Updated August 2016
Dateline: Sarajevo, Bosnia and Herzegovina
Nervous smiles and laughter.
That was the response to my impromptu visit with a banker here in Bosnia’s capital of Sarajevo today.
Let it be said that these were not smiles of happiness over Bosnia’s strong performance in the World Cup this year. All around the city, people are going crazy with nationalistic pride over their teams’ performance.
Even so, the laughter I received was the response to my inquiry about banking here in Bosnia.
I’ve been traveling around Europe for the last four months and have seen many of the continent’s economies firsthand. Some, like Montenegro, are keen to open bank accounts for foreigners of any kind. Others, like Serbia, offer some of the highest interest rates in Europe but are rather tough to crack.
Still, instead of bogging me down with paperwork, the banker here in Sarajevo just laughed when I inquired about opening an account here.
He said to simply not even bother.
Of course, I wasn’t under the impression that Bosnia is the new wealth safe haven. But I do find the banking process as a sort of window into a country’s soul; whether that be their openness to foreign capital or their willingness to be a puppet to US financial imperialism.
Outside of Andorra (or Switzerland or Liechtenstein if you’re lucky, and being non-American=enough to get in), I would avoid banking in Europe altogether.
But I couldn’t help but appreciate that the only guy who spoke English in the entire multinational bank I visited could only muster to ask me, “Why in heavens would you want to open a bank account in Bosnia?”
It was rather charming.
Where to put your money in Bosnia
Indeed, the ten-minute walk from my home in the hills of Sarajevo to this large bank’s main office was marred with potholes and road repairs.
However, the stunned banker — who had spent some time living in The Land of the Free — said that if one is going to put any money in Bosnia, they ought to invest it in a local business.
Of course, that was my end game all along. The entire ethos here at Nomad Capitalist is to put your money in wealth safe havens like Singapore, and then invest or start a business in business havens…
…which could include right here in Bosnia.
Entrepreneurship in the emerging Balkans is an attractive proposition. While Croatia is now a member of the European Union and Montenegro is largely composed of gorgeous seaside resorts that double as dumping grounds for Russian cash, countries like Bosnia and Kosovo have little in the way of entrepreneurship.
That is slowly changing, but the business opportunities in this part of the Balkans are wide open.
One test I use to determine suitability for entrepreneurship is how easily the average person could start a business with a decent chance of success. For this, I frequently use the example of starting a restaurant.
After all, while restaurants in the West are low-probability businesses, they are perhaps the most common small business on earth.
The food scene here in Sarajevo is rather undeveloped. Trying to find a restaurant that actually serves food past 9pm was quite a challenge for me. The variety of food is rather minimal and prices — while hardly outrageous — seem to have healthy margins built in, especially compared to the far more international Serbian capital of Belgrade.
The few international chains (save McDonald’s) were packed during today’s lunch hour. European chain Va Piano, which offers salad and pizzas under a brilliant pay-as-you-go system, costs as much as eating anywhere in Western Europe, yet was packed.
Similarly, I walked through a surprisingly upscale shopping mall that was quite busy for a Monday afternoon at 2pm. Malls in some of my favorite emerging economies in Central America are dead at that time of day, but people here in Bosnia were busy shopping.
International and regional chain stores like Zara, Swarovski, and Pull and Bear have all moved into the brand new mall here in Sarajevo, which actually sports some rather interesting architecture. Imagine my surprise to find that another brand new mall is just across the street.
The growth, opportunities and potential are there, they just need your ingenuity and money.
The benefits of Bosnia’s reputation arbitrage
Sarajevo has a number of conditions that I believe are positive for on-the-ground entrepreneurs: a growing amount of retail space, a small but steady number of emerging middle-class consumers, and demand for foreign products.
Also, Bosnia and its fellow former Yugoslav counterpart Kosovo have another factor I like even more: reputation arbitrage.
You may know I’m a huge fan of arbitrage, the concept of taking advantage of a widespread in a market. Geoarbitrage, for instance, is the practice of living a high-quality western life on the cheap in emerging countries where the cost of living is lower.
I also coined the term “reverse geoarbitrage” to describe selling developed world goods to consumers in emerging markets while using emerging market employees and low costs of doing business.
Reputation arbitrage is another concept I’ve coined that explains the lower cost of doing business in places that are mired by a poor reputation.
Bosnia and Kosovo fit this bill perfectly.
Mention either country to anyone in the western world and their first — and probably only — reaction will be to tell you about the wars that took place here in the 1990s.
Most people don’t know anything else.
And in both Sarajevo and Kosovo’s capital of Pristina, locals on the ground are, of course, well aware of the recent wars. They lived through it and are desperate to move forward and stake their claim in an emerging world. They are motivated to become developed economies and (sadly) join the European Union.
This means a market of people eager to consume westernized products and services, yet few foreigners interested in providing them due to the reputation of the country.
Hunger for western culture
Outside of McDonald’s, you don’t see many markings of “America” here, despite US military involvement in the Bosnian war twenty years ago. Even Coca-Cola hasn’t put much in the way of resources here; I’ve seen more signs for the Balkan “Sky Cola” than I have for Coke.
While there are the aforementioned European chains entering the market, my initial feeling is that they’re not coming in fast enough.
Granted, the infrastructure here in Bosnia isn’t as strong as one would like. I ran into a fellow traveler this morning who told me that his bus ride into Sarajevo was on a long and winding road that moved along at barely 25 miles per hour.
Even with such challenges, an entrepreneur looking to sell into the local Bosnia market could easily come up with a dozen ideas for starting a business here.
Those who have followed the Chinese economy and entrepreneurship there have seen the copy-and-paste strategy many local business owners have employed to build huge brands. In the shadow of the huge popularity of KFC are knock-offs like MFC and even OFC – complete with a caricature of Obama.
In Bosnia, brands like KFC don’t even exist. Yet young Bosnians are eager for western culture and the western experience that their foreign counterparts are enjoying.
Capitalizing on inefficiencies
Likewise, the growing middle class is no doubt eager to travel more, and buses that take seven hours to complete a drive that should take five must be unappealing to them.
The fact that the slow buses here aren’t exactly cheap is just one way an expat entrepreneur could come here and make money fixing the inefficiencies in the system.
Because there is little competition in many local markets, entrepreneurs could blow lazy established business owners away. As a breakaway state, my impression of Bosnia is that they are not overly provincial.
Also, the Balkans are home to several countries with the lowest tax rates in Europe.
Bulgaria, for instance, has a 10% flat tax. Montenegro also has rates as low as 9%. Even Serbia tax rates top out at 20%.
An entrepreneur could set up a regional company — for example, a small shuttle service that eliminates the big inefficiencies in the system — and take advantage of the best tax laws in the region by setting up their business the right way.
Countries like Bosnia are excellent places for dedicated frontier market entrepreneurs because they suffer from image problems that keep most people away.
I would argue that having such an image problem is even worse than being a country no one has ever heard of, like Laos.
For a location independent entrepreneur, Bosnia probably doesn’t tick enough boxes (even though I was able to upload 1GB file in under mere minutes today).
However, if you are looking to stake your claim and are willing to put your years in on the ground, I believe the potential rewards here are great.
All while being in close proximity to some of the best beaches and beautiful people in the world.
Big opportunities in small places
I built an $11 million business by age 27, and then built other small businesses that returned up to 2200% in short order — all by investing in things no one else thought would work. Some of the most simple concepts were my biggest hits.
That’s what I love about the prospect of doing business in Bosnia or other similar countries. You can take proven business models from elsewhere and get a good runway with little competition. You won’t even find that in some emerging markets in Southeast Asia, where you’ll be copied in two seconds flat.
A place like Bosnia offers a wide-open market, relatively little competition, and a surprisingly reasonable regional tax climate… perfect breeding grounds for foreign entrepreneurs who want to adapt the western model of quality service and market-driven pricing to a market.
If you’re serious about staking a claim in an emerging market like Bosnia, apply for a free Strategy Call today and we can begin to design yoru personalized offshore entrepreneurial blueprint.