Bosnia and Herzegovina is a Balcanic country that got independent after the collapse of Yugoslavia, in 1992. The Bosnian war (1992 - 1995), a attempt of the Serbians living in Bosnia to prevent the independence of the country from Yugoslavia, ended with the Dayton Agreement in 1995. Since the end of the ethnic conflict, the security and political environment in Bosnia and Herzegovina has significantly improved. However, the complex institutional and administrative structure created with the Dayton Peace Agreement continues to burden the business environment and limit government initiatives to increase the country’s attractiveness to investors. 

Bosnia was constituted as a decentralized State, composed of two federations: Sparka Republic (majority of Bosnian Serbs) and the federation of Bosnia and Herzegovina. Policy differences and gaps between the two political entities have significantly reduced over the past few years, as part of the government’s growing efforts to implement EU-mandated reforms. However, the State of Bosnia is built upon the co-existence of three ethnic groups: the Bosnian Muslims (Bosniaks), the Bosnian Croats and the Bosnian Serbs. The political struggle between the three nations makes the national politics inestable. For instance, the Presidency of the country is a collegiate Presidency, with three presidents: one appointed by the Serbians, other by Croats and other by Bosniaks.  Morover, in Sparka Republic the Bosnian Serbs continuously challenge the legitimacy of state institutions on the  territory, and occasionally refer to potential secession and an independence referendum for the Sparka Republic, something that maintains the institutional risk high. 

The economic development of the country is affected by this institutional, regulatory, economic and community fragmentation. The weakness of the State's institutions implies a lack of public investment, that only accounts for the 2% of the public expenditure. Corruption, cronyism, administrative delays, emigration and a large informal sector are other problems that damage the Bosnian economy. However, Stabilisation and Association Agreement with the EU with pre-accession funds and government efforts seek to gradually reform the economy. In November 2020, Bosnia joined the Regional Common Market of 6 Balkan countries, that will strengthen economic and political ties between the Balkan nations. GDP has shrunk by -5,5% in 2020 due to COVID-19, but it is expected to growth by 3,5% in 2021. 

COVID-19 projections of the IHME shows that infections are currently very low and they are predicted to continue being low during summer. Vaccination campaign is low, with just 5,7% of the total population inoculated with at least one dose. 

Politics in Bosnia and Herzegovina is still divided along ethnic lines. Political power is shared between the three constituent nations – the Bosnian Muslims (Bosniaks), the Bosnian Croats and the Bosnian Serbs. The presidency of the country is exercised by a collective body of three presidents: one appointed by the Bosniaks, other by the Serbs and other by the Croats. Although the unsubdivided body is the collective head of state, one member is designated as Chairperson. The position of Chairperson rotates twice around the three members every eight months, with the candidate receiving the most votes overall becoming the first Chairperson over the four-year term.

This obligation to include in the government political parties from all three ethnic communities often leads to large and unsustainable coalition governments and drives political and government instability. Following the October 2018 elections, a government was not formed until December 2019 – 14 months later – largely due to disagreements regarding NATO membership. Policymaking is slow and subject to frequent delays because all three communities have the right to veto legislation in state parliament. 

The state retains considerable influence in the economy, despite long-standing post-conflict privatisation programmes. Opaque links between politicians and businesses continue to shape policymaking. Relations with neighbouring states have improved significantly since the end of the conflict in 1995, and BiH has close relations with both Serbia and Croatia. In general, the government aims to get the country closer to NATO and EU membership, but prospects for joining these two organisations in the next five-to-seven years are low.

Bosnia and Herzegovina is considered a Hybrid regime in the 2020 Democracy Index, developed by The Economist Intelligence Unit (EIU), where the country ranks 103 out of 167 countries scored.

The country ranks 75 at the 2019 Human Development Index developed by the United Nations Development Programme.

Bosnia ranks 58 out of 180 in the 2020 World Press Freedom Index developed by Reporters Without Borders. The polarised political climate, marked by constant verbal attacks and nationalist rhetoric, has created a hostile environment for press freedom.

Businesses in Bosnia and Herzegovina face occasional obstacles to smooth business operations. The complex institutional and administrative structure poses significant burden to businesses, and increases delays and costs of investing and doing business in the country. Overlapping governance and geographic competences of different institutions reduce the transparency and predictability of the business environment. Regulatory and policy gaps between the two entities are gradually reducing. 

The complex administrative and institutional structure is the key driver of institutional risks, which is high. Several layers of government can issue laws and regulations, which sometimes results in contradictory and confusing legislation. In addition to extensive and overlapping layers of administration, persistent inefficiency and a lack of reforms in the judicial sector further drives institutional risks. The legal and judicial frameworks are weak; the judicial system is slow, inefficient, and plagued by bureaucracy and corruption.

Bosnia will depend on EU and IMF funds to restore economic health in the wake of the coronavirus disease (COVID-19) virus pandemic. The IMF on 20 April approved USD361 million in emergency support for Bosnia.

Overall, Bosnia ranks 90 out of 190 countries scored at the 2020 Doing Business Index by the World Bank and 111 out of 198 at the 2020 Corruption Perception Index by the Transparency International Organization.

The security situation has substantially improved since the end of the ethnic conflict in 1995. Relations between the three main ethnic groups in the country, though tense at times, are now overwhelmingly peaceful. Relations with neighbouring states have also improved, and the lack of open bilateral questions with neighbouring states limits the potential for war.

Like elsewhere in the region, a small proportion of local Muslims have adopted radical Islamist ideologies and joined militant groups such as IS in the Middle East. However, the country remains an unattractive target for terrorist groups. The brief jihad that formed in the country in the course of the 1992 war did not result in the formation of a perennial terrorist threat. Crime levels are lower than in most West European countries, and despite the war-time legacies and availability of weapons, violent crimes are very rare. Petty and acquisitive crime – higher in larger cities – is the most salient security threat to business personnel and assets. Organised criminal groups, often with criminal roots during the war years, tend to still operate across the country, but usually do not target legitimate businesses.

War veterans frequently protest to demand financial state support for unemployed former soldiers. Sarajevo and Tuzla have been particularly affected by such protests, typically involving roadblocks at key highways. The risk of similar economically driven protests by other groups, including farmers opposing the liberalisation of the agricultural sector, are also relatively common. Those factors, toghether with the sporadic and minor incidents of ethnically motivated violence between and among the three main ethnic groups, increase the civil unrest risk. 

Another security risk that is worth mentioning is the increasing inflow of refugiees that are entering in the country as an attempt to reach the EU through Croatia. The instability of the country and the institutional fragmentation have made impossible for authorities to control the inflow of refugiees, mainly coming from the Middle Eeast and Pakistan / Afganistan. Depending on the evolution of the inflow trend, this problem may become a serious security risk in the future. 

Overall, Bosnia ranks 79 out of 163 within the 2020 Global Peace Index by the Institute for Economics and Peace.

No vaccinations are required to enter the country.

Bosnia ranks 79 out of 195 within the 2019 Global Health Security Index, a project of the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHU), developed with The Economist Intelligence Unit (EIU).