Restrictions during the lockdown in march 2020 due to the COVID-19 pandemics in
Bosnia and Herzegovina, not surprisingly, did have a significant effect on the
business activities of companies. In the two rounds of Economic pulse research
conducted by UNDP, first one in April 2020 (with 1.023 respondents) the other one
in June (with 379 respondents), there is a slight optimism noticeable among
businesses.
Significant difference between planned and conducted activities is reported by
approximately 43% of the respondent companies in both research cycles, while 31%
reported that they did not have any changes in sales and plans. Frankly, what is
surprising and somewhat encouraging is those 31%, almost one third, that remained
undisturbed in the same business activities as planned. However, the real situation is
that 25% of the companies are heavily affected (sales drop between 51 and 100%)!
As expected, the sales dropped disproportionately and unevenly across industries.
Again, as it is a global trend, business processes and sales are significantly
endangered in Services, Hotels and Tourism and Real Estate, thus leaving those three
industries in an extremely insecure surrounding with questionable future. Some of
the explanations for this significant decrease is obvious and temporary in its nature,
such as:
- „95% of our buyers belong to HoReCa industry.”
- „Four of our retail objects are closed, and the demand is decreased for
everything but the necessities.”
While others offer deeper reasons, which are more difficult to overcome. Such as: - „Due to the difficulties and increase in prices of global transport because of
the PSS duties (Post Season Sea charge) our final market price is not
sustainable.” - „I am from advertising industry and demand for advertising in this period is
literally 0.”
The first ones might have picked up the pace as soon as the retails or HORECA
reopened, while changing the global transportation prices or waiting for the
advertising budget to be the priority again is going to take more time and effort.
The question is, among the obvious ones (i.e. objects are closed), what are the main
limitations for the business activities on the regular basis? Every respondent stated
that they have encounter from one to four different limitations, while the top six are
the following:
- Low domestic demand
- Inability to collect receivables
- Inadequate legal framework during the crisis
- Low foreign demand
- Inability to pay obligations
- Financial issues (access to finance)
Low domestic demand is by far the leading limitation, but bear in mind that during
this research (April and June) strict restrictions were still in place in the domestic
market. It will be extremely interesting to see the change in September, when
domestic demand will more or less increase, but the foreign demand will remain
problematic.
Inadequate legal framework during the crisis is one of the top three problems, as
seen by the companies in BH. Nevertheless, the questions at hand are (1) was the
legal or institutional framework to slow to respond or (2) were companies inactive in
finding and using the measures that were introduced? The answer is both. On one
side governmental measures came late, came slow and came inadequate. On the
other side, companies did not seek them actively, but rather waited for the measure
to be imposed to them.
In April 2020, companies from Republika Srpska were much more active in use of
measures, but in June 2020, companies from Federation BH caught up and the
percentage of the companies who use governmental measures is equalized among
two entities. What is scary is the fact that more than 70% of the companies did not
use any COVID-19 response measures; while less than 10% of companies use more
than one measure. Argument that measures came later than they should lies in the
fact that in April 83% of the companies did not use measures, but that number
significantly dropped in June to 65%, still remaining the average of 70% of
companies which were not supported by the government. That proves the second
argument that companies are inactive in seeking their solution and finding the
appropriate measure that will support their struggling at the moment.
The most common measure used by business sector is Deferral or subsidy for taxes
and contributions payments and it is followed by the Deferral payment of loans for
legal entities. But the problem is that beyond those obvious measures, there is
nothing else done, nor the companies know about it, how to creatively and
sustainably support business environment in Bosnia and Herzegovina. This leaves
companies in a difficult position when they don’t see desperately needed safety net
from the government. This is not the case in other countries in EU, which quickly
responded and prepared the safety net especially for the companies in endangered
sectors, such as Services, Hotels and Tourism and Real Estate. In most of the
European and even our neighboring countries, governments participated in the
wages and contribution for all employees who are on stand by, in different ratios
from country to country, or participation in the fixed costs such as rent for business
premises. Companies in BH can rely on themselves, own recourses and own
creativity to overcome the crisis and remain sales on domestic and international
market, because the governmental safety net is not there to save them.
Author: Maja Arslanagić-Kalajdžić
