Sarajevo — nearly the hardest place on earth to start a business, and the tech scene doesn't care
BiH is ranked 184th out of 190 countries for ease of starting a business (World Bank Doing Business 2020). Businesses face approximately 500 different parafiscal charges, many with no clear purpose. Despite this, the IT sector is the fastest-growing in the canton — and there is still no technology park, no incubator, and no accelerator.
The canton’s development strategy says three things on pages 31–33 that, taken together, form one of the sharper paradoxes in the Sarajevan economy.
The three numbers
184th out of 190. According to the World Bank’s Doing Business 2020 report, the last edition before the Bank retired the series, Bosnia and Herzegovina ranks 184th out of 190 countries in ease of starting a business. That puts it behind nearly every country in Africa, most of Central Asia, and every European country except one (Eritrea-adjacent footnote territories aside). The strategy cites this number directly.
Approximately 500 parafiscal charges. The strategy estimates that Bosnian businesses face around 500 different forms of parafiscal levies, taxes, fees, charges, stamps, permits, and other non-tax payments, many of which have no transparent rationale. On payroll taxes alone, BiH is ranked 141st out of 190. The strategy notes that these charges are among the highest in the region and constitute a significant barrier to formalisation.
No technology park, no incubator, no accelerator. Despite the IT sector being the fastest-growing sector in Kanton Sarajevo by number of registered businesses and employees, the canton has no technology park, no business incubator, and no startup accelerator. A study cited in the strategy proposes building one at the Šip settlement in Centar municipality. As of the strategy’s 2021 publication date, it had not been built.
Why the paradox matters
The IT sector’s growth despite the business environment is not a sign that the environment doesn’t matter. It is a sign that IT companies have found ways to route around it, often by registering offshore, billing in foreign currency, and treating the Sarajevo office as a remote-work site rather than a headquarters.
The strategy is frank about this. It notes that most Sarajevan IT companies are export-oriented, developing software for EU and US clients. Their revenue comes in euros or dollars. Their Sarajevan employees are paid in BAM. The regulatory environment they face in Bosnia is, in operational terms, a cost they absorb rather than a framework they participate in.
For any other sector, hospitality, manufacturing, retail, construction, the 184th ranking is a concrete barrier. The strategy attributes several consequences to it:
- Informal employment. The high parafiscal burden encourages employers to hire off the books. The strategy cites this as one driver of the shadow economy.
- Brain drain. The 1.76-out-of-7 brain-drain score (see the hotel-labour piece for the anecdotal version) is partly a consequence of the business environment: young professionals leave not only for higher salaries but for environments where starting a business does not require 184th-out-of-190 levels of bureaucratic navigation.
- Low foreign direct investment. The strategy notes that despite the canton hosting 34.2% of all FBiH registered businesses, foreign investment relative to the potential is low.
What the strategy proposes
The strategy names several measures under Strategic Goal I (economic competitiveness):
- Reduce business registration costs. Registration of a new business entity costs 80 BAM (the lowest in the FBiH), a recent improvement.
- Reduce parafiscal charges. The document acknowledges the problem but does not name a specific list of charges to cut.
- Build the technology park. The Šip proposal is mentioned. It would cluster IT companies, provide incubator space, and connect to the university.
- Strengthen SERDA (the Sarajevo Economic Region Development Agency) as the one-stop-shop for investors.
- Digitise administrative procedures. The strategy notes that as of 2021, the business-registration process still cannot be completed entirely online, a fact it describes as behind most EU and neighbouring countries.
What a visitor sees
You do not see the 184th ranking on the street. What you see is the consequence:
- Small shops that are almost always sole proprietorships. The regulatory cost of hiring a second employee is high enough that many businesses stay single-person.
- A café economy. The lowest-barrier-to-entry business in the canton is a café, and there are a great many cafés.
- IT workers in cafés. Sarajevo’s growing class of remote-working software engineers — billing clients in Berlin, Dublin, and San Francisco — sit in the same cafés as the sole-proprietor shop owners. One group works inside the 184th-ranked business environment. The other works around it.
The strategy documents this split without resolving it. The IT sector’s success and the broader economy’s stagnation are both Sarajevan realities in the same planning document.
What to do with the story
The 184th ranking is a fact. So is what happened despite it.
The IT sector grew. Business registration costs dropped to 80 BAM, the lowest in the entire Federation. The SERDA credit-guarantee fund is operational, with two credit lines (5,000–200,000 BAM and 200,000–500,000 BAM) at subsidised rates. The number of registered business entities in the canton grew 19.8% between 2014 and 2019, from 32,272 to 38,668. The people sitting in those cafés with laptops open, billing Berlin and San Francisco, are not waiting for the ranking to improve. They are building the next version of the Sarajevan economy from a coffee table in Baščaršija.
The 500 parafiscal charges are real. The bureaucracy is real. But so is the fact that 38,668 businesses registered anyway, in a city of 420,000, that is roughly one business for every eleven residents. Sarajevans have a specific talent for building things inside systems that are not designed to help. The word for that, in Bosnian, is inat. The ranking measures the system. It does not measure the people working around it.
Next time you sit in a Sarajevo café, look around. The barista owns the shop. The developer at the next table is shipping code to Dublin. The coppersmith on Kazandžiluk is hammering the same patterns his grandfather hammered, for the 184th-ranked business environment in the world, and he is still here.
Sources & further reading
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