Croatia has recorded considerable economic and social progress since the start of the post-independence reforms in the late 1990s. GDP per capita increased by an average annual rate of 2.5% between 2000 and 2018 (in PPP, at constant 2011 international USD). Due to this strong economic growth and improvements in labour market conditions, the share of the population living below the poverty line (at USD 5.5/day PPP) has continued trending downwards to 4.6%, from 7.3% in 2013. In addition to its expanding tourist sector, Croatia’s strong performance has been supported by major policy reforms, including continuous efforts to open the economy to investment which have helped spur capital inflows.

The Investment Policy Review of Croatia assesses the investment climate in Croatia and discusses the challenges and opportunities faced by the government of Croatia in its reform efforts. Capitalising on the OECD Policy Framework for Investment, the Review takes a broad approach to investment climate challenges facing Croatia, with chapters on foreign investment trends and performance, competiveness, foreign investment regulations, the legal and institutional framework for investment protection, investment promotion and facilitation, regulatory practices, and policies to promote and enable responsible business conduct.

This Investment Policy Review is the fruit of a two-year inclusive process carried out in partnership with the Ministry of Foreign and European Affairs of Croatia, and for which the European Union (EU) provided funding. It has been undertaken to provide Croatia with a systematic approach to investment climate reform, using the well-tested methodology of the OECD Policy Framework for Investment (PFI), and accompany Croatia’s application for adherence to the OECD Declaration on International Investment and Multinational Enterprises. In total, the Review is composed of eight chapters.

This chapter documents the overall development context in Croatia since independence in 1991, describing the current economic situation and the main investment policy reform efforts, and identifies specific challenges that hinder investment, economic growth, and well-being. It summarizes the key findings in each policy area covered by the Review and provides tailored recommendations.

This chapter reviews investment trends in Croatia. It provides information on the evolution of inward and outward FDI flows and stocks and compares Croatia’s performance to other similar countries. It also provides information on the relative importance of greenfield FDI and mergers and acquisitions. The country has performed relatively strongly in attracting foreign investment, but there is need to diversify FDI by destination sector, source country and mode of entry as well as support further internationalisation of domestic firms.

This chapter examines Croatia’s integration into the global economy and the structure of foreign trade. It looks at various indicators which, taken together, determine the nation’s ability to compete in global markets. It also summarizes various measures that can be taken to improve productivity and competitiveness, notably by promoting linkages, addressing skills shortages, enhancing market functioning, and facilitating trade.

This chapter provides an overview of the regulatory framework for starting and expanding a business in Croatia and reviews existing regulatory restrictions to foreign direct investment. It looks at the conditions Croatia imposes on the entry of foreign investors and the extent it provides them national treatment once they are established. The chapter also benchmarks the openness to foreign investment, an area where Croatia far exceeds many of its competitors.

This chapter reviews the provisions in both domestic legislation and Croatia’s international investment agreements offering protections for investors. It looks at the domestic framework, particularly the rules for expropriation and the protection of intellectual property rights, and discusses the legal and institutional framework for contract enforcement and dispute resolution, with particular attention given to the judiciary and alternative dispute resolution mechanisms. It also reviews Croatia’s international investment treaty practice and its legal framework for investor-state dispute settlement.

This chapter provides an assessment of the evolving investment promotion and facilitation framework in Croatia. It discusses existing strategies and institutions governing investment promotion and facilitation as well as provides an overview of the use of investment incentives and special economic zones. It also highlights key reforms and remaining challenges to improve the business environment, including by streamlining administrative procedures.

This chapter first provides an overview of recent advances and remaining challenges relating to regulatory quality, drawing on the recent OECD Regulatory Review of Croatia. In particular, it considers how Croatian authorities review existing regulation and introduce new ones. It also provides an overview of the situation regarding corruption in Croatia: perceptions, criminal and preventive measures in place, and outstanding issues. In particular it analyses the measures to enhance public integrity that have proven effective and successful. The chapter also explores what the government, business associations and individual companies do in order to strengthen business integrity, with a particular focus on anti-corruption measures.

Responsible business conduct (RBC) is an important part of the investment climate and is increasingly integrated within policies aimed at attracting quality investment and enhancing sustainable development. In line with global trends, RBC has also emerged as an important topic in Croatia. This chapter provides an overview of the RBC landscape in Croatia and Croatia’s plans for its National Contact Point for the OECD Guidelines for Multinational Enterprises.