Successfully investing in Croatia

published on May 16, 2018

 

How do you assess the current economic situation in Croatia?

Croatia reported a GDP growth rate of approx. 3 per cent in 2016, whereas the country's economy continued to grow in 2017 and this upward trend still continues. Growth is based and driven mainly by exports, investment and private consumption, which in turn benefits from higher real income due to wage increases in the public sector, from the tax reform and a strong tourist season. Although the financial problems of Croatia's largest private corporate group AGROKOR affect the country's current economic situation, it should be mentioned that the implemented restructuring efforts have stabilised the situation of most corporate groups which could take out new, specially secured loans. A happy ending to those difficulties is already on the horizon.
 
The Croatian government has also committed to create favourable framework conditions and a positive environment for foreign direct investments which are absolutely indispensable for an open, export-oriented and competitive economy. The impact of the implementation of this new policy is becoming more and more noticeable also in the economy.

How would you describe the investment climate in Croatia? Which sectors offer the largest potential?

Gross fixed capital will increase significantly in 2018 and 2019. It is projected that growth in the coming years will be higher than the last 10 years' average. Thus, the Republic of Croatia has large investment potential. This is mainly attributable to the geographical location of Croatia in Southeastern Europe. Access to the Adriatic Sea along the long coastline, a very well-developed motorway and rail network, as well as good flight connections offer potential investors the opportunity – on the one hand – to invest in the tourism industry on the coastline and – on the other hand – to build production facilities in the country's interior. The widely popular issue of renewable energies is far from being exhausted yet and is certainly interesting for entrepreneurs having expertise in this area. The Republic of Croatia is also more than suitable for setting up locations for the IT industry. Thanks to the very good education system in Croatia, entrepreneurs may choose from a large number of excellently educated engineers and specialists available every year.

 

The north-western region of the country offers the largest competitive advantages because Croatia's capital city Zagreb – the Croatian economic hub – is located in this region. Other two regions include Central and Eastern Croatia as well as the Adriatic Coast. The central-eastern part offers good investment opportunities for agriculture and the coastal region – mainly for tourism.

 

Other factors that attract foreign investors include a well-educated workforce, the geographical location with key pan-European routes, natural resources, well-developed financial services and high-quality telecommunications infrastructure.

 

The main impetus behind the positive development in Croatia comes from domestic demand, growing private consumption and investments. Also strong exports of goods and services contribute to achieving good results. Exports of goods recorded strong growth in the course of 2017. Thanks to the successful tourist season, also exports of services are on the increase. The tourism sector hit a new record high in 2017; a large part of investment activities refers to new construction and modernisation projects in this area of industry.
  

What challenges do German companies face during their business ventures into Croatia?

The bureaucratic system and difficult access to information are the hurdles that businesses are faced with in Croatia. The biggest challenges for a German entrepreneur seeking to do business in Croatia will surely be bureaucracy and the particularly pronounced formalism. Depending on the area of entrepreneur's activity, it is necessary to obtain various approvals, permits and consents to operate a business in Croatia. It should be noted that the procedure of issuing the above documents often takes longer than expected. The Croatian authorities and courts often contend with the directly applicable EU regulations; therefore, if a German entrepreneur wants to invoke the EU regulation, this will certainly involve a greater deal of persuasive effort on his/her part than would be the case in a comparable situation in the Federal Republic of Germany.
 

Are there any local differences in the implementation of applicable laws? If so, how does this affect businesses?

Although the applicable laws and regulations are the same throughout the Republic of Croatia, there are cases where the implementation and interpretation of laws varies depending on the location and region. Therefore, also the local circumstances should be examined in advance, if possible, in order to avoid any unexpected situations. If differences do exist, they will be mainly visible in the fact that the authorities will set different requirements for starting your business, even though the requirements are laid down in the laws or in the implementing regulations. In that regard, it is recommended to seek prior advice from experienced local specialists in areas such as law and taxes. Basically, however, it should be noted that the differences in the implementation of applicable laws are slowly becoming less significant, which is good news not only for potential investors.
  

In your opinion, how will Croatia develop?

It is expected that the enormous potential of the Republic of Croatia will be fulfilled in the future especially as a result of the EU accession, access to various EU funds as well as opening up the market, and will thus let the country develop into a stable and strong member of the EU. All these developments will make Croatia an even more attractive location for foreign investors.
 

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