 1,451 to 1,637 (for 186). Simultaneously, there is ten times less budget funds allocated from the FBiH budget than is recommened by legislature for developing small enterpreneurships.
BiH economists are burdened by inadequate tax payment system and high levies for employees’ work, even for the newly employed, who step out of the educational system unprepared and whose additional education also falls on the employer’s shoulders. A worsening economic liquidity is evident, there is a lack of economic funds, and an increasing indebtness of the BiH firms while at the same time the highest debts in agriculture are made by the governmental institutions. It is even more absurd that today’s VAT system is conducted by invoice and not by charge for goods or services, economists credit the state apparatus, pay it in advance even when a public institution owes them for a delivered service.
The number of blocked accounts of the economic subjects is increasing year after year. In the end of 2014 in BiH 67,253 business subject accounts were blocked, and 41,474 firms had at least one blocked account. In November 2012, as the Central Bank of BiH issued its first report on blocked accounts, the number of blocked accounts was 58,038 in relation to 35,694 business subjects. For comparison, according to the research prepared by Bisnode BH, in BiH every fourth enterpreneurship recorded a blockage, in Croatia it was every seventh, in Serbia eveny eighth and every thirteenth in Slovenia. Economic experts point out that a current number of blocked accounts of law persons indicates lack of liquidity and insolvency disrupting the financial flow, causes a plummet in production, expenditure and employment.
According to the estimates of the farmers, BiH has only a quarter of its fertile land, acres, pastures and non-cultivated land in use. As they state, from the farmers’ association, a better legislative is necessary, along with safety of farmers in case of natural disasters, modern technology that the farmers cannot acquire on their own, a better infrastructure and good water management, a corresponding repurchase, significantly greater and more directed budget allocations for agricultural incentives, etc. Event he minimal incentives are often not directed to strategic branches of economy, the requirements of consumers according to the assortment and the quality of the produce, so that the manufacturers would know for a longer time period what they should produce for the requirements of the market. Agricultural developement is being presented as a strategic decision of the governement and there is currently a vast foreign trade deficit in food products. According to the UNDP research, BiH imports more than 65% of food required to fulfil its own needs, and what the domestic force could manufacture on its own. According to the data by the Foreign Trade Chamber, BiH imports almost two and a half billion BAM in food products. Fruit and vegetables production in BiH was 35% smaller in 2014 than in 2013, according to the dana from the Annual Report made by the Foreign Trade Chamber of BiH. The ambience is such that the domestic production is plummeting, making way for certain import lobbies, as BH agricultural workers state, adding that there are people interested in practicing agriculture if the state would provide them with quality conditions.
BiH is abundant in tourism potential and as such should not be behind other regional countries that are touristically much more developed. However, tourism in BiH economy is seven times less represented than in the competitive regional countries. In the regional countries, tourism comprises nearly 14% of the GDP, while the percentage in BiH is a little over 2%, according to the data of the Foreign Trade Chamber of BiH. In comparison to Croatia only, our position is 7 times worse in relation to allotment in overall economy, and 25 times worse regarding the amount of money gathered through tourism. There is a great disproportion between potential and the achieved result.
The difficult position of the economy and underdeveloped enterpreneurship have their causes. According to the conditions for staring business, we are at the bottom of the world list. Data from the GEM research (Global Enterpreneurship Monitoring), BiH has the lowest overall result of the Global Enterpreneurship Index (0.18) in comparison to the countries of the neighbouring region and the amount of failing businesses is the greatest in the world. In the reports of prominent international institutions, BiH is listed as a negative example of business startup motivation, because most of the enterpreneurs start businesses for necessity.
Starter firms require support, eduction, seed capital, space, councelling, new technologies, monitoring and directions. According to the research by the National Business Incubation Association (NBIA), the percentage of firms that endured during and after the incubator is 87%, while the percentage of those that never encountered the incubator is 35%. That means that business incubation provides three times greater opportunity for the firms to survive. Business incubators in BiH are few and so far left to the mercy of budget funds and are not included in the current enterpreneurship support programmes. According to the published analysis of the situation, only twelve business incubators are active today in BiH. An evidence of their significance is the fact that since 1998 they generated more than 160 firms, created 1304 workplaces, are regularly filling up BiH budgets and contributing to the socio-economic stabilisation of BiH citizens. Business incubators should be a part of the national strategy, however, it is obvious that there is no developed conscience in BiH on Business Incubation as a significant instrument of the economic development.
BiH businessmen require financial incentives. Two out of three employers, according to a reseach conducted by the Federal Employment Bureau on a sample of over 2500 employers state that they require incentives to hire new workers. The existing system of awarding incentives to businesses is inadequate. In comparison to the neihbouring countries, BiH invests significantly lower funds in agriculture, the incentives are late and are often not paid for the year in which the businessmen planned their expenditure, their planning is also questionable, since the funds are mostly not directed to perspective branches of economy that record growth and have the potential to open new workplaces, the effectiveness of their expenditure is ot evaluated, etc. Intransparency while awarding and numerous recorded affairs additionally illustrate the defects of this field.
Industry of wood, that is one of the leading exporting branches of the BiH economy that records the greatest foreign trade surplus – it exports three times as much as it imports – and a constant growth, hiring over 30 thousand workers, is almost left on its own, with barely any incentives. Due to an incomplete legislative that has been waiting to be passed for years, even the raw material is not readily available for them.
The promotional video in attachment, that was made as a part of the “BH Business Site” initiative is a contribution to required solutions in the field of economic support and enterpreneurship development in BiH. The initiative aims at significantly improved and budget strengthened entity support programmes for small and medium enterpreneurships and an organised distribution of different financial economic incentives at all governmental levels.
The Institute for Youth Developemnt KULT, is close to completing the research on distributing budget incentives for economic development in BiH and it will present the results to the public in the beginning of June 2015. The results of the research will be used as one of the sources to develop an analysis of states in the area od distributing budget incentives to perspective economic branches in BiH. The analysis of states, along with the identified perspective agricultural branches, will serve as a platform for creating precise guidelines to improve the process for all the institutions that financially encourage and stimulate economic development.
“The “BH Business Site” initiative is being implemented within the Civil Society Sustainability Project in BiH, implemented by the Centres for Civil Initiatives (CCI) and the Civil Society Promotion Center (CPCD). The project is funded by the United States Agency for International Developmentand the Government of Great Britain.“
The promotional video for BH Business Site – “It Can Be Better” is available HERE.
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