Successfully investing in Croatia

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published on 27 May 2020 | reading time approx. 3 minutes

 

 

How do you assess the current economic situation in Croatia?

Croatia reported a GDP growth rate of approx. 2,7 per cent in 2018 and 2,9 per cent in 2019 – this upward trend still continues. Growth is based and driven mainly by a strong tourist season, exports, investment and private consumption. The highest growth in gross value added was achieved in the group of activities that combines wholesale and retail trade, transport and catering, and in construction business.

 
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?

The Republic of Croatia has large investment potential. Key sectors are:

  • car industry,
  • ICT sector,
  • pharmaceutical industry, 
  • food industry, 
  • metal industry, 
  • energy sector and 
  • tourism.

 
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 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 natural resources, well-developed financial services and high-quality telecommunications infrastructure. Also, Croatia has attractive tax incentives, double taxation agreements with many countries, and is – of course – part of the EU's single customs area.

 
The main impetus behind the positive development in Croatia comes from investments, domestic demand, growing private consumption and successful tourist seasons. Also strong exports of goods and services contribute to achieving good results.
   

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.

    

Is there a sector that has a particularly promising future in Croatia?

The Republic of Croatia is 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. Croatia has always been known for top scientists and our time is no exception. Many of them are already known in Europe and the rest of the world. There are also those hard-working IT experts unknown to the public, who took a number of emergency actions in the corona crisis and after the earthquake in Zagreb, and thus enabled others to work painlessly from home.

 
Also, Croatia encourages foreign investment in the IT sector with various incentives for investors.

   

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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