Croatia to address stalled foreign investment

30/01/2013

Croatia may look to Montenegro on ways to simplify and reduce public administration demands and attract foreign investments.

By Cornelis van Zweeden for the Southeast European Times in Dubrovnik -- 30/01/13

Dubrovnik seeks to change the ways it does business to attract investments. [Cornelis van Zweeden/SETimes]

In an effort to better shape the country's foreign investment portfolio, Croatia is looking to Montenegro's example. Croatia's tiny neighbour has made a concerted effort to simplify and reduce public administration and attract foreign investments.

Croatia's foreign direct investment declined to nearly half a billion euros last year from more than 4 billion in 2008. Analysts blame an inefficient public administration system, slow judiciary and flimsy property rights.

"We are more dependent on the EU than other countries in the region [and] many EU-countries are in recession," Sandra Svaljek, heads of the Zagreb-based Institute for Economics, told SETimes.

Investor Aaron Frankel, an Israeli arms dealer, is still waiting for a building permit six years after investing 100 million euros into a project to build a golf course in Dubrovnik.

"It is very surprising that neighboring Montenegro can do in one year what we can not achieve in six," Ivan Kuselic, Frankel's Croatian business partner, told SETimes.

By contrast, Montenegro built the third biggest marina in the Mediterranean in 2011 within two years. The Bay of Kotor marina will soon be extended again to become the world's biggest.

"Administrative procedures here are straightforward, involving only two levels of government," Becket Tucker, head of sales at the Kotor marina, told the SETimes.

Despite alleged corruption in the form of bribes and the allowing of illegal construction in Montenegro, the Montenegrins do have a plan, according to Mato Frankovic, head of the Dubrovnik marina.

"The plan is to make money," Frankovic told SETimes.

Dubrovnik Mayor Andro Vlahusic told SETimes that Croatia should amend its constitution to oblige civil servants and serve private businesses in order to negotiate the red tape.

Meanwhile, Vlahusic has changed the negative practice. Each time a bureaucrat refuses to approve an application, the paper lands on his desk.

"Four years ago we had 2,000 pending applications, now we have only 100," the mayor said. But residents and analysts said the bigger projects also require the approval of two other layers of government, which is the source of the delay.

In an attempt to address the issue, officials in Zagreb said a one-stop agency to assist strategic investors is in the plans.

"Once applied, this should speed up the process," Svaljek said.

Yet, for some problems like land ownership, there are no easy solutions.

Croatia has a digitalised cadaster, but the abundance of many small plots still impedes large projects.

Radisson Blue Resort is a case in point. It built a large complex of ultra-modern houses and villas 20 kilometres north of Dubrovnik around two houses whose owners refused to sell their property.

One of the houses is right next to the resort's swimming pool -- a visual reminder of the larger issue Croatia needs to tackle.

This content was commissioned for SETimes.com.