US Trade with Bosnia & Herzegovina Research Papers

Just as service activities have been major engines of national economic growth, so too have they become an increasing factor in international trade flows and economic interdependence. (Human Geography, pg.343) The political, economic and social map of the Bosnia and Herzegovina State was changed to a great extent by the war. The country is therefore in a period of transition, with programs of reform and reconstruction in progress. Before the war Bosnia and Herzegovina was a medium-developed industrial and agricultural state with about 1,000 industrial organizations. After the war it was left with economic output at less than 10 per cent of its previous record. The country is therefore currently under economic recovery, with the revival coming about through the combined efforts of the governments (Federation of Bosnia and Herzegovina and Republika Srpska), the international financial institutions, international donors and foreign investment.

Economic infrastructure (power, roads, railways, telecommunications, water supply etc) has been reconstructed giving a possibility of economic recovery and realization of projects. The number of the unemployed is extremely high; therefore tax concessions are available for potential investors who are opening new working places in the country. New employment as well as market ambience and institutional and political frameworks for fast economic and social transition are all priorities of the reconstruction process in Bosnia and Herzegovina.

US Reaches Out to Bosnia and Herzegovina Companies
By Violeta Kovaçeviç for Balkan Times in Banja Luka — 02/05/02
The US Embassy in Bosnia and Herzegovina (BiH) organized a series of presentations on programs the US government is sponsoring to support local economic development and co-operation between BiH companies and US. Led by Ambassador Clifford Bond, the delegation of US trade and commercial agencies began the US Commercial Outreach events in April.

The presentation held in Banja Luka on 4 April at the Republika Srpska (RS) Chamber of Commerce addressed companies from the greater Banja Luka region. The delegation discussed business development funds, preparation of feasibility studies, equity financing, business partnering, generalized system of preferential tariffs, environmental partnerships and trade lead facilitation. RS Prime Minister Malden Ivanic and BiH Ambassador to the United States Igor Davidovic attended the opening event.

“Trade and business have always played an important role in bringing people together,” said US diplomat Bond. He emphasized that the revival of BiH’s economy is an important factor in stabilizing this region.
Beryl Blecher, a commercial counselor with the US Commercial Service (CS) at the US embassy in BiH, explained her office’s role in facilitating economic co-operation between the two countries. CS offers a variety of sources for local companies seeking to establish contacts with US suppliers of equipment or services, such as registration in the database and CS-sponsored visits of delegations from local firms to major trade shows in the United States and Europe.

Jeanette Miller, director of business development for Southeast Europe at the US Trade and Development Agency, reported that the agency has invested more than $11m in feasibility studies and technical assistance to BiH since 1997.
The Small Enterprise Assistance Fund, another US government-sponsored program, provides equity capital and technical assistance to small and medium enterprises with the goal of promoting sustainable economic development by encouraging business activity in transition economies. This program also provides marketing assistance to start-up businesses.

Harvey Lee, economic counselor at the US embassy, explained the system of preferential tariffs aimed at encouraging BiH exports to the United States. The “generalized system of preferences” program provides tariff breaks on BiH-produced products exported to the United States. The audience was particularly interested in this, as it provides the opportunity for local companies to place their products on US markets duty-free. At the end of 2002 and during 2003 there are 27 countries in economic transition. Some of them are on the surface of the central and Eastern Europe. The report of transition that EBRD issued for year 2002 was encouraging. Some of those 27 countries have improved their economic for 3,5%. However, European union region countries have grown their economy for 2,2%. Less growth rate than in other countries in transition was resulted mainly because of floods that occurred during 2002.

At the same time, countries of Southeast Europe, including Bosnia and Herzegovina, recorded the growth of 3,5% in 2002. The economy growth for 2003 is expected to be 4%. This is a result of stabilization of political situation that offered more foreign investments. The rise of trade and export of goods is expected as well. Through a survey that shows the progress of transition, it has been proved that Bosnia and Herzegovina was one of the most active countries dealing with the same problem. Bosnia and Herzegovina was the strongest reformer in year 2002.

Legal regulations defining the economic relations with foreign countries are compatible with regulations of the European countries.

The trade is largely liberalized. Import and export are free and, in some exceptions, there can be quantitative limitations in the protection of domestic market or protection of people, animals and environment.
Advantages of doing business with Bosnia and Herzegovina are:
1.Stability of the exchange rate (national currency KM is linked with EURO),
2.Orientation of economic policy is free and open market,
3.Foreign and domestic legal and physical entities are equal in their rights and obligations in business operations.

There are some examples:
Foreign trade exchange
in 000 KM
1999. 2000. 2001. 2002.
Export BiH
(F BiH + RS+BD) 1.375.619 2.264.921 2.243.405 2.098.652
F BiH 950.213 1.429.552 1.644.576 1.524.005
RS 425.406 835.369 598.829 565.647
BD BIH 9.000
Import BiH
(F BiH + RS+BD) 6.047.912 6.642.726 7.080.088 8.167.867
F BiH 4.458.976 4.852.226 5.382.633 5.730.500
RS 1.588.936 1.790.500 1.697.455 2.164.367
BDBIH – – – 273.000

Most important foreign trade partners of B&H
EXPORT in 000 KM
Countries 2000 2001 2002
Italy 515.014 513.171 246.524
Yugoslavia 464.820 439.568 417.271
Germany 262.061 325.878 262.360
Croatia 173.413 233.261 311.553
Switzerland 284.856 228.647 229.965
Slovenia 150.614 170.048 174.070
Austria 74.194 80.352 83.543
USA 20.635 22.743 26.590
France 16.391 21.643 41.707
Macedonia 24.575 13.443 19.500
Turkey 40.707 10.667 12.920
Hungary 7.921 9.413 12.931
Other countries 229.720 276.711 250.718
TOTAL EXPORT 2.264.921 2.345.545 2.089.652

IMPORT in 000 KM
Countries 2000 2001 2002.
Croatia 953.134 1.035.895 1.264.487
Italy 704.214 922.284 777.850
Slovenia 998.717 898.683 895.402
Germany 805.186 728.748 986.625
Yugoslavia 439.282 476.358 644.894
Austria 368.070 385.344 455.842
Hungary 307.711 311.828 406.131
Switzerland 167.438 204.349 148.251
USA 117.748 136.235 155.034
France 103.138 94.001 133.998
Turkey 42.406 57.557 114.646
Macedonia 53.357 44.022 40.976
Other countries 1.582.325 1.515.788 1.870.731
TOTAL IMPORT 6.642.726 6.811.092 7.894.867

No. Custom tariff Goods
1. 7601 Aluminum alloys
2. 4407 Wood roughly trimmed-coniferous
3. 2716 Electric power
4. 9401 Seats
5. 4101 Hides and skins of bovine animals
6. 9403 Furniture, other and parts
7. 8708 Parts for vehicle
8. 6403 Leather footwear
9. 4403 Wood in the rough
10. 6203 Suits

No. Custom tariff Goods
1. 2710 Oil from petroleum and bituminous minerals obtained by distillation and refinement
2. 8703 Vehicles, Motor cars
3. 3004 Medicaments put up in forms for retail sale
4. 2402 Cigarettes
5. 1701 Sugar, beat, cane
6. 9403 Furniture, other and parts
7. 2523 Cement portland, slag,supersulfate,
8. 8471 Automatic data-processing machines and units thereof
9. 2202 Waters containing sugar or flavored
10. 8704 Motor vehicles for transport of goods

Before the war, as the name indicates, the Socialist Federal Republic of Yugoslavia was a socialist state, nevertheless with an interventionism less strong than in communist countries. Of course, this was also so in Bosnia and Herzegovina. The main indicators of this policy were the small numbers of privately owned firms, the high degree of social re-distribution and the predominance of heavy industries, as in Zenica (BiH Steel) or in Mostar (Aluminji). Furthermore, in his desire to strengthen the unity of the whole country, Marshall Tito spread out the points of fabrication of consumer goods among the whole of Yugoslavia. Thus, to quote a “Zastava” car as an example, the chassis was manufactured here, the engine there, and the tires in a third republic of the country.

Another specific point was the existence of the so-called “payment bureau,” which collected all the bills and taxes from the citizens and paid part of this revenue directly to the Party.

But BiH remained a landlocked country, with no access to the sea, no highways, few railway lines and only two ports on the Sava River, Samac and Brcko.

Is that to say that economic and social situations are frozen and that there is no chance of improvement? Certainly not, for a lot of things have recently changed for the better. Of course, it’s always more difficult to go towards an unknown system than to come back to a previously well known one. During more than 50 years – about two generations -, citizens of this country only experienced war and communism, and sometimes both together. Such moves, however as normalization of the dismantling of payment bureau, Air Space co-ordination, privatization, and the march for joining the Council of Europe are many examples of the efforts of the common institutions to reach western standards.

The HR (High Representatives) himself adopted a new concept of “ownership,” which means the progressive withdrawal of the international community and more responsibilities for the state institutions.
Another positive point was the creation, in July 1999, of the Stability Pact, which deals with all the countries of the Balkans through a regional approach. There is virtual unanimity, in southeastern European countries, that the way forward is integration into Europe.

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