Local economic development

According to current OECD data, Bosnia and Herzegovina has the least favourable business environment and the lowest productivity of small and medium-sized enterprises in south-eastern Europe. The private sector faces major challenges, due to inconsistent, poorly harmonised and fragmented legislation, e.g. for business start-ups, and an inefficient and cumbersome bureaucracy, as for example inconsistent registration requirements or excessive complexity of tax regulations. Incentives and public policies target the public rather than the private sector. The focus of economic policy on promoting consumption rather than investment in local value creation results in significant trade balance deficits and promotes the country’s indebtedness. Few municipal services are digitised. The complex political system imposes framework conditions that are not only unfavourable for the private sector and in particular for SMEs, but also for the citizens, and present obstacles to the development of innovation, entrepreneurial spirit and economic development. Dissatisfaction with living conditions and prospects as well as limited access to appropriate jobs are the main reasons for the growth in migration, especially from rural and remote regions such as eastern Bosnia.

The overriding project goal is the promotion of economic development at the local and regional level. Local and regional actors jointly develop a strategic vision for economic development in target municipalities and cities and implement it with a focus on innovation promotion and income growth for women and men. This aims to achieve more strongly institutionalised and participatory planning of economic development, building on the specific comparative advantages of the target areas. Thanks to the promotion of more investment-friendly conditions on the part of the cooperating municipalities and cities, the private sector will make a vital contribution to the prosperity of the target areas. Overall, this approach aims to lead to more sustainable and inclusive economic development, with more dignified and inclusive jobs and higher incomes for men and women.

The aim is that, by means of systemic change, the economic situation in the target municipalities and cities will be sustainably improved in the medium to long term without further donor aid. The roles of the local private sector, local authorities and other market participants, as well as the formal and informal rules that govern the market, are examined and substantially changed if required. The project is implemented using existing local structures: a lasting impact is achieved above all by strengthening them - instead of direct aid in the traditional sense. The local institutions and structures are thus enabled to sustainably improve the economic development of their region by taking all factors and market participants into account.

By establishing territorial boundaries, responsibilities, particularly on the part of the authorities, can be defined, which makes the dialogue and engagement with the private sector and civil society easier, more efficient and dynamic. Compared to higher levels of state administration, municipalities have a greater sense of responsibility due to their proximity to citizens and companies. Equally, companies feel more duty-bound to the social inclusion of the local citizens than to external jobseekers.

Approaches to good local governance and the improvement of competitiveness are combined to create better business conditions for the private sector. This aims to maximise the competitive advantage of the target municipalities.