20 minute read
OUR GOAL IS TO IMPROVE THE INVESTMENT CLIMATE IN B&H
BRANIMIR MUIDŽA
Advertisement
”W
e are aware of the fact that the governments of Bosnia and Herzegovina's entities have been additionally burdened by the challenges created by the pandemic, our focus in 2021 will be on boosting cooperation with local communities, especially those from which our member companies come,“ says the President of the Foreign Investors Council in Bosnia and Herzegovina, Branimir Muidža, with whom we talked about the business climate in the country, its potential and the pandemic's impact on foreign investments.
You have been the President of the Foreign Investors Council in Bosnia and Herzegovina since 2011. What has changed in the country in the last ten years in terms of the business environment?
Since its establishment in 2006, the Foreign Investors Councils (FIC) has launched an initiative to establish a normative and institutional framework with the view of improving the investment climate in the country. We have also established dialogue and cooperation with Bosnia and Herzegovina's authorities, in all areas of common interest, through the process of drafting and adopting the recommendations contained in our White Book. The value of the White Book lies in the fact that it provides very specific recommendations and answers to the questions of how, who, when and what should be done to have a much more favourable business environment. About 100 experts from our member companies have been working on the White Book, who have a cumulative age of 3,000 years and cumulative work experience of 1,500 years, both in Bosnia and Herzegovina and abroad, and who have worked and are working in domestic and foreign companies.
In terms of the business environment, the past period was marked by
the Reform Agenda, as well as its inconsistent implementation. Unburdening businesses, increasing efficiency in the public sector, conducting structural reforms in labour legislation, improving the fiscal system, public administration reform, public sector employment policies, improving the business climate and boosting competitiveness, social benefits reforms, public enterprise restructuring, health sector reforms and the rule of law were the goals stated in the Reform Agenda, which coincide with the platform and concept of development that our Council has been representing for many years. Some important decisions were made during this process, but unfortunately, they were not fully implemented. We believe that the implementation of these policies has no alternative and that decision-makers should start applying them as soon as possible, with the aim of achieving higher competitiveness and economic growth in the country.
To what extent and how did the COVID-19-induced crisis 19 affect the decline in foreign investment in Bosnia and Herzegovina?
The onset of the pandemic coincided with a time when the global economy was already facing difficult times. Therefore, in a given situation, business people had to take prudent financial actions, both preventive and corrective, to ensure overall financial liquidity. It also means that many potential investors will align their investment decisions with the changed reality.
In order to keep their business liquid, many companies will focus on short-term goals and will realize longterm ones more boldly once greater stability and certainty of economic opportunities and other circumstances affecting the business are in place. As fears grow that the global economy will move toward recession, there will be a drop in liquidity, along with high inflationary pressures. In this situation, setting short-term financial goals becomes very important. This means that investments in sectors directly affected by the pandemic will be delayed for some time until financial stability is established. Unfortunately, the COVID-19 pandemic will affect investments worldwide and expectations related to the trend of foreign direct investments in Bosnia and Herzegovina too.
According to the data collated by Bosnia and Herzegovina's Central Bank referring to the first half of 2020, investments dropped by 46.7% compared to the same period in 2019. Foreign direct investments in less developed countries such as Bosnia and Herzegovina have been further hit both 2020 and 2021, due to the impact of the COVID-19 pandemic. The decline in global foreign investments in 2020 was estimated at 30-40%, also as a result of the pandemic.
How do you assess the general economic situation in the country and what should and what could be changed?
Looking at a cross-section of the current situation, we can say that the challenges have remained more or less the same as in previous years. The biggest challenge in companies' operations is still the excessive red tape which is also complex and expensive, which leads to its inefficiency and failure to provide adequate quality of service. Therefore, the complex organization and the way the state functions are the biggest obstacles. Due to its constitutional organization, Bosnia and Herzegovina also has a complex business environment, in addition to the already known challenges. The country's economy is currently facing the coronavirus pandemic, which requires the government to be agile and to take appropriate economic measures to minimize the negative effects of the pandemic on the economy. On the other hand, can Serbia be a good external trade partner when it comes to relations between the two countries?
Apart from the European Union, the Republic of Serbia remains the most important external trade partner of Bosnia and Herzegovina. Given that our country and Serbia are geographically and historically naturally dependent on each other, these two countries have great interest in economic cooperation, because according to the Foreign Trade Chamber of Bosnia and Herzegovina, Serbia is the most important partner of Bosnia and Herzegovina in terms of external trade. Last year, Bosnia and Herzegovina exported goods worth just over 450 million euros to Serbia and imported just under 970 million-euro-worth of goods from Serbia. Very good cooperation between the two countries is also reflected in investments. Serbia occupies third place on the list of the biggest foreign investors in Bosnia and Herzegovina. Also, the two countries have concluded a number of interstate agreements related to the economy.
In your opinion, is the key to Bosnia and Herzegovina's further development?
Stability and predictability are some of the key criteria for investors. The more stable the political situation, the greater the predictability, the greater the chance of attracting investors and creation of new jobs, both in the country and everywhere in the world. Bosnia and Herzegovina has a complex business environment, so investors are more cautious. Billions of euros are circulating every day in the world's financial bloodstream, looking for a favourable place to fertilize. There are certainly opportunities and we will use them only if economic issues are an unquestionable political priority.
First of all, there is an urgent need to increase the competitiveness of the private sector, starting with the much-needed reduction of the payroll tax.
Furthermore, there is a need to im-
prove the quality of public services and reform the cumbersome and inefficient public sector, which is a constant burden on the private sector.
Then, the country has to ensure a level playing field, increase transparency and eliminate the system of favouritism. Bosnia and Herzegovina needs to become more determined in supporting the private sector and must reap the benefits of technologies that are now readily available, including digitization, automation and greater use of e-government and e-services.
What will the Foreign Investors Council work on in the coming period and what challenges do you expect to face given the ongoing pandemic?
The Council will continue to work and insist on the implementation of regulatory reforms that are necessary to create an optimal investment climate in Bosnia and Herzegovina this year too. First of all, I am referring to the implementation of our recommendations contained in the new White Book, which we will publish this year, and launching new activities together with the relevant government institutions.
Also, at the beginning of next year, we plan to publish and present to the public the results of our Business Barometer survey, which we periodically conduct among our members. The survey results will be consolidated and presented to the relevant authorities in Bosnia and Herzegovina and will be used to improve our position and requirements towards the state institutions, with the aim of improving the regulatory framework, increasing the efficiency of public administration and policy decisions in order to improve the position of existing investors and encourage new investments. The new survey covers the 2019/2020 period. In addition to the standard chapters, it also contains a new one that deals with business conditions during the COVID-19 pandemic. We hope that the survey results will show governments what challenges companies have been facing in this difficult period and what are some of our recommendations to remedy them.
We are aware of the fact that the
governments of Bosnia and Herzegovina's entities have been additionally burdened by the challenges created by the pandemic, our focus in 2021 will be on boosting cooperation with local communities, especially those from which our member companies come
What are Bosnia and Herzegovina's greatest values - its natural resources, geographical position or people? According to the results of the Business Barometer, our members said that skilled workforce, proximity to the European Union and low labour costs are the most important competitive advantages of Bosnia and Herzegovina in terms of attracting investors. The next most important advantage, compared to other countries, is the low profit tax rate and VAT and low prices of electricity and energy, followed by good suppliers and local business support services, solid transport connections and reliable energy supply. Local incentives for foreign investors, as a competitive advantage for investing in Bosnia and Herzegovina, are an issue where, according to our survey participants, a lot of progress has been made. In addition to the aforementioned, investors believe that natural resources, the potential for business expansion and the availability of raw materials are additional competitive advantages of Bosnia and Herzegovina in attracting foreign investments.
CHALLENGES AS MOTIVATION
SLAVEN RISTIĆ
General Manager TRB Bratunac
In the time of uncertainty and turbulent changes brought by the modern age, which was additionally exacerbated by the outbreak of the COVID-19 pandemic, Tehnički Remont Bratunac (TRB) stands out as a good example of business practice in the Republic of Srpska, Bosnia and Herzegovina.
Since the company’s inception, its
General Manager, Slaven Ristić, has been guided by the vision of creating a better and more promising future for residents in this area and not just the realization of the short-term goal of making a profit and running a clean business. "The future depends on us, but when I say ‘us’, I mean individuals who will assume a clear role in the function of improving the community in which they live,
DECISIVE FACTOR
like bees in a hive. I have always been asking myself and the people around me the following question: what can we do today to make our children live in a better world tomorrow? As a logical answer and sequence of activities, there was a need to become politically active, which I see as a form of civic responsibility in which we all, through our own engagement, should contribute towards creating a better ecosystem for all our compatriots.
Bosnia and Herzegovina is facing widespread emigration as one of the biggest problems in the country - people simply do not want to be held hostage to the current politics, which is the policy of pointing the finger and finding the culprits on the other side without a clearly defined vision and system that will lead both the citizens and state to prosperity. It is time to take responsibility for our town and community. Very few people understand is that life depends on us, our choices and that we build our future on our own… But in order to bring about significant changes, we need support and that we all rally around this goal. If we do not start dealing with politics, it will, unfortunately, deal with us.
New times need to bring both new people and a new approach to politics. Politics should be practised by people who are successful, accomplished, who have results to show and know how to achieve what they set out to do, not those who use politics to grab what they need and advance on the social ladder."
THE QUALITY OF SERVICE ABOVE ALL
For me, the main priority is to keep the quality at the highest level, and I think we are on the right track. Not only do I run the office, but I also educate my colleagues to work the way I did in my time. And that, in my opinion, is the key to securing some kind of continuity. I have been a successful lawyer for 50 years and I think that it is important for the tradition to continue now
BRANKO MARIĆ
Managing partner, Marić & Co
"For me, being a lawyer is not an occupation, it is a vocation that still has a grip over me. Everyone keeps asking me how long I am planning to work. I have been a lawyer for 51 years now and the reason for that is that I still love to work, instead of spending my retirement years sitting at home and doing crossword puzzles. Being a lawyer has always been a challenge for me. It’s definitely a job where you can’t get out of the office, close the door and say I’m going home - there’s no such thing in this business. Work goes wherever you go,” says Branko Marić, managing partner at Marić Law, with whom we spoke about his long career, law practice and the legal system in Bosnia and Herzegovina.
Marić & Co Law was founded in 1959. How have you lasted so long?
— In my opinion, constantly insisting on the quality of services is essential. It is also important to notice changes in our profession, because there are huge differences between being a lawyer when the office first opened and today. In the past, law practice meant court appearances and doing a criminal or civil procedure. Now the situation has completely changed. Today, being a lawyer means being engaged in prevention, i.e. instructing the client what is the correct way to act to avoid them becoming a party in a dispute.
One of the key elements of success and longevity is adapting to changes in society on time, as well as registering the change that is happening not only in society but also in our business. Again, the quality of service is the key, the most important thing. If you provide a quality service, you will have a returning client in a year, two or twenty. Good service sticks in one’s mind as much as a bad one does.
CHANGES
It is also important to notice changes in our profession, and adapt to new requirements
What is the main focus of Marić & Co Law? Which area of law do you specialize in?
— We provide services in various areas of law, including commercial law. We help companies that want to open a subsidiary in Bosnia and Herzegovina. The key to success lies in having a really good team. We work as a team and have experts for every area of law. This is also our main advantage, i.e. having a large number of lawyers who specialize in various fields of law. For example, there is a corporate department that deals with the establishment, internal structure and management of companies and we have colleagues who deal with labour relations because this is an issue that every company is bound to face. Then, we have experts in finance and taxes, real estate, intellectual property, etc.
In essence, we specialize in everything that may appear as a problem to the client. However, no one must do everything, but for each such segment there is a lawyer who specializes in it. We approach problem-solving as a team, as well as in a multidisciplinary way, because only then the problem can be solved to client’s satisfaction.
Bosnia and Herzegovina has a very complex legal system. What are the biggest challenges that lawyers face and how do they overcome them?
— You know, I have always had a personal dilemma. I would like to be a lawyer in Germany, in an organized society where everything is in its place and
works wonderfully. But, on the other hand, I did work there, I wouldn't have had as much work as I have now.
Very often, the wrong approach that the state authorities, state bodies and courts have generates a large amount of work for us. Calling Bosnia and Herzegovina’s legal system complex and complicated is putting it very mildly because the system is much more than that. The biggest problem is that the law is interpreted in different ways. To illustrate this, a judge who is involved in registering a company in, in let’s say, Sarajevo reads the same law completely differently to a judge in Zenica. Based on this same legal provision, I can finish certain things in Zenica that I can't in Sarajevo.
So, not only are there inconsistencies, but for each canton, we have several laws that regulate an area, each in a similar and slightly different way. That is why our office has the most advanced business affairs department, because lawyers must know not only the law but be acquainted with the views of each judge in every court in Bosnia and Herzegovina. That is why there you must be a top professional to succeed.
Generally speaking, to what extent is the legal system in Bosnia and Herzegovina harmonized with the European one and what still needs to be harmonized?
— Making such an evaluation for Bosnia and Herzegovina is impossible because it is not a question of how much we need to prepare, adopt and apply, but rather when is this country going to start functioning properly. Ever since it was founded, this country has been, more or less, suffering from some kind of blockade regarding decision-making.
For example, a donor called me to give an opinion on the law on civil procedure, and I agreed to do it. I tried to explain to them that they are trying to replace the principle of substantive law with the principle of formal law. Of course, the donor was not too happy that I made such a conclusion, and even when I made 50 remarks to the law, of which they adopted over 40, they immediately realized that they had done something wrong. When they asked me if that was all, I told them that if I had at least 15 days to do that and my team with me, every single world of their law would be changed. After that, they stopped calling me for consultations. This is just an example of how our legal system was created.
When we were introducing VAT to the country, the government copied the VAT Law that is valid in the EU. However, the EU has changed a lot of things since then, but we haven’t, so instead of our law being harmonized with the EU’s, we have completely different regulations on the matter where they should have been 100% harmonized.
ADAPTATION
If you are an EU candidate country, than you should closely follow the changes in the EU and adapt your legal regulation to those changes
How did you organize your office during the COVID pandemic? What did your clients requested the most during that period?
— As far as I am concerned and far as our profession as a whole is concerned, the COVID pandemic has changed some standard, meaning that we don’t have days off anymore. As a result, it became normal for me, for example, to receive an inquiry from a lawyer from England on Saturday and for them to ask me to do it by Sunday evening, that is, to give them the information they had asked for. This is what COVID has done in my life. As for the business sector, the issue of lending and securing financial resources, the volume of our work has increased, since we work for the EBRD and the EIB. We can see by the amount of funds they provide to domestic banks that new credit lines are being opened to try to mitigate some of the consequences that COVID has had on the economy.
— It is easier to work with foreign clients, because they have a tradition that when they do a big job, they go to a lawyer to structure that job. That is still not the case in Bosnia and Herzegovina. Here, a client does all the work and uses a lawyer if or when they need him. And by default, it is quite difficult to explain to the client that if they hired a lawyer at the very beginning everything could have been set up much better and cost less, and that the client could have saved a lot of tax money. Financially speaking, it is also much better to work with foreign clients because our fees are far lower than the fees of lawyers in their respective countries.
You are also a member of the SEE Legal Group. How does that benefit your company and your clients?
— SEE Legal was formed as an idea coming from the three strongest law firms in Serbia, Bulgaria and Romania, which were looking for market leaders in other countries to join them. The bottom line is that when a client from Bosnia needs to get a job done abroad, in Slovenia or Turkey, for instance, they can get the best lawyer in Turkey following our referral, who will pay utmost attention to the client and solve their problem in the best possible way. In every country, we have a law firm that is a market leader. We also exchange information on market trends and discuss problems in the region which is quite important.
GREATEST SUCCESS
What do you consider your greatest success? — Creating a law firm like ours is my greatest success, because we are pioneers in that field in Bosnia and Herzegovina. It gives me great satisfaction when I manage to change certain legal positions with which I do not agree, such as disputes over loans indexed in the Swiss Franc, or, for example, the issue of banks charging excessive loan processing costs. Following my appeal, the Constitutional Court has begun to deal with tax issues for the first time. So, I am proud that I have managed to remove that barrier of inviolability of institutions.
