ZAGREB, March 28, 2018 – Most companies operating in Croatia achieved better business results and increased the number of employees in 2017 compared to the previous year, and 47% of them describe their overall business experience as good or very good, shows a survey conducted among members of the American Chamber of Commerce (AmCham) in Croatia and presented on Wednesday.
AmCham Croatia brings together more than 220 US, Croatian and other international companies which employ more than 70,000 people in Croatia, and the business environment survey covered 140 management board members, of both domestic and foreign-owned companies.
Sixty-five percent of the respondents said that in 2017 their companies recorded better business results than in 2016, while around 10% said that their results were poorer than in 2016. Also, 64% of the surveyed companies increased the number of their employees, in 23.5% of the cases their number remained the same while in 12% of the cases the number of employees decreased.
As for the overall experience of doing business in Croatia, 37.5% of the respondents said it was “good”, 9.3% said it was “very good”. On the other hand, almost 11% described it as “bad” and “very bad”, while 42% describe it as “average”.
This year, Croatia marks the fifth anniversary of its accession to the EU, and 45% of the respondents believe that conditions of doing business in Croatia over that five-year period have improved, 40% consider them to have stayed the same, while 15% believe they have become worse.
The main limiting factors in the period since 2013 have been an unstable regulatory framework, long and complex administrative procedures and labour taxation. In 2017, an additional limiting factor was also the lack of the desired labour force.
Forty-nine percent of the respondents said the area where the situation had deteriorated the most in the last five years was the implementation of legal regulations and procedures, 41% complained the most about the judiciary and 39% about the quality of laws. On the other hand, the areas seen as those that have improved the most since 2013 are demand for goods and services (41%) and terms of financing (33%).
When asked about the impact of regulations and activities of state administration on the business environment in Croatia in the last five years, 43.5% of the respondents said it was negative, 9% said it was significantly negative, and 34% said there was no impact.
This puts the percentage of those who believe that the impact of regulations and activities of state administration on the business environment has been negative at 86%. The situation is similar also with regard to local administration, with 53% of the respondents opting for the answer “no impact”, 25% for “negative impact”, 10.5% for “significant negative impact” and only 11% for “positive impact”.
The survey also includes a comparison between Croatia and countries of central and eastern Europe considering that 72% of AmCham companies operate also in those countries. Only 9% of the respondents described conditions of doing business in Croatia better than conditions in those countries, 44% said they were worse while most or 47% of the respondents said the conditions in Croatia were “average, as in comparable countries.”
Croatia’s main shortcomings in relation to central and eastern European countries are a slow state administration and the degree of taxation, while 42% of the respondents singled out the small size of its market and lack of a long-term government strategy. They said Croatia’s biggest advantages were its potential as a tourist destination, its membership of the EU and its geostrategic position.
In the next three years, 79% of AmCham members plan to expand their business in Croatia, 18% intend to keep the same scope of operation, and only 3% plan to cut down their business activities. Also, 71% plan new hiring in that period as against 10% who plan to cut the number of jobs.
Most respondents, or 78%, describe Croatia’s membership in the EU as positive, and even though a large number of them consider access to EU funds an important advantage of EU membership, as many as 86% said that their companies had not used those funds.
AmCham executive director Andrea Doko Jelušić said that trends indicated that Croatia was lagging behind other countries in the region, notably Romania and Bulgaria, whose economies have been expanding strongly. “This is a rivals’ competition that has been going on for a while, and Croatia is indeed moving, but not as fast as those two countries,” said Doko Jelušić.
Regardless of the progress made and the optimism in the business community, business people believe that Croatia should embark in a faster and more resolute way on reforms that will directly address the country’s main shortcomings in relation to other countries, primarily the reform of public administration, further tax cuts for the business sector, as well as reforms of the judiciary.
