ECONOMIC INDICATORS

Source: Croatian Bureau of Statistics (CBS), Croatian National Bank (CNB), Ministry of Finance (MoF)

ECONOMY IN 1997 AND 1998

Owing to a comprehensive stabilisation programme launched in October 1993, Croatia has become one of the leading transition countries in terms of macroeconomic and political stability, which enables her to achieve stable economic growth and to join global economic integration processes. In spite of all the hardships suffered recently, a legal framework modelled after Western European countries has been established, thus promoting the development of free entrepreneurship and a market economy.

Government expenditure has been adjusted to peacetime requirements, and the share of public consumption in GDP is decreasing to 44%.

The domestic currency exchange rate has remained stable for four years in a row, and foreign exchange reserves at the National Bank of Croatia amounted to 2.538 billion USD at the end of 1997. Relations with the creditors from the Paris and London Club have been resolved successfully, thus enabling the entry of Croatian bonds on the global capital market. Due to a favourable credit rating (BBB) Croatia has obtained more favourable borrowing conditions and better references for foreign investors. The shares of PLIVA, the largest Croatian pharmaceutical company, and the “ZagrebaËka” Bank are already listed on the world stock exchanges. Inflation has been maintained at a rate of approximately 3.5% throughout the last couple of years, and the budget deficit is lower than 1%. Croatia’s economic indicators are congruent with the parameters defined in the Maastricht Treaty, which ranks her among potential EU members.

The process of restructuring of economic entities is being carried out successfully. Most small and medium-sized enterprises have already been privatised, and the privatisation of the public sector is about to begin. Voucher privatisation will help to complete the privatisation process before too long, and the process of restructuring of the banking system is to be completed soon.

The priority task in the forthcoming period is an increase in production and exports for the purpose of securing stable economic growth. Following a successful reintegration of the occupied territories, most of our endeavours have to be dedicated to the revival of production and the reconstruction of infrastructure and housing units in the war-affected regions. Therefore an increase in FDI from 13% to at least 25% of GDP is of greatest importance.

One of the top priorities in economic policy is the finalisation of negotiations on Croatia’s accession to the World Trade Organisation, CEFTA and subsequently the European Union. Croatia is an open country from the economic point of view, and its trade system is almost completely liberalised. The European Union participates in Croatia’s commodity exchange with a share of 60% and CEFTA countries with 17%, which proves that we have achieved all the necessary macroeconomic conditions for joining these associations.

AGRICULTURE

Agriculture in Croatia is well developed. Of a total of 3 million hectares of agricultural land, 61.3 per cent is cultivated and the rest is pasture land. 82 per cent of the cultivated land is privately-owned.

Crop production is especially well developed, covering the domestic needs for cereals, while cattle breeding accounts for almost 40 per cent of agriculture-generated GDP. Croatia has also a well-developed fishing and fish-processing industry, and is rapidly developing marine-culture production.

Of a total of 2,100,000 hectares of the Croatian forests and woodland areas, 76 per cent is state-owned and the rest is in private hands. Conifers make up 11 per cent of the forests, while in the remainder oak and beech are among the more important broad-leaved species. The annual biomass growth is 4m3 per hectare, of which 70 per cent is felled. Based on its rich resources of high quality timber, Croatia has a well developed wood-processing industry with 40,000 employees and annual exports in this area of 350 million USD.

INFRASTRUCTURE

Croatia has a well-developed economic infrastructure, even though it is still below the standards of developed European countries. Of a total of 29,000 kilometres of roads, 20,000 kilometres are asphalted; of a total of 2,762 kilometres of railways, 983 kilometres are electrified. The main Croatian ports, Rijeka, Split and PloËe, are well connected with the inland. In 1997 more than 27 million tonnes of goods passed through Croatian ports, mostly through the port of Rijeka.

The Croatian postal and telecommunications systems have experienced intense development over the last few years. According to available figures for 1996, 1,581,000 telephone subscribers were registered in Croatia.

BUILDING AND CONSTRUCTION

Building and construction is an important industry in Croatia. In 1997 it employed 58,037 employees in 10,295 companies. The total value of construction contracts carried out abroad in 1997 amounted to more than 154 million USD, 95 per cent of which was earned in Europe.

EMPLOYMENT

Labour relations in Croatia are regulated by laws, collective and individual contracts, and regulations adopted by employers.

The Labour Act (in force since 1996) is in harmony with the employment systems of Western European countries. The provisions of this Act respect the conventions of the International Labour Organisation and other international standards.

The main issues regulated by this Act are:

• the legal basis of labour relations is made through a work contract; the Act dictates the form and obligatory contents of the contract;

• working hours (maximum of 42 hrs per week if not otherwise stipulated), vacations and other leave (at least 18 working days), forms of protection in case of maternity leave or for employees who are temporarily or permanently disabled;

• wages: the employer must not pay less than stated in the collective contract, discrimination of payment is prohibited; protection of the employee in case of bankruptcy;

• the procedure for the termination of the work contract, i.e. the reasons for a regular or irregular notice of dismissal. The Act also stipulates an obligatory programme in cases of redundancy due to different changes in the organisation or due to some economic or technical changes if they result in the dismissal of more than 10% of the labour force. It also has to be applied if the employer intends to dismiss more than 20 work contracts within a month.

• the employees have the right to participate in decision-making regarding their economic and social rights and interests through their representatives on their employee council.

The employers (or their associations) and the trade unions (or their associations) sign collective contracts which regulate the rights and obligations of the employers and employees. These contracts can also contain regulations for employment, the termination of labour relations, matters regarding the employee council, social insurance or other matters in connection with labour relations.

In order to protect and promote the economic and social interests of the employees, trade unions (or their associations) have the right to organise strikes. They have to inform the employers, or the association of employers, in advance about the place and time, and stipulate the reasons for the strike.

EMPLOYMENT OF FOREIGN NATIONALS

The Employment of Foreign Nationals Act regulates the employment of foreigners in Croatia.

A foreigner may be employed in Croatia only if he/she holds a work permit and fulfils the general and special conditions of employment.

A foreigner who

• has obtained permission for permanent residence;

• intends and can prove that he/she will engage in specific activities (e.g. foreign investment);

• will perform professional activities as stipulated in the technology transfer contract or the long-term production co-operation contract;

personally submits the request for obtaining a work permit.

A domestic employer who employs a foreigner has to request a work permit for a foreigner who has been granted a prolonged stay in Croatia.

A work permit is, as a rule, issued for a limited period of time, i.e. for the duration of specific activities or professional work. Work permits are issued by the State Employment Office, Central Office Zagreb, through the competent local service.