Croatian Companies Face Strong Competition and Require Innovation

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Croatia’s EU presidency during the first half of 2020 will be a great opportunity for our country, its promotion and the Croatian economy. Luka Burilović, President of the Croatian Chamber of Commerce (CCC), spoke with Novac/Adriano Milovan about the Croatian Presidency and about the challenges it faces within the new financial framework of the union and the use of EU funds. These topics were also the focus of today’s conference titled: “Invest EU: Investment Incentives and Expectations for the Croatian EU Presidency”, which was co-organized by Hanza Media at the Esplanade Hotel in Zagreb, where Burilović was a participant.

Croatia will soon assume the EU presidency. How do you evaluate the goals of the Presidency presented by Zagreb officials?

– The priorities of “Developing Europe” and “Connecting Europe” have distinct economic dimensions. With this we are sending a powerful message that economic growth and sustainable development are at the top of the list of national and European priorities in the upcoming period. These goals are achievable and, if realized, we can strengthen our position as a serious and successful partner in the international environment.

How do you view the Union enlargement process? After Croatia’s accession to the EU, it appears that further enlargement is “on ice”, which can also be seen by the EU’s decision not to open accession negotiations with Albania and Northern Macedonia. How should Croatia be positioned towards EU enlargements in Southeastern Europe and what could it contribute to the Croatian economy?

– EU enlargement is a politically, economically and security relevant topic. It is of importance to Croatia because this is a neighborhood with which we have certain unresolved issues, but also strong economic ties. The region has traditionally been an essential market for our businesses. It is our interest to continue the enlargement process, but it is not possible to predict accurately when, to what extent and with what dynamics this will occur. The fact remains that our “neighbors” are bound by long-term economic interests, regardless of whether they are EU members.

How is the Croatian Chamber of Commerce welcoming the Croatian Presidency of the European Union? What will it mean for the Chamber?

– Of course, the chairmanship is an opportunity to give the CCC events which it normally organizes even more meaning and resonance. An economic forum with significant players involved, regarding statesmen, institutions and companies, would certainly be a greater opportunity for cooperation. But it’s secondary. It is much more important to see how we can influence policies. Our sectors analyze the needs of members to see how we can better promote our interests at the right moment. The question of all questions is, of course, budgeting. We have the potential to establish a better beginning position for our economy.

In Croatia, much has been said in recent years about fostering innovation. You recently pointed out that Croatia is a country with a long tradition of innovation which continues today. Nevertheless, the fact is that by spending less than one percent of the GDP on research and development, Croatia is at the very bottom of the EU and far from the EU average and proclaimed targets?

– A combination of factors is needed to change the situation. We begin from a situation that drives us to be creative, innovative and different from others in order to survive. We need a higher-quality scientific research community. We need a clear strategy and a stimulating financial framework for investment in research, development and innovation. Ultimately comes the part of the story with the highlights. We need to have resources available for investment and research and development.

In your opinion, what are Croatia’s biggest innovations? What can we offer Europe and the world?

– As a small and open economy, Croatia is exposed to strong competitive pressures from the global market. For businesses to survive, they are compelled to find new and more effective solutions. Innovation is a necessity for us. Some of the advantages are having a quality academic staff in the faculties of technical and natural sciences and a strong IT sector, which is a prerequisite for development in today’s digital age. The substantial amounts available from the EU research and development funds, which will continue to be available in the new financial framework, should not be neglected.

How do you evaluate the use of EU funds in Croatia so far? The government has boasted that major steps have been made here, but the European Commission figures show that we are still at the very bottom of EU rankings. Why is that so?

– The current value of the disbursed funds is at 28 percent, but we should bear in mind that funds from the existing financial reserves will be disbursed until the end of 2023, and I am optimistic about this realization. We know from the experience of entrepreneurs that they are plagued by inadequate competition and lack of information. They are also discouraged by the complicated procedures and duration of the evaluation process.

In which segments should we strengthen the use of union funds to make them an engine for economic development? And how do we reduce the portion that we must put back into the EU budget, which is about 10 percent of the withdrawn funds?

– These funds are not or should be a major impulse to stimulate significant economic growth. When it comes to areas requiring additional funding, it is about making a major investment in research and development with the goal of bringing as many innovations as possible to the EU to compete globally with countries such as the US and China.

Shortcomings in establishing procedures as well as in the implementation of those procedures have already been identified during the use of EU funds. Consideration should be given regarding how to make the process easier for applicants and users of funds.

What are the chances of Croatia establishing a new EU financial framework for 2027? As it stands now, less money will be allocated to us than within our current financial framework?

– Of course, within the framework of EU policies, Croatia sets its own priorities, i.e. the sectors and areas for which we will be able to spend EU funds. Therefore, the financial framework depends primarily on how we plan for the next financial period. The solution is to adopt the Croatian Development Strategy as soon as possible and propose operational programs based upon it. There is no doubt within the CCC, that the ecosystem for the development of entrepreneurship, innovation and exports must be at the top of our priorities.

Although Croatia has, cumulatively, attracted large foreign investments since independence, we still chronically lack greenfield investments, which would create jobs and stimulate exports. What should be done in this regard?

– Creating a stimulating investment environment is a process from the ground up. It requires a solid macroeconomic framework, tax policy, various targeted sectoral incentives and the availability of a quality workforce. It also requires a tailored education system for industry development, a dependable legislative framework, a geostrategic position, and transport connectivity…

It is imperative to open the door to new investments with high-value products, by making investments in research and development and the creation of products for export. Croatia is not an investment destination for cheap labor, nor should it be. We should target investors who will raise the standard of workforce that Croatian professionals already enjoy abroad, so that we could also achieve it in Croatia.

More information about Invest EU can be found here. And information about the Croatian Chamber of Commerce can be found here.

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