Reforms and stable operating conditions as key prerequisites of further development

“The world is enshrouded in a negative investment climate due to the consequences of the C-19 pandemic. Investors have been more cautious, as they have been preparing for long-term investment cycles recovery. Croatia must raise its level of competitiveness and technological development, as well as focus on industries with high added value which succeed at attracting foreign investment. Croatia has only one objective weakness – the size of the domestic market. Everything else can be taken care of. With a pragmatic approach it will be possible to realize additional investment potential within one year,” pointed out Marko Derča, Partner, Kearney, in his opening speech at Executive Lunch “Managing Competitiveness and Attracting Foreign Direct Investment” hosted by the American Chamber of Commerce in Croatia (AmCham).

Mr. Derča’s opening statement was followed by a panel discussion whose participants were Ana Čulo, Head of the Investment Sector at the Ministry of Economy and Sustainable Development, Josip Funda, Senior Economist at the World Bank Group, Ruža Tomić Fontana, General Manager of Coca Cola HBC for Croatia, Bosnia and Herzegovina, and Slovenia, and John Gašparac, Country Managing Partner, PwC Croatia. Among else, they discussed opportunities in the investment area, competitiveness and productivity in Croatia compared to CEE countries, inclusion into global value chains, as well as the challenges and advantages of investing in Croatia.

“Global recognition is a prerequisite for the increase in investment and export, which is why we are constantly working on strengthening visibility and recognition of the Republic of Croatia as an attractive investment and business destination on the European as well as on the global level,” stated Ana Čulo, Head of the Investment Sector at the Ministry of Economy and Sustainable Development.

The panelists agreed that reforms and stable operating conditions are key prerequisites for further development and attracting domestic and foreign investment.

Ruža Tomić Fontana, General Manager of Coca Cola HBC for Croatia, Bosnia and Herzegovina, and Slovenia emphasized that the factors of every investment include the environment and the operating conditions, which is why it is important to systematically work on increasing competitiveness and eliminating of the known shortcomings. Stability is crucial in three aspects: legal, tax and political. Frequent tax changes impact the stability of operating conditions, particularly if they do not mean shifting the tax burden away.

John Gašparac, Country Managing Partner, PwC Croatia, agreed with Ruža Tomić-Fontana’s statement and added: “Attracting foreign investment is of utmost importance for Croatian economy, not only during and after COVID-19 pandemic, but at all times. Competition for foreign investment has become more fierce during the pandemic and it is evident that Croatia must be in the best shape in order to attract such investment, given the current environment. This means that the criteria considered sound and transparent by the community of foreign investors, such as ease of doing business, digital mobility of people, preservation of local talent, operating expenditure (tax) and availability of EU funds, to name a few, must be constantly monitored and revised to ensure that Croatia is competitive. The better our management of business environment, the more successful and competitive we will be not only in attracting foreign investment, but also in preserving local and existing investment.”

Reforms that create better business climate are key for both domestic and potential foreign investors. In this respect, increasing the efficiency of the judicial system, reducing red tape and increasing the quality of education should be made a priority. Furthermore, additional opportunities should be sought in global value chains reshuffling, which may lead to a new wave of foreign investment in subsequent years, concluded Josip Funda, Senior Economist at the World Bank Group.