German-Croatian business group: Croatian economic and business climate poor

NEWS 16.04.2019 17:22
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Source: Pixabay

Insufficient fight against corruption, high taxes, inefficient public administration and legal insecurity are still the biggest risks to investment and business in Croatia, leading to fewer companies willing to invest in Croatia than last year, surveys conducted by the German-Croatian Chamber of Industry and Commerce released on Tuesday showed.

A regular survey of the economic and investment environment covered 150 companies operating in Croatia, while a survey of the level of digitisation was carried out for the first time, covering 90 companies. The surveys were conducted over the past two months and showed that about 60 percent of those polled described the economic situation in Croatia as very negative.

A slight majority or 53 percent of companies expect things to stay the same for them in 2019, 29 percent believe the situation will deteriorate and only 18 percent expect changes for the better, the Director of the German-Croatian Chamber of Industry and Commerce, Sven Thorsten Potthoff, said while presenting the results of the surveys.

About 60 percent of businesses said they consider the business situation to be satisfactory, at least for them, 26 percent said that it is good and 14 percent described it as bad. On the other hand, about 60 percent said that the overall economic situation is bad, while 32 percent said they are satisfied, he added.

Potthoff noted that 54 percent of companies said they would choose Croatia again for investment, while 46 percent said they would not.

The percentage of companies that would choose Croatia for investment again was lower than last year (68 percent) and was the lowest in the last five years.

Things in Croatia are not changing, at least not quickly and well enough, which is bad, although in the Central and Eastern Europe region the average for investing again was also lower than last year. In 2019, 79 percent would invest in the region again, compared with 82 percent in 2018. On the other hand, as many as 95 percent of companies in Poland said they would come back to invest, Potthoff said.

Thomas Sichla, the president of the Chamber and managing director of the Zagreb waste water management company Zagrebacke Otpadne Vode, agrees with the assessment that things in Croatia could be accelerated, given that the country has been a member of the EU for five years and has incorporated EU law, but it seems that this is not sufficiently applied in practice.

That is the reason why the average rating of business conditions in Croatia has fallen from 3.49 last year to 3.55 this year, on a scale of 1 to 5, one 1 being the highest score.

Even five years after Croatia joined the EU we don’t see substantial legal and other changes that would lead to improving conditions and facilitating business. However, there are also good things, as the survey has shown, such as EU membership, skills and qualifications of people, excellent higher education, productivity and motivation of employees, and infrastructure, Sichla said.

He said that nearly 70 percent of those surveyed described the government’s performance as poor.

There is a lot of room for improvement, and we believe we can help, particularly in light of a great friendship between Germany and Croatia and good cooperation, which should be used for the economy as well, Sichla and Potthoff said.

The president of Siemens’s management board, Medeja Loncar, said that Croatia needed more flexibility and speed to improve its economic and investment climate. She said that Siemens would continue investing in Croatia, depending on the environment.

Presenting the results of the Chamber’s first survey on digitisation in Croatian companies, 80 percent of 90 companies covered by the survey expressed a positive view, while only a half said they are very or fully digitised. All more or less expect that digitisation will help improve their efficiency, business control and planning, but that it will also require more investment, a new skilled work force which they are not sure they will find, with unclear economic effects.

More than 50 percent of companies consider digitisation positive and necessary, most of them expect that it will help them achieve more, but 74 percent also believe that it will change their business model in the next three to five years. It is interesting that a majority, or 45 percent, described government activities in digitisation as favourable, Loncar said.