Croatian Economic Diplomacy

CROATIAN ECONOMY

ABSTRACT

The Republic of Croatia is included in a group of States, with a small and open economy, which is to a great extent associated with other foreign markets. The priorities of the Croatian economic policy are: continuation of the development of a stable and strong market orientated economy; competitiveness on the world markets; maintaining and strengthening macroeconomic stability; and the continuation of structural reform in order to secure stable and sustainable economic growth, in particular relating to exports and increased employment. Special emphasis has been placed on the creation of favourable business environments, harmonised with the business environments prevailing in the European Union, further development of the institutions in the market economy, promotion of private investment, promotion of international competitiveness, as well as entrepreneurship and market freedoms.

During 2005, the service HITRO.HR began, with the purposes of strengthening entrepreneurship, aimed at simplifying administration procedures, and in January 2006, began the service e-PDV (e-VAT), which enables users of the VAT system to declare value added taxes via the Internet. The Government of the Republic of Croatia is pursuing the e-Hrvatska (e-Croatia) whose goal is the implementation of IT for the whole Croatian educational system, and is also planning on-line access to medical services, which would enable provide quality medical health. By 2007, it is planned to establish a network system, which will, via the Internet, allow for the use of services of public administration, health, education and justice systems. In 2006 began the initiative with the scientific community in Croatia in order to advance the cooperation between the economy and science.

Likewise, it has begun also to create the conditions for high sustainable economic growth rate, in particular through the increase of competitiveness and flexibility of the market, which will contribute to solve the problem of unemployment. With the increase of production and exports, through the stimulation of export activities, restructuring large Croatian companies in state ownership and the increase of competitiveness of Croatian products on the world markets, will positively influence foreign debt and the deficit in the balance of payments.

The underlying economic aims are increasing export, implementation of quality standards, complying with environmental requirements and the acquirement cost efficiency. The diversity of climate, terrain and soils, allow of a wide variety of agricultural products, while low pollution promotes environmental production. Croatia, as one of the important tourist destinations in the Mediterranean, has a long tourism tradition and large developmental capacity. In the last few years, Croatia has been categorised as one of the tourist destinations in Europe with the fastest growth rate. In particular, in the last few years, the trend in restructuring the building sector, which is in compliance with modern European trends, has had the effect where small and medium companies more easily adapt to modern demands of the market. Favourable geographic location allows for the development of the transportation infrastructure and transport industries as one of the important factors for the entire economic and social development of the country.

One of the primary economic goals of the Government of the Republic of Croatia is the creation for the stimulation of the working environment, incompliance with the standard in the EU and countries with developed market economies. The commitment of the Government to the reform the national economy, with the aim of increasing the attractiveness of Croatia to foreign investors, will be done not only in Croatia but abroad as well.

Within the Ministry of Economy, Labour and Entrepreneurship of the Republic of Croatia is the Investment Promotion and Export Directorate, which is the competent body for the implementation of the Law of Investment Promotion, that is, for giving promotion measures, tax and customs fringe benefits, to local and foreign investors.

The Trade and Investment Promotions Agency was established in 2002, whose main activities are aimed at proactive searching, informing, attracting and realising qualified investment projects, which include the production of goods and services with high value added for export, and those projects which generate new work places.

For a successful Croatian economy, larger GDP growth and living standards, and increased employment, it is important to direct towards export. In this respect, the Croatian Export Boost was presented in January 2007, as a project of the Ministry of Economy, Labour and Entrepreneurship, in cooperation with the Croatian Exporters Association, Croatian Chamber of Commerce, Croatian Chamber of Trades and Crafts, Association of Croatian Employers and the Croatian Bank for Reconstruction and Development. The main goals of the strategy is to solve the key problems for increasing export, such as small capacity, fragmentation of production and poor competitiveness. Important emphasis is given to the establishment of six clusters for export: water, small shipbuilding, textile-clothing, ICT solutions, wood-furniture and mariculture-Croatian fish.

It is to be expected that the commencement of negotiations with the EU, which will contribute to a larger inflow of foreign capital, in particular in „Greenfield“ investment projects, which will in the end increase economic growth and global competitiveness of the Croatian economy.

In the international arena, the most important achievement was realised on October 4, 2005, with the commencement of negotiations for Croatia's entry into the EU, after the positive decision of the Council of Ministers of the EU. Croatia is currently undergoing the process of analytical review and the evaluation of the conformity of the Croatian legislation with that of the legislations of the EU. Croatia, likewise, as a member of the WTO is actively conforming its legislation with WTO standards, signatory to Stabilisation and Association Agreement with the EU, which went into force in 2005.