SARAJEVO, Nov 9 (Reuters) - Only the implementation of promised reforms and the creation of a single economic space in Bosnia can stem a steep decline in foreign investment in the ethnically divided Balkan country, a foreign investors’ group said on Wednesday.
Foreign direct investment (FDI) in the first half of 2016 more than halved from the same period last year to just 82.3 million Bosnian marka ($46.4 million), accounting for less than 2 percent of national output compared to 5.3 percent in neighbouring Serbia, the Western Balkans’ largest economy.
Since the 2008 global financial crisis, the investment has been steadily decreasing in Bosnia, which is split into two autonomous regions and has a fragmented legal system and multiple layers of administration and decision-making, said Branimir Muidza, head of the Foreign Investors’ Council (FIC).
Last year FDI amounted to only $270 million, down from an average $703.4 million annually before the crisis in 2008.
“This trend can only stop if the reforms are implemented at a much faster pace and in line with the goals set in the reform agenda,” Muidza said, referring to plans the European Union wants Bosnia to implement to further its bid to join the bloc.
“We will insist on public sector reform, tax reform, curbing the grey economy, easing of the tax burden on labour and investments and the creation of a single economic space.”
Many of the reforms have been included in a three-year 553.3 million-euro ($605.25 million) aid programme for Bosnia approved by the International Monetary Fund in September, when the EU also accepted the country’s membership application in what is certain to be a lengthy negotiating process.
Presenting its annual report on Bosnia’s progress on Wednesday, the European Commission praised the implementation of some of the reforms sought but warned about a lack of progress in the area of public administration and the rule of law.
The FIC groups more than 50 international and regional companies which have invested a combined 9 billion Bosnian marka ($5.1 billion) and created more than 13,000 jobs since the end of Bosnia’s 1992-95 war, which claimed 100,000 lives. ($1 = 0.9142 euros) (1= = 1.767 Bosnian marka) (additional reporting by Daria Sito-Sucic; Editing by Gareth Jones)