Somebody asked me this question on Quora a couple of months ago. I have answered it, my answer currently has higher rating than other answers, but since it’s a bit long, and I kind of feel like I have explained the situation in the right way, I feel like it would be fair to post my answer here as well.
First of all, Bosnia & Herzegovina was the only country in the former Yugoslav region in which the entire territory was at war 20 years ago. Because of it, now, 20 years later, the situation is a bit more complicated than in other surrounding countries like Croatia (of which “only” a part of the country was directly affected by the war) and Serbia (in which no part of the country was directly affected by the war).
The war in Bosnia & Herzegovina technically ended when all parties signed the Dayton agreement. The Dayton agreement is as complicated as it can get, but this agreement was signed with the sole purpose of stopping the war (which it did… kind of (last attack in the Siege of Sarajevo happened a month after it was signed)).
Now, if you have an agreement that is still valid, but was signed solely with the purpose of stopping the civil war, you cannot really touch it now without being afraid of jeopardizing the stability of the entire country. If you try to change it, you’re risking creating a spark that could make the situation even more complicated (and possibly even start a new war). The Dayton agreement basically split the country into two entities (Republic of Srpska and Federation of Bosnia & Herzegovina) and created one semi-autonomous district called Brčko DC (which kind of behaves like Washington DC).
Because the political situation is more complicated than anywhere else in Europe, it pulls the investors off. After all, if we, as citizens of Bosnia & Herzegovina, are usually not sure which law applies to us and which one does not (as an example, my current residency is in the Federation of Bosnia & Herzegovina, but all of my documents were issued in Republic of Srpska, so I have no idea which law applies to me), you can easily see why investors are not so thrilled about investing in a country where they have to comply with certain laws depending on where they decide to invest. The whole situation is basically like a house of cards, if you take one wrong card off (or, if politicians on which you have no control over decide to take it off), everything will fall apart and the investors are going to lose their investments.
So, without a lot of foreign investors, citizens usually have to rely on domestic companies. Because almost all (if not all) of the big companies that operated in Bosnia & Herzegovina were affected by the war in one way or another, they have a hard time of getting back on their feet and becoming good enough to compete against other companies in the former Yugoslav region and the rest of the Europe.
Therefore, if you have no foreign investors and quite a few successful domestic companies, most of the people rely on getting employed in some part of the government.
Then, there’s a so called “White bread” law that states that if you worked for some government entity (even for a day) you’ll be payed even after you leave (or resign) from your position and you can’t get a new job and you’re not close to your retirement, you’re going to get payed for additional 12 months after you leave (or resign) from your position directly from the budget.
Because, of course, nobody wants to find a job if they don’t have to, this kind of leaves us in an awkward position where, unless a person decides to find a new job, he’s going to receive about 1000€ per month (at least) from the budget by doing absolutely nothing. You can easily see why most of the people rely on getting a job in some level of government. Even if they do a terrible job, they’re still going to get payed for up to a year.
So, to conclude things:
- Investors are not thrilled with investing in a country that has no guaranteed stability.
- Domestic companies are having a hard time competing with regional companies.
- Laws are a mess and there’s really nothing we can do about it without jeopardizing the country’s stability.
- Most of the people are kind of relying on getting a job in some level of government agency. Even after they leave this position, they’re still getting payed directly from the budget until they get a new job.