Improving the Investment Climate in Croatia • Evening for Safe Steps ...

News&ViewsCroatia is a beautiful country of beautiful people. Of course,nobody is perfect. It is a young nation that was growing up in difficultcircumstances. The nation has changed different types of governmentand different rulers. It all left mark, if not a scar. The results are visibleto foreign and domestic investors. They created some obstacles to theinvestors in their way to realize this beauty. Two main obstacles (and theyare often mentioned by investors) are:• Frequently changing legislation; and• Unmotivated civil servants/judiciary.We will briefly describe in this article these two issues.Frequently changing legislationFrequently changing legislation is mainly a result of transition where fordifferent reasons some of the basic laws had to be passed with greathaste creating loopholes in interpretation. These loopholes resulted infurther changes sometimes creating further chaos.In addition, frequent changes are result of the attitude that it iseasier to change the laws than people. The frequent changes will comemore into focus as Croatia approaches the EU and more and more regulationshave to be in line with the EU regulations and directives.Frequently changing legislation creates uncertainty (investorsare not sure if the same rules of the game will apply at the beginning andat the end of their project) and creates problem in implementation forthe civil servants/judiciary and common people alike. Examples of suchchanges can be found in changing rules for construction, introduction ofvarious fees and quasi-fiscal duties during the investment cycle, etc.At first sight these issues seem to be relatively easy to tackle.First step in this battle is that laws are also analyzed for their investmentimpact and not only for its fiscal impact or cost impact. In that mannereach decision and rule would take into account implications on investmentsand investment cycle in Croatia. Second step is structured andorganized training for civil servants and judiciary (this can be made inform of academy, special educational institution, etc.) and to create oneknowledge data base. It goes without saying that the civil servants andjudiciary bore the greatest burden of implementation of the laws andtherefore should receive proper training. They are also human and canbe puzzled by the magnitude and implications of the legislation change.Further benefit would be equal implementation of the laws in the country.It is not infrequent that laws are interpreted differently in different cities ofCroatia or different counties or that decisions in key issues depend onlocation of the authority. More precise explanations and institutionalizedtraining can for sure help. Furthermore, this approach can for sure helpdecrease the duration of various proceedings with the authorities or judiciaryand also serve as training for the junior staff. It is not a great effort,it is not an expensive effort, but its ramifications go far beyond cost sideand the benefits are immeasurable.reportInvestment obstacles CroatiaBy Krešimir Lipovšćak, Partner, TPA Horwath d.o.o.Motivation of the civil servants/judiciaryMotivation directly influences productivity and efficiency. This statementis for sure something which is not new, but certainly appears tobe the new approach for the civil servants and judiciary. Motivationdirectly influences duration of the proceedings which is seen by themost investors as one of the greatest obstacles in realizing their investmentprojects.Most civil servants are not motivated to work and in that mannerthey are “stealing” both salary and reputation of their colleagueswho really invest all their best efforts in order to keep things going.Most of the employees (not only civil servants) know that if they receivethe same salary regardless if they outperform or underperform theircolleagues, they will stop any work or will do only basic minimum. Also,this would motivate them to undertake continuous education coursesand improve themselves in what they are doing. Obvious solution forthe motivation is introduction of bonus system and other motivationpackages. Again, the costs of changing legislation and costs to statebudgetary dwarf the effects of motivation system.In conclusion, all investment obstacles are in our view moreor less sourced from these two issues. The issues are relatively easyto handle and do not require great time span or financial means to beimplemented. They just require goodwill. We sincerely hope that this advicewill be taken into consideration so that the beautiful country of thebeautiful people from the first paragraph can become more beautiful tothe investors.4/2010 ISSUE 23