Existing Free Zone in Croatia

Strategic Plan for the Long Term Development of Existing Free Zones in Croatia

REPORT

Export Oriented Foreign Direct Investment into Croatia and its Major Competitors

Paddy Gallagher
Ljiljana Bozic

Zagreb, July 24, 2006

Contents

Section 1 1
Terms of Reference and Study Methodology 1 1.1 Objectives of Project 1 1.2 Scope of Services under Project 1 1.3 Study Methodology 2
Section 2 3
Executive Summary 3
Section 3 5
FDI Inflows into Croatia and its Competitor Locations 5 3.1 Croatia 6
3.1.1 Export Oriented Knowledge-led Services 9
3.1.2 Foreign Direct Investment 9 3.2 Bulgaria 11 3.3 Romania 13
3.4 Slovenia 15 3.5 Serbia 16 3.5.1 FDI Oriented Exporters 16 3.6 Albania 17 3.7 Bosnia and Herzegovina 18 3.8 Macedonia 19
Section 4 20
Export Performance 2000 to 2005-Croatia and its Major Competitors 20
Section 5 22
Factors Influencing the Attraction of FDI 22 5.1 Overall Infrastructure Quality 23 5.2 Quality of Educational System 24 5.3 Brain Drain 25 5.4 Impact of Rules on FDI 26 5.5 FDI and Technology Transfer 27 5.6 Labour Costs and Manufacturing Costs 28 5.7 Costs imposed on Business by Corruption and Organised Crime 30 5.8 Judicial Independence 31 5.9 Efficiency of Legal Framework 32 5.10. Export Marketing 33 5.11 Breadth of International Markets 34 5.12 Foreign Ownership Restrictions 35
Section 6 36
Barriers to Investment in Croatia and its Free Zones 36 6.1 Barriers to Investment in Croatia 37 6.1.1 Education, Skills and Training 37 6.1.2 Government and Legislation 38 6.1.3 Financial Environment 38 6.1.4 FDI Policy 39 6.1.5 Infrastructure/General 39 6.2 Reactions to US State Department comments on Barriers to Investment in Croatia 40 6.3.1 Public and Private Institutions 41 6.3.2 Market Inefficiencies 42 6.3.3 Technological Readiness 42 6.4 Priority areas for Reform 42 6.4.1