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Trends of Agro-industry
• Economic Development
BiH is an upper middle income country with GNI per capita as of US$ 4,700 in 2009. Total number of population is 3.8
million inhabitants, of which 52 percent live in rural area, and the annual population growth is -0.17 percent. BiH
enjoyed strong economic performance with 5.4 percent of average real GDP growth between 2001 and 2008. As a
result of the global economic crisis, GDP declined to 2.7 percent in 2008 after a 5.4% increase in 2008. The agricultural
sector contributed with 8% of value added to GDP and employed around 21% of the total labour force in 2009. On the
Entity level, the agriculture sector is more important for the economy of Republika Srpska, when it is estimated to be
around 13% of GDP (2005), than for FBiH where it stands stable at 6%. Agriculture since the end of the civil war has
tended to be subsistence rather than market oriented. Manufacturing industry generated about 13% of GDP with a
sharp decline by 6% after experiencing a strong annual growth of 7.9% on average between 2000 and 2008.
• Food and Beverages Demand
The largest increase of prices was registered in Food and Non-Alcoholic beverages 24.8%, but slightly slower growth
in alcoholic beverages and tobacco 1.5%. The highest share in food consumption refers to dairy products, meat and
bakery & macaroni. The agricultural and agro-processing sectors do not meet BiH’s food needs. About 34% of
shoppers in BiH claim supermarket to be their main shopping place for food and beverages and another 35% of
shoppers spend most on food in hypermarkets in 2010. The latest trends is to develop the so-called “light”, “healthy”,
“functional” and organic food products and the Halal food production (food permissible under Islamic law), but the
standards have not yet introduced.
Food and Agriculture Organization of the United Nations
Regional Office for Europe and Central Asia
Agro-industry Outlook
The food and beverages industry in FBiH forms a large part of the economy, generating BAM1.33 billion (US$0.96 bln) of output, that
represents about 22.6 percent of manufacturing output, and accounting 26.6 percent of manufacturing value added in 2009 with an
annual growth by 14 percent. It employed 13.5 thousand people (or 16.4 percent of manufacturing labor force) in 2009. Most of foodprocessing enterprises are private micro, small or medium-scale enterprises. In 2008, there were 35 dairies operational in Bosnia and
Herzegovina, of which 22 in the FBiH and 13 in RS. Apart from the registered dairy farms, there is a certain number of small family
dairy farms, but these are exclusively focused on the immediate local market. Agri food processing industry is recovering after a long
period of under-investment over the last decade. In 2006, the sector attracted the largest amount of FDI, 80% of the industry had been
already privatised.
Important subsectors include dairy, production of fruit juices, flour, processed fruits / vegetables, processed meat, sugar (isoglucose)
and fodder. Domestic retail market is underdeveloped and fragmented across the country. Retail trade of food products generated
BAM2.6 bln (US$1.9 bln) in 2009 sharing 45.6% of total retail turnover on food and non-alcoholic beverages and 3.5% of alcoholic
beverages and tobacco sales, out of which only 4.2% of food products are sold through specialized stores. Since 2004 organic food
production began to be developed, still sharing only 0.08% of total agricultural land with 39 certified producers, working for the
European market, and accounting EUR1.3 mln of turnover in 2009. Main products are medicinal herbs, small fruits, and mushrooms.
Chart 1: Food and Beverages Industry Performance in the Federation of BiH
BOSNIA AND HERZEGOVINA
2011
Key Economic Indicators
2009
Food, Beverages & Tobacco, FBiH
GDP, US$ billion
17.04
Output, % of manufacturing
22.6
Value Added, % of manufacturing
26.6
Enterprises, % of manufacturing
n/a
Manufacturing VA, % of GDP
Agriculture VA, % of GDP
12.9
8.0
2009
Employment in Agric., % of total
21.2
Employment, % of manufacturing
17.1
Gross Fixed Capital F., % of GDP
19.7
Investments, % of manufacturing
22.6
FDI net inflows, % of GDP
1.38
FDI inflows, % of total FDI inflow
25.1
R&D, % of GDP
0.03
R&D, % of Output
Merchandise Trade, % of GDP
74.5
Net Trade, US$ billion
n/a
-0.82
Merchandise Exports, US$ billion
3.9
Exports, %of merchandise exp
5.2
Merchandise Imports, US$ billion
8.8
Imports, % of merchandise imp
12.1
Global Merchandise Exports rank
106
Exports annual growth, %
-5.6
Agro-industry National Policy Framework
National Development Programme. The key documents setting out the Government policies for the
country, agriculture, rural and agro-industry development include: (i) the Country Development Strategy for
2009–2014; (ii) the Strategic Plan for Harmonization of Agriculture, Food and Rural Development with the
Strategic and the Subsidy Programs 2008-2011; (iii) the Strategy of Rural Development with a Strategic Plan
for 2009-2015; (iv) the Strategy of Stimulation and Development of Foreign Investments for 2009-2012; (v)
the Strategy of Small and Medium-Sized Enterprise Development for 2009-2011; (vi) the Policy of
Privatization of the State Capital and the Privatization Plan; (vii) the State-level Employment Strategy for
2010-2014; (viii) the Science and Development Strategy for 2010-2015.
Under the Dayton Peace Agreement BiH is divided into 2 political Entities, Federation of Bosnia and
Herzegovina (FBiH) and the Republic of Srpska (RS), besides the self governing Brcko District was
established. As a result, there is a complicated, contradictory and duplicative multitier legal and regulatory
framework (e.g. each has their own tax and minimum wage laws, rural development strategy and
operational programme on agriculture, food and rural development as well as business registration and
administration procedures are not harmonized between RS and the state-level framework of FBiH). BiH has
three common national-level food institutions: the State Veterinary Office, the Plant Health Administration
and the Food Safety Agency. There is no a State-level Ministry of Agriculture, Food and Rural Development,
therefore the Ministry of Foreign Trade and Economic Relations has taken the lead in food safety.
Since 2008 BiH has a status of a potential candidate country for EU accession starting its negotiation with
the EU on a Stabilisation and Association Agreement in 2006. The assistance of donors’ organisations is
planned under eight projects related to agriculture, agro-industry and rural development with a total budget
as of US$32 mln over the period 2007-2012. Together with the UN organisations the country elaborated
UNDAF for 2010-2014 with the overall budget as of US$178.5 mln, out of which US$114 mln will be
mobilized from donors. In 2009, direct budget subsidies to industry and agriculture increased to a
consolidated 1.7% of GDP from 1.5% in 2008.
Legal Framework. BiH has adopted a number of laws to encourage agricultural and agro-industry growth
and rural development, among those are: the Law on Agriculture, Food and Rural Development (2008), the
Law on Money Support in Agriculture and Rural Development (2010), the Law on Agricultural Land
(1998/09), the Law on Cooperatives (1998), the Law on Competition, the Law on Industrial Property, the
Law on GMO (2009), the Law on Tobacco, the Law on Cooperatives (2003), Law on Organic Production.
Tr ad e L i be r al i zat i o n , W TO A c c e ssi o n an d Tr ad e Per fo r m anc e
Foreign Direct Investments
Trade Regulation. BiH has a liberal and transparent foreign trade regime that has been almost
harmonised with the international trade rules. BiH adopted the Law on Customs Policy (1998/10),
the Law on Foreign Trade Policy (1998/04), the Decision on Classification of Goods onto export and
import regimes (1998/05) and the Law on Custom Tariffs. BiH does not apply custom duties on
exports, export quotas, prohibitions or other forms of export limitation. Import into BiH is conducted
according to the Customs Tariff, which is harmonized each year with Combined Nomenclature of EU
and positive legislative regulations. Tariffs rates range between 0% and 15%. Imported goods are
subject to payment of 17% of VAT while such products like coffee and cigarettes are subject to
payment of excise in accordance with the Law on Excise.
BiH concluded three FTAs with the CEFTA (in force since 2009), Turkey (since 2003) and the EU
(since 2008 under the Interim Agreement on trade and trade-related matters). BiH exports enter the
EU are duty and quota free for almost all agricultural products, except for wine, some fish products,
sugar and baby beef where tariff quotas were introduced. Import duties for primary agricultural
products coming from EU into BiH have been reduced since 2008 and abolished in 2011.
WTO accession. BiH has been negotiating accession to the WTO for 11 years since May 1999, and it has gone
through various steps of the WTO accession procedure (application, Working Party creation, memorandum of
external trade, no export subsidies, 7 meetings, and agreements). The current status of BiH in WTO is an observer.
BiH has reported on a progress in legislative action plan for WTO accession, especially in the areas of sanitary and
phytosanitary measures, and on intellectual property rights. Many members of the 7th Working Party expressed
support for the speedy accession of BiH.
Trade Performance. The merchandise trade deficit narrowed from US$7.2 bln in 2008 to US$4.4 bln in 2009.
Exports dropped by 21 percent in 2009 and imports – by 31 percent. In 2009 BiH had a negative trade balance of
US$0.7bln in processed F&B that has been steadily increasing till 2008 and declined by 16% in 2009. Processed
F&B products accounted around 11 percent of total merchandise imports and 4.8 percent of total merchandise
exports in 2009 with an annual export decline by 8.8% after experiencing a steady growth till 2008. BiH is an highly
import-dependent country in F&B products. Major commodity groups for imports are beverages, cereals, tobacco,
edible preparations, sugars and dairy products; for exports are edible preparations, beverages, fruit and vegetables.
The major exports to the EU are raw hides, sugars (isoglucose), mushrooms, plums and frozen raspberries.
Top destinations for F&B products: Croatia (40%), Serbia (21%), Italy (7.1%) and Macedonia (6.6%) in 2009;
Top origins for F&B products: Croatia (28%), Serbia (23%), Brazil (9%) and Slovenia (6%) in 2009
Chart 2: Food and Beverages Trade Performance over time
Regulation. Law on Foreign Investment Policy
(1998/10), Law on Foreign Investments (2001/03),
Law on Companies (1999/05), Law on Free Trade
Zones (2009), Law on Registration of Business
Entities (2009) and the Decision on Establishment
and Work of Foreign Representative Offices (2003)
provide the legal basis for foreign investment in BiH.
No legal distinctions are made between foreign and
domestic investors. Foreign investors can participate
in the privatization process. The Government of BiH
established the Foreign Investor Support Find with
BAM 2 mln budget per year. There are 36 Agreement
on Protection of Foreign Investments signed.
FDI inflows. In 2009 BiH’s FDI inflows accounted
US$0.23bln or 1.4% of GDP dropped significantly in
almost 9 times to the pick level in 2007, mainly
thanks to the privatization of the large state-owned
enterprises. There were considerable outflows of FDI
in the financial sector. Manufacturing and trade
accounted for more than 80% of FDI inflows. FDI
inflows in F&B&T industries generated US$58.9mln
or 25.1% of total FDI in 2009 declined by 14% to the
pick level in 2007. The vast majority of FDI is directed
to manufacturing (34%), financial sector (22%),
telecommunication (12%) and trade (11%).
In 2009 there were 2’269 and 381 affiliates with
foreign capital registered in the FBiH in total and in
manufacturing, respectively. Top investor countries
are from Europe with 90% of total FDI, among those
are: Austria (26%), Serbia (15%), Slovenia and
Croatia (12%). According to WIR 2009 BiH was
considered as a country having middle relative
importance as in agriculture so in manufacturing.
Chart 3: Share of Exported Product Groups of
F&B in total exports, in 2009
F o od S afe t y , C e r t i fi c at i o n & Qu al i t y C on t ro l
Food Safety regulation. BiH is a member of the Codex Alimentarius
Commission and of the International Organisation of Standardization
(ISO). Issues of protection of human health in general and in particular
from food-borne risks are dealt with the Law on Health Protection (2010),
the Law on Sanitary Appropriateness of Food and Articles for General Use
(1994), the Law on Food (2004), Law on Food Safety (2004), the Law on
Veterinary (2002), the Law on Protection of Plant Health (2003), Law on
Sanitary Correctness of Food and Goods of General Use (1991), the Law
on Consumer’s protection, the Law on Technical Requirements for
Products and Conformity Assessment (2004) and the Law on Market
Surveillance (2004/09). The quality of individual groups of products is
subject to specific ordinances (e.g. Quality of Meat and Meat Products,
Quality of Milk and Milk Products, Quality of Honey and other bee
products etc) and the Rulebooks (e.g. on General Labeling of Packaged
Food, alcoholic drinks, labeling of nutritional values, use of food additives,
use of colors in food, use of sweeteners, use of other food additives, fruit
juices and non-alcoholic drinks. State-level legislation that transposes the
fisheries acquis remains to be drafted. The legislation still needs to be
harmonised with the acquis.
Certification. The Institute for Standardisation of BiH adopted 2’053
European standards as national standards, bringing the total to 11’279
ENs. Altogether there are 50 technical committees. Organic Control is a
certification body in BiH for the certification of organic food producers,
accredited by IFOAM in 2007.
Quality Control. The enforcement capacity remains weak in the absence of
implementing legislation on food hygiene and official control. BiH Food Safety Agency
is responsible for food safety measures. An overlap in competences between the
veterinary and food safety sectors persists. The Institute for Accreditation of BiH
granted accreditations for 39 testing laboratories. No progress was made to upgrade
agri-food establishments. By 2008 there were 20 dairies certified with HACCP,
ISO9001 and ISO22000
Business Environment and Competitiveness
Business Environment. According to the Doing Business Report 2011 BiH has
through business reforms improved in registering property, closing business,
paying taxes, dealing with construction permits and trading across borders, it was
ranked (out of 183 economies) as 110 in 2011 with no changes to 2010. Trading
across the borders is ranked as of 71 (down by 15 points), paying taxes – 39,
protecting investors – 93, getting credit – 65, and starting business - 160.
Taxation Relieving. The tax burden on companies was eased by lowering the
social tax and the corporate income tax from 30 to 10 percent (2008), and by
simplifying labor tax processes, reducing employer contribution rates for social
security and abolishing its payroll tax. A new law effective from 2011 introduced
has introduced an integrated system for the registration, monitoring and payment
of Social Security Contributions. According to the Law on Excise Duties cigarettes
will be subject to proportional duty (42% of retail price) and flat-rate duty (BAM
0.45 per packet of 20 cigarettes) from 2011. BiH is also a party to 30 double tax
treaties.
Competitiveness. According to the Global Competitiveness Report 2010-2011
BiH is in a stage 2, it got 102 overall Global Competitiveness Index among 139
countries, having the most five problematic factors of doing business as follows:
access to financing, tax rate, inefficient government bureaucracy, corruption and
tax regulations.
Agr o- indu str y Br ief