The Economy

A developed and stable economy is a priority goal of every society, as it directly affects economic stability and better living and working conditions for all citizens. Strengthening the economic environment is one of the greatest potential for investment, and this directly leads to improved business conditions and greater competitiveness.

The Republic of Srpska’s economy and its development largely rely on natural resources as one of the key factors for the development of the region, the most important of which are agricultural land, forestry, water and mineral resources.

The Republic of Srpska is characterized by significant agricultural and forest potential.

The total agricultural land area accounts for 51% of the area of Republic of Srpska. By utilization category, arable land and gardens, meadows, pastures and orchards occupy the largest areas, and fishponds the smallest. Given that one third of arable land is still free to cultivate, there is a great potential for agricultural development.

The forest complex represents a national asset and it is one of the basic potentials for the development since forests and forest land cover 40% of the territory of the Republic of Srpska.

Water potential is also a great asset of the Republic of Srpska, and the watercourses meet 73% of the parameters prescribed for the first class of water classification.

There are extremely favorable conditions for the development of the thermal power and hydropower sectors. The utilization of the total potential for electricity production is 30%. Thermal and thermo-mineral water is also particularly valuable potential on the basis of which several spa and recreation centers operate in the Republic of Srpska.

The Republic of Srpska has a rich and still underutilized ore and mineral resources, especially coal, bauxite, lignite, iron and copper.

With its favorable geographical position, attractive natural resources and rich cultural heritage, the Republic of Srpska has a great potential for the development of various types of tourism, especially spa, rural, sports, cultural, historical and eco-tourism.

Advantages for investing in the Republic of Srpska are geographical proximity to the EU countries and relatively cheap and educated workforce, as well as richness in natural resources such as arable land, woods, bauxite and iron ore, etc. As many processing stages as possible should be used here to make a higher use of its’ own factors, including the domestic workforce.

Of the working-age population, 74.79% is employed and 25.21% is unemployed. Economically the most inactive group is retired population – 40.3%. The average number of employed people in 2018 was 166.163, which is 3.3% more than in 2017. The average net salary in the Republic of Srpska in July 2019 was 912 BAM.

The Republic of Srpska’s economy – statistics

Regarding the Republic of Srpska’s economy, official data from the Chamber of Commerce show that total revenues in 2018 amounted to 21.53 billion BAM, and are higher by 1.57 billion BAM, or 7.8%, compared to 2017. Total expenditures amounted to 20.13 billion BAM and, compared to the period of 2017, they increased by 1.30 million BAM, or by 6.9%. Total assets and total liabilities amount to 48.18 billion BAM, which is 4.4% more than in the comparable period of 2017. The costs of gross earnings and salary compensation amounted to 2.46 billion BAM, and they increased by 7.4% compared to 2017. Of the total number of processed financial statements from the business entities in 2018, the largest share was recorded by trade (29.1%) and processing/manufacturing (19.5%).

Gross Domestic Product (GDP) in the Republic of Srpska in the first quarter of 2019, expressed at current prices, amounted approximately 2.53 billion BAM and had a positive growth rate of two percent compared to the same period in the previous year.

In the first quarter of 2019, gross value added increased by 8.8% in real terms in the areas of trade, transport, storage and service industry (accommodation, catering, hotels, restaurants, etc.).

Gross value added increased by 4.1% in the field of information and communication technologies, and in the financial and insurance industries by 3.8%. In the first quarter of 2019, gross value added in manufacturing industry was decreased by 7.1%.

The Republic of Srpska’s economy – potential

Improving the business environment and maximizing the available capacity is one of the priorities of the RS Government. The goals and guidelines for economic development are defined by the current strategic documents in the field of economy and entrepreneurship, and include the restarting of the production facilities in the bankrupt enterprises, as well as the utilization of all available resources of business zones in the RS.

Investment is possible within existing business zones, but also by establishing new ones at potential locations.

According to the RS Economic Reform Program for the period 2019-2021, the main goals of development policies are classified into seven priorities.

Increasing the competitiveness and productivity of the Republic of Srpska’s economy with an aim to increase wages;
A sustainable health system;
An efficient public sector;
Education system and labor market adapted to the needs of the economy;
Improving the demographic position of the Republic of Srpska;
Research, development, innovation and digital economy;
European integration, regional and international cooperation.

Priority areas for the development of the Republic of Srpska include:

the agricultural sector, where the objective is to make a positive balance in foreign trade,
wood processing,
formation of complexes based on bauxite and alumina processing,
construction of energy facilities,
construction of infrastructure,
tourism development,
reactivation of formerly large industrial systems,
shifting credit potential from imports of durable goods to productive investments.

Business zones with favorable locations for investment, a plan for privatization of companies, as well as the possibility of revitalization of existing production facilities from various branches of industry, are prerequisites that have made the Republic of Srpska an economically attractive area for many years.

In the field of metal processing industry investments are possible in the following companies:

“New Purification Factory” from Rogatica – A long industrial tradition, quality and availability of highly skilled workforce, with competitive labor costs, make the “New Purification Factory” from Rogatica recognizable.

Favorable investment conditions also come from an attractive location, as the facility is located not far from the city center, while the geographical location of the Rogatica municipality also brings you close to the border with Serbia.

Activities:

production of air purifiers and pre-purifiers,
air filters,
fuel purifier,
oil purifier, oil filter.

Production facilities have complete infrastructure. „New Purification Factory“ a.d. Rogatica is 100% owned by the RS Government, which is currently looking for a strategic partner.

“Kosmos” – Metal Industry, from Banja Luka. Previous activity of the company:

production (stationary and mobile aerodrome and aircraft equipment, special tools and products, antennas for all kinds of purposes),
overhaul and repair (radars and radar-computer systems, rocket systems, automation systems, combat and non-combat vehicles and weapons, electrical machines and automation elements),
planning and construction (overhaul and production capacities, components, blocks and systems, command systems),
services (calibration of measuring instruments, chemical laboratory, repair and overhaul of explosion-proof electrical devices, equipment and installations).

Company „Kosmos“ a.d. Banja Luka is 100% owned by the RS Government, which is seeking for a strategic partner.

Why to invest in this project?

Good geographical location and low transportation costs. The company facilities are located in an attractive location in the wider center of Banja Luka, which is the administrative center of the Republic of Srpska. It is possible to use railway transport connections with the railway passing through the city. Mahovljani Airport is 20 km away. The newly built highway is a link to the E70 Belgrade – Zagreb highway.
Long industrial tradition, quality and availability of highly skilled workforce, with competitive labor cost.
Free production capacity that can be put into operation.
Production facilities have complete infrastructure.

“New Elastic” a.d. Vlasenica – textile industry, Vlasenica municipality area. Previous activity of the company:

manufacture of trimmings and haberdashery (woven elastic and non-elastic ribbons six to 30 mm), used in other industries – textile, metal, footwear, graphics and military, and are widely used in healthcare and construction.
Production Capacity / Installed Capacity (current):
up to 5,000,000 meters per year (suspenders, metal and plastic zippers, straps for pendants, belts, belts for lifting loads).
Production facilities have complete infrastructure (electricity, water, sewerage system, boiler room, access for trucks).

Why invest in this project?

Favorable geographical position. Vlasenica Municipality is located on the main road Belgrade – Sarajevo, Novi Sad – Sarajevo.
Long industrial tradition, quality and availability of highly skilled workforce, with competitive labor cost.
The premises of the company “New Elastic” a.d. are suitable for starting a textile production or other sort of production, and it can also be used as a storage.

The facility location is a part of the bigger complex “Novi elastik” a.d. Vlasenica, an it is owned by the RS Government. Available space: 10,741 m2 of land, of which 745 m2 is under the buildings.

“Vlasenica Wood Industry”, a.d. Vlasenica. Previous activity of the company:

manufacture of furniture, parquet and sawn timber.
Production Capacity / Installed Capacity (current):
primary processing capacity (sawmill) of 12,000 m3 / year,
Bed production capacity of 24,000 pieces / year,
parquet production capacity of 48,000 m2 / year,
Dryer capacity is (in one turn) 150 m3.

Production facilities have complete infrastructure: electricity, water, sewerage system, boiler room, access for trucks.

Why invest in this project?

Favorable geographical position. Vlasenica Municipality is located on the main road Belgrade – Sarajevo, Novi Sad – Sarajevo.
Long industrial tradition, quality and availability of highly skilled workforce, with competitive labor cost.
The Republic of Srpska has a significant raw materials potential for the wood industry.
The premises of “Vlasenica Wood Industry” a.d. are suitable for starting a wood production or other type of production, and it can also be used as a storage.

“The Eagle” – metal industry, city of Bijeljina. The aim of the project is to find a strategic partner for the company “Eagle” a.d. Bijeljina. Previous activity:

repair of turbojet engines,
production of parts for turbojet engines, special tools and equipment,
calibration of measuring equipment,
composition examination of the physicochemical characteristics of the product material.

„The Eagle“ has a capacity to conduct very useful range of special processes and technologies, which, except in aeronautical programs, are used to inspect the repair of vital machine components.

Production Capacity / Installed Capacity (current):

Total overhaul and rapair capacity is 187,000 NF / year. (equivalent to 80 VIPER engines overhaul);
Total production capacity is 143,000 NF / year;
Laboratory services, calibration and testing of materials: 100.409,00 NF / year.
Production facilities have complete infrastructure (electricity, water, sewerage system, access for trucks).
Cooperation possibilities:
privatization,
business-technical cooperation (business partnership with world manufacturers in the field of aviation industry),
company holds the certificates: EN9100: 2009 (BVC, Paris); ISO 9001: 2008 (BVC, Paris); Part 145 (BH DCA, Sarajevo); BAS EN ISO / 17025: 2006 (BATA, Sarajevo).

Property of “The Eagle” a.d. Bijeljina is 81.49% owned by the RS Government, which is seeking for a strategic partner.

Why invest in this project?

Favorable geographical position. The location of the company is at a distance of five km from the city center. The city of Bijeljina is located in the northeastern part of the Republic of Srpska. Bijeljina’s distance from Belgrade (railway, airport) is 140 km, and the distance of the E70 highway (Belgrade – Zagreb) is around 40 km.
Long industrial tradition, quality and availability of highly skilled workforce, with competitive labor cost.
Free production capacity that can be put into operation.

The property is located in the complex of “The Eagle” a.d. Bijeljina, and 81.49% of the company is owned by the RS Government. Available space: 94.919 m2 of land, of which 12.094 m2 is under the buildings.

Special Purpose Engine Factory a.d. Pale. Previous activity:

production and repair of special purpose engines,
thermal treatment, sandblasting, painting, precise measuring and surface protection services,
production of parts for mechanical engineering.
Production Capacity / Installed Capacity (current):
Tank motors (150 pcs / year)
Engine overhaul and repair (100 pcs / year)
connecting rod (5,000 pcs / year)
protection cases (3,000 pcs / year)
Heat treatment (600 tons / year)
Sandblasting (1,200 tons / year)
Lacquering and paint baking (100 tons / year)

Production facilities have complete infrastructure: electricity, water, sewerage system, access for trucks.

„Special Purpose Engine Factory“ a.d. Pale is 52.99% owned by the RS Government, which is seeking a strategic partner.

Why invest in this project?

Favorable geographical position. The location of the company is three km away from the urban parts of Pale municipality. The municipality of Pale is located in the east of the Republic of Srpska, around 16 km away from Sarajevo (railway, airport) and 297 km from Belgrade (railway, airport).
Long industrial tradition, quality and availability of highly skilled workforce, with competitive labor cost.
Free production capacity that can be put into operation.

The facility is located within the complex of „Special Purpose Engine Factory“ a.d. Pale, and 52.99% of the company is owned by the RS Government. Available space: 39.150 m2 of land, of which 5.012 m2 is under the buildings.

The Republic of Srpska’s economy – business environment

Regarding the stimulation and support for the development of medium and small enterprises, there are several financial support options for medium and small enterprises in the Republic of Srpska through the public budget, including the financial support from The Republic of Srpska Investment-Development Bank (IRB RS), the creation of a development fund for small and medium-sized enterprises and SME agencies, facilitation offers, etc.

The Republic of Srpska Investment-Development Bank offers multiple credit lines with stimulating interest rate incentives, longer repayment periods, and low processing costs that may be associated with granting a loan.

The Guarantee Fund of the Republika Srpska facilitates the access to the financial resources necessary for carrying out the entrepreneurial business activities (legal entity and individual) based in the Republic of Srpska, by issuing guarantees for securing a part of the loan obligation or other contracted financial obligation of the entrepreneur towards a bank or other financial organization.

Incentives of the Ministry for Scientific and Technological Development, Higher Education and Information Society – In accordance with the Law on Scientific Research and Technological Development (“Official Gazette of the Republic of Srpska”, No. 6/12, 33/14 and 66/18) general interest and strategic goals in the area of technological development are realized through following programs: research in the field of technological development; fostering invention, innovation and protection of intellectual property; transfer of knowledge and technologies and encouraging the application of the scientific research results; support to organizations for technology infrastructure development.

Funds from the budget of the Ministry of Trade and Tourism for financing small projects in the field of tourism – implementation of the program for allocation of the funds for tourism development from current and capital grants is based on the adopted Strategy of Tourism Development of the Republic of Srpska for the period 2011-2020 (“Official Gazette of the Republic of Srpska”, No. 68/11), as well as on the Decree on Conditions and Criteria for the allocation of earmarked funds for tourism development (“Official Gazette of the Republic of Srpska”, No. 1/18).

Local incentives – In the Republic of Srpska’s municipalities, which have compensation for the natural resources exploitation (compensation for submerged land, exploitation of forests, stone or ore), there is a legal basis for directing a part of the funds collected in this way towards support to the SME sector. The resources allocated by the local levels of government are certainly significant because they are “closest” to the beneficiaries, that is, they can directly meet specific needs of the local businesses community in the best way.

The Law on Incentives in the Economy of the Republic of Srpska (“Official Gazette of the Republic of Srpska”, No: 52/19) foresees the incentives for the economy development, namely: incentives for increasing the salaries of workers employed in business entities and incentives for direct investments.

All companies and entrepreneurs operating in the Republic of Srpska in the field of production, trade and services, as well as business units of companies whose headquarters are outside the Republic of Srpska, are entitled to incentives for increasing the wages of workers. The right to the incentive to increase the salary can be exercised only for the workers with whom has the business entity based an employment contract by March 2019 the latest. Business entities are entitled to an incentive to increase salaries in two accounting periods, one lasting from January 1 to June 30, and the other from July 1 to December 31, in one calendar year. After the end of the accounting period for which they seek incentive funds, they have a deadline of 60 days to apply for an incentive.

Incentives for direct investments are intended to provide the conditions for achieving greater competitiveness of the economy, in order to ensure sustainable economic growth and employment in the Republic of Srpska. Adoption of a regulation defining the rights to this type of incentive is underway.

Employment Support Program

The Employment Service of the Republic of Srpska is a key labor market organization that participates in the preparation, development and implementation of employment projects that are in line with the Employment Strategy of the Republic of Srpska, as well as with the Employment Action Plan for the implementation of the Strategy for each year individually.

The Employment Service implements a project to support employment in the Republic of Srpska’s economy based on the Rulebook on Conditions, Criteria and Manner of Implementation of Active Employment Policy Measures, through a public call.