VIDEO: Australian-Croatian economist discusses Croatia’s economy after EU accession

Article by: Peter Bury, Editor at Crodiaspora and Politicorp

As is well known among our Croatian diaspora communities, our base is large, vast, and powerful. Croatian diaspora has a clear and distinct presence in many established nations like the United States, Canada, Australia, Chile, Argentina, and of course throughout the rest of Europe. Although the estimates are rough, it has been recorded that there are over 2 million Croatians living outside of Croatia. This amount, considering that Croatia’s internal population is only just over 4 million is simply extraordinary. With such a global reach, the diaspora communities really hold a lot of hidden potential and influence with regards to their homeland.

The positive impacts of Croatian diaspora can be highlighted through some success stories of individuals who have returned to Croatia from the diaspora and have made real change in the domestic spheres of politics, economics, and society. One such example can be shown through Goran Šaravanja’s detailed career in Croatian commerce as a returnee who was born and raised in Australia.

Goran began his career in Australia at the New South Wales Treasury, which is a government department responsible for financial reporting, advising, and policy development. Shifting focus to Croatia, he worked in the Ministry of Finance, on macroeconomic forecasting and public debt management. In the private sector since 2001, Goran first worked as a regional Senior Economist at the Zagreb subsidiary of Austrian bank Creditanstalt Investment Bank, then moved on to work as Chief Economist at Croatia’s largest bank, Zagrebačka Banka as well as serving on UniCredit’s economic analysis team for four years. Next, from 2012-2017, Goran was the first-ever Chief Economist at INA, in the oil and gas industry, and for his final two years there he also served as the head of Strategy Development. Most recently, Goran has founded a private consulting firm, IMELUM, which acts as an independent source for financial and business advising in southeast Europe.

In a public webinar with Crodiaspora’s Mate Paškanović Pavković, Goran shared some of his vast insights on working in Croatia, the process of returning to the homeland from the diaspora, and some of the prospects for Croatia.

In discussing Croatia’s accession to the European Union and their fit and recent adaptations to the European framework, Goran outlines that Croatia is a clear net recipient in the EU, and since joining the union, Croatia’s exports have surged and risk has diminished as a result of access to the European Single Market and the policy anchor EU membership represents. More recently, Croatia has garnered financial attention through hikes in their credit rating, which now stands as an investment-grade rating by multiple reputable rating agencies.

In terms of Croatia’s political atmosphere, Goran highlighted one major event that confirmed the nation’s path to a stable democracy, and that was the short-lived government of Tihomir Orešković; the first not to serve out its full term. Democracies have built-in mechanisms like early elections, which Orešković faced, that prove democratic resiliency and flexibility in times of struggle, disagreement, and political deadlock. In this specific case, early elections did the work and maneuvered the nation to another government where agreements could be made to facilitate policy introduction.

Now, one of the things that so many people in our diaspora wonder about is the business environment and potential in Croatia. Having substantial experience in that field, Goran talks about his interactions and conversations with foreign investors he met with mostly during his time with Zagrebačka Banka. He explains that their concerns with the Croatian business atmosphere are that there is an evident lack of ambition and lack of real expansionary effort amongst too many domestic businesses. He goes on to say that generally, the tax burden is too high; put another way, for the level of taxation the public sector offers too little in the way of consistent policy formulation and implementation. The legal system remains too cumbersome.

Having said that, Goran has noted marked improvements in his more than 20 years of living and working in Croatia. There is still not enough awareness that the public and private sectors are partners in securing faster, more sustainable growth, not enemies. This would allow tax rates to be lowered, supporting the business environment further and generating even higher tax revenues from which public servants could credibly expect to receive justified pay rises. He believes the focus in the future must be on improving the efficiency of public service provision in order to unlock the public spending cuts many entrepreneurs continue to call for.

This is where the diaspora can really play a transformative role in Croatia’s domestic growth and development. The simple fact is that we have grown up in nations with a different mindset when it comes to business; we have been exposed to more opportunities, and with them, we get a greater degree of natural ambition. With these externally sourced assets, the Croatian diaspora has the potential to come back and act as an economic, political, and social driver for Croatian prosperity now and in the future.

Tasked with a diminishing population, as seen through our diaspora, attracting young people to come and live and work in Croatia must be one of the nation’s top priorities. Goran mentions that the issue with this is that emigration is not a Croatia-specific problem but rather one for all of Eastern Europe, and in any case, the major factor for attracting new professionals is all around stability, and that is something that must simply be fostered over several years. In the context of adverse demographic trends, the pension reform enacted over 20 years ago which introduced mandatory private pension savings is a long-term guarantor of fiscal policy sustainability. Croatia is one of few EU member states in this position, which the European Commission also acknowledged in its most recent Debt Sustainability analysis.

One thing though that has been a central topic regarding Croatia in the European Union is its anticipated entrance to the Eurozone and adopting the euro as their main currency. The euro has the potential to be very good for Croatian commerce and trade as it will reduce transaction costs which are brought upon through currency exchange, reduce economic uncertainty, and provide an increased degree of financial transparency. With these economic stabilizers in place, Croatia will undoubtedly have an enhanced platform with which to advertise their eagerness to welcome new professionals and their ideas into our increasingly stable and reliable nation.

Further, with increased Croatian participation in the European Union by way of joining the Eurozone, our accession to the Schengen Area nears. The Schengen Area is another facet of European connectedness of free movement by way of abolished border stops and customs checks. When Croatia joins the area, it will experience substantial boosts in the overall movement of goods and labour as well as an influx in an already thriving tourism industry.

However helpful these additional EU mechanisms may be, Croatia still has outlying gaps in its own domestic economy. Apart from achieving already mentioned synergies between the public and private sectors, there is a need to broaden perspectives, to drive home that opening up the economy to the world is an opportunity to learn best practice business techniques, access human and financial capital rather than a threat to what has already been achieved. Too often in Croatia, people think they can do everything on their own, that it is almost shameful to cooperate with others including foreign investors. There is so much opportunity for ambitious professionals to build new industries and diversify the national economy into one where no one industry must prop up the entire nation.

The fact still stands that there is such an abundant Croatian population outside of Croatia with such driving passion and ambition for growth and innovation and it would be a shame not to bring back some of that passion to the homeland to support growth and industrial advancements. From agriculture to computer technology, Croatia is a niche market with expanding economic potential by way of the European Union, and it can be a fantastic platform for small businesses to expand and thrive as opposed to being shut out of more established and rigid markets elsewhere.

Goran definitely has some excellent insights on the inner workings of Croatia’s economic system and financial sphere and his expertise is always recommended for anyone looking to invest or get involved in Croatian business, or any business operations in southeast Europe for that matter.