Bosnia Herzegovina

Melissa Jakupovic


Overall Score: 59

World Ranking: 97

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Quick Facts

  • Population:
    • 3.9 million
  • GDP (PPP):
    • $32.1 billion
    • 1.2% growth
    • -0.2% 5-year compound annual growth
    • $8,280 per capita
  • Unemployment:
    • 28.6%
  • Inflation (CPI):
    • -0.1%
  • FDI Inflow:
    • $331.7 million

Rule of Law (1. Legal System) Property Rights & Freedom From Corruption

Housing and real property rights in Bosnia and Herzegovina has changed significantly after the fall of former Yugoslavia. The country had gone from a socialistic point of view concerning property rights to viewing property rights as a basic civil human right. Unfortunately, new appeals to the topic of housing and property didn't quite make an impact because of the war following immediately after the new regime was put into place. The war lead to political parties wanting to establish ethnically "clean" territory and mass murder, called "ethnic cleansing" , took place against minority groups such as Muslims. This started the widespread violation of human property rights. Post war era, property rights and freedom from corruption were left in shambles. 60 percent of institutions fail to recognize the procurement law, while 25 percent of contracts are processed through public tenders. The government system employed leaves no room for advancement.
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2. Competitive Markets:

Bosnia and Herzegovina does not have much of a market. After the war, the population only seemed to find need in the basic resources, leaving little room for competitive markets in other goods such as technologies. Furthermore, Bosnia and Herzegovina has not had a traditional market history either. The country is still growing in terms of business and does not have the economic resources like other countries such as the United States. A market that is somewhat successful is the agricultural sector. Energy subsidies also prove crucial as they make up about ten percent of Bosnia's GDP.
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3. Limits on Government Regulation:

All decisions in regards to market competition in the energy market require a 7/8 majority vote, making it difficult to start any new implementation. Licensing requirements also impose burdens on the growth of the economy. There is a lack of an overall energy policy for the country due to the inconsistency of rulings. The largest issue for Bosnia Herzegovina as to back lack of funding though. Bosnia's council needs to remove the strict restrictions of the market in order to make economic progress.
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4. An Efficient Capital Market:

Bosnia and Herzegovina is not a country that holds a lot of wealth in the form of capital. In fact, it is one of the poorest countries in Europe. Most money had been outsourced towards war efforts and not much was ever earned to replenish capital. Without any consistent regulation, Bosnia and Herzegovina either fails to enforce government policy or is too strict with policy which does not allow for business growth. It is difficult to enforce any rule in the country, so backing an idea that channels effort into creating capital proves extremely difficult. Changes need to be made to policy in order to start new innovation economically.
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5. Monetary Stability:

Bosnia and Herzegovina has decent monetary stability. After the war, the country looked to its currency board to establish a fixed exchange rate and a way to back economic pursuits through the difficulties presented by the complex political environment. Inflation is relatively low and falls near one percent in most regions. Stability is not a large issue in this country, but perhaps the lock on policy creates too much stability that causes the economy to become stuck in place. It is important to have a low rate of inflation, but it's not good when the rate is low due to inactivity from the productiveness of the country's economy.
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6. Low Tax Rates:

Tax policies in Bosnia vary depending on the body of government. The highest individual and corporate income tax rates are ten percent. Other taxes may also come into play such as added value tax and/or property tax. The overall tax accounted for about 38.8 percent of GDP in the most recent year. Public spending amounted to 49.2 percent of domestic output. Public debt takes up to 43 percent of the domestic economy. Taxes are not at extreme high, but policy could be altered to free up economic intent and motive.

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7. Free Trade:

Bosnia and Herzegovina had a low average tariff of 1.4 percent. Other barriers that do not involve tariffs have been slightly minimized, and customs procedures have improved. Foreign investors, however, face difficulty with bureaucracy. Nearly 80 percent of banking capital is privately owned, and about 90 percent of banks are foreign-owned. The inconsistent law enforcement and varying policies limit the availability of credit for start-up businesses. Thus, the Bosnian economy is at a stand still.

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Bosnian Protests Have Dwindled, But Economic Troubles Run Deep

Video Summary

Bosnians are at a state of unrest due to the inefficiency of the economy. Riots are taking place in the capital of Sarajevo where buildings are being burned and people are becoming violent. Families are struggling to get by in regards to purchasing everyday goods and groceries. Meanwhile the unemployment rate is at an all time high. No citizen has faith in the government taking control of the situation and trying to help turn it around. Many are furious with the inactivity and incapability of the policy makers. It is a tough time for many so everyone is reducing spending. The economy of Bosnia and Herzegovina is in a frozen state.