BiH is among the least competitive economies in Europe.  BiH suffers from lengthy and arduous processes to start a new business and obtain construction permits, issues which have impacted U.S. companies.  The lack of a single economic space in BiH affects companies trying to do business across the entire country.  BiH’s poor investment climate, endemic corruption, complex legal and regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and weak judicial system have resulted in stagnant foreign direct investment inflows over the past five years.

The country’s political environment and complex government structure creates significant obstacles to economic development.  Moves by the RS entity to unconstitutionally seize control of state property have increased tensions, including threats by RS President Milorad Dodik to separate the RS from BiH.  In July 2024, the BiH Constitutional Court ruled in two high-profile cases involving state property that the entities of the RS and the Federation are not competent to convey any rights to state property, including its temporary use. These actions on state property, combined with RS efforts to form parallel entity level institutions, create legal ambiguities that further complicate the business environment, disrupt the economy, and hinder investment.  While no new parallel RS agencies are yet operational, the RS has taken concrete legislative and regulatory steps to lay the groundwork for their full implementation in the near to mid-term. Investors should conduct rigorous due diligence before considering any investment in BiH. This includes avoiding exposure to individuals and entities under U.S. sanctions and confirming land ownership rights and the status of sub-national institutions to avoid becoming entangled in a potential illegal and/or unconstitutional arrangement.  Potential investors are urged to read the legal reviews and statements of the High Representative for BiH.  The Federation also has functionality issues.  After forming a new government in April 2023 for the first time in eight years, the governing coalition has achieved only modest progress on economic and rule of law reforms.