Insight Into Construction in Croatia by European Construction Sector Observatory

Lauren Simmonds

The Croatian construction industry was hit hard by the economic crisis. Between 2008 and 2014, the number of companies operating in the sector fell by 22.4% and overall productivity fell by 46.7% between 2008 and 2014.

The most significant decline in productivity occurred in building construction (-53.4%) and civil engineering (-39.4%). Between 2008 and 2013, total construction industry turnover declined by 44.9% and the industry’s grossoperating surplus declined by 49.7%, reaching totals of EUR 8.4 billion and EUR 1.2 billion respectively in 2013.

The key issues that are affecting Croatian construction sector performance include problems with accessing credit, the lack of skilled workers, late payments, burdensome administrative procedures, and curtailed public-sector investment. The financial sector is often reluctant to support the construction industry, and large infrastructure projects in particular. There is high unemployment in the country, and yet the construction sector continues to face a lack of qualified personnel, such as bricklayers, carpenters, welders and roofers. In 2016, for example, it is estimated that there were 3,000 unfilled construction jobs.

Late payments are common, both for business-to- business (B2B) and public-sector payments. In addition, the performance of the Croatian building permit process is ranked ‘below average’ when compared to OECD high income countries, particularly in terms of the number of procedures and the cost involved.

To tackle some of the industry’s main challenges and to improve competitiveness, the Ministry of the Economy launched Strategic Guidelines for the Development of the Construction Sector in 2013. The guidelines address a range of important issues including human resource development, access to finance, and support for research.

Croatia’s housing policy aims to improve the supply of good quality housing, including affordable housing. The policy is supported by government-funded schemes such as the Programme of State- subsidised Housing Construction. Macroeconomic improvements are expected to help the construction sector to recover. Total output value is forecast to achieve an average annual growth rate of 1.8% over the 2016-2020 period. The increase can be attributed to rising investments in public infrastructure supported strongly by EU-funding, as well as by commercial and energy projects.

The Public Procurement Act (PPA) was implemented in 2012 as a part of a strategy to make the procurement system more transparent, to encourage competition in the public procurement market, and to align the national procurement framework with EU rules. The PPA is now the core legislation for procurement in Croatia. It prescribes procedures for all types of contracts and transposes relevant EU directives. The PPA has benefited the construction sector by introducing process and cost-related improvements.

It created the conditions for the electronic (e-)submission of tender documents to simplify procedures and e-auction tools to reduce administrative costs for both tenderers and contracting authorities. Nonetheless, a number of issues still remain. For example, stakeholders still consider the system to be too burdensome and time-consuming for bidders, and contracts are too often awarded to the lowest bidder.

The European Construction Sector Observatory is helping the construction value chain to confront the economic and social challenges that impact the construction industry. Through regular analysis and comparative assessments, the initiative aims to inform European policymakers and industry stakeholders on the market conditions and policy developments in the European construction sector.

The key outputs of the Observatory include Country Fact Sheets that profile and analyse the construction sector in each Member State, Policy Fact Sheets on key sector-related policies in each Member State, and a series of Analytical Reports on the implementation of Construction 2020 Strategy objectives.

Visit the Observatory website to download analytical fact sheets and reports on Croatia and other Member States, and gain insight into the European construction sector.

 

Subscribe to our newsletter

the fields marked with * are required
Email: *
First name:
Last name:
Gender: Male Female
Country:
Birthday:
Please don't insert text in the box below!

Leave a Comment