Thursday, 6 June 2019

Croatia Performing Poorly with Reforms, Tax Burdens Continue to Cripple

As Novac writes on the 6th of June, 2019, fiscal consolidation, investment and business barriers and the burden on the Croatian economy make things very difficult for business in Croatia, according to the results of HUP Skor for 2018, showcased by the Croatian Employers' Association (HUP).

It is a tool to measure the progress of reforms in the twelve critical areas necessary for doing better business and improving life in the Republic of Croatia when compared to the EU 10.

As Gordana Deranja, HUP's president, explained, "HUP Skor is an objective measure of how much we're really reforming."

Since the countries of central and eastern Europe progressed faster than Croatia last year, Croatia's HUP Skor for 2018 is a rather embarrassing 36 out of the possible 100 points, and what continues to push Croatia to the bottom, as was stated by HUP, are taxes and similar burdens. The ratio of general government tax and social contributions to the GDP in Croatia is continuing to rise, and even now it's exceeding the maximum achieved before the reforms in the tax system.

''Structural problems continue to pose a serious threat to adaptation to one of the next crises and permanently limit the speed of economic growth. Although we're satisfied that [Croatia's] GDP grew by 3.9 percent in the first quarter of this year, the fact is that this is still too little and we should be at least four percent more in the long run,'' Deranja said.

"The Croatian economy is the most burdened and that's reflected in its productivity. The economy is congested and has no power to grow," she said.

In addition to the above-mentioned problematic areas in the Croatian economy, the encouragement of investment, productivity and competitiveness, the justice system and the labour market, education, health and pension systems continue to be ''in the red''.

''This year's result suggests that Croatia is lagging significantly behind the EU member states from Central and Eastern Europe, and what's particularly worrying is the fact that Croatia's score is worse than that in countries which are less developed than Croatia, such as Bulgaria and Romania,'' said Davor Majetić, Director of HUP.

Follow our dedicated business page for much more.

Wednesday, 24 April 2019

''Easier Opening of Companies Raises Croatian Competitiveness''

The Croatian Employers' Association (HUP) has welcomed changes to the Law on Companies and has urged that no new burdensome regulations be introduced.

As Ana Blaskovic/Poslovni Dnevnik writes on the 23rd of April, 2019, recent changes to the Law on Companies, which simplifies the establishment and the liquidation of companies, will enable entrepreneurs to be more competitive and help Croatia to climb up and improve its place on lists such as that of the World Bank, Doing Business, on which Croatia occupies 68th position out of 140 countries worldwide. 

The Croatian Employers' Association (HUP) has openly welcomed these positive changes, but has warned that this step in the right direction should not end up with people simply becoming lost once again but this time in a maze of new obstacles.

"The Croatian Employers' Association welcomes the simplification of procedures related either to the establishment of companies or to their liquidation, and we expect the introduction of changes that will stimulate the competitiveness of the Croatian economy and make it easier to monitor rapid changes on the global market," stated Admira Ribičić, the director of legislation and legal affairs at the Croatian Employers' Association which itself proposed changes in the same direction.

Better competitiveness should bring forward the ability to establish a simple and ''normal'' d.o.o. online, just with the payment of court fees, and without the cost of a public notary. The changes to the law open the doors for faster and easier business/company registration. However, even though e-foundation has now come into effect, the application that will enable it to function correctly will only come into force in September.

The Croatian Employers' Association has also readily welcomed the removal of the stipulation of reserving a company name, the shortening of the deadline for the court to make a decision on registration in the court registry from fifteen to five working days, as well as the provisions for the simpler and cheaper liquidation of a company, simply with a statement proving the non-existence of any debts.

"What worries us most is that we don't end up with a situation in which we remove a whole host of regulations and end up accidentally replacing them with different ones through changing the regulations. In Croatia, there are between 300 and 400 new regulations introduced annually, or amendments to existing ones, and each of them "laments" the danger of introducing a new administrative or financial burden,'' Ribičić concluded.

Make sure to follow our dedicated business page for much more on Croatian companies, doing business in Croatia, investing in Croatia and Croatian products and services.


Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

Monday, 4 March 2019

Lack of Workforce Obstacle to Continued Development of Croatia

As Adriano Milovan/ writes on the 4th of March, 2019, the situation on the Croatian labour market is all the more alarming: despite the significant number of registered unemployed people, there are numerous activities for which a labour force must be imported. With regard to the further trends on the labour market, as well as the challenges that Croatia is facing in terms of a digital revolution, Novac sat down and talked to the leading man of the consulting house of the EC in Croatia, Berislav Horvat. Berislav Horvat has good knowledge of the trends on the labour market, as well as on entrepreneurial scenes across Croatia.

We're approaching the 6th anniversary of EU membership and the 28th anniversary of independence. While we have achieved our main political goals as a country, it's a general belief that we've left it a bit late when coming up with an economic plan. How do you assess the current development of entrepreneurship in Croatia, especially compared to the countries we're usually compared to?

Unfortunately, we have not yet completed the transition process. On the other hand, our entrepreneurs don't yet enjoy the status in our society that they enjoy in other transition countries. In our country, entrepreneurs are still looked at with skepticism, they're still the black sheep in a way, and realistically, they don't deserve such a status. The EC has therefore launched the ''EC entrepreneur of the year'' program, through which we want to show that there are also successful entrepreneurial stories in Croatia.

I personally think that the situation in Croatia and the attitude towards entrepreneurs in the last five years has changed significantly. In that sense, it's enough to say that five years ago in Croatia, practically nobody spoke about startups, funding, and so on. Moreover, these terms weren't even being used. Nowadays, the situation is different: we're talking about that, we look at who started a startup, who invested what, what entrepreneurial incubator was used and the like... So, the focus of the public is slowly changing and turning towards entrepreneurship, but it's not as fast as we'd like it to be.

Exactly. We do have all this Croatia today, but there's still very little of it. Even the many start-up companies belong to ''emergency entrepreneurship'', ie, they're not a real statement of the desire to start a business in order to engage in entrepreneurship, but are driven for the sake of employment...

I think there's far more entrepreneurship in Croatia than we can see. Media attention loves to highlight the negatives and it's difficult for some of the entrepreneurs to become a star in such a situation.

In Estonia, for example, it's different. Their stars were also once football players, athletes, and starlets, but they systematically worked to change that. Today, after twenty or more years, Estonia's main stars are entrepreneurs, which, of course, doesn't mean that their media doesn't highlight lifestyle [sections] and that jet set type people aren't stars. There's enough space for everyone.

But we have not yet reached that level. In our public domain, the best still don't dominate [the scene], those who have created something from nothing and succeeded in life with their own work and effort. We've gone too deeply into the negativity and now we can't get out of it, even in the conditions that in recent years the situation with the economy is much better, as is evidenced by the growth in income and profit of companies. That's why we have the impression that everything is bad, and that's just not the case. You can be successful in Croatia.

When you talk to clients, especially those from overseas who want to invest and start a business here, what do they complain about most?

The main problem over the last few years is the lack of workforce. Mass emigration from Croatia resulted in a shortage of workers. Before that, you could feel a lack of workforce in tourism, hospitality and construction, and now that's the case in almost all sectors. This will surely be a major obstacle to the further development of Croatia. An example is the construction industry, which even for a secure job constructing something, you can no longer find people to do it.

Once, our main problem was unemployment, and now it's a shortage of workers. According to some estimates, even among those who are officially registered as unemployed, there are only actually 10,000 to 15,000 who really are unemployed, while others have remained registered as such for other reasons.

On the other hand, this year we've got a quota of 65,000 foreign workers we can import. This is the record for now, and it's quite certain that this quota, and thus the number of foreign workers in Croatia will grow in the next few years.

Apart from tourism and construction, which sectors lack a workforce the most?

Definitely the IT sector. Practically every IT company I know would hire 100 developers tomorrow because there's a lot of work. Most of them work on foreign markets, where the demand is higher than the supply.

Do you expect bigger waves of emigration from Croatia? Let us not forget that next year the doors of to the Austrian labour market, the last in the EU [to keep restrictions on Croatian workers] will open...

Emigration will still continue. True, Austria could attract a part of our workforce because it's close and workers will be able to come and go virtually from weekend to weekend. So, emigration will continue, but there will be returns, especially as salaries in Croatia are rising. Estimates for the future are difficult to give, but it's clear that the shortage of workforce will remain the number one issue for Croatia in the next few years.

How do we solve the problem of the lack of workforce?

We will have to turn to the import of labour, in the long term. But let's not forget that because of this shortage of labour in Croatia, there's a rise in wages, which means that some of the Croats who have left will come back in time. They will simply begin to calculate whether it's worth living abroad or here. Let's be realistic, many of our emigrants, especially those who are paid less, don't live in the best conditions in the countries they've moved to, so we already have cases where people are returning. The salary increase in Croatia will bring back some of those who left the country.

There is also the problem of education, the programs of which should be adapted to the needs of the labour market, just as enrollment quotas should be.

What could the state do to reduce emigration and boost returns?

The state could intervene in tax policy measures. Further reductions in personal income tax and the abolition of the highest tax rate would greatly help people increase their net salaries. This would lead to less people leaving and some former emigrants returning.

But, how usefeul are such efforts when taking into account the state of public finances, especially the pension and health system?

These measures can be implemented, but the only way to do that is to reduce the spending of the state, on both a central and a local level. This implies reforms. There is also a need to increase the base of people who pay taxes, or more people bring to the labour market.

Now the situation is almost ideal for some action to be taken: in the real sector there is a lack of people, and in the public there is a surplus of employees. The economy is growing, and the government is stable, so there should not be many problems and the solution is obvious. So, we just have to implement the reforms we're talking about. This is a historical moment that this government has and it must use it.

The world is undergoing a new digital revolution, but we're lagging behind. Moreover, we're still dealing with ''classic'' industries. What are the perspectives open to us?

Digitisation opens up a large area, and a large number of companies that are opening in Croatia are IT companies, so we can't say that we're not following trends in the digital world. Existing, already established Croatian companies invest heavily in digitisation. For many Croatian companies, the EC helps in the introduction of software robotisation. While, for example, Gideon Brothers produced real autonomous robots, which instead of forklifts drive pallets by warehouse, and our domestic companies, such as Atlantica, Orbica and Tokić, are already piloting projects with this new technology. Or, let's say, Mate Rimac, our EC entrepreneur of the year, who, besides producing cars, works hard on the development of the use of digital technologies, and all this is happening in Croatia.

You are in contact with investors. What is the current interest in Croatia from investors?

We are a world leader in auditing and consulting services. We have 270,000 employees worldwide, and in Croatia there are more than 220. Among our clients, we have a lot of investors who want to invest here, especially private equity funds. Still, the problem is that they are looking for big investments, those of 20 or 30 million euros, and there aren't many like that in Croatia. In the case of Croatia, it would probably have helped us to have venture capital funds, which would aid startups. Otherwise, HBOR and EIF have recently launched a venture capital program, which is good for entrepreneurship development in Croatia, but, it's also necessary to have a network of business angels, venture capital funds and private equity funds, so that the system can accommodate and enable funding at all stages of entrepreneurship development.

How does the digital revolution reflect on the EC?

The EC is doing a lot of work on digitalisation. We have digitised our internal talent management system and now we have ''click'' solutions. Numerous processes have been robotised. One digital marketing company joined us last year, so now we have a rounded service - from tips to accessing a buyer, to the performance of the app or website. Customers want less advice, they're now seeking complete solutions, and we can offer them that now. This also allows us to work on innovations. We're also investing hundreds of millions of dollars in audit tools and technology so we can carry out EC digital audits worldwide. I can say that a lot has changed since I started doing this job sixteen years ago!

Make sureto stay up to date by following our dedicated business page.


Click here for the original article/interview by Adriano Milovan for

Thursday, 27 December 2018

Digital Croatia: Country Lacks Citizens with Advanced Digital Skills

The desire of many Croatian companies, institutions and state bodies is to create a digital Croatia, in which the country's draconian and almost masochistic love of paperwork and stamps are banished to the past and recalled only as a bad memory. Despite the wishes of many, it seems that the dream of a digital Croatia will take a while to become a reality.

As Bernard Ivezic/Poslovni Dnevnik writes on the 25th of December, 2018, the increase in the number of employees of various digital professionals in Croatian companies, and the retention of qualified digital professionals in Croatia, are two key goals for the establishment of the national coalition for digital skills and jobs.

A new body, coordinated by the Croatian Employers' Association (HUP), has kicked off with its work in Croatia. Representatives of HUP-ICT Association, the Croatian Government, the Ministry of Science and Education and the Ministry of Labour signed a memorandum on the establishment of the national coalition for digital skills and jobs.

Davor Majetić, CEO of HUP, says that digitalisation is now absolutely imperative for all companies which want to be competitive on today's market, and this is felt by the significant change that we have experienced in Croatia since 1997 in terms of jobs and employment.

"We lack digital skills and ICT professionals in all industries, and we're continuing to persuade people that the issue of digital skills is a matter of 21st century literacy, a standard without which our children will not be ready for the labour market," stated Majetić, adding that in solving this very issue lies an opportunity for the national coalition for digital skills and jobs.

Boris Drilo, President of HUP ICT Association and member of the Croatian Telecommunications Board, said that their ultimate desire is to move the current ICT sector's positive momentum over into other sectors of the economy and transform the Croatian economy into a digital economy.

He says that in Croatia's neighbouring countries, as well as in the rest of the European Union, the ratio is in favor of having a digital economy, as opposed to the traditional 3:1 contribution to the overall GDP of the country. He claims that the situation in Croatia is currently the other way around, adding that Croatia currently has about 50,000 ICT experts, and that the country needs 200,000 citizens with advanced digital skills for further market competition at an international level.

Bernard Gršić, State Secretary of the Central State Office for Digital Society Development, stressed that the work of this body is supported by the Croatian Government.

"This coalition should address the challenges of multi-level digital skills, and the work of the coalition is being supported by the Government of the Republic of Croatia and by Prime Minister Andrej Plenković," Gršić said.

Hrvoje Balen, Vice President of the HUP-ICT Association, who is also a member of Algebra board, says that the Republic of Croatia is experiencing a significant increase in the emigration of younger and highly educated individuals, he therefore highlighted the two main goals set by the coalition: an overall increase in the number of digital professionals, and their retention here in Croatia.

This Croatian coalition will likely become a leading power in the creation of a digital Croatia and is part of the grand coalition for digital jobs initiative, which was initially launched three years ago by the European Commission with the aim of linking the economy, educational institutions, and the state together to work on the general development of digital competencies.

Is digital Croatia on a concrete path to reality? Only time will tell.

Make sure to follow our dedicated lifestyle and business pages for more information on the transformation of digital Croatia and much more.


Click here for the original article by Bernard Ivezic for Poslovni Dnevnik

Thursday, 22 November 2018

Croatian Employers' Association Claims Croatia Learned Nothing from Crisis

The Croatian Employers' Association score which measures the implementation of reforms in twelve key areas puts the Republic of Croatia at the very bottom of the European Union.

As Darko Bicak/Poslovni Dnevnik writes on the 22nd of November, 2018, after the World Bank and the Croatian Chamber of Commerce (HGK) showed data this past month that proved the country is lagging behind in terms of business and investment climate, the Croatian Employers' Association (HUP) has confirmed this unfavourable position once again with its HUP score. Moreover, according to HUP, which, as stated, measures the implementation of reforms across twelve key areas, it appears that Croatia has the worst score in the EU, even worse than countries such as Bulgaria and Romania, which are still considered weaker and less developed than Croatia.

"The first significant shift from the beginning of the measure of the HUP score (op.a. 2013) has been confirmed, but Croatia is still at the back end of the ''New Europe''. It's obvious that the country doesn't possess the capacity for quick economic growth and convergence. The problems with the entrepreneurial climate aren't caused by culture and mentality, but primarily by weak institutions,'' they state from HUP, adding that, first and foremost, the system of public and state enterprises needs to be reduced, restructured, professionalised, depoliticised, and then privatised, and that's how more investments will occur.

These preliminary results indicate that the HUP score for 2018 stands at 37, which is one point less than it was last year.

"This result shows that Croatia also lags considerably in regard to EU member states from Central and Eastern Europe (EU10) this year. Economic growth, which was re-established in 2015 after a long six-year crisis, was an indicator of economic strength and good looks. The lessening of that score for this year should be interpreted as an indication that the current growth impulse has a cyclical or rather passing character. Deep economic and institutional structures remain weak due to the lack of reforms,'' they note from HUP.

Not one figure in the aforementioned twelve areas exceeds 2/3 of the maximum value, which means that Croatia doesn't have a strong competitive edge in some areas. The biggest visible improvement can be seen in regard to fiscal consolidation (from 54 in 2017 to 56 in 2018), productivity and competitiveness (from 34 to 45), and capital supply (from 36 to 42). The HUP score of the education and pension system is still "in the red ", but was held at 26, while the justice system stands at at 33.

The biggest negative change can be seen in terms of the fall of the investment score and needless limitations and business barriers (from 35 in 2017 to 23 in 2018), following the rise in the cost of establishing a company and increasing the number of procedures for obtaining building permits and dealing with public administration due to the rapid growth in the number of days needed to launch a business. The areas of economic burden (19) and the labour market (22) continue to be critical, year on year. Gordana Deranja, the president of HUP, believes that Croatia is experiencing weak progress and is stagnating because other countries are more successful and faster when it comes to adapting properly to new circumstances and conditions.

"The burden on the economy is still high, which is why we can't be completely satisfied with the last wave of tax changes. Although we do consider them to be a step in the right direction, they're insufficient to give the economy a more serious positive incentive, and it's necessary to maintain the current growth rates, this relates particular to the burden on [taxes on] salaries.

The [situation with the] labour market situation is really difficult. There is not enough of a qualified workforce, and the pressure on wage growth is high. The problem is that with the current burdens, tax and everything else, employers have no room for further and more substantial salary increases without jeopardising the viability of their business. Instead of looking for room for greater decompression on companies and people, our budget continues to grow. Obviously, we haven't learned anything from the crisis. As a country, we continue to spend more than we make. We're just part of the expensive credits, which have now been replaced by funds from European Union funds, and these funds are the only development moment for the budget for 2019. There's no indication of any serious reforms in it [the budget], and that's what we all need to worry about,'' stated Deranja.

Davor Majetić, the Croatian Employers' Association's chief executive, pointed out that without stronger economic growth, nothing will stop more people from leaving the country, especially young people and those who make up Croatia's labour force.

"A serious labour shortage can endanger this kind of growth we now have, which is not the only problem for employers, it's a problem that needs to be solved systematically and comprehensively, the question of whether or not there will be enough maids, waiters, traders, etc depends on the salaries of doctors, teachers, policemen and soldiers,'' said Majetić, adding that everything that the Croatian Employers' Association points to as neuralgic points continue on being repeated from year to year - the burden on the economy, the labour market, the health system, the education and pension system, and the judiciary.

"The government is taking steps, but they're not enough because the huge problems we've inherited are enormous, and the changes we're making aren't going deep enough, nor are they big enough to be called reforms, which is why their reach is so limited, and when compared to other countries, we continue to remain behind them, trapped at the bottom of the European Union,'' concluded Majetić.

Make sure to follow our dedicated business and politics pages for more information on the Croatian Employers' Association, the domestic economic situation, and potential reforms.


Click here for the original article by Darko Bicak for Poslovni Dnevnik

Thursday, 25 October 2018

Is a Labour Market Crash Threatening Croatia?

The Croatian National Bank estimates that the number of workers in the next twenty years in Croatia will be reduced by half a million.

Friday, 22 June 2018

Anđelko Leko, Famous Hotelier Who Transformed Croatian Tourism Dies

Some sad news as one of the most recognisable faces of Croatian tourism passes away.

Tuesday, 29 March 2016

Croatian Employers' Association Sends a List of Demands to Minister of Economy

HUP is asking for significant changes in public procurement

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