PhD Saša Muminović, President of SLO CRO Business Club: Economic relations at an extremely enviable level

The economic relations of the two neighbouring states have been developing since the moment of independence, which happened at the same time. Today they are such that they break all records. However, there is still room for improvement, especially in third markets, but also individually, says Saša Muminović president of the SLO CRO Business Club. Joint application for EU funds is something relatively new for us (in the last ten years) and not so exposed in the media. The European Union strongly supports regional cooperation and there are opportunities not only for the economy but also for non-governmental organizations, says Muminović.

 

  1. Croatia and Slovenia are celebrating 30 years of diplomatic relations this year. Both countries declared their independence at the same time, and they are bound by a common past. How would you evaluate the development of economic relations in the previous 3 decades, and how do you see them today?

After the declaration of independence, both countries faced a relative loss of the common Yugoslavian market due to wartime circumstances and sanctions. Therefore, they turned to Western markets, primarily European, where they established new economic relations very quickly. In the export of goods, Slovenia took a big step forward and became a highly export-oriented economy. This is a great advantage of the Slovenian economy, its development engine, but unfortunately it also makes it vulnerable because it depends on the state of economies of the countries to which they export. Croatia was somewhat weaker in its efforts to make exports a priority. But that’s why tourism, as Croatia’s best export flagship, significantly changes the overall picture. Unfortunately, it also has its own pitfalls and shortcomings that we saw during the pandemic. For this reason, the development of sustainable tourism with high value added is the only true way to develop Croatian tourism in the future. Mutual economic relations between Slovenia and Croatia are at a high, we can even say enviable level, today. Cultural relations between the two countries are also at an enviably high level. Namely, in addition to the economy, culture is the link that also unites Slovenes and Croats and helps us understand each other. Also, there are visible signs of progress in the political aspect. We hope that it will continue in this direction, because weaker political relations have an adverse effect on the mutual economic cooperation since they create unnecessary tension and aggravation.

  1. In your opinion, and from a businessman’s point of view, is there room for development of these relations and where (joint participation in third markets, joint application for EU funds, mutual investments…)?

At first glance, it seems that this is it, however, it is very interesting to see how primarily a small and medium economy sees the potential in the neighbouring country. In the period from August 31 until September 24, 2021, in cooperation with their partners from the Association of Employers of Slovenia (Združenja delodajalcev Slovenije) and HGK Krapina County Chamber (HGK Županijska komora Krapina), the SLO CRO Business Club conducted a survey among Slovenian and Croatian businessmen about their opinions and attitudes about Slovenian-Croatian business cooperation. 45 respondents from Slovenia and 82 respondents from Croatia responded to the survey. We asked respondents about their experiences in business cooperation with the neighbouring country. We wanted to learn what, in their opinion, affects the cooperation, and about the directions of internationalization of business. The sample of Croatian companies, in almost half of the cases that have branches in Slovenia, also includes the first branch/company that the Croatian company opened abroad or when it decided to internationalize. In almost 65% of cases, a branch in Croatia is also the first branch/company that a Slovenian company opened abroad or when it decided to internationalize. The vast majority of respondents stated that doing business in the neighbouring country is without major obstacles, and characterized the business climate as similar to the one in their home country. The most important thing is that the majority of respondents from both countries see the potential for further cooperation and are planning it. So, we just need to continue the current right trend. Joint application for EU funds is something relatively new for us (over the last ten years) and it is not too exposed in the media. The European Union strongly supports regional cooperation and there are opportunities not only for the economy but also for non-governmental organizations. However, I would place greater emphasis on the joint performance of Slovenian and Croatian companies on third markets and their synergy. In June of this year, the SLO CRO Business Club organized a business breakfast on the topic of investments and business opportunities in West Africa. The guest of honor was the Nigerian Ambassador and several important businessmen from Ghana and Nigeria, who do business from London and Budapest. After that event, we concluded that most of us in this part of Europe have no idea what business opportunities the African market offers, or its potential for business cooperation. The Americans and the Chinese know, they have been there for a long time, the British know, of course, and even the Germans – but we are too little informed or full of prejudices. Nigeria alone has more than 200 million people – and that is a huge market where Croatia and Slovenia should certainly perform together. We need to point out another segment of cooperation, which is the very important personal contact. Corona handicapped us in this respect. Regardless of all the advantages of video conferencing, it has become clear that the virtual world cannot replace a real handshake. This is exactly the advantage of the SLO CRO Business Club, which provides its members with the much-needed networking. The trust established this way between business partners is extremely important. At our business breakfast about investment opportunities in Africa, we had business people, managers from Ghana and Nigeria, and our business people who already work there, so we got first-hand information – and trusted contacts. A recording of that breakfast is available on YT channel of the SLO CRO Business Club, and your readers are free to take a look.

  1. What do the numbers show, who has more investments and what is the mutual exchange between the two countries?

According to data from the Ministry of Economy and Sustainable Development of the Republic of Croatia, from 1993 to the end of the fourth quarter of 2021, the sum of EUR 38.8 billion in foreign direct investment was recorded in Croatia. Slovenian investors make for 5% of that or EUR 2 billion. In 2020 alone, a third of Slovenian investments abroad, or 32.9%, will be investments in Croatia, and in 2021 – 34.6%. Croatian investments in Slovenia are not insignificant either, in 2021 they were fourth ranked with 9.7% of total investments in Slovenia in that year. Mutual trade is very interesting, the statistics are impressive in this area. At the same time, the export of goods from Slovenia to Croatia increased by 145% (from 1.2 to 3.1 billion EUR), and the export of goods from Croatia to Slovenia increased by 266% (from 0.65 to 2.3 billion EUR). The figures will certainly be even higher this year, but unfortunately not so much because of the increase itself, but because of the inflation. We will have to go back to constant price calculations. After the traditional export markets of Germany and Italy, Slovenia and Croatia are each other’s third trading partner in most observed years. This is not negligible, especially if we compare the sizes of the first two economies (Germany and Italy) and our two (Slovenia and Croatia).

  1. Where is there still room for progress in economic cooperation? How is your communication with decision makers and what are the biggest problems of businessmen?

I would like to circle back to the survey conducted by the SLO-CRO Business Club. In the sample of Croatian companies, almost 85% answered that they have a greater need for cooperation; only 13.4% answered that there would be no need for greater cooperation. In the Slovenian sample, 63% responded that they want to participate more. However, one third of them stated that they do not need more cooperation. We also asked both sides what are the obstacles in doing business – if they had to define them. In the Croatian sample, more than half answered that there are no obstacles in doing business. In the second place were administrative or bureaucratic obstacles. This answer is very interesting, especially considering that companies do not know the government bodies that could help them when entering foreign markets (such as Spirit or Spot points and the lack of information). This is interesting considering the number of companies claiming to have enough information on the internet. When it comes to obstacles to cooperation, 7% of Croatian respondents also cite weak ties between the two countries, and 4% mentioned the difference in language (it is safe to assume that they have not yet tried to penetrate the Chinese or Japanese market). Only two respondents opted for political reasons. When it comes to Slovene respondents, more than half (62%) of them believe that there are no obstacles for business cooperation. Similar to Croatian colleagues, the Slovene sample most often cites administrative and bureaucratic obstacles (26.7%). They also mention lack of information (almost 9%) and weak ties between countries, and the political reasons – little less than 7%.

  1. The pandemic, the war in Ukraine, the energy crisis, the inflation… things are not going well for economic development. What do you see as a potential solution to the on-going crisis (government measures, on EU level or each country separately..)?

Every war brings suffering and devastation. We talked about the measures during the pandemic. Today, we are facing completely different challenges. The mechanisms of the electricity market in Europe do not function in a healthy way because they were never designed to absorb shocks. It is illusory to talk about any state aid or EU aid to the economy, i.e. to the economies of the member countries. If a company used to pay one hundred thousand euros a month for their electric bill, now it will be 400,000 euros. On an annual level, this is a difference of EUR 3.6 million! There are no state aids that can neutralize such losses. We need systemic solutions to calm the market. Even in the direction of temporarily freezing the objectives of the green plan.