Once relatively prosperous, Croatia emerged from a mild recession in 2000 with a sound tourism sector, but massive structural unemployment. Coalition politics and public resistance impeded economic reforms needed to spur growth.

Nathan Associates worked to improve Croatia’s business environment by spreading appreciation for a sound business environment, institutionalizing private-public dialogue on that environment and supporting government efforts to improve it, and by building momentum for competitiveness at the industry level.

Spreading Appreciation
The Croatian Competitiveness Initiative (CCI) first brought the concepts of competitiveness and industry clusters to Croatia through a conference of more than 300 business and government leaders who heard the President of Costa Rica, Jose Maria Figueres, and the Prime Minister of Ireland, Garrett Fitzgerald, describe their successes firsthand.

To build appreciation for the virtues of competitiveness, CCI brought together business, government, and media representatives in a media seminar. The seminar also helped build trust between business, government, and media. Croatian journalists publicized project activities and their importance for Croatians. CCI also organized a management education roundtable and worked with the university’s Economics Faculty and 25 students to develop case studies of Croatian business.

Building Institutions
CCI created institutions and programs that promote dialogue between the public and private sector and among businesses and industries at the national and regional levels. The Business Competitiveness Council (BCC) consists of business leaders who meet monthly to work on improving the image of Croatia, developing a top-class management education capability, fostering the development of a vibrant and entrepreneurial IT sector, and supporting other regional and international competitiveness projects.

The BCC’s Competitiveness Business Forum, June 2002, attracted 42 business leaders for an intensive discussion of competitiveness and Croatian case studies. The forum is now an annual event. The BCC also created the National Competitiveness Council (NCC) of business, government, labor, and academic leaders to build consensus on policy among all sectors of the economy and set an agenda for competitiveness.

The NCC’s first annual report in May 2003 set priorities for a national debate on competitiveness and the changes required to achieve it.

In 2002, CCI ensured that Croatia was listed in the World Economic Forums annual Global Competitiveness Report, which uses international benchmarks to rank countries’ competitiveness and helps countries identify areas they need to improve. The NCC has now taken on the task of keeping Croatia listed in the GCR.

CCI helped form the city of Bjelovar’s Economic Council, which signed a Memorandum of Understanding with the U.S. Ambassador and the municipality to implement competitiveness activities and reforms. CCI has also helped form business councils in Nova Gradika as well as Bjelovar.

Supporting the Public Sector

CCI created model legislation for technology and business parks and supported the legislation with a financial impact assessment, a pending legislative impact assessment, and an international survey of potential business interest. CCI’s credit reporting recommendations became a part of the new banking law.

CCI helped design the Foreign Investment Advisory Service (FIAS) Matrix and Action Plan, the guideline for economic reforms and a prerequisite for World Bank loan financing.

Supporting Industries
CCI formed industry clusters for the wood and tourism industries. The wood cluster brings together representatives from all parts of the value chain-from forest to final production and retail-and includes the monopoly supplier, Croatia Forests.

Working at the national level as well as with producers around Varadin, the cluster drafted a national strategy. Other regions are forming clusters according to the model provided by the wood cluster.

Developed around a core of small hoteliers in Dalmatia, the tourism cluster brings together representatives from the tourism board, restaurants, food producers, airline and ferry boat companies and tour operators, and is reaching out to hoteliers countrywide.

In addition to devising a strategy, the cluster developed a Certificate of Authentic Tourism for companies that develop and preserve unique Croatian products. This criterion of preservation has been integrated into a credit program offering support for refurbishment of structures and tourism properties.

In the information and communications technology sector, CCI provided technical assistance for site selection, design, and establishment of a technology park in Varadin. CCI also courted a U.S. investor who could prove to be the park’s first strategic investor.

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