Foreign Direct Investment

According to UNCTAD's World Investment Report 2023, FDI inflows to the Federation reached USD 661 million in 2022, up by 12.6% year-on-year and above the levels recorded before the pandemic. Meanwhile, the total stock of FDI was estimated at USD 9.3 billion (-1.2% on the year), around 36.6% of GDP. According to Central Bank data, as of December 2022, the Federation of Bosnia and Herzegovina accounted for 64.5% of the total FDI, amounting to EUR 5,755 million. The Republic of Srpska contributed 34.4% of the total FDI, equivalent to EUR 3,065 million, while the Brčko District constituted 1.1% of the total FDI, totaling EUR 101 million. Concerning the FDI stock by country, Austria, Croatia, and Serbia lead with EUR 1.4 billion, EUR 1.3 billion, and EUR 1.2 billion respectively. Slovenia, the United Kingdom, and Germany follow with investments exceeding EUR 500 million each: EUR 668 million, EUR 562 million, and EUR 553 million respectively. European countries remain the key investors in Bosnia and Herzegovina, with investments from EU-27 countries representing 59.4% of total FDI at EUR 5.3 billion. Of the total foreign direct investments, 37.7% have been allocated to production (primary, industrial, and electricity production), with the banking sector following closely at 19.6%. Trade accounts for 14.3% of investments, while telecommunications captures 11.4% (data Foreign Investment Promotion Agency).

Bosnia and Herzegovina can offer investors low levels of corporate taxation, several well-developed industrial zones, a solid banking sector, and its strategic location. The country is richly endowed with natural resources, providing potential opportunities in energy (hydro, wind, solar, along with traditional thermal), agriculture, timber, and tourism. Major problems facing foreign investors include a lack of transparency of procedures and weak judicial structures, as well as the dual nature of the state and weak protection of property rights. Furthermore, complex labor and pension laws as well as the lack of a single economic space also hinder investment, and the business regulations and administrative procedures impacting companies vary across each of the Federation's ten cantons. Excluding some exceptions (defense industry and some areas of publishing and media, electric power transmission), foreign investors are entitled to invest in any sector of the economy in the same form and under the same conditions as those defined for residents. The Federation ranks 77th among the 132 economies on the Global Innovation Index 2023 and 67th out of 184 countries on the latest Index of Economic Freedom.