POTENTIALS OF SMALL AND MEDIUM ENTERPRISES IN BOSNIA AND HERZEGOVINA: SOURCE OF ECONOMIC PROGRESS-RESULTS OF EMPIRICAL RESEARCHES-

The article deals with the issue of the SMEs development in Bosnia and Herzegovina in order to determine capabilities and opportunities for their future adjustment to grand challenges in business environment caused by active B&H participation in the process of globalization. All conclusions and researches conducted by the author of this article show insuffi cient level of SMEs development necessary for the realization of signifi cant orga-nizational changes. Analyzing all this, it is evident that low level of SMEs’ capability and capacity represents a barrier for quicker economic growth. In comparison to the previous years, there is a signifi cant improvement in elimina-tion of administrative barriers for both domestic and foreign investing. Due to the speed of implementation of those reforms it could be stated that by the end of the year 2005 the major administrative barriers will be eliminated, disputes will be settled in quicker way and larger protection of creditors will be provided. In order to improve the business climate more attention will be paid to: creation of better conditions for achieving of higher competitiveness level of domestic production, de-crease of tax rates and strengthening of economic management. Those two factors represent key strategic instruments in future development of small and middle sized enterprises in Bosnia and Herzegovina. Strengthening of entrepreneurship in B&H is already defi ned as a precondition for fast private sector development, especially SMEs development. In comparison to the other countries in transition, B&H has the lowest number of companies per 1000 inhabitants. Costs for foundation of a company are the highest ones in the region, higher than in the countries of EU, USA and Russia. This represents a clear signal for the B&H Government to speed up the process of the implementation of the necessary reforms in order to create a business climate suitable for SMEs development. However, in spite of all this a number of newly established companies is very high. According to the Court data, 12.141 new companies were established in B&H for the pe-riod of fi rst 10 months of the year 2004. This data clearly indicate that there is a high level of business interest, but still this level is lower than in the other countries of the region or EU countries. On the basis of the evident conclusions here it can be stated that there are no enough evidences showing that small and medium sized enterprises are really ready to accept the necessary changes. However, those changes represent precondition for successful surpassing of all barriers in this sector of B&H economy (administrative barriers, insuffi cient usage of informatics services and lack of own working force