Croatia, the New Europe and a second chance for Canada
By Ottawa Business Journal Staff
Mon, Jan 30, 2006 12:00 AM EST
In 1989, the Berlin Wall came down and the countries of the Soviet bloc embarked on a process of rapid transformation. Today, they represent, after China, the second most dynamic investment destination in the world. Canada largely missed out on that opportunity, preferring to focus on the United States. Now, countries like Croatia are going through the same rapid economic transition, offering Canada a second chance.
Milan Bandic, the mayor of Croatia's capital, Zagreb, will make an official visit to Canada on Feb. 4 to 9. His itinerary will include Toronto, Ottawa, and Montreal, where most of Canada's 100,000 Croatians live. He is expected to meet with municipal and provincial government officials, chambers of commerce, corporations such as Bombardier and Lavalin, as well as business groups such as the Croatian-Canadian Business Association.
While seeking to strengthen ties with cities that have large Croatian populations, Mr. Bandic is also interested in how Canada's municipalities have managed infrastructure, airports and waste. The mayor will talk about Zagreb's economic development strategy, investment in the city, restructuring and privatization, financial programs to support crafts, trades, and SMEs as well as significant initiatives for which partnerships are being sought. Zagreb should be of interest to Canadian business since it is located only hours from major capitals like Vienna and Budapest.
Promoting opportunities and Croatia's modern image are also the main goals for Her Excellency Vesela Mrden Korac, the new Croatian Ambassador accredited to Canada in November. Her priorities are to let Canadians know that Croatia is open for business, has a welcoming investment climate, and offers opportunities in areas such as tourism, transportation, telecommunications, construction and energy. The ambassador would also like to increase cultural cooperation and exchanges.
While the countries of Western Europe represent developed markets, to the east is a New Europe of economies undergoing rapid transition. These markets should interest Canada, which is trying to overcome dependence on a single trading partner.
Situated strategically at the intersection of the two Europes, Croatia offers opportunities for collaboration and partnership as it pursues economic development and strives to meet international standards.
Nowhere is Croatia's startling transformation more evident than in the massive waves of tourists that flock to the Adriatic coastline every year. When Canadians want to vacation they go to Western Europe; when Western Europeans vacation they go to Croatia. The majority of Croatia's tourists come from Germany, Italy, Austria and Slovenia.
In 2004, Croatia was the single largest destination for French tourists. In 2005, the Lonely Planet tourist guide declared Croatia to be one of the most desirable tourist destinations in the world. This judgment was reflected in visits by American tourists – nearly 128,000 of them. This represented an increase of 39 per cent from 2004. An even larger number would visit if there were direct airline connections between the two countries, something the Croatian government is exploring.
All signs suggest that tourism will continue to grow in 2006. Citing the attractions of the Kornati archipelago, National Geographic Adventure recently called Croatia one of the world's most desirable destinations. Croatia also appeals to a special type of tourist. The Ethic Tourist, a non-profit group from Berkley California, has pronounced it to be one of 13 countries that deserve to be visited not just because of natural beauty but also because of a special relationship with the environment and social development.
Beyond tourism, Croatia is positioning itself to become a full participant in the international economy. It became a member of the Council of Europe (1996), NATO's Partnership for Peace (2000) the World Trade Organization (2000), the Central European Free Trade Area (2003) and is gradually concluding free-trade agreements with countries involved in the Stabilization and Association Process. Croatia is expecting an invitation for membership to NATO, having fulfilled all political, defense and military criteria.
The country is also in negotiations to join the European Union and expects to become a member before European Parliamentary elections in 2009. While it is recognized that legislative alignment with the EU institutional framework is a long and complex process, Croatian authorities do not regard membership as an end in itself but rather as a means to reach out to other international markets, including Canada.
Like other countries in southeastern Europe, Croatia is looking for foreign direct investment. It is a member of the Multilateral Investment Guarantee Agency and it has accorded foreign investors the same rights, obligations and legal status as domestic investors. Special tax exemptions are even offered, depending on the nature of the investment.
Croatia offers investors a tradition of quality, an educated work force, modern communication systems and high standards of transport infrastructure. Opportunities are abundant, even in service areas such as the management of health care, reform of the judiciary, or the development of a new vocational education and training policy to harmonize with Europe. Though it has a small domestic market, it is well situated to act as a springboard into the European Union. In addition, Croatia enjoys established business relationships throughout southern and eastern Europe. Canadians partnering with Croatian businesses can reap the benefit of those links through the Croatian ports of Rjeka and Split, which offer easy access.
In 2004, Croatia's overall trade totalled $28 billion. But bilateral trade between Canada and Croatia amounted to only about $45 million, or 1.6 per cent of the total. Unless it moves quickly, Canadian business will miss out on yet another tremendous opportunity to enter a dynamic region.
By Vesna Knezevic
Special to the Ottawa Business Journal
Vesna Knezevic is a federal policy analyst with a Masters in International Affairs.