1. The Industrial Policy in Croatia
19 September 2016

2. Industrial Development Strategy of the Republic of Croatia 2014 - 2020

3. THE REPUBLIC OF CROATIA
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
THE REPUBLIC OF CROATIA
Area:
56,542 sq km
Capital:
Zagreb
Population:
4.4 million
Official language:
Croatian
Domestic currency:
Kuna (HRK)

4. BASIC MACROECONOMIC INDICATORS
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
Harmonized with EU legislation
Negotiations ended with EU by mid of 2011
Accession: July 1, 2013
Croatia became a
full member in
April 2009
Croatia was a
non permanent
member of UN
Security Council from January 2008 till January 2010
BASIC MACROECONOMIC INDICATORS
INDICATOR
2008
2009
2010
2011
2012
2013
2014
2015
GDP per capita, €
10,856
10,181
10,191
10,453
10,300
10,213
10,129
10,364
GDP growth, %
2.1
-7.4
-1.7
-0.3
-2.2
-0.9
-0.4
1,6
Unemployment rate (ILO) %
8.6
9.2
11.7
13.7
16.0
17.3
17.0
16,3
Inflation rate, %
6.1
2.4
1.1
2.3
3.4
2.2
-0.2
-0,5
Export of goods and services, % of GDP
38.5
34.5
37.8
40.5
41.7
43.0
46.2 50
FDI, billion €
3.6
1.0
0.7
2.9
0,5
Gross monthly salary, €
1,030
1,056
1,040
1,035
1,044
1,038
1,031
Exchange rate HRK/EUR
7.32
7.30
7.38
7.53
7.54
7.63
7.66
7.50

5. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA

6. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
FDI – 29.8 BILLION € (1993 – I-III / 2016*)
FDI by sector
FDI by country

7. - C Processing industry (includes 22 activities),
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
Industrial sectors
Croatian industry – industrial sectors of the economy defined by the areas:
- C Processing industry (includes 22 activities),
- F Construction (includes 3 activities) and
- J Information and Communication (include 6 activities) NACE 2007.

8. The key obstacles of the Croatian economy:
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
The key obstacles of the Croatian economy:
Institutional environment: non-efficient public sector (state administration), legal insecurity, corruption, high and complex tax burden, administrative procedures and incomprehensible regulations
Low FDI rate in industry
Low share of highly educated labour force in total labour force
Insufficient investment in research and development (low level of innovative capacity)
Low level of labour productivity
Difficult access to capital markets and high cost of capital
Low level of technical equipment
(Non)aligment of educational system with the industrial demands

9. - Key industrial activities in the Republic of Croatia are:
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA KEY INDUSTRIAL ACTIVITIES
- Key industrial activities in the Republic of Croatia are:
C 21: production of basic pharmaceutical products and preparations,
C 26: production of computers and electronic and optical products,
C 25: production of finished metal products,
J 62: computer programming, consulting and related activities (ICT),
C 27: production of electrical equipment,
C 28: production of machines and appliances

10. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
Strategic goals – Croatian industry in 2020.
Main strategic goal:
Repositioning of the identified strategic activities on the global value chain towards production of the goods with higher added value.
Research and Development
Design
Supply Logistics
Production
Distribution Logistics
Marketing
After sales services
Added economic value
Base price
Pre-production
non material
material
Post-production
Non material
Activities that add value

11. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
Strategic goals – Croatian industry in 2020.
Other strategic goals:
Growth of the industrial production volume at the average annual rate of 2.85%,
Growth of the number of new employees by 85,619 by the end of 2020, out of which minimum 30% with higher education
Growth of the labour productivity by 68.9% in the period from ,
Growth of the export by 30 % from and change in the export structure in favour of goods with higher added value.

12. Development of the capital market – ”alternative financial sources”
INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC
OF CROATIA
Priority areas
Creation of the stimulating investment environment – “long-term contract with investor”
Encouragement of the strategic cooperation between industry and education system – “new knowledge for new employments”
Increase of the efficiency of the public service and administration – “proud to be working for public service!
Development of the capital market – ”alternative financial sources”

13. The Operational Plan for the Implementation of the Industrial Development Strategy in Croatia in 2016

14. Traditional approach MODERN APPROACH
NEW PHILOSOPHY AND APPROACH
Traditional approach
a certain reduction of taxes for a certain capital invested
State is not a partner investor
State bears no risk
all countries have very similar incentives
State is not listening to the observations and is not actively involved in their resolving
MODERN APPROACH
State is a partner and entrepreneur
placed in a position of an entrepreneur
takes care of his investment
through personal contact leads him through the bureaucracy
State bears a part of the risk and "shares" with entrepreneurs
a part of the profit (tax)

15. The Operational Plan for the Implementation of the Industrial Development Strategy in Croatia
4 groups of activities:
Activities to increase employment and productivity,
Activities to encourage capital investments,
Activities to encourage research, development and innovation,
Other activities
a total of 13 horizontal and 5 vertical groups of activities with associated sub-activities

16. The Operational Plan for the Implementation of the Industrial Development Strategy in Croatia
13 horizontal groups of activities that involve more sub-activities:
H1. Activities to ensure stable and unchangeable business conditions
H2. Enabling the investment conditions "consultation” system
H3. Employment Promotion Activities
H4. Activities to keep the most talented human resources in the country
H5. Activities to support capital investment to maintain employees
H6. Activities to promote the use of inventions and copywright works in Croatia
H7. The establishment of the Industrial Development Fund or the organizational unit within the Agency for Investment and Competitiveness
H8. Activities to promote occupations on which the "green economy„ is based
H9. Activity to establish database and create possibilities for financing projects in the area of technology and innovation that could not find resources to finance development
H10. The establishment of the venture capital fund for industry
H11. Activities to promote the introduction of special exports funding programme (insurance) by the Croatian Bank for Reconstruction and Development
H12. Activities to reorganize the Ministry of the Economy
H13. Activities to develop official documents

17. The Operational Plan for the Implementation of the Industrial Development Strategy in Croatia
5 vertical groups of activities that involve more sub-activities:
V1. Activities to promote the development and research (R & D) projects
V2. Activities to promote special education and training of workers
V3. Industrial tutoring for disadvantaged workers
V4. Activities to promote increased cooperation of employers and educational and scientific institutions
V5. Activities to promote the employment of persons older than 50 years
will apply to strategic activities

18. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
The realization of selected indicators of industry - comparison with
the real scenario of the Industrial Strategy
1 INDUSTRIAL PRODUCTION VOLUME INDEX (2008 = 100)
year
2008
2014
2015
2016
2017
2018
2019
2020
planned
100.0
83.5
84.3
86.1
88.7
92.2
95.9
100.7
accomplished
81.9
85.0

19. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
The realization of selected indicators of industry - comparison with
the real scenario of the Industrial Strategy
2 RATES OF INDUSTRIAL PRODUCTION VOLUME CHANGES as compared to a previous year (%)
year
2014
2015
2016
2017
2018
2019
2020
planned 1% 2% 3% 4% 5%
accomplished
3.1
3.5

20. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
The realization of selected indicators of industry - comparison with
the real scenario of the Industrial Strategy
3 CONSTRUCTION WORKS VOLUME INDEX (2008 = 100)
year
2008
2014
2015
2016
2017
2018
2019
2020
planned index
100
88.9
real index
56.5
56.1

21. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
The realization of selected indicators of industry - comparison with
the real scenario of the Industrial Strategy
4 GROSS VALUE ADDED (000 HRK)
year
2014
2015
2016
2017
2018
2019
2020
planned (mil HRK)
68,763
71,480
76,983
86,476
100,600
118,089
141,555
accomplished (mil HRK)
58,648
60,644

22. INDUSTRIAL DEVELOPMENT STRATEGY OF THE REPUBLIC OF CROATIA 2014-2020
The realization of selected indicators of industry - comparison with
the real scenario of the Industrial Strategy
5 NUMBER OF NEW EMPLOYEES
year
2014
2015
2016
2017
2018
2019
2020
planned
2,209
2,992
6,098
10,604
16,005
20,132
27,579
accomplished
-994
1,247

23. Eligible investment costs
INVESTMENT POLICY ELIGIBLE SECTORS AND COSTS
Manufacturing activities
Technology centers
Strategic business support services
Tourism (4 plus star hotels and resorts, sports and health centers, etc.)
Sectors
Tax incentives
Employment and education grants
Incentives for modernization of technology and R&D activities
Incentives for initial and capital expenses of the investment project
Incentives for labour intensive investment projects
Incentives
Equipment and machinery and intangible assets: patent rights, licenses, know-how, or
2 year-gross salaries
Eligible investment costs

24. INVESTMENT POLICY Incentives
Minimum investment: 150,000 € - SME’s and large size companies
Incentives
Tax incentives
0% - 10% profit tax rate
Employment incentives
€3,000 – €18,000 per employee
Incentives for Innovation and Development
20% of the eligible cost of buying the equipment/machinery (up to € 0.5 million)
Incentives for Initial and Capital Expenses of the Investment Project
Cash grant in amount of 20% of the eligible costs (up to € 1.0 million)
Respective investment incentives are calculated on an individual basis.

25. STRATEGIC INVESTMENT PROJECTS
Private, public or public- private investment projects
Sectors:
Economy, energy, tourism, transport, infrastructure, electronic communications, postal services, environmental protection, utilities, agriculture, forestry, water management, fishery, health care system, culture, science, defense, judiciary, technology and education
Main criteria:
minimum investment value:
 ≥ 20 million EUR
 ≥ 10 million EUR(if co-financed from funds and programs of the European Union )
≥ 2.7million EUR (for the areas of special national concern)
Significant employment
Development /Improvement of the production standard of goods and services
Introduction and development of new technologies
Positive effect on economic activity and creation of added value
Contribution to the Croatian economy competitiveness, sustainable development and protection of environment
In compliance with the obligations undertaken by international agreements and the strategic documents of the EU and the Republic of Croatia

26. INVESTMENT CLIMATE

27. INVESTMENT CLIMATE
According to the current Doing Business World Bank report (2015), Croatia is in the 40th place out of 189 countries.

28. QUICK OBTAINMENT OF BUILDING LICENCES
INVESTMENT CLIMATE
QUICK OBTAINMENT OF BUILDING LICENCES
Glass processing factory - Press glass SA day
Hotel Valamar President days
Factory for leather products - Wollsdorf components Ltd days
Washroom hygiene, mats, workwear and textile - Cws-Boco Ltd days
Industrial plant for the production of energy bars - Atlantic Multipower Ltd 19 days

29. The Program of Aid for Investment in Production Technology

30. Small entrepreneurs that on 31.12.2015 employed minimally 40 workers
The Program of Aid for Investment in Production Technology
The total amount of resources and users
The total amount of funds intended for the implementation of the Program: 40 million
Small entrepreneurs that on employed minimally 40 workers
Medium entrepreneurs
Large entrepreneurs

31. The Program of Aid for Investment in Production Technology
Eligible applicants
entrepreneurs registered for economic activities for at least two years before the date of application submission
entrepreneurs, as well as their affiliates, who do not have any outstanding commitments to employees, public duties, as well as obligations under previously awarded grants
entrepreneurs who are, along with the implementation of investments, able to maintain or increase the number of employees

32. Small and medium entrepreneurs: 35% of eligible costs
The Program of Aid for Investment in Production Technology
The intensity, the level of support and measurable goals
The aid intensity:
Small and medium entrepreneurs: 35% of eligible costs
Large entrepreneurs: 25% of eligible costs
The maximum level of support per applicant: 1.5 million kuna
Measurable objectives of the Program are:
employment growth
revenue growth
growth of export value

33. The Program of Aid for Investment in Production Technology
Method of projects evaluation
Value parameters
Value for money that the project offers:
contribution of the project to the increase of employees,
increase in sales revenue and
Increase of the exports value
The financial viability of the project
Enforcement capacity of the applicant:
The expertise and capacity of the applicant,
Financial capacity of the applicant
Design and project maturity
Identification and formulation of the project,
The feasibility plan of the project
The risk of project
Analysis of options
Horizontal issues
The contribution of the project to solving specific development problems at the site of implementation

34. Shipbuilding in Croatia

35. part of the industrial heritage of Croatia
SHIPBUILDING IN CROATIA
Industrial sector
part of the industrial heritage of Croatia
share of this sector in GDP is about 1.4%
share in Croatian commodity exports in the last few years is over 15%
Croatian shipbuilding industry employs approximately 8,000 employees in four largest shipyards
share of products and services produced in Croatia in the built ship is between 50-65%

36. SHIPBUILDING IN CROATIA
The multiplier effect
The value of the shipbuilding multiplier factor determined according to the latest estimates is 2.83
In addition to directly employed, shipyards provide employment for about subcontractors, while more than 1500 companies (manufacturers of marine equipment, and variety of materials and services) and more than 20,000 employees are linked to shipbuilding
The importance of the shipbuilding industry, especially in the area of ​​employment, for Croatia is extremely large.

37. SHIPBUILDING IN CROATIA
Shipyards
Two large shipyards of four (Uljanik, Pula, Brodograđevna industrija and 3. Maj d.d. Rijeka) are located on the northern Adriatic (Istria and Primorje) and two (Brodosplit, Split, Brodotrogir, Trogir) in the south
Shipyard 3. MAJ d.d.

38. SHIPBUILDING IN CROATIA
Plans and further activities in the implementation of the restructuring process
Uljanik brodogradilište d.d., Brodograđevna industrija Brodosplit d.d., Brodotrogir d.d. and Brodograđevna industrija 3 MAJ d.d., the shipyards in majority state ownership have been privatized by the Government. All of them, except Uljanik are in the process of restructuring.
Brodograđevna industrija Split d.d.

39. SHIPBUILDING IN CROATIA
Plans and further activities in the implementation of the restructuring process
Croatia intends to preserve its shipbuilding industry, starting from the knowledge, experience and tradition in the production of ships, its maritime orientation, importance of this industry concerning employment and the impact on the entire of the economy.
Brodotrogir d.d.

40. Ministry of the Economy
Sector for Industry and Investments
Robert Blažinović, Head of Sector