Economic growth of Bosnia and Herzegovina

Student: Bilajac Dino

Broj indeksa:

Mentor: Avdić Mirnes

Maj, 2018.
 2

Economic growth of Bosnia and Herzegovina

 3

CONTENT

Content..............................................................................................................................3
Introduction.......................................................................................................................4
Definition of Economic Growth and Development..........................................................4
Employment......................................................................................................................4
Gray economy...................................................................................................................4
Innovation.........................................................................................................................5
Bosnia and Herzegovina in comparison with recession in world economies...................5
Ignorance of BiH Authority..............................................................................................5
Banking sector in a new situation.....................................................................................6
Exit from the crisis............................................................................................................6
Technology........................................................................................................................6
Policy circumstances.........................................................................................................7
Corruption..........................................................................................................................7
Conclusion.........................................................................................................................7

Literature...........................................................................................................................7
 4

Introduction
The aim of this seminar is to present the current situation in Bosnia and Herzegovina,
the problems it faces and the opportunities it has to overcome these problems.
The economic development of Bosnia and Herzegovina is still at its beginnings.Despite
the extensive assistance of foreign organizations and many foreign investments in BiH
after the war, it is hard to say that BiH has made a lot of progress. The high
unemployment rate boosted by the global economic crisis, the existence of a "gray
economy" as well as the ineffective legal and political system are only some of the
factors that slow down and hamper economic growth and development in BiH.

Definition of Economic Growth and Development

Economic growth implies an increase in production, production capacity and all other
elements of a single economy. Economic growth is measured by the growth rate by
bringing the gross domestic product (GDP) into the ratio to the population of a
particular country and expressed as the GDP per capita.

Employment
A large number of unemployed, those registered as employed but not working, as well
as those who will become unemployed, make the issue of unemployment policy very
difficult. The issue of unemployment as well as unemployment protection during the
transition process should be an integral part of overall economic restructuring.
Unemployment protection as well as unemployment reduction policies require an active
way of promoting employment. This should include:
- Process of pre-qualification, acquisition of new knowledge and permanent education;
- Self-employment assistance programs;
- Measures to encourage employment, especially in the private sector;

Gray economy
The negative effects of the gray economy, according to analysts, are reflected in the
reduction of public revenues, which results in a decline in the quality of public goods
and services, as well as the standard of budget users and other citizens. This informal
part of the economy indirectly increases the tax burden on business-minded businesses,
discourages foreign investment and encourages corruption. As estimated, the most
fertile ground for the side economy in BiH is civil engineering.
However, it can be said that the gray economy also has its own positive side for
securing the work and existence of a large number of citizens, which it also uses for the
authorities as it maintains social peace.
There is a dilemma in how to act to reduce the gray economy, without endangering the
poorest of the poor. For this reason, the initial step in this struggle must be legal
regulation in such a way that for every form of property that someone has acquired
should have the origin of the money that it has acquired. This would be a powerful
incentive to get out of the gray zone exactly the ones who make the most of it.
Poverty must not be an excuse for the failure of the gray economy, the fight against this
phenomenon does not only mean repression but also stimulation of transition to the
legal part of the economy. However, as things stand, we can express doubts about the
government's readiness to embark on its eradication, as it involves fighting corruption
and illegally acquired property.
Finally, we can draw the pervasive conclusion that the gray economy was the only
'social program' that the authorities are responsibly implementing.
 5

Innovation

The process of innovation is the systematic development and practical application of

new ideas. This is the process of converting inventions (new knowledge) in the new
procedures, techniques, technological processes, technology, new or improved products.
Nowadays, the number of innovations is rapidly increasing, and their commercialization
time is shortened.Accordingly, nowadays the competition innovation and creation of
new technologies and processes becomes crucial important. The main competitive
advantage of every modern enterprise is its ability to innovate. Only companies that
manage to bring its technology to the highest level and this level is maintained, it will
be further developed.

Bosnia and Herzegovina in comparison with recession in world economies

Unfortunately, on the whole pile of economic problems through which Bosnia and
Herzegovina has passed since its inception as a sovereign country, the global economic
crisis has not hindered us.
While world economies have been signaling the emergence of a recession, we find that
the path of Bosnia and Herzegovina to recovery will be painstaking and long-lasting.
American and European economies have reached the bottom of this crisis and a slight
upward path can be expected, and what is likely to be the biggest problem in all of this
is that the current crisis has led to enormous huge unemployment in these countries, so
recovery will be harder, because employment is not a simple thing.
In addition to problems related to the price of domestic goods intended for export, most
domestic manufacturing industries are labor intensive, but very few technologically
intensive. Machines whose products are not modernized, are made of much simpler
products, there is no high percentage of technology, are further expanding to different
types, so under conditions where there is no research, development or investment, it is
very difficult to compete.
There is also a fall in bank profits, which is again about the state of the economy, and
that other stock exchanges are relatively recovering, while both stock exchanges in BiH
are still in poor condition.

Ignorance of BiH Authority

The improbability of the system in Bosnia and Herzegovina is characterized by the fact
that even in the 22 years after the war, no model has been established that will be able to
function in crisis situations, whatever they are. This also applies to the current financial
crisis. In this country, there is simply no element that would be a stable backing against,
for example, collapse of banks or massive layoffs.

Most importantly, there is no money for investments in large public works that many
countries see in the world as saving for the economy or for calming social tensions that
would arise once thousands of workers lose their jobs.
 6

Banking sector in a new situation

The financial flows in our country are left to others. Most banks are in foreign
ownership and it is expected that the earthquake will be easily transferred to our
banking system. The first signs are already visible and are reflected in lower lending
rates and tighter criteria for obtaining credit. More importantly, the loan, especially in
this situation, will not be for the economy that is the basis for maintaining stability, even
though the banks neither from entering our market have been struggling to help the
domestic economy / economy, but mostly to get as much money from citizens.

The closure of the banking sector for the financing of economic development is slowing
down, ie the fact that most domestic banks are sold out and that now the state of Bosnia
and Herzegovina does not have any strong bank that could do something.
Only the authorities are left to appeal to banks, although it is clear that there will be
no grace or interest in any type of intervention, and it is called the reduction of interest
rates that remain steadily at us at an insignificantly high level.

Exit from the crisis

Helping a small and unstable Balkan state can, to a limited extent, come from Brussels.
But this is a sign of the issue as all leading European economies tone each day and are
increasingly unemployed on the European continent. In addition to the political interest
in this part of the Balkans, it is hard to expect any major investments to keep the
remains of the BiH economy.
The only way to save what is still good in the economic sense is, it seems, the greater
the purchase of domestic products and the maintenance of those companies that are
productive and profitable. The only way out is, then, a kind of economic patriotism that
would sustain the production cycle and save jobs that would lead to the loss of an
unsustainable social crisis.

Technology

Without capital there is no technological progress, without technological change there is

no prosperity, capital is not without foreign direct investment, foreign investment is not
without free market and prosperous economic climate, there is no free market with state
intervention in economy, state intervention has no capital, since there are no
transnational corporations , Without transnational corporations no capital, without
capital, no technological progress.
Infrastructure
Most of the international aid went to infrastructure. The disadvantages in investments
are:
- Lack of investment in basic research;
- Lack of scientific workers;
- Inadequate protection of intellectual property;
- The level of demand is insufficient and poor in relation to its required sophistication;
 7

Policy circumstances

What is most lacking in Bosnia and Herzegovina and what it might have managed to get
out of this situation is precisely what it does not have, and that is an adequate political
power. The instability that governs the political scene promotes the decay of BiH not
only in economic terms but in every other way.
Only a strong government could implement a strong echelon policy that could get the
country out of the crisis. Many goals require determination, perseverance, and
fulfillment of obligations. The government that would have the greatest influence would
be the government of experts, which is light years away from current power. Economic
policy must have clear directions as well as strong will to implement it.

Corruption

Inadequate application of the legal framework and mismatch between the entities as
well as domestic laws with international standards are listed as the biggest obstacles of
BiH on the road towards the EU.
The Progress Report also highlights the problem of the judiciary, which is inert with
regard to investigations, prosecutions and judgments on corruption cases at the higher
levels, especially bearing in mind that even cases brought before a court do not await a
dismissal or a verdict.
As a conclusion, the phenomenon of corruption is highlighted in all areas, particularly
within government and state and entity institutions, particularly in the fields of public
procurement, establishment and registration of companies, transport infrastructure and
education.

Conclusion

The problems in BiH seem to be never written enough, and good things are left to hope
for. Bosnia and Herzegovina in this situation is hard to maintain. In the trap of corrupt
and incompetent politicians, the lack of efficient economic policy has ceased to be a
fertile ground for foreign investment, especially in times of global economic crisis.
Young and capable people are increasingly leaving BiH in search of a better world. Less
and less patriotism and hope for better tomorrow. BiH urgently needs some solution.
Certification of their products and their competitiveness on foreign markets, investment
in technology development, more advanced education of people, effective fight against
corruption, are just some of the factors that could contribute to improving the situation
in the country.

Literature

www.seebiz.net/ - Poslovno finasijski portal

www.posao.ba/ - portal za zapošljavanje u BiH
www.soros.org.ba