Entitled "Enhancing Job Opportunities in Eastern Europe and the Former Soviet Union", the report found that despite fast economic growth, recorded since 1998, the region had seen lackluster results in creating productive jobs.
"While some transitional unemployment was expected, the surprise lay in its persistence," explained Jan Rutkowski, the bank's lead economist for the region and co-author of the study.
The report says that Croatia should improve the investment climate, cut the costs of doing business and reform the labour market in order to reduce unemployment and encourage job creation.
"In some of the new member states of the European Union, as well as in some acceding countries, the unemployment rate tends to be in double digits," the report says.
Croatia was included among countries of Central and Eastern Europe that have already joined the European Union or are in the process of accession, such as Bulgaria and Romania, rather than among countries of Southeast Europe as before.
Citing figures for 2003, the report said that the unemployment rate in Croatia exceeded 14 per cent. "Many workers displaced by structural shifts failed to find new jobs, and quite a few others have either been out of a job for over a year, or are in low-productivity occupations."
Arup Banerji, the bank's official who supervised the report, said at a press conference that Croatia had an opportunity to take steps to reduce the relatively high unemployment rate.
Banerji said Croatia should cut the cost of doing business, improve the investment climate and ease labour market regulations in order to facilitate job creation. The most important challenge to Croatia is to make it easier for firms to create jobs and ensure their progress, he said.
Noting that registration of property took 956 days in Croatia, as opposed to 33 days in developed countries, Banerji said this was symptomatic of problems in creating a climate in which it would be easier to start businesses, plan for expansion and create jobs. I think that is the gist of the challenge to Croatia, he concluded.
The World Bank report urged Eastern and Central European countries, including Croatia, to lower taxes on labour, reform the pension and social security systems, strengthen contract enforcement, and increase incentives for employment in less developed regions.
The report also urged countries of Europe and Central Asia to boost their investment climates in ways that stimulated firms to invest and create productive jobs. It also called for steps to lower the cost of labour mobility by developing the housing and mortgage markets as well as improving access to lifelong job opportunities.
The authors of the report, tapping a survey of over 4,000 business owners and managers, analysed the factors that encouraged or discouraged firms from investing and hiring. They cited economic and policy uncertainty, corruption, high taxes and inefficient courts as key factors stifling entrepreneurship.