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The competitiveness of Bosnia and Herzegovina (BIH) in the region has had a more negative than positive trend over the past ten years. The causes for the weak competitive position of BIH and slow economic development are the result of an unstable political situation, poor business environment, incompetent and malevolent resource management, as well as the negative effects of the global economic crisis which has mainly affected small and transition countries such as BIH. The aim of this paper is, by analyzing the key factors for BIH’s weak competitiveness relative to the region, to suggest adequate guidelines and economic policy measures that are optimal for increasing the competitiveness of the BIH economy, which would ultimately contribute to economic development and accelerate the process of integration of BIH into the European Union (EU). For the purposes of this paper, the definition of competitiveness of the World Economic Forum is accepted. The methods of induction, deduction, compilation and comparative analysis were also used and on the basis of the results obtained; measures are suggested for increasing the competitiveness of BIH in the region. The results of research suggest that the increase of the competitiveness of BIH's economy in the region is possible primarily through accelerated and continuous economic development, a structural reform of state institutions and by attracting foreign investment, which would also accelerate the process of integration into the EU. The paper also deals with the possibility of regional market integration, with the aim of attracting foreign investment, which would further increase the competitiveness of BIH in the region.

INCREASING THE COMPETITIVENESS OF BOSNIA AND HERZEGOVINA IN THE REGION IN THE FUNCTION OF ECONOMIC DEVELOPMENT AND INTEGRATION INTO THE EUROPEAN UNION