CROATIA
Overview Croatia became a member of the World Trade Organization (WTO) in November 2000. Important liberalization of the Croatia’s trade regime took place during the country’s WTO accession. Croatia is pursuing a program of thorough economic adjustment and reform, transforming its economy into one based fully on market principles. ... Croatia is strengthening institutional relations with the European Union and free-trade ties with countries in central and Eastern Europe. ... Croatia has also introduced a new Customs Tariff, incorporating the 1996 amendments to the International Convention on the Harmonized Commodity Description and the Recommendation of the World Customs Organization Regarding Ozone Layer Depleters and the Draft Recommendation on Drugs. ... Expansion of Croatias market through reduction/elimination of barriers to Croatias exports not only reduces trade barriers but enables Croatia to negotiate Free Trade Agreements (FTAS) with the members of the Central European Free Trade Agreement (CEFTA), thereby enlarging the size of its market for investors. Croatia has FTAS with Slovenia and Macedonia, will sign an FTA with Hungary, and has already engaged other CEFTA members (Czech Republic and Poland). Finally, Croatia is expected to complete an agreement with Bosnia and Herzegovina. ... The General Economic Background Economic Structure Croatia resembles a post-industrial economy, with services accounting for just under 60% of GDP in 1999. ... Services have grown in importance, partly because Croatia has reached a more advanced stage of development, but also because of the collapse in industry at the start of the 1990s. The disruption caused by the wars of the Yugoslav succession, the loss of much of the former Yugoslav market and the lack of competitiveness of many export sectors have compounded structural problems that Croatia shares with other transition economies. ... Economic Sectors Agriculture Agriculture in Croatia is varied, reflecting the countrys geographical diversity, with cultivated lowland regions, mountainous regions in which pasture predominates, and coastal areas where viticulture and fruit and olive production are prominent. ... Croatia is no longer self-sufficient in food: in 1999 it was a net importer of agricultural products, food and tobacco. ... The manufacture of wood products and paper, using the countrys still fairly abundant forests, is also important for Croatia Construction The war, with the destruction and population upheaval that it led to, brought the need for an extensive reconstruction programme, which was an important motor for growth in 1996-98. ... Economic Policy The parliamentary election of January 2000 brought in a new coalition between the Social Democratic Party (SPD), Croatia Social Liberal Party (HSLS), Croatian Peasant Party (HSS), Istrian Democratic Party (IDS), Liberal Party (LS) and Croatian people’s Party (HNS). ... i) Policy trends In March 2001, the IMF granted Croatia an SDR200m (US$260m) stand-by facility. This will be a precautionary facility, on which Croatia will not draw unless there is a major deterioration in its prospects. ... The new Law provides new incentive measures and tax benefit, related to investment in Croatia. ... The Law foresees four incentive measures: initial capital, real estate usage, assistance in creation of new jobs, vocational training and re-training iii) Privatization: In 1991 Croatia started a process of transformation and privatization of enterprise, which for the majority of the companies has now been completed. ... In October 1999, a 35% stake in Croatia Telecom Company ( HT) was sold to Deutsh Telekom US$850 million. ... On July 14th the Chamber of representatives of Croatia Parliament approved strategy for the restructuring and privatization of energy sector. ... Over the same period Slovenias exports rose by 29% in US dollar terms, and Hungarian exports grew by 116%, even though both countries also experienced falling export prices when the US dollar strengthened, indicating that Croatia had recorded a much slower rate of growth in export volumes.