The economic and business relations between Croatia and Austria have always been excellent and keep improving every year. We are looking for further improvements in the Croatian business climate and introduction of dual education. Furthermore we are pleased that HGK has decided to use our model of export promotion, says Mr. Christoph Leitl, President of the Austrian Federal Economic Chamber for Diplomacy&Commerce magazine.
1: Four years after Croatia’s EU accession, could you sum up for us how beneficial was this for the strengthening of the business and economic relations between Croatia and Austria?
The economic and business relations between Croatia and Austria have always been excellent and keep improving every year. The harmonization of Croatia’s legislation with EU regulations prior to Croatia’s EU accession and ever since has been very important for Austrian subsidiaries in Croatia and Austrian enterprises doing business with Croatia, as it provides for more a predictable and stable regulatory framework for business.
The strong economic ties between Austria and Croatia become especially evident when we look at the entirety of bilateral economic relations. The sum of bilateral trade in goods in 2016 totaled 1.9 billion EUR and total bilateral trade in services amounted to 1.6 billion EUR. If you add foreign direct investment (FDI) to this, the economic relations between Croatia and Austria stand at an impressive EUR 7.2 billion EUR. Although Austria has a surplus in goods trade, this is more than compensated for by Croatia’s surplus in services trade. Only with regards to FDI, Austria’s position in Croatia at the moment is stronger than Croatian FDI in Austria. But this year EUROHERC opened an office in Vienna and this, I hope, is only going to be the first of many Croatian companies to set up a subsidiary in Austria.
2. In these past four years, how much did the business climate in Croatia improve to be more in line with the European Standards?
Our Advantage Austria office in Zagreb conducts business sentiment surveys among Austrian investors in Croatia on a regular basis. Comparing the surveys from 2013 and 2017 shows interesting results. In 2013 business sentiment was quite subdued, owing to the ongoing recession; therefore business climate was rated as poor by more than 70% of respondents. The areas that were rated worst were payment behaviour, public administration, the legal system and the taxation system together with tax administration. Also slow processes with regard to the issuing of permits and labour legislation in general were rated as poor.
Looking at this year’s business sentiment survey, the general mood has improved considerably, mainly because Croatia has found its way out of recession. Furthermore, the previously mentioned areas of concern were rated slightly better, however, there is definitely still quite some room for improvement.
In the four years since Croatia’s EU accession, Croatia held two parliamentary elections in short succession, which, unfortunately, slowed down the much needed reforms. I firmly believe that if Croatia manages to implement the structural reforms that have been planned for a long time, then growth would pick up considerably and Croatia would be able to close the gap to EU countries that have been outperforming Croatia.
3. In that context, what are the main topics that you usually discuss with your counterparts from the Croatian Chamber of Commerce? In which areas is more progress needed, and how much can the cooperation between the two chambers help in this respect?
It is no coincidence that the Croatian Chamber of Commerce (HGK) and the first economic chambers in Austria were established around the same time over 150 years ago in a similar manner, and so our institutions have traditionally had a very good relationship. Both our organizations are striving to improve the general business conditions for our members.
Here at the Austrian Federal Economic Chamber, our priorities for policy improvements are to incentivize investments of the private sector, including digitalization and innovation, to reduce red tape and to increase flexibility in various aspects of labour legislation. As you can see the topics we are dealing with in our respective countries are quite similar and hence this is also what we are discussing with our partners from the HGK on a regular basis. But in a few areas we have been cooperating more closely recently, namely dual education and export promotion.
Regarding dual education we are supporting the HGK as consulting partner for capacity building within the Cap4App Erasmus+ program. This cooperation aims at establishing a dual educational model in Croatia, which is better geared towards the needs of businesses. The aim is to get apprentices to spend more time in companies, which would ideally also lead to a higher retention rates of apprentices once they have finished their education, and thus reduce youth unemployment. Also, the businesses offering apprenticeships should have a stronger voice in curriculum design, selection of apprentices, etc. In Austria this is facilitated through apprenticeship offices established at the local economic chambers. This model works very well and hence could also be interesting for Croatia to not only reduce youth unemployment, but also to meet the needs of Croatian businesses for skilled workers.
Regarding export promotion, we are proud that the HGK has decided to develop a trade promotion organisation similar to our ADVANTAGE AUSTRIA model. Therefore, naturally, we have had a lot of contact regarding the set-up and organizational challenges of our model and how it could work for Croatia. In Austria, six out of ten Euros are earned in export and hence a strong network to support our SMEs in their international business is vital. I am sure that once Croatia has set up its organization, Croatian SMEs will strongly benefit from it.
4. Apart from nurturing bilateral relations with your Croatian counterparts, you have also been cooperating under the framework of Eurochambres, which you preside over. What are your main priorities in the following period, and how much influence does this chamber association have in the EU and on the national level?
EUROCHAMBRES was established in 1958 as a direct response to the creation of the European Economic Community. It is an important companion for European integration and a promoter of the European idea in the business community. The chamber network represents over 20 million businesses in Europe through 45 members (43 national associations of chambers of commerce and industry and two transnational chamber organisations) and a European network of 1700 regional and local chambers. More than 93% of these businesses are small and medium sized enterprises (SMEs). Chambers’ member businesses employ over 120 million people.
EUROCHAMBRES is the biggest business organisation for the representation of interests at the European level. It contributes massively to the strengthening of the business location and makes the chamber members fit for global competition, in particular through its commitment to the promotion of education and training, research and development as well as digital infrastructure.
Our priorities within the EUROCHAMBERS are to support entrepreneurial spirit by improving access to finance, fighting red tape, and enhancing free trade, to respond to new challenges such as digitization, migration and integration, climate change, innovation, automation, implementation of new technologies. When it comes to people, our task is to bring talent to skills through life-long learning, Erasmus+, apprenticeships, combating youth unemployment, and dual education.
5. Both Croatia and Austria suffer from a workforce shortage in tourism. Have you given any thought to having a joint approach to resolving this issue?
The shortage of workforce in tourism has a number of reasons hence tackling this problem needs a bundle of measures, among them the creation of attractive work environments but also educating people about the prospects and advantages a job in tourism can offer. With our friends from the HGK we often are discussing this issue but we are also exploring various ideas and checking their feasibility. One idea, for instance, is based on the fact that the summer tourism season in Croatia still in many places lasts only from April to October and in Austria, winter tourism usually runs from December through to March. So maybe people who are working in the summer in Croatia would be interested to work in the peak winter season in Austria. So, yes we are discussing various ideas and I am sure that we will come up with something that will benefit everyone – tourism staff as well as the tourism industry in Austria and Croatia!
6. To what extent can dual education solve this problem?
Tourism professions are classic VET (vocational education and training) professions and are, to a large extent, taught very successfully in the dual education system in Austria. Many great international careers have started with dual education in tourism in Austria.
No doubt, working in tourism can be quite demanding, but it can also be extremely rewarding. In Austria dual education in tourism offers young people an additional path of entry into the profession, with the advantage that from the very beginning they are treated as full members of the team, as they are employed directly by the company providing the education. Also apprentices in tourism very quickly will be able to realize if the profession fits them or not and can take appropriate measures. The education is also very versatile as people can choose to remain in the classic jobs they are being trained for, or pursue paths of higher education, if they find that they want to move their careers into different directions. Dual education in tourism is also a very interesting option because it offers education and jobs in regions where there might not be many other options, for instance in alpine villages. What is vital in order to make the system work, is to educate young people and their parents about the many advantages dual education in tourism has to offer, and of course to keep developing dual education according to the demands and needs of the industry and its staff.