Bosnia & Herzegovina’s business climate has been overshadowed by political turbulence and lingering uncertainty, according to AMB Legal Group Attorney at Law Dino Aganovic, who mentions this year’s significant minimal wage increase and the establishment of a special prosecutor’s office as notable developments and stresses that investor confidence remains tied to whether the judiciary can restore credibility and efficiency.
"Unfortunately, the situation has been stagnant for nearly a year," Aganovic begins. "Much of it stems from the political turmoil around Milorad Dodik, the President of Republika Srpska. Earlier this year, he was found guilty in a criminal case, confirmed by second instance court recently, received a one-year prison sentence, and a six-year ban from political activity, which has triggered a wave of political hurdles, affecting everything from EU and NATO accession discussions to the tourism sector, where at the time we’ve had some cancellations due to tourists feeling uneasy about potential instability." While an actual conflict remains improbable, the perception itself is damaging. "Against that backdrop, there’s little discussion of foreign investment or meaningful legislative reform; politics overshadows everything."
As for any notable regulatory or economic changes despite this political backdrop, Aganovic mentions an increase in the minimum salary in the country. "It has been one of the biggest developments this year. It went up from BAM 600 to BAM 1,000. While that’s important socially, it’s created real challenges for employers, especially smaller family-run businesses, who struggle to absorb the additional costs." According to Aganovic, the state has also applied pressure through the tax authority, effectively "urging companies not to lay people off despite the heavier burden. This leaves many businesses in a very difficult position."
Focusing on institutional and judicial reforms of late, Aganovic says that this May, the "Federation established a new special prosecutor’s office for organized crime and corruption, called POSKOK. The aim is to relieve the central prosecutor’s office, which has been overwhelmed." However, Aganovic indicates that POSKOK is already facing a mountain of cases. "The ratio is said to be around 100 cases per prosecutor, when realistically, they can only handle about five at a time. That gap highlights just how overstretched the system is."
Finally, from the client’s perspective, Aganovic stresses that "the judicial system is perhaps the biggest problem for investors in Bosnia & Herzegovina. There is very little trust in the courts or the prosecution service. A recent high-profile case illustrates this well: the Prime Minister of the Federation was indicted over COVID-era procurement issues, convicted locally, but European Court found his rights for a fair trial were breached. Cases dragging on for ten to fifteen years are far too common." Still, Aganovic hopes that "this new special prosecutor’s office will bring more credibility and efficiency, which in turn could rebuild confidence. If the judiciary starts functioning more effectively, enthusiasm might return, and with it, real investment and market activity."
