What can one little island nation teach Croatia?
Plentiful are the tales of innovative businesses in Croatia falling on hard times and having an incomprehensible amount of obstacles put in front of them, all while being proverbially strangled by the country’s infamous red tape. Sagas of would-be startups and entrepreneurs being forced to give up are all too common, and it does make one wonder why in a country that breeds so much talent of all kinds, this keeps on being permitted to happen. Some would argue that politics is the reason, others would blame different outside influences, but whatever it is, it’s causing an economic epidemic.
Whatever the root causes are, and that is a subject about which one could easily go on, and on, and on a little bit more about, just how can Croatia’s almost painfully passive viewing of its innovative business climate benefit from the Maltese example?
As Bernard Ivezic/Poslovni Dnevnik writes on the 30th of June, 2018, the pretty island nation of Malta has just adopted three crypto laws, the first such laws to exist within the European Union, as well as in the world. After online bookmaking, this small country is now looking for its chance as the European Union’s blockchain hub and crypto business hot spot in the information economy.
In Croatia, the Ministry of Finance and the Tax Administration are both furious that Croatia’s residents are betting using online betting sites typically registered in another EU member state, specifically Malta, all because it reduces income to the state-owned company of Hrvatska lutrija, which according to the law on gambling, holds determined exclusive rights. In stark contrast, Malta shows how to think capitalist, all while maintaining an equal responsibility to its citizens.
More than 500 online bookmakers are registered in Malta. The overall Maltese idea is to bring in more business, allow for export, open up jobs, and properly collect taxes. As a result, Malta has twice the GDP per capita of Croatia, the average salary is twice as high as the average wage in Croatia, while at the same time, the territory of the country itself is much, much smaller than Croatian territory.
By virtue of the “virtual financial assets act” document, Malta has regulated what is known as the Initial Coin Offering (ICO). The ”Malta digital innovation authority act” provides a new regulator to track developments in this area, and through the “innovative technology arrangements and services act” a new positive regulatory framework for new blockchain and crypto business has been created.
At the same time as all this is going on in Malta, the Croatian Government continues to actively preserve the positions of state oligopolists and the like, while on the other hand, it passively observes that the most innovative and most promising business opportunities, owing to judicial and regulatory constraints and foreign trade negligence, have no choice but to simply open up their headquarters abroad. Instead of attempting to remedy these more than pressing, very real issues, the government is now treating the consequences of it, or, put more specifically, destroying another (private) pension pillar, all while quite desperately chasing the idea of being in the Eurozone.
In such an environment, which resembles the economy of the time before Croatia’s independence than the economy of a country that has apparently opted for market-oriented capitalism, from time to time we’re surprised by some miracle that takes place from the real, private sector. The news that Porsche has acquired a stake in Rimac Automobili is one such case, evaluating its value to nearly 400 million dollars. This is quite the miracle for a number of very legitimate reasons.
Rimac Automobili is registered in Croatia, unlike Agrokor, which is of course actually registered in the Netherlands. Equally unlike Agrokor, Mate Rimac’s work has developed through high technology innovations, sales abroad, and free market competition. Furthermore, Rimac Automobili is a company which remains one of the best in its niche in the world. If we make yet another comparison to Croatia’s formerly largest privately owned company, Agrokor, this was never the case. Moreover, while Mate Rimac’s dazzling success story keeps his company at the top of the top, Agrokor can’t compare with, let’s say Walmart, or with Amazon. As a result of such conditions, Mate Rimac’s share today, after nine years of work in this outstanding company, is more than 500 million kuna.
While for Croatia it’s something entirely out of the ordinary, Rimac’s story sounds like something that would be pretty normal in Malta. In Croatia, however, what should be the rule ends up as something rather miraculous, which speaks volumes about the current state of affairs. The problem is that the government is continually working to make and keep the number of potential new ”Rimac’s” as small as possible. We have one, and we should have thousands of them.
It is most commonly stated that such entrepreneurs just aren’t in our country, which couldn’t be further from the truth. During the last five to ten years in particular, such individuals are becoming more and more ambitious entrepreneurs, coming up with ever-better projects. The latest in the series was the Tolar.io startup, which, due to unfavourable regulations in Croatia, had to be opened in Slovenia. Otherwise, Slovenia, much like Malta, wants to be the European Union’s hub for blockchain and crypto business. With its current tempo, Tolar.io is on an excellent path to even surpassing Rimac, reaching a market value of 100 million dollars, which is what the desire to achieve in one year is.
Blockchain and crypto startups are those who now have a larger user base, even bigger than those digitally transfigured, horizontal innovators and automotive manufacturers such as Rimac. Specifically, the technologies that are being developed by such startups are also globally applicable, and are used in many industries. Not least, unlike Rimac, who had to travel physically to China to reach bigger investors, blockchain and crypto startups do the same, attracting investment over the internet. So, by getting involved with such businesses, citizens could earn a great deal more.
It is, therefore, utterly tragic that the Croatian Government continues to doggedly pay obsessive attention to political decisiveness and outdated ways, as opposed to learning from the grand mistake which was the Agrokor crisis, and committing itself to the final burial of the model of wealth acquisition by which the sly and ever-shrewd Ivica Todorić managed to almost destroy the domestic economy, and promoting the adoption of the model which saw Mate Rimac do so exceptionally well, or the model(s) of any new blockchain or crypto player, which are entirely based on market competition and global competitiveness.
It may be time for the government to realise that slogans such as “small country for a big holiday” are good only in the context of attracting tourists, nothing else. It isn’t deep, it isn’t lasting, and it means nothing.
While Croatia prides itself of being a small country for a big holiday, Malta applies the same ideals, but for big business.
Click here for the original article by Bernard Ivezic for Poslovni Dnevnik
