January the 6th, 2024 – The number of Croatian free zones has been facing a constant decrease since 2016 – do they have a future at all?
As Poslovni Dnevnik/Josipa Ban writes, the number of Croatian free zones, as well as those operating in them, is continually decreasing. Back in 2019, there were 8 active Croatian free zones in which 71 users operated, and slightly less than three thousand workers were employed.
By the end of 2022, six Croatian free zones remained. There were 57 companies who employed a little less than two thousand employees in them, according to the report on the business of Croatian free zones for the year 2022. If we compare their business with that of 12 years ago (back in 2012) a considerable and continuous decline is very much in evidence. Back during that time, 234 users were operating in Croatian free zones and almost eight thousand people were employed in them.
The revenues free zones nationwide then generated amounted to 730 million euros. Back in 2022, however, they achieved a significantly less 223 million euros. In the space of a decade, the revenues of those free zones fell by as much as 69 percent. Compared to the year 2021, however, they are slightly higher – by a negligible 0.56 percent. They’ve also recorded export growth of 23 percent – amounting to 158 million euros.
Are Croatian free zones no longer attractive?
The figures suggest that free zones are no longer particularly attractive to enterprises, but Dubravka Maras, president of the Croatian Free Zone Association, disagrees.
“Those numbers need to be adapted to the time and context. With Croatia’s entry into the EU back in 2013, the status of free zones changed in one part, and their operations began being regulated by the EU customs legislation,” explained Maras, noting that today, Croatia continues to boast an adequate number of free zones in relation to their positions.
Their establishment was initially launched with the aim of creating a quality entrepreneurial environment in Croatia. Free zones are, in fact, a subcategory of entrepreneurial zones, and they enable their users to share the infrastructure, which should contribute to the rationalisation of operations and overall cost reduction.
The main difference between free and entrepreneurial/business zones is in the customs and tax regime and the method of their establishment. Consent for the establishment of Croatian free zones is provided by the government, as well as entrepreneurial cities and municipalities.
Of the seven free zones that were in operation back in 2022, three were land-based, and four were ports. The best business results in 2022 were achieved by the Port of Ploče with revenues of 15.1 million euros and a profit of 1.7 million euros. The worst was achieved by the Port of Pula, which ended 2022 with a loss of 247,000 euros.
That same year, the concession for the Osijek Free Zone expired, and the concessionaires didn’t ask for an extension. Concessions have also expired for the Kukuljanovo Free Zone, the one in Krapina-Zagorje, the Split-Dalmatia Free Zone and the one in Zagreb. Only the Zagreb Free Zone requested an extension of their initial concession, which was granted for an additional period of 12 years.
What does the future hold?
In Croatian free zones, warehousing is the most represented activity, as 57 percent of users are engaged in it. A smaller part, 28 percent of them, is engaged in production.
The president of the Association of Croatian Free Zones also noted the large investment cycles in the ports of Rijeka, Ploče and Split.
“Free zones are a very attractive instrument of economic policy and a good place for investors. They’re also a brand that is known all over the world and as such are attractive to investors who know exactly what they’re getting by doing business in a free zone”, Maras pointed out, revealing that there are ambitious plans to open a port free zone around Slavonski Brod. In the future, according to Maras, new land zones should be connected to port areas.