ZAGREB, Oct 28 (Hina) - In the period between 1993 and the first half of 2001, direct foreign investments in Croatia amounted to around USD5.1 billion, with privatisation receipts accounting for the largest part of the amount.
However, most of the capital was used for budgetary purposes instead of being directed into production. The latest (last week's) revenues from the sale of 16% of Croatian Telecom shares, amounting to 500 million euros, have been already used for covering budgetary expenses. This makes statements by senior government officials that next year's privatisation revenues will be directed into a fund for development and employment all the more important. However, when it comes to foreign investments, it is particularly unfavourable that Croatia lacks investments in new production facilities, the so-called greenfield investments. The first real greenfield investment in
ZAGREB, Oct 28 (Hina) - In the period between 1993 and the first half
of 2001, direct foreign investments in Croatia amounted to around
USD5.1 billion, with privatisation receipts accounting for the
largest part of the amount.
However, most of the capital was used for budgetary purposes
instead of being directed into production. The latest (last week's)
revenues from the sale of 16% of Croatian Telecom shares, amounting
to 500 million euros, have been already used for covering budgetary
expenses.
This makes statements by senior government officials that next
year's privatisation revenues will be directed into a fund for
development and employment all the more important.
However, when it comes to foreign investments, it is particularly
unfavourable that Croatia lacks investments in new production
facilities, the so-called greenfield investments.
The first real greenfield investment in Croatia was a recent
(September) investment by the Italian company Calzedonia into a
men's socks factory in Cakovec, worth 50 million euros.
According to the Croatian National Bank (HNB), around 65% of all
direct foreign investments refer to three segments -
telecommunications (24%), other transactions (privatisation of
banks, 21%) and the production of medicines (20%). Extraction of
crude oil and gas and cement production account for three percent
while wholesale trade accounts for less than two percent of total
foreign investments.
There is a lot of discussion about foreign capital, but data for the
first half of this year show Croatia cannot boast any major
investments.
How realistic is it to expect significant foreign investments in a
situation when leading international investors have mostly
distributed their capital in the region, and in light of the
administrative, legal and other obstacles foreign investors
encounter in Croatia?
According to some estimates, the situation is not hopeless, with
tourism and services being the potentially most attractive sector
for foreign investments.
A World Bank study on Croatia shows there are some 50 obstacles to
foreign investments - from a slow and inefficient administration,
to disorganised land registers, bureaucratic barriers, non-
transparent costs and an inefficient judiciary.
Eliminating those obstacles is a precondition for a more
significant influx of greenfield investments, which could
positively affect economic growth and development, reduce
unemployment and improve the country's balance of payments.
If the financing of the balance of payments continues to depend on
privatisation receipts, difficulties in financing deficits will
reappear once large privatisation projects are finished, HNB
analysts warn.
The deficit in the balance of current accounts in this year's first
half rose to close to USD1.4 billion due to high imports and
stagnating exports, while revenues from services were somewhat
improved.
In relation to 1999 and 2000, when direct investments covered the
largest part of external imbalance, this year's deficit in the
balance of current accounts has been covered again by foreign
loans.
According to the latest HNB reports, Croatia's total foreign debt
in late August amounted to USD11.7 billion, which is USD780 million
more than in late 2000. The state's share in the debt increased from
43.8% in late 2000 to 46.5% in late August this year.
(hina) rml