Bosnia’s Private Sector Lacks Capital, Needs Less Regulation – World Bank

An inefficient regulatory regime imposes unnecessary bottlenecks and excessive costs to enterprise start-up, operations and growth in Bosnia, whereas no quick market mechanisms exists for pushing failing companies to restructure or exit, the bank said in a statement summarising an Investment Climate Assessment (ICA) report for Bosnia it conducted earlier this year.

“Some of these constraints could be removed by streamlining regulations to allow quick start ups, reduce the number of licenses and permits required for business operations, and strengthen the systems for recordkeeping of real property transfers,” the statement said.

The ICA report was ordered by the Bosnian government in a bid to find ways to improve the Bosnian industry competitiveness, including restructuring and strategic ownership change of some 1,600 enterprises sold previously by the state under Bosnia’s voucher privatisation conducted in the late 1990s.

“Improving competitiveness of a country and its industry was always important, but it becomes essential at the time of global recession,” John Pollner, team leader of the report, said in the statement.

“As foreign investments decline, getting them will be harder and harder. More competitive economies will attract more funds with simplified business procedures,” Pollner said.

The report said that the voucher-privatised companies still control a large share of assets but continue to underperform, due to the lack of capital and non-existence of strategic ownership. These firms also suffer hidden losses, pension and tax debt arrears and wage payment delays.

“The large scale of the problem imposes the need for graduated solutions and requires a greater legislative flexibility and improving institutional capacities for both restructuring and exit of such firms,” the World Bank said.