Q: What are the major trends in the economy of Bosnia and Herzegovina? Which are the dominating sectors of the economy?

A: Bosnia and Herzegovina is politically decentralized and consists of two entities, the Federation of Bosnia and Herzegovina and Republika Srpska. Formerly, the country was one of the six federal units of Yugoslavia and gained independence in the beginning 1992.

Over the last years, the GDP growth rate has been about 7%, but we still have not reached the pre-war economic development. Estimates indicate that, if we sustain those growth rates, we would reach the pre-war GDP level in 2011. The war had a very negative impact on the economy of the country. In 1995, the level of production was only 10% of the level in 1992. Since 1995, the international community has supported the economic recovery, and there has been growth, but it still cannot compensate for the dramatic decrease.

Before the war, Bosnia and Herzegovina had an export-oriented economy. From the top 10 export companies in ex-Yugoslavia, five companies were from Bosnia and Herzegovina, and the corporations are organized along the lines of export. For instance, the largest company, Energoinvest Sarajevo, had turnover of about $2 billion and export of about $800 million.

The industry is the leading economy sector, and the energy sector is especially well developed. The main exports are aluminum, steel, automobile spare parts, electricity, and raw materials. The financial sector is also impor- tant and last year it was privatized by regional banks. Currently, the domestic banks are more than 80% owned by banks from Italy, Germany, and Austria. The service sector is another important sector of the economy.

Q: What is the main activity of the largest company that you mentioned, Energoinvest Sarajevo?

A: It was the largest export company in former Yugoslavia and the $2-billion revenue that I mentioned was achieved in 1990. The company exports complex objects, or the designing, engineering, and maintenance of products in hydro and thermo power plants. It provides engineering services, transmission lines, power plants, and everything related to the production and transmission of electricity.

Q: What is the size of the Bosnian economy? How large is the population?

A: The estimates indicate population of about 3.8 million in Bosnia and Herzegovina - 2.3 million in the Federation and 1.5 in Republika Srpska. With population of about 3.8 million, there are probably about 1 million households. The population of largest city, Sarajevo, is about 400,000 citizens. Our GDP is $13 billion, and the GDP per capita is in the range between $3,000 and 3,500.

Q: Could you provide us with historical information on the Sarajevo Stock Exchange?

A: The exchange was established in 2001, so our capital market is very young. The necessary laws were adopted by the Parliament in 1999. Then, we established the institutions, such as the Security Commission, the Central Registry, and the brokerage houses. In September 2001, eight brokerage houses founded the Sarajevo Stock Exchange, and the Exchange executed its first trade in April 2002. That means that we have only six years of trading and existence.

The capital market in Bosnia and Herzegovina began with a mass privatization process. The international community, namely the IMF and the World Bank, created the model for the privatization, which was similar to the process in the Czech Republic and Russia. Every citizen had the possibility to participate and received privatization vouchers. Then, those vouchers could be exchanged for stocks in the publicly traded companies either directly or through investment funds.

The stock exchange presented the first stock index, the Bosnian Investment Fund Index, in April 2003. The index consists of 11 investment privatization funds. In 2006, we launched a new index called the Sarajevo Stock Exchange Index, which consist of the best 10 companies on the market.

The trading volume has been picking up steadily since inception. In our first year, the trading volume was only about $30 million, while last year it reached about $1 billion. That is a dramatic increase, which means that investors recognize the good potential of our capital market.

Q: How large is the market capitalization and how has it developed over these six years? What are the major sectors on the market?

A: Initially, it was very small because we started with only a few companies. The most recent market capitalization of the Sarajevo Stock Exchange is 7.5 billion euro, or approximately $11 billion.

The energy sector represents about 30% of the total market capitalization, followed by telecommunications, which accounts for 21.5% of the market, and by the banking sector, which represents about 7% of the total capitalization. Energy is a main sector of the economy and the investors recognize its potential because Bosnia and Herzegovina is one of the few countries in the region with a surplus in energy production.

Within the telecom sector, there are three telecom companies and only one of them is private. In the other two companies, the state ownership is 90% and 50%, respectively. Mobile services are gaining popularity and more than 1.5 million people have access to mobile phones. By our domestic standards, that is a developed sector, but there is room for growth in comparison with the rest of Europe.

Q: How many companies are listed on the stock market and how large is the investor base?

A: In the period 2000 to 2002, the government offered the stocks of more than 700 companies. Today, there are about 500 listed companies and about 15% of them, or 60 to 70 companies, are traded daily.