Bosnia and Herzegovina is a country in which economic transition is still underway. However, after nearly two decades of moving towards a liberalised and capital-driven business model and a free market, the economy is still too weak. Large companies have been dismantled and after a series of unsuccessful privatisations, the economy is characterised by small enterprises and a weak private sector and there are serious difficulties in attracting investors.
“For this very reason, there is no future without enterprise restructuring,” said Željko Šain, Professor at the Faculty of Economics in Sarajevo and a moderator of the workshop on Enterprise Restructuring and Expansion, held as a part of the Forum for Prosperity and Jobs in May 2014.. “However, the question arises whether restructuring is possible in Bosnia and Herzegovina and whether there exists the corporate knowledge required for the process,” he said.
Business people and technical experts participating in the workshop agreed on the need to improve legislation that will protect investors, to improve corporate governance and access to funding (particularly for new enterprises), and to establish a more efficient insolvency framework. Participants called on the authorities to speed up key reforms that will strengthen the insolvency framework, relaunch the privatization process, and stimulate the creation of new businesses.
Privatization must proceed on the basis of operational, managerial and financial restructuring; as well as restructuring the workforce. This is preferable to the practice until now, which has largely involved shutting down companies, dismissing employees and selling off assets below their market value.
The workshop noted that among the many failures in past privatisation in Bosnia and Herzegovina there are nevertheless a small number of positive examples that were only made possible after restructuring.
Among other things, the workshop proposed that, as a priority, assets of companies should be activated through new privatizations or other means of restructuring to create new companies and investment opportunities. In the meantime, the authorities should adjust the legal framework in order to encourage investment.
The workshop also stressed the need to create conditions and incentives that will meet the needs of private companies and encourage new companies, especially small and medium-sized enterprises, to start up. This would include improving the legal framework and increasing access to funding through better project preparation. Participants highlighted the need for this to be done as soon as possible.
Milica Uvalić, Professor at the Faculty of Economics in Perugia, Italy, stressed that making BiH companies more competitive must be a central element in the restructuring process. “However, it is very important that companies in Bosnia and Herzegovina and in the Western Balkans establish close cooperation, because I think the time has come where small companies alone will not be able to compete in the European and global markets,” she said.