The Minister of Economy and Entrepreneurship of Republika Srpska, Vojin Mitrović, stated that the government and the ministry will continue their policy of economic incentives to increase productivity and competitiveness of business entities while retaining the workforce.
In an interview with Srna, Mitrović explained that 23.5 million BAM has been allocated for wage increase incentives in 2024, covering the periods from July to December 2023 and January to June 2024. This support benefits 844 businesses and 68,500 workers.
“This is crucial for increasing workers’ purchasing power and improving their financial position, while also helping businesses manage wage increases through subsidies,” he emphasized.
Advantage of proximity to the EU
Regarding direct investment incentives, as defined by the previous law, Mitrović stated that 11 million BAM has been allocated in 2024, benefiting 159 businesses with approximately 12,000 employees. The supported investment projects total around 52 million BAM.
“Direct investments were primarily focused on acquiring new technologies and upgrading equipment to enhance productivity and competitiveness,” Mitrović said.
Additionally, 185,000 BAM was allocated last year to support 15 businesses engaged in preserving and reviving traditional and artistic crafts.
From 2019 to the end of 2024, a total of 132 million BAM has been allocated for incentives, with 85 million BAM directed toward wage increase support for 74,000 workers.
“On the other hand, 46.9 million BAM was allocated for direct investments, while the total investments supported through these incentives amount to 300 million BAM,” he noted.
Speaking about the new law on foreign investments, Mitrović stated that there are no significant changes, except for some adjustments regarding specific jurisdictions. Additionally, the Law on Independent Entrepreneurs was adopted, covering 26,000 entrepreneurs, primarily aimed at supporting traditional crafts.
Mitrović emphasized that Republika Srpska’s geographical proximity to the EU has proven to be an advantage, particularly during the COVID-19 pandemic.
“During that time, EU countries with production facilities in Asia and other distant regions faced immense difficulties in supply chains and obtaining necessary components for final products, as well as high logistical costs,” he explained.
Education system reform
Mitrović highlighted that certain business entities are looking to relocate their production to Republika Srpska and noted trends indicating that the automotive industry may move some of its European operations to Srpska.
He stressed the importance of reforming the education system to align with the needs of the business sector, ensuring that training programs include professions that were previously unrecognized but are now in demand.
According to him, in 2024, economic improvements were observed in the service sector, trade, and hospitality, with agriculture, water management, and forestry also contributing to growth.
“On the other hand, the manufacturing sector, and industry in general, experienced a significant decline during this period. However, by mid-2024, industrial production is expected to recover,” he noted.
Mitrović reported a 6.7% drop in industrial production in 2024, with a 5.4% decline in the manufacturing sector.
“Given that manufacturing accounts for 63.3% of total industrial production, it is clear that the overall decline is largely due to challenges in this sector,” he explained. He added that this also affected employment, with a 4.7% drop in industrial jobs and a 6.1% decline in manufacturing jobs.
Rising raw material costs
Mitrović pointed out that the leather and textile industries are particularly at risk due to competition from Asian countries, where cheap labor drives down production costs.
“As a result, Western partners are pressuring businesses in Srpska to lower their service prices, which in turn reduces their competitiveness and exports, ultimately leading to a 12.7% decline in workforce numbers,” he stated.
He also emphasized that conflicts in Ukraine and the Middle East are impacting global markets, including the EU, the Balkans, and Republika Srpska.
“Due to these conflicts, Srpska is facing rising costs of raw materials sourced from the EU and neighboring countries. Additionally, energy prices have increased, prompting businesses to raise product prices, which in turn reduces competitiveness,” Mitrović said.
He reiterated that industrial production dropped by 6.7% last year, with a 5.4% decline in manufacturing, and emphasized that the recovery of the EU economy will have a positive impact on business conditions in Srpska.
“In response to the decline in industrial production, the ministry implemented a series of laws last year aimed at improving business conditions for enterprises, with a focus on boosting competitiveness in both domestic and international markets through increased productivity,” Mitrović concluded.
Source: RTRS
