J.7 Diaspora Invest Lessons learned.pdf

Diaspora Invest Activity

OVERVIEW OF KEY LESSONS LEARNED

October 31, 2021

This document was produced for review by the United States Agency for International Development. It was prepared by Financial Markets International, Inc. under the Diaspora Invest Activity, contract number AID-168-C-17-00001. The views contained herein do not necessarily reflect the views of the

United States Government.

J.7

List of Acronyms

APIF Agency for intermediary, information and financial services of Republika Srpska, BiH

B2B Business to Business

BDM BiH Diaspora Marketplace

BAM Bosnia and Herzegovina Convertible Mark

BiH Bosnia and Herzegovina

DBC Diaspora Business Center

DBN Diaspora Business Network

DCA Development Credit Authority

DDI Direct Diaspora Investment

DI Diaspora Invest

EU European Union

FDI Foreign Direct Investment

FIA Financial Information Agency of the Federation of BiH

GDP Gross Domestic Product

MoC Memorandum of Cooperation

OSS One Stop Shop

SGF Small Grant Fund

SME Small and Medium Enterprise

TA Technical Assistance

Contents:

1 Introduction

2 Review of Diaspora Invest results at the end of the fourth implementation year

3 Key implementation lessons

3.1 Models of Diaspora Engagement in BiH Economic Development

3.2 Diaspora’s role in export promotion

3.3 Impact of diaspora in local development

3.4 Activating diaspora members through proactive outreach at home and abroad

3.5 Financial instruments to maximize diaspora investment beyond DDI

1 Introduction

Diaspora groups are potential powerful actors in international affairs and foreign assistance. Diasporas contribute significantly to the sustainable development of both destination and origin communities, making diverse economic, social and cultural contributions. Diaspora members send money home to fund basic goods and services, while helping mitigate shocks and supporting recovery from crises. They invest money to improve lives, to make a financial return, or both. They share the skills acquired from experiences abroad, either virtually from distance, or by returning to their community of origin. Diasporas are the embodiment of their heritage country’s image abroad, forging ties and creating transnational spaces.

In the context of Bosnia and Herzegovina, a country with 3.5 million residents and more than 2 million diaspora members residing abroad, the engagement of its diaspora with all its potential development contributions is a clear imperative.

To help to catalyze the economic contribution of BiH diaspora to BiH’s socio-economic development, USAID/BiH has designed the Diaspora Invest program, a five-year, $6.6 million intervention to engage BiH diaspora members in a structured manner and provide incentives and support for diaspora investment.

The Activity, implemented by FMI Inc. since April 2017, has been achieving this purpose through three key objectives/intervention areas:

A. Leveraging diaspora input into the development of an institutional policy framework for diaspora investment by supporting diaspora investors and entrepreneurs in formulating reform recommendations to promote an enabling environment for diaspora investment, and providing assistance to relevant institutions in Bosnia and Herzegovina in developing a Diaspora Investment

Document;

B. Expanding diaspora direct investment by providing technical assistance and grants to eligible early-stage SMEs and start-ups through (i) implementation of a Bosnian Diaspora Marketplace (BDM) and business plan competition to source innovative and high-growth oriented business ideas, linked to (ii) business advisory services and technical assistance provision, and (iii) grant funds.

Successful investors and startups have also been eligible for DCA-backed loans provided through a complementary program outside of the scope of this Activity; and

C. Developing a sustainable local platform to provide business services and facilitation to potential diaspora investors through the establishment of (i) a One-Stop-Shop for diaspora investors, (ii) creation of an online diaspora business network, and (iii) outreach activities, including diaspora investment conferences and B2B events.

This document is prepared following the first four and a half years of Diaspora Invest implementation

(April 2017 – October 2021) in an attempt to summarize and discuss the key lessons learned from the implementation, outline the approaches that have yielded results as well as those that have fallen short of their original purpose, and inform possible new avenues for intervention, should USAID/BiH decide to pursue such avenues further. The lessons learned are based on the results achieved through the implementation using indicators and benchmarks set at the Activity’s outset and the observations of the project team, beneficiaries and partners. An updated version of this document will be prepared and appended to the Activity’s Completion Report due in February 2022.

2 Review of Diaspora Invest results at the end of the fourth implementation year

The development hypothesis for Diaspora Invest Activity is that if linkages are created between domestic investment opportunities and diaspora capital/knowledge, if business enabling environment obstacles are reduced, and if diaspora has access to finance, technical assistance, and grants to start and expand enterprises, then diaspora investment in BiH will increase contribution to job creation. The three sub-activities each contribute to this job creating investment and engagement in different ways. Objective 1 improves the environment to promote and facilitate diaspora investment. Objective 2 incentivizes and facilitates diaspora investment through business support, technical assistance and matching grants. And

Objective 3 strengthens locally driven platforms for business service provision and matchmaking supporting diaspora investment in the long-term. Collectively, these sub-activities will engage diaspora and increase investment, which will in turn yield sustainable jobs.

As depicted in the table below, eight indicators have been identified to track Activity results. These indicators were deemed sufficient to enable a full report on the achievement of each intended objective and were designed to enable the Diaspora Invest and USAID/BiH to capture and communicate major

Activity results and to track implementation progress.

Table 1: Diaspora Invest Result Framework on 31 October 31 20211

1 All figures from official sources (FIA/APIF) and DI records. Average exchange rates used for each intervention year.

Number of new full time officially registered jobs in USAID-assisted enterprises and other private sector partners/beneficiaries 250 479 192%

Number of firms receiving USG-funded technical assistance for improving business performance 140 164 117%

Percentage of female participants in USAID-assisted programs designed to increase access to productive economic resources 25% 29% 116%

Value of investment in assisted private enterprises disaggregated by: 22,000,000 22,250,289 101%

a. Direct investment resulting from BiH Diaspora Marketplace (BDM) (in US$) 7,000,000 15,335,087 219%

b. Investment resulting from Diaspora Invest One-Stop Shop (in US$) 15,000,000 6,915,202 46%

Percent of policy recommendations submitted to the BiH governments at all levels 50% 71% 142%

Number of diaspora eligible, early stage SMEs and startups that graduated from

BDM

70 60 86%

7 Number of BiH diaspora organizations registered on the Diaspora Map 100 102 102%

Number of potential diaspora investors (firms) who used information and services provided by the Activity/One Stop Shop 100 110 110%

Total cumulative result

(Oct 31, 2021)

% of completion

LoA TargetNo Indicator description

A quick review of the results presented reveal that Diaspora Invest Activity has already achieved and, in most cases, exceeded the life-of-activity targets for 7 out of 8 indicators. Given that the Activity’s closeout is planned for April 2, 2022, there is little doubt that one remaining target will be attained as well by the end of the Activity, despite the difficulties imposed by the ongoing Covid-19 pandemic.

In terms of the key results, deliverables and outputs, the Activity has met with success in all of the three key areas and engagement:

Objective 1: Leveraging diaspora inputs into the policy-making process -

• Strategies for Cooperation with Diaspora have been adopted by the Federation of BiH and the Brcko

District Governments during the third year of the Activity, marking a major milestone in Diaspora

Invest policy work. The strategies’ adoption followed the endorsement of the Diaspora Investment

Sections of the Strategies (“Pillar 3: Enhancing diaspora contribution to economic development”), completed during the third year of activities together with the BiH, FBiH and Brcko District Working

Groups. The strategies’ adoption at these two levels has opened up an avenue for USAID Diaspora

Invest to work with these and other authorities in the country and assist them in implementing the strategy measures going forward. The Post-Evaluation Action Plan prepared by Diaspora Invest and submitted to the USAID/BiH on December 24, 2019 and a follow-on Request for Contract

Modification sent to USAID on April 22, 2020 and approved at the end of March 2021 proposed several activities along these lines.

Objective 2: Establishment of a BiH Diaspora Marketplace

• Eight requests for applications have been published under the BiH Diaspora Marketplace (BDM) Small

Grants Fund (SGF), attracting 306 applications from prospective diaspora investors with 77 grant agreements and technical assistance agreements signed. The total investment generated by the grantee companies is approximately $15.3 million2, with 479 new jobs created through assistance implementation, far exceeding the life-of-activity targets of $7 million and 250 new jobs, respectively.

Objective 3: Development of a sustainable local platform

• Diasporainvest.ba Diaspora Business Network Platform (BNP), a web portal launched early-on in the project, has since established itself as leading source of information for diaspora investors. The statistics show that 74,206 unique website users recorded 115,488 sessions with the total number of pageviews reaching 305,214. A total of 511 news articles were posted on the site, 24 video stories were produced and published, and 52 newsletters were developed and distributed to close to 2,000 subscribers. The number of registered platform users with established B2B connections has grown steadily over the period, reaching 1,326 registered users at the end of October 2021. Diaspora Invest has also registered 102 diaspora organizations on the site, meeting the contractual target.

• The Diaspora Business Center (DBC) has provided 100 potential diaspora investors with information and investment facilitation support since its establishment in late 2017. Standalone technical assistance

(TA) was provided through DBC to 86 diaspora firms encompassing a wide range of services, such as business set up support, introduction of technical standards and regulations, supply chain management, operational efficiency, branding, sales and marketing interventions, and others. The standalone TA interventions have yielded $6.9 million in new diaspora fixed asset investment by the end of 2020.

2 The figure includes fixed asset investment estimates for 2020, as the official data has not yet been made available at the time this document was prepared.

Furthermore, the DBC has expanded its outreach and developed a network of local partner institutions, including 16 local authorities that have signed Memoranda on Cooperation (MoC) with the DBC to jointly work on attracting and facilitating diaspora investments into these communities.

Furthermore, the DBC has implemented a series of “DiaWorks” physical workshops and “DBC

Online” webinars with experts positioning DBC as a platform for knowledge exchange. So far, DiaWorks workshops and DBC Online webinars have brought together more than 160 participants, demonstrating the demand for diaspora knowledge transfer and sharing of good practices.

• Communications and outreach effort to raise awareness on diaspora investment opportunities among the diaspora business community, the local private sector, and the general public was conducted systemically throughout the program. This has been particularly important as the Activity targeted potential beneficiaries residing outside of the country, unlike most development assistance programs that deal solely with country’s residents. To reach this audience, the Activity engaged closely with local media which proved to be receptive to the type of content produced by the project. Overall, at least 2,000 media articles dealing with Diaspora Invest activities were published during the implementation, with the advertising value equivalent of BAM 381,290 engaging with an audience of hundreds of thousands of citizens residing both in the country and abroad. To complement the media work, the Activity has set up its own social media presence growing organically its base of followers on Facebook (7,568), LinkedIn (1,670), Twitter (1,098), Instagram (670 followers) and YouTube

(30,919 views). Finally, a total of 94 business-to-business (B2B) events, workshops, knowledge-sharing and information sessions were organized throughout the implementation period with more than 5,000 participants taking part.

3 Key implementation lessons

Attaining success with Diaspora Invest Activity was made easier by a clear and concise project design. The scope of work for the project derived from the design had clearly defined goals and objectives, relevant problem definitions, and realistic, measurable, and attainable results. Given the innovativeness of the design, USAID/BiH has maintained a high level of flexibility and willingness to pilot and test out different approaches within the defined scope to arrive at desired outcomes. Overall, notwithstanding the challenges in the implementation environment (such as deploying effective and cost-efficient communications and outreach to a diverse global diaspora community, political commitment for policy reforms, Covid-19 pandemic impact, etc.), the execution of the project avoided any pitfalls thanks to the clear parameters established in the project design and close support and guidance received from

USAID/BiH throughout the implementation period.

Close to five years of implementation yielded some valuable experiences that can help in identifying successful and less successful approaches and derive lessons to inform any future follow-up actions. While some of the learning has been outlined in previous annual reporting, the current stage of implementation, with Diaspora Invest nearing the end of activity, provides an opportunity to quantify these lessons and illustrate with examples in all of the areas outlined. The following section groups the key lessons learned in main areas, provides analysis of data compiled over the past 55 months through official sources and

Activity records, and outlines possible follow-on actions that can be taken to maximize diaspora engagement in the BiH economic development going forward.

3.1 Models of Diaspora Engagement in BiH Economic Development

The BiH diaspora engagement with the home country takes several forms and shapes, depending on the diaspora motivation, professional background, investment capacity and long-term commitment. Four key types of diaspora engagement were observed during the implementation of the project with different features and distinct resulting impact on the ground (Figure 1):

• Diaspora Change Agent – this model is typified by direct diaspora investment (DDI), where usually greenfield investment takes place by a diaspora investor putting up her/his own funds to set up a BiH-based company in an industry in which the diaspora member has had extensive experience and success abroad. These types of investors either operate directly as individual investors or through foreign-based companies in their ownership risking their own capital and using existing contacts and business networks abroad to place the newly established company’s goods and services in export markets, and to some extent, in the local market as well. This was the predominant type of engagement observed, and Diaspora Invest instruments (investment facilitation, grants and technical assistance) were well matched to the needs of these types of investors. Thanks to diaspora member’s strong links with host country markets, these investments have demonstrated outstanding turnaround times from company establishment to the first sales being made in export markets.

• Diaspora Tipping Agent – this model is characterized by diaspora-facilitated foreign direct investment (FDI), where diaspora member ‘tips’ the investment location decision of a foreign company towards Bosnia and Herzegovina. These diaspora members are almost always foreign company employees or executives that exert influence over investment decisions of the firm. In this model, the diaspora member usually takes up a minority equity stake and active supervision of the BiH-based investment, usually by moving back to the country and taking up a formal management role. While the Activity has supported only a handful of these types of investments (Eagle Technologies, HIK SM, Webo, SB Laser), they have demonstrated an investment capacity that far exceeds that of typical DDI, given that the investment backers are usually well-established foreign firms looking to outsource or nearshore part of their manufacturing operation, taking advantage of competitive cost structures in BiH.

• Diaspora Trade Agent – this engagement model does not entail diaspora investment directly, but rather forges a link between local SMEs and foreign markets, thus boosting exports and increasing overall sales. The Diaspora Trade Agents, working either as supply chain managers, procurement managers or freelancers, are looking to engage with local firms in specific sectors that can supply foreign-based (business) buyers with products and services sourced from the country. While the Activity has not actively sought out or directly supported these types of interventions during the first four years of implementation (outside of providing information on and links to local business that conform to certain standards), it is clear that these types of arrangements can provide a welcome boost to the internationalization of the BiH SME sector that is overwhelmingly focused on the local market.

Furthermore, the sales relationship usually also leads to new investment in the local firm as the company looks to expand capacity to satisfy the growing export demand.

• Diaspora Knowledge Agent – these diaspora members are looking to support local

SMEs through information and knowledge sharing, technical advice, links to export markets and referrals to buyers, usually as volunteers and with little or no commercial interest of their own. The diaspora members engaging in this way are usually seasoned professionals or executives of foreign-based companies with decades of experience in conducting business in developed markets. This type of assistance to local firms could be extremely valuable as it is difficult to come by in the local market and expensive to procure. While the Activity has piloted some actions in this area (such as DiaWorks workshops and mentorships during the fifth year of implementation), there have been no larger scale structured efforts to channel this knowledge to the local private sector through mentorships and focused trainings or workshops.

Possible follow-up actions:

• Financial and technical assistance has proven to be a valuable tool for supporting diaspora direct investment and the diaspora facilitated FDI. The total investment ratio achieved under the program has been 11:1, with private diaspora investors putting up $11 in fixed asset investment for each USG dollar invested. This is made even more remarkable by the fact that the grant and technical assistance support was extended to startup firms and early-stage companies. The median age of all 164 companies supported was 12.6 months at the date of signing the technical assistance and/or grant agreement with Diaspora Invest. Furthermore, these companies have had no other outside financial assistance, unlike ‘legacy grantees’ and ‘repeat grantees’ that are fairly common in donor-funded interventions. Also, the mid-term Performance Evaluation of Diaspora Invest found that 77% of investors supported through the grant program would not have invested, would have invested less or would have considered investing only at a later date without Diaspora Invest financial and technical support. Thus, grant financing and technical assistance support, including investment facilitation, should continue to form a backbone of any intervention aimed at mobilizing new diaspora direct investment (Change agents), and diaspora facilitated FDI (Tipping agents).

• Follow on actions should attempt to further integrate all four models of diaspora engagement in effecting change in Bosnia and Herzegovina. Practically, this would mean that in addition to existing grant and TA instruments, new mechanisms could be put in place to engage with Trade agents and Knowledge agents. This can take the form of (i) actively identifying and engaging with Trade agents, (ii) developing sectoral databases for the Trade agents to tap into when selecting possible local suppliers, (iii) technical workshops to better prepare local SMEs to fulfill requirements of diaspora-identified buyers, and (iv) mentorship programs and workshops to provide a platform for Knowledge agents to engage with local SMEs.

3.2 Diaspora’s role in export promotion

One of the most distinguishing features of diaspora firms has been their strong focus on export markets.

The vast majority of Diaspora Invest beneficiaries were established with an intent to address demand in

Figure 1: Models of diaspora engagement in BiH economic development

• Diaspora members ready to take risks with own capital, bring new ideas and new ways of investing into their country of origin and, when successful, seen as role models for replication

• Diaspora Direct Investment

(DDI)

Diaspora Change Agent

•Diaspora members influencing (‘tipping’) an investment deal towards BiH and acting as brand ambassadors for BiH.

Usually take up equity and mgmt position in local firm.

•Diaspora-facilitated FDI

Diaspora Tipping Agent

•Diaspora members who link home country manufacturing and service industries with host country markets. Often industry insiders.

•Diaspora-supported export

(DSE)

Diaspora Trade Agent

•Diaspora members volunteering time and effort to transfer knowledge and know-how to the local home communities

•Diaspora knowledge transfer

Diaspora Knowledge Agent export markets, usually the market of diaspora member’s host country. Out of the 164 companies supported by the Activity by October 2021, 116 firms (71%) are exporting their goods and services. Close to BAM 89 million worth of goods and services were exported by these companies in 2020, making up approximately 71% of the entire sales (BAM 125 million) of all beneficiaries for the year.

Such overwhelming focus on exports would be difficult to find in any other cohort of companies in Bosnia and Herzegovina, regardless of their business, sector or geography. The diaspora firms lie in stark contrast to the rest of the private sector in the country, where only 15% of total sales were generated through exports3 during 2020. This low level of internationalization is indicative of both underwhelming competitiveness of BiH firms, but also of inadequate knowledge of export markets and opportunities available. Diaspora companies are largely well integrated into European and global value chains and are bringing much needed knowledge of export markets and developed business networks abroad that could be transferred to the rest of the private sector.

Interestingly, among the beneficiary firms, exporters significantly outperformed non-exporters in all key performance areas (Figure 2). Exporters hired 1,448 workers (92% of total), invested (cumulatively) almost

BAM 42 million in fixed assets (79% of total) and sold BAM 112 million of goods and services (93% of total) during 2020, with BAM 88.5 million sold in export markets and the remaining balance of BAM 36.2 million in revenues generated in the local market.

Furthermore, the exporting companies consistently reported the least issues encountered in the local business environment which is probably best explained by their relative detachment from the local operating context and their ability to conduct business independently of public procurement systems and local political rents.

Finally, the recent disruptions in global value chains caused by the COVID-19 pandemic have accelerated some of the value chain diversification trends observed even before the pandemic outbreak. According to the QIMA supply chain barometer, the proportion of US and EU-based businesses that have already begun sourcing from new countries (outside of East Asia) during 2020 or intend to do so in the near term have shot up to 80% in the US and 67% in the European Union. Furthermore, McKinsey’s survey of supply chain managers (Q2 2020) notes that 40% intends to near-shore and increase the supplier base and 38% intend to regionalize supply chains. This provides ample opportunities for closer integration of BiH businesses in

3 Based on FIA/AFIP datasets for 2020

Figure 2: Export performance of Diaspora Invest beneficiary firms at October 31, 2021

Source: FIA, AFIP (2020), Diaspora Invest records global value chains, particularly via EU-based integrators, with diaspora members playing a substantial role in the process.

Possible follow-up actions:

• Any follow-up actions should take into consideration the BiH diaspora’s impact on exports.

Interventions could be geared towards (i) providing larger incentives to export-oriented diaspora investment linked to export performance, (ii) stimulating integration of local SMEs into diaspora companies’ value chains as a steppingstone to prepare the firms for the competitive pressures of the export markets, and (iii) structured efforts to link local SMEs with diaspora Trade agents as described above.

3.3 Impact of diaspora in local development

Initial expectations for diaspora investment to agglomerate along the main urban and industrial centers in

BiH have not materialized. Rather, investment supported by the Activity has been extremely widely distributed, with 164 supported companies locating in 64 different municipalities across the country -almost half of all the municipalities in BiH. This distribution results from a strong bias by diaspora members in selecting their hometowns to locate their investment. This has had a large impact on local development, particularly in smaller municipalities that were otherwise struggling to attract investment, both foreign and local.

The impact of diaspora investment on underdeveloped local communities is further revealed by analyzing the municipal developmental profile of investment locations of Diaspora Invest beneficiaries. Least developed municipalities in BiH have attracted approximately 30% of all new employment generated and

27% of all diaspora investment (Figure 3) under the program.

Box 1: Diaspora Investment driving economic and social growth in small towns across BiH

While diaspora investment is having an important impact on economic development throughout the country, the beneficial effects are best observed outside of the largest urban centers. In Sanski Most, for instance, the project supported 5 diaspora firms through its financial and technical assistance program during the 2018-2020 period. These companies (Delta plus, HIK-

SM, CNC Tabakovic, Sana Metall and CNC Lab) have hired a total of168 people which represents around 7.5% of the entire private sector employment in the municipality. These diaspora firms have further generated BAM 14.5 million in exports during 2020 alone, making up around 20% of overall exports that originated from Sanski Most during that year.

In Lopare, a total of 100 workers were hired by three diaspora firms supported by the project (Djokic Metal, Termoelektro

Oprema and Octopus) which represents around 20% of the overall private sector employment of the town, with exports reaching BAM 1.6 million or 22% of total exports from Lopare in 2020. Octopus d.o.o., a company established by a Swiss-based diaspora member from Lopare, built a public swimming pool, a first such facility in the municipality and the wider region, with Lopare schoolchildren being able to learn to swim in the town for the first time in its history.

In Modrica, a single diaspora metal processor supported by DI (MP Pandurevic) hired 98 workers and exported goods worth

BAM 5.3 million or around 20% of total exports from Modrica in 2020.

All of these towns are facing a growing problem of outward migration, with few economic opportunities available to its residents. As illustrated by these examples, BiH diaspora is playing a crucial role in bringing jobs, investment, knowledge and technology from abroad, thus increasing economic opportunities and helping stem the outflow of young people from these areas.

From a developmental perspective, scaling up of diaspora investment could provide a lifeline to numerous communities across the country and mitigate some of the factors that are driving outward migration.

Possible follow-up actions:

• Designing a more structured approach by local authorities in engaging with diaspora members hailing from their local communities will inadvertently lead to better investment and employment results and improved outcomes. Possible follow-up on this could include: (i) diaspora mapping at a local level to identify the possible Change agents and Tipping agents from their communities abroad, (ii) systemizing local government incentives and investment opportunities, as well as compiling databases on local suppliers of goods and services for diaspora sourcing initiatives, (iii) developing and deploying toolkits for local communities to systemize best practices on diaspora engagement, (iv) co-organizing local diaspora-targeted B2B events, and (v) networking local authorities to exchange information and bet practices and build capacity on diaspora engagement.

3.4 Activating diaspora members through proactive outreach at home and abroad

The Activity was fairly successful in mobilizing diaspora investors through existing outreach efforts. A strong community of Bosnians and Herzegovinians interested in diaspora investment was built from ground up, and this community has kept engaged throughout the program. A healthy social media presence with thousands of followers, more than 5,000 participants at events, close to 2,000 recipients of monthly newsletters and tens of thousands visiting the diasporainvest.ba are all a proof that a solid global network can be built over time, even with limited resources. However, any attempt to scale up diaspora engagement and investment will require an even more proactive approach, in addition to maintaining the current channels of diaspora outreach – events, social networks, local media, diaspora organizations.

Spreading information on investment opportunities throughout the diaspora communities will require at least some presence in their host countries, both directly as well as through building a network of contact points/diaspora ambassadors in all focus countries.

This network effect, gained through increasing the number of people in the BiH diaspora business community, would bring proportionally more value to all network participants, but would also provide an incentive to others to join so they too can benefit from other network members. While diaspora

Figure 3: Overview of DI beneficiaries’ impact by investment location

Source: Development Programming Institute of FBiH, RS Government, FIA, AFIP (2020), Diaspora Invest records

Most developed Developed Medium developed

Underdeveloped Least developed

M ill io n s

Investment, Sales and Exports of DI Beneficiaries per Municipal Development Rank (2020 figures, million KM)

Total investment Sales 2020 Exports 2020

293 302

Most developed Developed Medium developed

Underdeveloped Least developed

Employment by Municipal Development Rank

(no. of employees in 2020)

27% of investment

27% of total sales 26% of exports

30% of employment organizations typically play an important role in cultural, educational, social and heritage engagement of

BiH diaspora, there are very few active organizations focused on business networking.

Possible follow-up actions:

• To scale up diaspora contribution to economic development, the diaspora members would need to be approached and ‘activated’ in their host countries through a multitude of methods, including:

(i) B2B diaspora events organized abroad, preferably with partners such as BiH diplomatic missions or bilateral chambers of commerce to help increase outreach and maintain cost effectiveness, (ii) identifying and activating credible and respected members of the BiH diaspora communities abroad

– diaspora business ‘ambassadors’ – who could be instrumental in recruiting other diaspora professionals and potential investors, (iii) engaging with the second generation diaspora through structured internship programs in local firms to reconnect young Bosnian professionals starting their careers abroad with the business sector in their homeland.

These initiatives would help activate a global network of diaspora to enhance “brand awareness” of Bosnia, advocate for BiH globally as a destination of choice for business and investment, promote BiH achievements worldwide, develop BiH international competitiveness, and identify emerging areas of development for BiH.

3.5 Financial instruments to maximize diaspora investment beyond DDI

Diaspora Invest has engaged directly with hundreds of potential diaspora investors residing outside of the country over the past four years. While many are interested to take part as direct, strategic investors setting up own companies or acting as conduits for other investors in Bosnia and Herzegovina, many others have expressed interest in portfolio investment options. This is particularly true of diaspora members living overseas (i.e., US and Canada), where the physical distance in most cases prohibits active management of investment, and where the familiarity with different financial instruments is notably higher than with the EU-based BiH diaspora. However, the absence of investment options as well as the lack of trust in local capital markets currently prevents any portfolio investment from materializing. Based on the interviews with diaspora members and the knowledge of the local market, Diaspora Invest is confident that there is ample room for a diaspora-focused collective investment vehicle that would be able to raise substantial capital from diaspora members abroad and allocate it to business undertakings that are currently underserved by the financial market (provided that it is professionally managed and independent of government influence in making investment decisions).

Possible follow-up actions:

• A proposal for a comprehensive package of financial, and other incentives, to support diaspora investors should be considered. Feasibility of various financing vehicles for diaspora investment should be explored, including a collective vehicle (fund) for diaspora investment, diaspora-backed securities, and other instruments to encourage diaspora members to invest in productive activities via an incentive scheme. A more innovative financing options should be considered as well, such as those matching grant financing with crowdfunded diaspora investment to expand access to capital for local startups.