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. Last Updated: 07/27/2016

Bosnia Lags In Creating Climate for Investment

SARAJEVO -- An Internet advertisement describing Bosnia as a "land of opportunity" persuaded a group of young Western entrepreneurs to take a chance.

But after struggling for six months with the country's bureaucracy just to register their monthly English-language newspaper, they decided to give up.

They published just three issues of the BH Reader, aimed mainly at thousands of foreign officials living in post-war Bosnia, and spent much of their cash in the process.

Their fate highlights difficulties facing foreign investors in Bosnia, shaped by decades of socialism and shattered by the 1992-95 war.

A $5.1 billion international aid package for 1996-99 has fueled a post-war economic recovery, but aid is now starting to dry up and the poverty-stricken Balkan country badly needs an inflow of private capital to take its place.

"There are no [economic] prospects without fresh money and fresh money can only come from abroad," said Beriz Belkic, prime minister of the Sarajevo canton in Bosnia's Moslem-Croat federation, one of the country's two autonomous post war entities.

Despite this, investors complain that bureaucratic and other obstacles make them feel far from welcome. A few have established a presence while others have tried without success.

"When we leave Bosnia, ditching countless hours of hard work and any delusion that we could regain the money we had spent, we will be neither the first nor the last foreign investor to do so," said John Bremer, former editor of the BH Reader.

"An unnavigable communist-era bureaucracy, vast corruption, and oppressive taxes have dissuaded countless more corporations, most notably McDonald's, from even setting up shop in the first place," he wrote in a letter obtained by Reuters.

Under Western pressure, Bosnian government officials say they are preparing legislation to make it easier for foreigners to register businesses. But Western diplomats and analysts warn that time is running out.

They say Bosnia must take urgent action to transform the country into a free-market economy, speed up privatization and implement legislation needed to attract investors.

"Time is money," said Chris Poole, commercial attache at the British Embassy in Sarajevo. "They cannot afford delays."

"The economic problems in Bosnia are so great that anybody who wants to start business should be encouraged."

Economics Minister Zaim Backovic of the Sarajevo canton agreed that economic reforms were needed. But he emphasized the many difficulties facing Bosnia after the war and said the slow process of returning refugees was hampering restructuring efforts.

"We are in a vicious circle," Backovic said.

He said there was a lack of serious investors prepared to stay in the country for the long term. "Many of them think they can come and quickly make money and then leave," he said.

The German carmaker Volkswagen, which set up a joint venture to assemble Skoda cars, and Coca-Cola Beverages, which has started production at a plant in a Sarajevo suburb, are among the few foreign firms in Bosnia.