Croatia – an attractive investment destination

Foreign investors take Croatia as an example in the “work-life balance” category, which is not negligible. By joining the EU and by accepting all the laws and norms of behaviour and business, Croatia has become a part of culture of the wider European circle, which thus brought the mechanisms of legal and financial protection of foreign investors to an EU level, for Diplomacy&Commerce says Mladen Fogec, President of the Foreign Investors Council in Croatia. 

1. How attractive investment destination is Croatia today?

Croatia has always been an attractive investment destination, however, its potentials were not sufficiently recognized or used.

Croatia has a very good geographic position in terms of position and connectivity, as well as an excellent road infrastructure, and what is most important – the quality of available human potentials in a wide range of expert knowledge is at a very high level.

There are a number of foreign investments that have already been implemented in Croatia, and whose business operations are very successful, but their success was not promoted to the general public. Like every country, Croatia also has its diversities, which when it comes to investments, reflects in the different approach to investors in different parts of the country. The result of this is that concentration of implemented foreign investments is much higher in northern parts than in other parts of Croatia. Exception to this is tourism, which is, of course, tied to the Adriatic coast.

3. What are your most important recommendations for improvement of the business climate?

For several years already, the Foreign Investors Council has been pointing to relevant obstacles, i.e. we give recommendations to improve the business climate. These recommendations are:

Legal uncertainty – changes in the legal environment, changing the rules, inappropriate implementation of EU regulations,

Tax liabilities – amendments to tax law, unequal solutions of different levels of tax authorities,

Parafiscal charges – number of additional expenses that must be settled, without clear connection to business operations

Public administration and judiciary – duration of court procedures, sometimes completely different treatment on local levels compared to the national level

Labour issues – rigid and inadequate labour law

4. How prepared is the Croatian Government to implement the changes that you suggested?

At the beginning of its term, the current Croatian Government showed determination to start the reforms and to improve conditions for development of the economy, including foreign investments, which was visible by the adoption of the new tax law.

Despite many difficulties, the current Government showed that it wants to persevere on that path, and the moves that they announced are promising. We hope that it won’t end like so many times in the past, where everything remained at a declarative level, and very little of what was promised was actually carried out.

Considering the very good economic indicators in this year, we believe that there will be a general political consensus in Croatia, which will contribute to growth and development of the economy, and thus to the possibility of arrival of major global investors.

5. What will be the Foreign Investors Council’s key areas of action in the following period?

Foreign Investors Council is regularly issuing its “White Book”, and we will continue to do so in the future.

Our activities are always tied to learning from the best, and on two occasions we organized conferences and brought in representatives of countries with the highest percentage of foreign investors, as well as representatives of countries in the region where foreign investments are on a high level, who shared their experiences and practice in these conferences. We will continue to do so in the future, and our first next event is the presentation of the 2017 White Book in November.

I would also like to point out that aside from the economic and financial aspect, I am receiving a strong message from the present foreign investors that Croatia is an extraordinary destination when it comes to the “work-life balance” category, which is not negligible.

6.How much has Croatia’s entry to EU contributed to strengthening of a legal state and to building a politically and economically predictable ambiance for long-term investments?

By joining the EU and by accepting all the laws and norms of behaviour and business, Croatia has become a part of culture of the wider European circle, which thus brought the mechanisms of legal and financial protection of foreign investors to an EU level. That is as far as normative acts are concerned. However, we must be aware that in real life, their application is not always ideal and efficient. Croatia as a young country with a young democracy in part has a mentality that originates from past times, so the process to change the common attitude that “foreign investors” aren’t that desirable and especially if they make profit in our country, takes time and adjustment.