The Ministry of Economy and Entrepreneurship is pivotal in the development of small and medium-sized enterprises (SMEs) in the Republic of Srpska. By implementing a range of incentives based on the Law on the Development of Small and Medium Enterprises and related decrees, the Ministry actively promotes technological progress and innovation. These incentives include support for digital transformation and technical innovation, such as the procurement of software, hardware, and new or used equipment. Between 2021 and 2023, over BAM 2.2 million was allocated to various SMEs to foster digital transformation and technical innovations.
The Ministry of Economy and Entrepreneurship is the responsible ministry for the development of small and medium-sized enterprises. In line with the said, the Ministry awards several types of incentives in this area based on the Law on the Development of Small and Medium Enterprises (Official Gazette of the Republic of Srpska, No. 50/13 and 84/19) and the Decree on the procedure for awarding incentives for small and medium enterprises in the Republic of Srpska (Official Gazette of the Republic of Srpska, number 66/22 and 54/23). Incentives that contribute to technological progress and the application of innovations are incentives for digital transformation and incentives for technical innovations, i.e. the purchase of equipment. The incentive for digital transformation is awarded for the procurement and introduction of appropriate software and accompanying hardware solutions, digitalisation of business processes, procurement and creation of digital platforms for product sales, advisory services and employee training. The incentive for technical innovation is granted for the purchase of new or used equipment not older than 10 years. In the period 2021-2023, a total of BAM 1,121,620.14 was approved for 66 small and medium-sized enterprises through the digital transformation incentive, and a total of BAM 1,148,406.03 was approved for the technical innovation incentive (equipment purchase) for 55 entities.
Support for innovation, digitalisation and green economy is envisaged in the Strategy for the Development of Small and Medium Enterprises of the Republic of Srpska for the period 2021-2027. In addition, the Ministry of Economy and Entrepreneurship, in cooperation with other competent institutions and organisations, prepared the Action Plan for Innovations in Small and Medium Enterprises for the period
2024-2027, which envisages projects and activities aimed at supporting innovations. The plan was adopted by the Government of the Republic of Srpska and prepared in accordance with the Strategy for the Development of Small and Medium Enterprises of the Republic of Srpska for the period 2021-2027 and the Strategy for the Development of Science and Technology, Higher Education and Information Society in the Republic of Srpska for the period 2023-2029. The key bearers of the implementation of the plan are the Ministry of Economy and Entrepreneurship and the Ministry of Scientific and Technological Development and Higher Education.
The Ministry of Economy and Entrepreneurship is a member of the Network for Digital Transformation of the Economy of the Republic of Srpska, which was formed in 2019 as part of the GIZ project of the German Agency for International Cooperation. In addition to the Ministry and project representatives, the members of the Network are also the Ministry of Science and Technology Development and Higher Education, the Banja Luka Innovation Center and the Chamber of Commerce of the Republic of Srpska. The Network aims to support the development of the digital transformation of the Republic of Srpska economy through joint participation in the preparation of strategic documents, action plans and other measures in this process, through the introduction of new technologies, knowledge development, connecting knowledge and the economy, and securing funds from domestic and foreign donors in the field of digital transformation. The key result of the existence of the Network is the establishment of the Centre for Digital Transformation of the Chamber of Commerce of the Republic of Srpska in 2020, with the aim of increasing the competitiveness of the economy and the application of innovations in the Republic of Srpska. The Centre, as a business support in the field of digital transformation, works to improve the knowledge and skills of employees in the economy, provides consulting support, promotes and provides informational and advisory services in the field of digital transformation.
Key strategic documents, such as e.g. the Strategy for stimulating foreign investments in the Republic of Srpska for the period 2021 to 2027, define technological development and investments that contribute to increasing efficiency as one of the key strategic commitments of the Republic of Srpska.
Consequently, in September 2022, the Government of the Republic of Srpska adopted the Decree on the procedure for awarding incentives for direct investments of special importance and further improved it in 2023. It defines special incentive measures for investors who introduce new technologies, employ a greater number of workers with better-paid jobs (which can only come through the application of new technologies), significantly influence the improvement of the education system and contribute to the competitiveness of the domestic economy.
The Decree on the procedure for awarding incentives for direct investments of special importance defines special incentive measures in the form of subsidies up to the amount of two years of refunds of paid taxes and contributions per employee and subsidies up to 30% of justified investments in material assets.
The incentive is provided for new direct investments that ensure new employment of at least 100 workers or investments of at least BAM 10 million in developed and medium-developed municipalities, i.e. employment of 50 workers or investments of at least 5 BAM million in underdeveloped municipalities. Investors, in addition to the number of workers or the amount of investment, should ensure salaries that are at the average level of the Republic or higher than the average during the entire course of the project, they should use mostly new equipment, they should be export-oriented, they should cooperate with the educational system (e.g. they provide practical classes, cabinet equipment, etc.) and have a positive impact on the local economy (e.g. they use local suppliers).
The goal of these incentives is to attract investors who contribute to increasing efficiency through the application of new technologies.
The processing industry is the carrier of the development of the Republic of Srpska. According to the latest data from the Republic of Srpska Institute of Statistics, this branch of the economy employs 59,582 workers, and the indices of industrial production, April 2024, show that the processing industry of the Republic of Srpska participates with 11.6% in the GDP, with 20.5% in the total number of employees, with 82% in the total export of the Republic of Srpska and with 63.3% in the total industrial production, which indicates the significance and importance of its further development.
The Ministry of Economy and Entrepreneurship, in accordance with the Law on Incentives in the Economy of the Republic of Srpska, encourages the technological progress of the processing industry through incentives for direct investments. Incentives for direct investments support the investments of business entities in the acquisition and introduction of modern equipment and technology. The most significant investments are in the acquisition of new production lines, digitalisation of production processes, CNC machines, robots, lasers and more. Incentives for direct investments are aimed at improving the competitiveness and productivity of our economy, especially the processing industry, which significantly affects overall economic growth and employment.
In 2024, the economy in the Republic of Srpska is experiencing the consequences of global trends, the conflict in Ukraine and the Middle East, and the additional tightening of already complex political, economic, and monetary policies. Global economic trends, i.e. surrounding trends, through trade shocks and price pressures, significantly affect the reduction of the volume of production in the Republic of Srpska, because orders from foreign partners who have multi-year contracts with business entities from the Republic of Srpska have significantly decreased.
Since the processing industry is the carrier of the development of the Republic of Srpska, and the operations of its most important sectors are threatened due to the reduction of orders from foreign partners, greater support is needed for business entities in acquiring new equipment and technology. Only technologically advanced companies can overcome the lack of orders by specialising in the production of new products or improving the services.
In order to encourage technological progress in the Republic of Srpska, the Budget of the Republic of Srpska for 2024 provides funds in the amount of 14.6 million to support business entities for the purchase of modern equipment.
