Resource information
The private enterprise sector in Bosnia
and Herzegovina (BiH) has been expanding steadily, and
estimates are that it presently contributes close to 50
percent of Gross Domestic Product (GDP). The BiH private
enterprise sector initially developed following the
privatization program starting in 1999. Under that program,
the majority of state owned enterprises (SOEs) that were
privatized were done so using the voucher privatization
process. Under this procedure, vouchers were issued to all
citizens over 18 years of age, these vouchers could be used
to buy state owned properties or shares in SOEs. To promote
an orderly process, privatization investment funds were
created to help purchase such vouchers in exchange for
citizens' shareholdings in the investment funds
themselves. This process was also meant to develop the
capital markets via the eventual trading of such shares.
However, the process of voucher-to-share conversion,
resulted in the new owners seldom having to invest their own
capital in these voucher privatized enterprises. This was
because the 'ownership transfer' was provided on a
grant basis from the government to citizens. Because of
this, new ownership became automatic, without incentives to
put up additional capital to improve the businesses, leaving
these enterprises performing below potential capacity. The
government should consider implementing a pilot program of
restructurings to attract new investor capital within a well
organized framework using a methodology defined in advance.
Finally, economic research shows that increased firm
competitiveness, innovation, technological capability, and
export potential have a strong correlation with foreign ownership.
