ZAGREB, June 29, 2018 – In the five years of its membership in the European Union, Croatia has gained economic benefits, which are evident in economic and fiscal indicators, but additional efforts should be made to improve the absorption of EU funds and speed up structural adjustment, Croatian business associations say.
The Croatian Chamber of Commerce (HGK) noted that, by joining the EU on 1 July 2013, Croatia had achieved one of its main foreign policy objectives and formally became part of the European single market.
The greatest effect of EU membership can be seen in the economy as the removal of administrative and non-tariff barriers led to lower business costs, but on the other hand the national economy faces stronger competition from other member states, the HGK said.
Over the last five years, Croatia has increased its exports by 56%, with exports to EU member states going up by 70%, the chamber said, adding that the other benefits are free movement of goods, services, capital and labour, and the possibility of using EU funds to boost the competitiveness of the national economy and ensure even development of all regions in Croatia.
By joining the EU, Croatia was also given access to 10.7 billion euro in grants from EU structural and investment funds. The latest figures provided by the Ministry of Regional Development and EU Funds show that contracts worth 4.8 billion euro have been concluded by 31 May this year, representing 45 percent of the total allocation to Croatia, while eight percent of the total allocation has been paid to end users.
The HGK said that large projects such as the construction of the Pelješac bridge would certainly further increase the rate of absorption of EU funds in the financial perspective 2014-2020. “In the five years of EU membership, enterprises have shown a great interest in financing their own projects with EU funds. However, on that road the lack of information and the complexity of procedures have been identified by enterprises as the most frequent obstacles,” the HGK said.
The director-general of the Croatian Employers’ Association (HUP) Davor Majetić told Hina that EU membership was an opportunity for the development of the national economy. “Being able to participate in a single market with over 500 million people is an excellent opportunity for the Croatian economy. When EU funds are added to the picture, and they are expected to give an additional impetus and access to inexpensive and non-repayable funds, then the benefits of EU membership are clear and unambiguous,” Majetić said.
“If we look at the levers of our economic growth, those are mainly exports to the EU countries where our access is simpler and more competitive thanks to the EU,” Majetić said, adding that “Croatia should have and could have made better use of its EU membership so far.”
“EU membership is primarily a tool for Croatia to achieve its strategic plans more easily and ensure a better life for its citizens. Many thought that entering the EU was a goal in itself and that after that everything would happen of its own accord,” Majetić said and added that the fact that Croatia was lagging behind its EU peers was due to “our failures and our resistance to change and to implementing reforms”.
“No one, not even the EU can help us if we do not help ourselves. The EU gave us the opportunity and funds and now it is up to us to use them,” he said.
Economic analyst Damir Novotny says that Croatia has benefited economically since joining the EU as have all other member states. “Those benefits are evident in the main economic indicators. Public finances have been put in order, fiscal stabilisation has been achieved, and the excessive financing of public needs and public investments has been stopped,” he said.
“Interest rates on all types of loans have dropped sharply, gradually approaching the lower level of interest rates in the euro area. Domestic companies have entered the single market and supply chains in developed member states. In 2017, commodity exports surpassed 100 billion kuna (13 billion euro),” he added.
The labour market has also changed, unemployment has dropped, mainly owing to the recovery of the labour markets in the neighbouring member states, which are “sucking in” Croatia’s workforce. Due to the full opening of the market upon accession, prices in Croatia have started to swiftly approach the lower level of consumer prices in neighbouring countries in the EU and the interest in investing in Croatia has begun to grow, notably in tourism, the most effective domestic sector, Novotny said.
Croatia has also initiated structural adjustment, which needs to be accelerated in the years ahead. It is also necessary to continue to privatise state-owned companies so they can attract fresh capital necessary for investing in technological development, Novotny said.
By comparison, the analyst said that Croatia has about 1,300 state-owned companies whereas Slovenia has about 40. “Not one successful member state has so many state-owned companies generating GDP as Croatia,” he said, adding that Croatian state-owned companies or companies in which political influence is significant are highly inefficient and strategically oriented only to the domestic market, and do not create jobs.
“Utilising the possibilities offered by EU structural funds is another area in which the government must make additional effort, notably in the 2021-27 period. It is also necessary to step up the development of institutions without which it won’t be possible to achieve the full benefits of EU accession,” Novotny concluded.
