Croatia shakes ABC ‘Anything But Croatia’ tag for investors

Foreign investors used the term “ABC” – meaning “Anything But Croatia” – for years to describe their reluctance to invest in the country. However, this sentiment no longer seems to apply.

This term is no longer at the forefront of the minds of investors was the conclusion of a panel on foreign investments organised by the American Chamber of Commerce in Croatia, held this week in Zagreb, Lider.hr reports.

Andrea Doko Jelušić, Executive Director of the American Chamber of Commerce in Croatia, highlighted at the start of the panel that the institution believes foreign direct investments (FDI) bring numerous advantages.

These include stimulating economic growth, integrating Croatian companies into global value chains, creating new jobs, enabling technology and knowledge transfer, and ultimately increasing productivity.

“The progress Croatia has made as an investment destination is evident, and this is perhaps best confirmed by the recent upgrade of Croatia’s credit rating to its highest historical level of A-.

We are particularly encouraged by the fact that nearly 80 per cent of AmCham members plan to expand their operations in Croatia over the next three years, an increase from 73 per cent last year,” said Doko Jelušić, specifically mentioning Jabil’s investment near Osijek, which is being officially opened this week.

(Photo credit: Jabil)

Fitch Ratings upgraded Croatia’s Long-Term Foreign-Currency Issuer Default Rating (LTFC IDR) from ‘BBB+’ to ‘A-‘ last month, highlighting the country’s robust economic growth, prudent fiscal management, and increasing integration with the eurozone.

Goran Romek, State Secretary in the Ministry of Economy, also emphasised that Croatia has experienced continuous growth in foreign direct investments over the past few years, with more than one billion euros of investments realised in the first quarter of this year alone.

“Foreign direct investment is a priority for this government. To ensure Croatia remains competitive in attracting investment, the Government and the Ministry of Economy are continuing to enhance the business climate through measures for administrative streamlining, the adoption of the National Plan for Investment Promotion, the National Plan for Industrial Development and Entrepreneurship, and a new Investment Promotion Act, which will provide even more favourable incentives for investors,” stated Romek.

Ivić Vodopija, Eastern Europe Director for Maersk, remarked at the panel that the entire Adriatic, including Koper and Rijeka, is viewed by the logistics multinational as a strategic corridor for supplying European importers and exporters.

“To realise the full potential and benefits that come with this, the development of the railway as a vital component of a green supply chain must be absolutely prioritised and significantly accelerated. Unfortunately, the current pace of development does not yet match the potential and opportunities available,” said Vodopija.

However, not everything is so optimistic, according to Josip Funda, the Chief Economist at the World Bank.

He pointed out that while foreign direct investments in Croatia have been relatively high in recent years, their structure remains suboptimal.

For one, companies tend to retain their profits rather than reinvest them, and a significant portion of ownership investments still goes into foreign purchases of Croatian real estate.

“Nevertheless, processes such as regionalisation and the shortening of supply chains triggered by the COVID-19 pandemic, further intensified by geopolitical tensions, offer Croatia an opportunity to attract new investments.

Even in conditions of labour shortages, continuous improvements in the business environment could lead to a gradual restructuring of the economy towards more productive activities and better-paid jobs,” said Funda, adding that the old notion of “invest anywhere but Croatia” no longer holds true. “Croatia has improved its business environment, and this is demonstrated year after year,” Funda stated.