REGIONAL COOPERATION AND ECONOMIC INTEGRATION

CEFTA-2006 AND ANHANCING COMPETITIVENESS OF THE REGION - SOME SECTORAL ASPECTS
in section four, which is followed by research results in section five. Section six includes
conclusions with theoretical and managerial implications, limitations of research, and
future research directions.
1. Overview of the croatian manufacturing industry
The manufacturing industry is an important economic sector in Croatia. It generates 17%
of total gross value added (GVA) and participates with 20% in the total employment. The
share of manufacturing in GVA has been declining since 2000. It decreased from 20.3%
in 2000 to 17.1% in 2007 (Figure 1). At the same time the service industries increased
their share in GVA. This trend has already been seen in other transition and post-transition
countries in Europe (Veselica and Vojnic, 2007). The decline of manufacturing industry
raises two big issues. The first one is related to the process of deindustrialization, while the
second issue is the weakening of the competitiveness of the manufacturing industry that
adds to it.
Since 2000 the Croatian manufacturing industry has undergone major changes. As shown
in Figure 2, between 2000 and 2007 GDP and industrial volume increased. As compared
to 2000 in 2007 GDP grew by 43.7% and industrial volume by 48.4%. There is a positive
correlation between GDP and industrial output (r=0.52).
Labor productivity as one of the indicators of competitiveness is relevant for the analysis
of the competitiveness of Croatian manufacturing industry. Correlation analysis indicates
that there was a negative correlation between employment and productivity (r=-0.81). This
indicates that manufacturing firms were restructuring passively in pursuit of short-term
survival. Enterprises tried to reduce employment, while industrial output increased. On
average, employment in manufacturing industry has been declining since 2000.
Figure 1: Share of gross value added of manufacturing industry in economy (in %)
21
20,3
20
19,8
19
18,6
18,2 18,2
%
18
17,5
17
17,1 17,1
16
15
2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007.
Years
Source: DZS RH.
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