Croatia
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Croatia is generally open to foreign investment and the Croatian government continues to make efforts, such as financial incentives, to attract foreign investors. All investors, both foreign and domestic, are guaranteed equal treatment by law, with a handful of exceptions described below. However, bureaucratic and political barriers remain. Investors agree that an unpredictable regulatory framework, lack of transparency, excessive duration of administrative procedures, lack of structural reforms, and unresolved property ownership issues weigh heavily upon the investment climate.
The Agency for Investment and Competitiveness (AIK) — previously a stand-alone Croatian government agency providing investors with various services intended to help with implementation of investment projects — became part of the Ministry of Economy, Entrepreneurship and Crafts at the start of 2019. The Ministry’s Directorate for Investment, Industry and Innovation has assumed the assistance role previously offered by AIK. For more information, see: investcroatia.gov.hr. The Strategic Investment Act helps investors streamline large projects by gathering all necessary information the investor needs to implement the project and then fast-tracking the necessary procedures for implementation of the project, including acquiring permits and help with location. Various business groups, including the American Chamber of Commerce, Foreign Investors’ Council, and the Croatian Employers’ Association, are in dialogue with the government about ways to make doing business easier and to keep investment retention as a priority.
Limits on Foreign Control and Right to Private Ownership and Establishment
Croatian law allows for all entities, both foreign and domestic, to establish and own businesses and to engage in all forms of remunerative activities. Article 49 of the Constitution states all entrepreneurs have equal legal status. However, the Croatian government restricts foreign ownership or control of services for a handful of national security-sensitive sectors: inland waterways transport, maritime transport, rail transport, air ground-handling, freight-forwarding, publishing, education, and ski instruction. Apart from these, the only blocks to market access involve routine professional requirements (architect, auditor, engineer, lawyer, and veterinarian). Over 90 percent of the banking sector is foreign-owned.
Other Investment Policy Reviews
The Organization for Economic Cooperation and Development (OECD) published an investment climate review for Croatia in June 2019:
https://www.oecd.org/publications/oecd-investment-policy-reviews-croatia-2019-2bf079ba-en.htm
The World Bank Group published a “Doing Business” Economic Profile of Croatia in 2018: http://www.doingbusiness.org/en/data/exploreeconomies/croatia
Business Facilitation
The Croatian e-government initiative “Hitro.hr” (www.hitro.hr ) provides for 24-hour access to on-line business registration. Additionally, Hitro.hr offices are located in more than 60 Croatian cities and towns. In order to begin business activities, a company needs to register with the State Statistics Bureau to obtain a company identification number, then with a Notary Public, the Commercial Court, Tax Administration, and Health and Pension agencies. This process can take from one to three days, depending on the efficiency of the local Commercial court, which processes the registration. Private sector participants have complained that the process can take as long as 60 days.
In 2018, the Global Enterprise Agency rated Croatia’s business registration process 4 out of 10, while the World Bank Ease of Doing Business report ranks Croatia as 123 out of 190 countries. The government has pledged to improve conditions for business registration. Croatia’s business facilitation mechanism provides for equitable treatment to all interested in registering a business, regardless of gender or ethnicity.
Outward Investment
Croatians have invested some USD 4 million in the United States. Croatia has no restrictions on domestic investors who wish to invest abroad.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical Source* | USG or International Statistical Source | USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other |
|||
Economic Data | Year | Amount | Year | Amount | |
Host Country Gross Domestic Product (GDP) ($M USD) | 2018 | $60,892 | 2018 | $60,805 | www.worldbank.org/en/country |
Foreign Direct Investment | Host Country Statistical Source* | USG or International Statistical Source | USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other |
||
U.S. FDI in partner country ($M USD, stock positions) | 2018 | $138 | N/A | N/A | BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data |
Host country’s FDI in the United States ($M USD, stock positions) | 2018 | $56.7 | N/A | N/A | BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data |
Total inbound stock of FDI as % host GDP | 2018 | 65.15% | N/A | N/A | UNCTAD data available at
https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx [Select country, scroll down to “FDI Stock”- “Inward”, scan rightward for most recent year’s “as percentage of gross domestic product”] |
*GDP at www.dzs.hr for 2018, FDI at www.hnb.hr for Q1-Q3 2018 Note: World Bank and U.S. Bureau of Economic Analysis do not have GDP or FDI data available for 2018 at time of publishing.
Table 3: Sources and Destination of FDI
Direct Investment From/in Counterpart Economy Data | |||||
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) | |||||
Inward Direct Investment | Outward Direct Investment | ||||
Total Inward | $39,675 | 100% | Total Outward | $7,722 | 100% |
The Netherlands | $6,856 | 20.4% | The Netherlands | $3,212 | 41.6% |
Austria | $4,326 | 12.9% | Bosnia Herzegovina | $1,448 | 18.8% |
Italy | $3,612 | 10.8% | Slovenia | $1,151 | 14.9% |
Germany | $3,215 | 9.6% | Serbia | $946 | 12.2% |
Luxembourg | $2,756 | 8.2% | Montenegro | $302 | 3.9% |
“0” reflects amounts rounded to +/- USD 500,000. |
*FDI at www.hnb.hr for Q1-Q3 2018
Table 4: Sources of Portfolio Investment
Data not available.