This was said at a business lunch entitled "Global trends in investments - where is Croatia?", organised by AmCham.
Josip Funda of the World Bank pointed out that FDI companies in Croatia, namely those with a share of foreign ownership above ten percent, generate about a third of GDP, employ about a quarter of the total workforce, and account for almost 50 percent of exports.
FDI companies, said Funda, have a positive effect on the productivity of the country in which they invest, in the form of the transfer of knowledge, technologies and business practices, and in Croatia, although it has a relatively high level of such investments, their structure is somewhat problematic, considering that in large part they refer to investments in sectors of non-tradable goods, such as finance, insurance, trade and real estate, which account for the largest share of last year's equity investments.
Falling behind in productivity in certain sectors
He pointed out the relatively high growth of Croatian GDP after the coronavirus crisis, as well as the acceleration of income convergence towards the EU average, whereby the Croatian average is currently 73 percent, adding that he expects it to be around 80 percent by 2030.
However, partly due to low labour productivity and its slow growth, Funda warned, the potential for economic growth in the long term is still low.
He underscored that Croatia was lagging behind in productivity in certain sectors, especially the manufacturing industry, recalling that Croatia is at only 35 percent of Germany's productivity, which means that it takes three Croatian workers to produce what one produces in Germany.
Funda stressed the need for greater investments in research and development, as well as the adoption of existing technologies and innovations. He also said that last year certain positive developments in labour productivity and a reduction in the gap behind comparable countries were recorded in Croatia.
Judicial reform and quality workforce
Funda highlighted the quality of the judiciary as key to attracting foreign direct investment, praising the reforms that the government is working on in that regard as part of the National Recovery and Resilience Plan.
Among other things, the quality of the workforce is extremely important, and the process of raising it is a long one, Funda said, praising the government's model of full-day classes, which should contribute to improving educational outcomes.
He also stressed the need for active work to attract foreign direct investment.
This part of Europe as the "new little China"
He also said that optimism is caused by the fact that the coronavirus pandemic has significantly changed globalisation processes, given that it has led to the shortening of value chains and regionalisation, so in the coming years investments will be more focused on countries that are closer to domestic markets. "It's a great opportunity for Croatia," Funda said.
Schengen and the eurozone "a strong impetus" for attracting investment
Hrvoje Bujanović, State Secretary at the Ministry of Economy and Sustainable Development, said that based on the Investment Promotion Act, 239 applications, i.e. projects with a total planned value of €2.3 billion, were received in 2022, which is three times more than the year before.
The executive director of AmCham, Andrea Doko Jelušić, stated that the situation is improving from year to year when it comes to Croatia's attractiveness for investment, with business conditions being comparable to the countries of Central and Eastern Europe.
In the context of investment, this year's entry into the eurozone and the Schengen area is also a strong impetus, Doko Jelušić said, noting that Croatia still needs to work on improving the business climate.