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Croatia: Entrepreneurs Propose Targeted Actions to Boost Private Sector Recovery

The Glas Poduzetnika Association (UGP), also known as the Economic Council of Croatia, announced the review of the current National Recovery and Sustainability Plan at a press conference aimed at bringing the government’s attention to the urgent situation in Croatia that could significantly affect the economy. and the society of the country as a whole.

“We wanted to propose specific measures and help the Croatian government accelerate the economic recovery, in order to avoid the 2009 crisis scenario, which took Croatia six years to recover. “Unfortunately, the Croatian government does not want to involve social partners in the negotiations and is ignoring the current state of the economy,” the press release said.

Experts from the Economic Council of Glas Poduzetnika have expressed their concerns over the recovery of the Croatian economy from the impact of the COVID-19 pandemic. As has already been pointed out in many cases, the National Recovery and Resilience Plan will not allocate sufficient funds to small and medium-sized enterprises which, in turn, will have a negative impact on the Croatian economy. Therefore, the Economic Council has analyzed the results of domestic and foreign scientific research on the effectiveness of state support provided to businesses for post-crisis development and recovery.

“The analysis of the recovery measures taken by other world economies shows that most countries have run a significant part of their support packages for those businesses (sectors) and citizens that have been hit hardest. It would be advisable for Croatia to use its EU funds in a similar way, as this is the way towards accelerating the economic recovery. However, the Croatian government has chosen a copy / paste approach to recycling projects from the Government 2020-2024 Program and the National Development Strategy 2030, projects that would have been funded despite the pandemic. The current National Recovery and Resilience Plan focuses mainly on projects carried out by state and local authorities; projects with low and long-term return on investment (or even negative), which contradicts the overall objective of a speedy recovery. “Research has shown that these types of investments give a negative return on investment,” says UGP.

Moreover, they said, it should be noted that the National Recovery and Resilience Plan proposes the allocation of 54% of funds to the economy and 46% to public sector “reforms”. However, 54% of the funds allocated to the economy include funds for wastewater treatment projects, waste management projects, as well as road construction and transport infrastructure projects, which again means investments in public enterprises that so far have proven their low efficiency (companies such as Hrvatske vode, Hrvatske ceste, Hrvatska elektroprivreda, Hrvatske Åželjeznice and local utility companies). Therefore, it can be safely argued that the National Recovery and Sustainability Plan has not focused on supporting the private sector or improving the competitiveness of the Croatian economy. Not a single aspect of the current Plan is oriented towards rapid recovery of domestic demand, investments in high-return projects or technological innovations.

Determining investment priorities in the private sector, focusing on high-return projects and monitoring return on investment and fiscal impacts is essential for the National Recovery and Sustainability Plan to generate a greater impact. Furthermore, it is necessary to deactivate corruption channels and preferential allocations, which are politically influenced in the process of distributing funds.

The Economic Council proposes the following steps to successfully spark an economic recovery:

Substantial changes to the National Recovery and Resistance Plan – a relatively significant portion of the funds should go to the private sector and citizens to recover aggregate demand, in line with other EU countries’ comparable recovery plans.

– Development of assistance models for citizens who became unemployed due to the pandemic

– Support for private enterprises should be implemented

– Tax exemptions for the most affected sectors

– Renewable energy investments

– Full transparency of the funding allocation process

We have a right to know what criteria and models are being used to determine which sectors and projects receive funding. Without the specified criteria, there are greater risks from an arbitrary, chaotic and politically motivated allocation procedure, which would reduce the impacts on economic recovery.

If the Government of the Republic of Croatia continues to insist on the current National Recovery and Sustainability Plan, maintaining the existing political and economic constraints, it is realistic to expect an ineffective distribution of EU funds. This will result in low return on investment and ultimately a subset recovery. As a result, lower growth rates and a relatively lagging behind Croatia compared to other EU member states can be expected. The National Plan for Recovery and Sustainability represents an opportunity for reforms in Croatia, strengthening the rule of law, reducing corruption, strengthening market institutions and market freedoms, thus creating conditions for EU funds to be used effectively. to enable rapid steps economic growth. The above can only be achieved through private sector investment, innovation and investment in new technologies, which would ultimately help create a stable and competitive economic structure in Croatia.

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