Bosnia and Herzegovina is endowed with a heterogenic landscape, multiple microclimates and fertile soil. A World Bank 2014 report on the country underlined country’s agriculture season, which starts earlier than other European countries as well as its proximity to European Union markets. Beyond its Mediterranean climate, the agriculture sector also benefits from both low labor costs and a largely rural population. Some 61% of the population is considered to be residents of non-urban areas. The Rural Household Survey found 13% of rural households could be classified as full or part-time farms. In Bosnia, agricultural employment provided average monthly wage of $444 in 2012. This is competitive to salaries in other European countries. The agriculture will continue to grow if it moves from substance-oriented Bosnian agribusiness to food stuffs production. Currently, 65% of the country’s food demand is met through imports, according to a United Nations Development Program (UNDP) report.

The share of the agriculture sector remains a substantial part of the total Bosnian economy. Throughout the early 1990s the contribution of agriculture to the GDP stood between 12-14%. While recent figures from UNDP and Bosnia and Herzegovina Agency for Statistics suggest that agriculture represented 8% of GDP in 2013, this statistic reflects the increasingly diverse nature of the economy. The agriculture sector continues to be a large employer in Bosnia and is estimated to be providing around twenty per cent of the jobs in the economy. At least 167,000 Bosnians were found working in the sector in the nation’s 2012 Labor Force Survey. Taking the latest figures provided by World Trade Organization (WTO) into account, agriculture exports (14,4% of the total exports of goods) where valued at around $800 million whereas agricultural imports (19,4% of the total imports of goods) was recorded as $1.9 billion. Main export targets in agriculture are the European Union (73,5%), Serbia (9,1%), Montenegro (3,2%), Turkey (2,0%), Switzerland (1,4%) and others (5,0%). On the other hand, main origins of agricultural imports are ranked as European Union (60,0%), Russian Federation (9,9%), Serbia (9,8%), China (6,0%), Turkey (3,2%) and others (0,01%).

Overall annual precipitation is 1250 l/m² per annum this is higher than the 1000 l/m² European average country possesses significant water resources. Existence of seven river basins and considerable amount of underground water collection enriches the Bosnian water resources which is vital for a successful agriculture. Foreign Investment Promotion Agency highlighted that average number of sunny days within Bosnian reaches up to 240 days a year, especially on the Adriatic coasts. WTO statistics indicate that 19.7% of total area in Bosnia and Herzegovina classified as arable land in 2012. This is a higher percentage than in Croatia (16.1%), Macedonia (16.4%), Montenegro (12.8%) or Slovenia (8.5%) but lower than its largest neighbor, Serbia (37.7%).

According to official statistical data, the composition of Bosnia and Herzegovina’s agricultural land are classified as follows: Arable land and gardens (1,023k ha, 47,3%), pastures (593k ha, 27,4%), meadows (445k ha, 20,6%), orchards and vineyards (93k ha, 4,5%), and finally wetlands, reeds, and fishponds (5k ha, 0,2%).

A full range of agricultural activities take place in Bosnia. These include the growing of field crops, MAPs (Medicinal Aromatic Plants) production, vegetable, fruit and vine growing, honey production, livestock, fisheries. As other important agricultural products wheat, maize, soybeans and tobacco can be counted. Organic food production is an emerging area of importance within the BiH’s agricultural sector. Since the membership in International Federation of Organic Agriculture Movements organic production is increasingly developing. Since 2007, Organic certifications have been issued by Organic Control, or "Organska Kontrola" in accordance with ISO 65 standard. On the other hand, addressing Halal products market is also an important topic for BiH given the existence of a Muslim majority population. The Agency for Halal Quality Certification was established in 2006. Furthermore, for the period between 2009-2015 the Fostering Agricultural Markets Activity (FARMA) project was launched. With a total funding of $19 million granted by United States Agency for International Development (USAID) and Swedish International Development Cooperation Agency (SIDA) the project aims to enhance BiH's agricultural sector with a focus on dairy, fruit and vegetables, and finally, medicinal / aromatic plants and honey. The major target is to support Bosnia in aligning its agriculture in line with the European Union standards.

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Through the assistance by FARMA in technical issues as well as capacity building, around 500 Bosnian agricultural producer organizations have been able to increase their value of sales above 28 percent since 2011.

A report from the United States Commercial Service indicated that fresh meat supply in the domestic market sufficiently meets local demand. The Rural Household Survey conducted by FAO reflected that around 43% of all rural households in Bosnia and Herzegovina keep livestock of some kind. However, around 50% of processed meat products such as salami, smoked sausage, as well as poultry products are imported. Poland and Hungary are considered as prominent sources of the federation’s meat and poultry imports.

According to FAO statistics the country is home to a large number of livestock operations. United Nations Development Programme research found out that contribution of livestock production to agricultural GDP amounts almost to 60%. The country is home to 161,000 cattle farms, 218,000 poultry farms, around 126,000 pig farms and 63,000 sheep farms in the BiH. Number of livestock species were listed by the BiH Agency for Statistics in 2012 as follows: Cattle (455,000), sheep (1,021,000), pigs (577,000), horses (19,000), goats (65,000), poultry (18,703,000) and beehives (382,000).

Bosnians enjoy a diet heavy in dairy products. Yet, despite this the country’s annual dairy consumption of around 500,000 MT is larger than the domestic production. In this sense, US commercial service underlined that 40% of its dairy and milk products are sourced from outside. Bosnian annual milk production per cow is 2,612 liters, which is low compared to EU average of 6,768 liters.

Together with meat and livestock keeping, milk and dairy production dominates the agricultural production in BiH, reported UNDP. Especially livestock production in general contributes nearly 60% of agricultural GDP. On the other hand, as confirmed by USAID, especially milk production is a considered strategic sub-sector.

The fruit and vegetable sector is largely defined by farmers selling directly from their farms or to meet their own consumption. With around 14 million pieces of trees, prominent fruits produced are pears, plums, apples and so on. Important vegetables include potato, cabbage, rye and barley which are all intensively produced in the BiH.

BiH sees a great potential in organic production since a great deal of importance is being given today in Europe and in the world to not genetically modified products.Bruno Bojic, President of the Foreign Trade Chamber of BiH

Bosnia and Herzegovina has a long tradition of modern aquaculture with production dating to 1894 with the establishment of first fish Farm near Illidza. BiH exhibits highly suitable preconditions for freshwater fish production. Around 70% of domestic production is exported to neighboring countries and in particular the European Union. Since 2008 the BiH, has been listed as a certified fish-exporter to the European Union. According to the BiH Agency for Statistics, total market size of fishery is projected to grow from around $70 million in 2011 to $83,5 million by 2014, equal to an almost 20% expansion.

Food Processing

There is much potential for growth in the food processing sector. In 2013 FIPA noted that the industry is currently operating at one tenth of its capacity as much of infrastructure was damaged in the civil war. Today, the food processing industry in the BiH includes firms operating in manufacturing or processing of a large number of products including meat, milk, fruit, vegetable, sugar, tobacco, edible oil, tobacco, and animal feed. According to Comtrade Data the total exports of food processing sector in the BiH amounted to $586 million in 2013 or around 10% of total exports made in 2013. The annual report of Central Bank of Bosnia and Herzegovina (CBB) employs a slightly different classification of export categories (animal & animal products, vegetable products, animal or vegetable fats, prepared foodstuff). Thus, according to CBBH calculations, these products amounted to $444 million or around 7% of total exports. It is possible to conclude that food processing is a critical industry for Bosnian economy, though it remains infant and falls short in matching domestic demand as total imports in this category reach over $1.8 billion by 2013.

The Bosnian food processing is undergoing a restructuring process in order to enhance its competitiveness in future. In this regard, food safety, certification as well as quality control have been recognized as significant matters by the BiH’s authorities. To exemplify, the BiH became a party state to IFOAM (International Federation of Organic Agriculture Movement) in 1996 and since then organic production is increasingly developing. In this sense, IFOAM accredited the Bosnian organization called Organska Kontrola in line with EN 45011 (ISO 65) criterion in 2007, which is obliged to provide organic certifications in agriculture and food processing. Consequently, BiH is approximating to the European Union standards in terms of food standards and organic product trends in order to ease export to those markets.

In this regard, an agreement on towards the establishment of a chain of command for exports of milk and milk products from the BiH to the European Union was signed in 2013. Though still not fully implemented the protocol was noted by the local EU delegation in 2014 as a concrete step toward qualifying Bosnian dairy products for exports to the EU. Alignment with EU criterion has become even more meaningful after Croatian accession to the EU, as it is the top destination of Bosnian exports for food and beverages (40%) according to the UN's Food and Agriculture Organization report.

The BiH business landscape in terms of investments in food processing is increasing giving the ongoing period of reform. Further advantages such as availability of fertile land that is mostly free from chemical fertilizers, high quality water and perfect climate conditions, as well as efficient labor costs. EBRD reported in 2014 that nearly 80% of the food processing industry is privatized and sector has attracted considerable amount of FDIs. In this sense, foreign companies such as Coca Cola Beverages from Netherlands, Perutnina Ptuj (chicken meal processing), Swiss company Kreisen Ind. (vegetable processing), Austrian firm Studen-Agrana (sugar production) and Croatian enterprise Ledo (ice-cream production) are have already established production facilities in the country as of 2014. Each firm has already invested more than 10 million Euros per annum in the country which shows their confidence and the potential of Bosnia and Herzegovina.

IIG Comment

Bosnia and Herzegovina carries a natural potential for a more efficient and productive agriculture sector. Investors seeking for a proximate market to advanced European economies with a plethora of agricultural opportunities continue to open operations in Bosnia and Herzegovina. Bosnia and Herzegovina is endowed with a heterogenic landscape, multiple microclimates and a fertile soil. The share of the agriculture sector remains a substantial part of the total Bosnian economy, amounting to 8% of total GDP by 2013. Amongst others, milk and meat are Bosnia’s principal agricultural outputs, produced mainly by privately owned smallholder farms. Dairy farming dominates agricultural production, and livestock production in general contributes nearly 60% of agricultural GDP. Food processing sector also represents a considerably important part of the economy, producing 7-10% of total exports. Bosnia is on its way towards further alignment with the European Union and international standards for agriculture.