Transcript Slide 1

Key Policies Improving Business
and Investment Climate
Presenter:
Governor CBBH: Kemal Kozarić, MA
Content
 Introduction through macroeconmic framework
 Trade deficit
 Recommendations
 Foreign direct investment
 CBBH expectation
 Conclusion
Introduction
There are many preconditions for the growth of one
small open economy as it is economy of BH, but
some of the main preconditions are:
 Good business environment
 Financial stability of the country
 Legal frame
 Stabile exchange rate
Introduction
Achieved results in referred period:
Year
1998
1999
2000
2001
2002
2003
2004
2005
2006
7,2
9,7
10,7
11,6
12,8
13,4
14,6
15,8
17,9*
Retail price
growth (%)
13.3
3.7
4.8
3.1
0.4
0.6
0.4
3.8
7.4**
Foreign reserves
in KM millions
283
866
1021
2696
2464
2781
3457
4195
5400
Foreign reserves
in months of
imports
0.5
1.4
1.5
3.6
3.2
3.4
3.9
4.2
5.4
Nominal GDP
in KM billions
Trade deficit in
KM millions
-5,482 -6,053 -5,868 -6,470 -6,892 -7,180 -7,193 -7,834 -6,655
*Estimate CBBH
** Inflation in Janury was 1.2%
Trade deficit
Current Account
Year
Goods
1998.
1999.
2000.
2001.
2002.
2003.
2004.
2005.
2006
31
-75.7%
-62.1%
-54.8%
-55.8%
-53.7%
-53.4%
-49.0%
-49.6%
-37.1%
Services
Income
4.6%
3.4%
3.7%
4.3%
3.5%
4.3%
4.6%
4.9%
5.3%
Current
Transfers
19.7%
13.7%
11.7%
10.0%
8.2%
6.9%
5.2%
4.5%
4.0%
43.0%
35.5%
31.5%
27.4%
22.9%
21.3%
20.0%
18.9%
16.4%
Capital and Financial Account
Capital
Financial
Account
Account
Total
Total
-8.4%
-9.4%
-7.8%
-14.1%
-19.1%
-20.9%
-19.2%
-21.3%
-11.4%
12.0%
11.8%
10.8%
7.5%
6.6%
6.0%
4.6%
4.1%
3.0%
-7.3%
-6.9%
0.1%
4.5%
10.8%
11.1%
10.2%
12.8%
4.0%
4.8%
4.8%
10.9%
12.0%
17.4%
17.0%
14.9%
16.9%
7.0%
Net Errors
and
Omissions
3.6%
4.6%
-3.1%
2.0%
1.7%
3.9%
4.4%
4.3%
4.4%
6
5,5
5
4,5
4
3,5
3
2,5
2
29
27
25
23
21
19
17
2001
GDP%
2002
2003
2004
Foreign reserves
2005
2006
2001
2002
2003
2004
2005
Foreign reserves in months of imports
2006
Current account deficit
First important question that has to be raised in a
country with high trade deficit is:
 How deficit is financed?
Balance of payments is a “balance” so by definition,
deficit of one component has to be financed by a
surplus of some other components.
 Trade deficit is financed by: current transfers 44%
(workers remittances 31%), services 14%, income
11% and the rest of trade deficit (31%) is CA deficit
(amount of KM 2.0 billions) and it is financed by
capital and financial account.
Current account deficit
 How CA deficit is financed and is it sustainable?
If currency crisis and foreign debt crisis are not a
threat for the country, CA deficit is sustainable.
CA deficit is financed by: capital transfers to public
sector 21%, FDI 27% and other investments 51%.
In some economies deficit is financed by foreign
reserves reduction. In BH CA deficit is not followed
by foreign reserves reduction.
In BH foreign reserves are growing and in 2006
foreign reserves increased by KM 1.2 billions.
Foreign reserves CBBH
DATE
FOREIGN ASSETS
MONETARY LIABILITIES
FREE RESERVES
DEC. 1997.
144,1
160,3
- 16,2
DEC. 1998.
283,3
253,9
29,4
DEC. 1999.
865,7
836,7
29,0
DEC. 2000.
1021,4
973,2
48,0
DEC. 2001.
2696,5
2591,6
75,0
DEC. 2002.
2464,4
2345,2
118,1
DEC. 2003.
2.780,6
2.626,3
153,3
DEC. 2004.
3.457,5
3.283,5
173,0
DEC. 2005.
4.195,9
4.007,8
187,1
DEC. 2006.
5.400,4
5.178,0
221,4
End of period in millions of KM
Current account deficit
Second important question that has to be raised in a
country with high trade deficit is:
 What is a reason behind trade deficit increase?
Undertake adequat steps.
Exports
Commodity
Aluminum Alloys
Parts of Compression-ignition Internal Combustion Piston
Engines
Electrical Energy
Other Aluminium Oxide
Parts of Seats Other than Dentists'
Concrete reinforcing bars and rods, Hot-rolled, Hot-drawn, Hotextruded
Iron Ores and Concentrates (Non-agglomerated)
Coke, Semi-coke of Coal, of Lignite, of Peat; Retort Carbon
Coniferous
Bars and Rods Of circular cross section measuring less than 14
mm (0.55 inch) in diameter
Of beech (Fagus spp)
Uppers and Parts Thereof, Other than Stiffeners
Seats, With Wooden Frames, Upholstered
Other Structures and Parts of Structures, of Iron or Steel
Other Wooden Furniture
Equipment for scaffolding, shuttering, propping or pit-propping
Total value of
exports for countries
1
476,676,032.47 Croatia
38.8% Italy
2
Top five BH exporters
3
4
25.0% Austria
21.2% Slovenia
4.8% Poland
Coverage
Five countries
3.1%
92.8%
39.2% Germany
20.8% Croatia
0.1% S and MN
0.1%
99.7%
5
313,420,420.61 Hungary
39.5% Slovenija
252,027,032.13 Croatia
195,785,699.67 USA
160,491,132.69 Germany
45.8% Switzerland 27.8% Slovenia
84.9% Poland
9.3% Romenia
51.2% France
12.8% Slovenia
13.8% Czech. R
4.6% Slovenia
5.2% Hungary
7.5% Germany
0.7% S and MN
1.2% S and MN
4.4%
0.0%
0.1%
99.2%
99.6%
70.6%
149,396,336.41 Slovenia
43.8% Croatia
20.9% Hungary
0.9% Italy
0.0%
99.5%
36.6% Czech. R
15.7% Italy
2.1% Macedonia 0.8% Italy
3.5% Austria
3.2% Italy
6.5% USA
0.4% Slovenija
0.9% Slovenia
0.0%
0.3%
0.2%
100.0%
71.4%
65.1%
91,479,122.33 S and MN 42.1% Macedonia
30.0% Croatia
14.0% Italy
8.9% Macedonia 0.8%
95.8%
84,085,035.87
62,123,145.81
62,053,049.47
57,117,100.90
52,077,835.09
50,030,296.33
18.3%
29.6%
21.2%
13.0%
18.9%
9.4%
16.7%
18.7%
11.9%
12.1%
18.1%
5.9%
118,438,666.27 Romania 41.2% Poland
109,376,070.02 S and MN 67.8% Croatia
93,390,529.62 S and MN 57.3% Slovenia
Croatia
Germany
Germany
Croatia
Germany
Italy
21.4%
31.8%
43.9%
46.2%
36.7%
62.0%
Italy
Italy
Croatia
UK
S and MN
Croatia
33.9% S and MN
Slovenia
Slovenia
Italy
Germany
S and MN
Croatia
Germany
Croatia
S and MN
Austria
Slovenia
Austria
49,390,399.92 Italy
43,761,655.83 Germany
77.6% S and MN
70.5% Slovenia
39,900,661.13 Croatia
74.8% Croatia
Whole Hides and Skins of Bovine Animals (Fresh or Wet-salted)
37,366,997.89 Austria
45.3% Holland
0.6% Germany
0.2% Turkey
0.2% n/a*
Silicon
36,480,534.52 Italy
79.3% Hungary
5.5% Slovenia
3.7% Germany
3.3% Poland
6.0% n/a*
32.7% Slovenia
2.4% France
2.1% Switzerland
9.7%
15.3%
5.1%
8.2%
6.2%
3.3%
Footwear, Covering the Ankle, With Uppers of Leather
Copper waste and scrap
Grill, netting and fencing, welded at the inter-section, of wire
with a maximum cross-sectional dimension of 3 mm or more and
having a mesh size of 100 cm2
Other Electric Conductors, Fitted With Connectors, Voltage 80-1,
000v854459 Other Electric Conductors, Exceeding 80v But Not
Exceeding 1, 000v
39,375,025.93 S and MN 34.7% Slovenia
2.4% Austria
27.1% Italy
Austria
Austria
Austria
Slovenia
France
Romenia
n/a*
23.8% Macedonia
• Analyze refers to the commodities that BH exports the most .
• About 4500 commodities were used. Only 22 commodities that contribute to export growth with
more than KM 36 million per year were closely analyzed
• 22 commodities explain 49 % of total exports in 2006.
2.0% Russia
0.1% n/a*
9.6%
0.7%
4.9%
4.7%
5.2%
1.0%
75.6%
96.1%
87.0%
84.3%
85.0%
81.6%
1.3%
85.8%
99.8%
n/a*
4.5% Hungary
80.8%
0.9%
96.7%
46.3%
2.1%
93.8%
Imports
Total value of
imports for countries
896,137,203.39 Croatia
Commodity
1
Top five BH importers
3
4
15.4% Hungary
7.3% Austria
2
Coverage
Five countries
5.3%
93.7%
5
6.4% S and MN
Other oils
59.3% Slovenia
Petroleum Oils, Oils Obtained from Bituminous
310,951,343.56 Croatia
65.0% Slovenia
14.5% Hungary
11.2% S and MN
4.6% Austria
3.3%
98.6%
Minerals
Parts of Compression-ignition Internal
203,338,340.88 Germany
97.5% S and MN
0.6% Italy
0.3% Switzerland 0.3% Slovenia
0.2%
99.0%
Combustion Piston Engines
Other Vehicles, Spark-ignition Engine Of a
cylinder capacity exceeding 1,500 cc but not
196,150,326.60 Germany
40.0% Czech. R
16.8% Slovenija
5.0% Austria
4.2% Slovakia
3.8%
69.7%
exceeding 2,500 cc
Natural Gas
145,512,021.87 Russia
100.0% n/a
n/a
n/a
n/a
n/a
100.0%
Other Medicaments
145,134,757.56 Slovenia
22.1% Croatia
17.6% S and MN 17.5% Switzerland 6.0% Macedonia 5.2%
68.5%
Other Aluminium Oxide
130,459,666.04 Switzerland
99.6% Germany
0.4% Slovenia
0.0% Italy
0.0% Holand
0.0%
100.0%
Bituminous Coal
123,612,472.27 Czech. R
42.3% UK
27.5% USA
26.0% Russia
1.5% Croatia
0.3%
97.6%
Cigarettes (Containing Tobacco)
119,212,684.46 Croatia
66.7% Switzerland 12.8% Germany
7.2% Austria
5.7% Macedonia 3.0%
95.3%
Beer Made from Malt
111,723,042.79 S and MN
50.2% Croatia
43.1% Slovenia
6.4% Austria
0.1% Germany
0.1%
99.7%
Electrical Energy
107,658,661.90 Switzerland
50.6% Slovakia
26.9% Czech. R
19.8% S and MN
1.2% Croatia
1.1%
99.7%
Other Vehicles, Spark-ignition Engine Of a
cylinder capacity exceeding 1,000 cc but not
100,002,206.77 Czech. R
43.8% Germany
15.7% Croatia
13.7% Italy
7.3% Slovenia
4.8%
85.3%
exceeding 1,500 cc
Parts of Air or Vacuum Pumps
86,170,429.56 Austria
44.9% Germany
23.6% France
12.5% Slovenia
11.7% Hungary
3.1%
95.8%
Seed, White, Other
77,980,437.48 Hungary
75.6% Croatia
16.5% S and MN
7.2% Austria
0.4% USA
0.2%
99.9%
Other Food Preparations
75,862,455.80 Slovenia
27.7% Croatia
26.9% Germany
6.8% Hungary
5.3% Italy
5.2%
72.0%
Other Ferrous Waste and Scrap
75,010,288.44 S and MN
40.4% Croatia
25.3% Romenia
13.7% Germany
8.6% Macedonia 8.4%
96.6%
Organic Surface-active Agents, Washing and
71,577,928.40 Croatia
39.6% Romenia
24.4% Czech. R
18.5% Switzerland 4.3% Italy
4.0%
90.9%
Cleaning Preparations for Retail Sale
Other Cane or Beet Sugar
70,557,045.76 Croatia
43.4% Austria
17.5% Czech. R
7.6% Hungary
5.3% S and MN 4.8%
78.6%
Other Non-alcoholic Beverages
66,545,154.62 S and MN
38.3% Croatia
25.6% Slovenia
23.4% Macedonia
5.4% Austria
2.3%
95.0%
Bilješka:
Analiza se odnosi na proizvode koje BiH najviše uvozi i koji samim tim doprinose produbljenju trgovinskog deficita. Korišteno je nešto više od 4500 proizvoda i izdvojeno je devetnaest proizvoda ko
•iznosu,
Analyze
refers
to2006.
thegodine,
commodities
that BH
imports
thedevetnaest
most .proizvoda objašnjavaju 36,8 % deficita u 2006. godini, a njihovo ukupno učešće u uvozu tokom 2006
po proizvodu
tokom
većem od 65 miliona
KM. Ovih
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• About 4500 commodities were used. Only 19 commodities that contribute to imports growth with more than KM 65
million per year were closely analyzed
• 19 commodities explain 36,8 % of deficit in 2006 and their total participation in imports during 2006 is 27%.
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Recommendations
 In order to improve external trade situation in BH it would be
recommended to conduct a detailed micro analyze of goods
that have the highest influence on BH import increase by
identifying all main trading partners in foreign trade exchange,
as well as, their price, quantity and type of imported goods.
 Improve BH agriculture policy by promoting BH agriculture
on international market and especially by solving internal
limitations and obstacles for the exports.
 Special attention should be given to development of export
capacities of the country and especially to the component of
raw materials which should not be exploit. Focus for
development should be on export of final goods and products.
 Encourage infrastructure development in the field of quality
standard certification in accordance with EU rules.
Foreign direct investment
During 2006 FDI inflow continued but with a weaker
intensity compared to 2005.
Estimated FDI inflow in 2006 is about KM 661* million.
FDI in GDP%
15.0%
10.0%
5.0%
7.7%
4.5%
4.3%
8.5%
4.9%
7.1%
12.2%
5.2%
6.0%
3.7%
0.0%
-5.0%
-11.2%
-10.0%
-15.0%
-19.1%
-20.9%
-19.2%
-21.3%
-20.0%
-25.0%
2002
2003
CA Deficit
2004
Direct investment
2005
2006
Other investment
*Final data on FDI for 2006, based on CBBH survey will be available in August 2007
Foreign direct investment
 By survey that CBBH conducts on regular basis, FDI for the
first nine months of 2006 reached amount of KM 428.7
millions.
 CBBH conducts regular quartarly (150 companies) and
yearly (around 700 companies) survey on FDI and collects
data on companies and banks with foreign investments in
BH in accordance with interantional methodology.
 Based on survey highest investment capital in the first nine
months of 2006 came from Austria 50.6%, then follows
Slovenia 27.3%, Serbia and MN 5.3% and Croatia with
4.9%.
Foreign direct investment
 Regarding the sectorial structure the highest investment were
recorded in banking sector 51%, manufacturing sector 21% and
non-banking financial enterprises 15% out of total FDI.
 In tourism sector which presents one of the potentials for BH
development, according to survey, no significant improvement
has been done in regards to increase in investment inflow that
would indicate a better perception of BH by potential foreign
investors.
 Already announced higher future investments in energy sector
and privatization of telecom operators are expected to have a
significant influence in BH investment position in 2007.
Foreign direct investment




State of foreign investments :
Is a separate statistical category and it does not represent a sum of
all previous flows, but also other changes such as exchange rate
differentials, accounting changes, etc.
Foreign investments at the end of 2005 amounted to KM 7.3
billion.
Foreign direct investment amount to KM 4.4 billion, and
portfolio and other investments to KM 2.9 billion.
Total foreign investment in 2005 increased by 26% compared to
2004.
Foreign direct investments
When compared to the region and thinking of a size of BH
economy, it can be seen from the graph and estimated that BH is
reciving a significant inflow of FDI*.
2003
2004
2005
Slovenia
Moldova
Albania
Macedonia
BH
Montenegro
Serbia
Croatia
Hungary
Bulgaria
800
700
600
500
400
300
200
100
0
-100
Romenia
FDI per capita in USD
2006
Source: data from "Transition report 2006" and CBBH estimates for 2006
*Final data on FDI for 2006, based on CBBH survey will be available in August 2007
CBBH expectations
• Presented data are showing that there is a space for investment
inflow in BH to come, but in order for investments to come
promotion of investment and necessary conditions preparation
requires more aggressive approach and the best way is through
efficiency in reform scenario implementation.
• Political stability, economic progress, as well as, country’s
image, represents the key elements for FDI inflow in single
economy.
• Economic growth can be achieved through intensive
development of the real sector of the economy, through
efficiency in reform implementation and especially through
fiscal reforms and through setting up the conditions for
strengthening of the business environment.
CBBH expectations
The part that is related to fiscal reforms is mainly related to:
 Adequate allocation of public revenues
 Decrease public spending
 Improve transparency and responsibility in collection and spending of
the public revenues
 Support development of entrepreneurship and encourage growth of the
private sector
 and work on constant decrease of the political risk
Establish business environment
 Strengthening of a single economic space in BH
 Improve efficiency of the legal system
 Establish legal and institutional framework for free competition and
consumer protection
 Stimulate regional economic development
 Increase mobility of the labor force
 Remove all administrative barriers to domestic and foreign investments
Conclusion
• There is still a lot of work on which country as a whole needs
to work more on its way toward stability.
• Macroeconomic frame is very important, economic activity
has to be measured in details by sectors and the rate of growth,
as well as, productivity, competitiveness, real effective
exchange rate, transparency etc.
• Potential of the real sector of the economy has to be used for
future development of BH economy.
• This should be recognized by all levels of the government, as
well as, by appropriate institutions which should work together
continuously on the implementation of reforms that will lead
BH towards a road of a desired development.