Abstract
In BMI’s Q209 Bosnia Infrastructure Report we forecast that the industry
value real growth will fall into
negative territory for 2009 – in
line with the contraction of the wider economic activity – to -7.9 %
and
industry value will fall to BAM1.12bn (US$764mn), from an estimated
BAM1.18bn (US$865mn) in
2008.
The utilities companies of both the
Muslim-Croat Federation and the Republika Srpska (RS) have
pledged
investments into power generation capacity and the transmission and
distribution networks, in
order to help boost economic activity in 2009
and 2010. Both European utilities majors CEZ and RWE
are present in the
energy and utilities sector of Bosnia (BiH), though as the recent experience
of CEZ
illustrates, this has not been without its problems.
Bosnia
remains one of the least favourable environments for doing business in Europe,
according to
the World Bank. CEZ announced in January 2009 that it is
pulling out of a US$1.4bn joint venture (JV)
with the RS utility EPRS
because ‘the Bosnian Serb partners failed to register property in a
timely
manner, issue concessions, expropriate land and put forward to
parliament a feasibility study in 2006’,
Reuters quoted the CEZ
project manager saying.
Bosnia' s highway network currently stretches for a
mere 30km across the country, significantly impacting
on inter- and intra-
country transport, and consequently trade and economic expansion. In October
2008,
Bosnia' s Serb Republic parliament approved a delayed EUR3bn deal
with Austrian builder Strabag to
construct 430km of road network.
Additionally, the European Bank for Reconstruction and
Development (EBRD)
finalised a loan of EUR180mn to Bosnia-Herzegovina to build key sections of
the
Trans-European Corridor V.
In BMI’s Project Finance Ratings
for Europe, Bosnia ranks in 12th place out of 20 countries. Though the
overall business environment presents deep structural problems, the
country’s score is boosted by low
levels of anticipated inflation
and relatively stable currency positions, which indicate more stable
revenues streams for the duration of a projects lifecycle. As expected, the
initial phases of design and
construction contain greater levels of risk
for sponsors and investors, and – as the CEZ experience
highlights
– it may be a while before a project actually begins construction.
Turning attention to the prevailing macroeconomic conditions, BMI’s
expects the deterioration of
Bosnia' s external environment, including
tighter regional credit markets, to weigh heavily on the
country’s
growth in 2009. BMI has revised down Bosnia’s real GDP growth forecast
for 2009, now
expected to contract by 0.5%, down from previous a forecast
that saw growth of 2.5%.
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