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Regional Office for Europe and Central Asia
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
EASTERN EUROPE AND
CENTRAL ASIA AGROINDUSTRY DEVELOPMENT
COUNTRY BRIEF
CROATIA
Contents
Agro-industry national policy framework ........................................................................................................................................... 2
Economic and social development and trends ................................................................................................................................. 4
Agro-industry outlook and performance ............................................................................................................................................ 5
Trade liberalization, WTO accession and trade performance ....................................................................................................... 7
Foreign direct investments .....................................................................................................................................................................11
Food safety, certification and quality control ..................................................................................................................................12
Retail, domestic market and international trends ..........................................................................................................................13
Business environment and competitiveness ...................................................................................................................................14
Ranking Croatia...........................................................................................................................................................................................15
Key indicators
Key Economic Indicators1
GDP (PPP), US$ billion
2006
2009
Food & Beverages
indicators
2011
74.68
87.78
88.28
Output, % of manufacturing
16.91
15.83
18.09
5.18
5.41
Employment in Agric., % of
total
14.20
Gross Fixed Capital F., % of
GDP
2006
2007 /
2009
2011
n/a
n/a
n/a
Value Added, % of
manufactur.
21.05
23.42
n/a
5.47
Enterprises, % of
manufactur.
12.64
14.45
n/a
13.9
13.0
Employment, % of
manufactur.
17.52
18.93
n/a
26.04
24.88
21.91
Investments, % of
manufactur.
21.86
28.68
n/a
FDI net inflows, % of GDP
6.93
5.24
2.30
FDI inflows, % of total inflow
6.5
7.7
n/a
R&D, % of GDP
0.75
0.83
n/a
R&D, % of Output
n/a
n/a
n/a
Merchandise Trade, % of GDP
63.94
49.93
51.19
Net Trade, US$ billion
-0.25
-0.43
-0.52
Merchandise Exports, US$
billion
10.38
10.47
12.29
Exports, %of merchandise
Exp
7.9
8.0
7.3
Merchandise Imports, US$
billion
21.50
21.20
20.40
Imports, % of merchandise
Imp
5.0
6.0
6.6
Exports annual growth, %
18.3
-25.7
13.2
Exports annual growth, %
28.0
-11.8
16.1
Import annual growth, %
15.9
-31.0
13.2
Import annual growth, %
21.6
-14.9
22.8
GNI per capita, 1’000 US$
10.80
13.81
13.85
345.1
319.2
n/a
184.9
189.8
199.6
Manufacturing VA, % of GDP
Agriculture VA, % of GDP
Trade per capita, US$ 20092011
Doing Business Indicators
Rank
Global Merchandise Exports
Imports Rank
11,008
118
Output per capita, US$
Exports per capita, US$
84
Agribusiness Indicators
Value
78
71
FDI Inward Attraction Index
Global Competitiveness
Index
4.67
84
81
Agro-industry national policy framework
National Development Programmes: The key documents1 that set out the Government of Croatia’s policies for
overall economic development as well as for agriculture, the agro-industry and rural development include:
(i) the long-term Economic Recovery Program for 2010-2020; (ii) the Government Programmes Strategy
2011-2013; (iii) the Pre-accession Economic Programme (PEP) for 2011-2013 and the short Programme
of the Government for the adoption and implementation of the acquis for 2012; (iv) IPARD Programme –
Agriculture and Rural Development Plan 2007–2013 with total funds of EUR 184.4 million (75 percent EU and 25
percent Croatia); (v) the Action Plan for Organic Agriculture Development for 2001-2016; (vi) the Programme
of Consolidation of Agricultural Land for 2009–2021; (vii) the National Consumer Protection Programme for
2009–2012; (viii) the Phytosanitary strategy for 2009–2012; (ix) the Cluster Development Strategy for 2010–2015;
(x) Agricultural Aid System Reform for 2010–2013; (xi) the National Programme of Data Collection (2010); (xii) the
Operation Plan of Small and Medium-Sized Entrepreneurship Promotion for 2008–2012; (xiii) and the Strategy for
1 World Bank Indicators Database and ITC accessed in October 2012. Author’s calculations
2
Promoting Investment and Internationalisation for 2012-2020.
Croatia has been a candidate country for EU membership since 2004 and formally closed accession negotiations in
June 2011. It will become the 28th EU member country on 1 July 20132. The Accession Treaty was signed in 2012
and has been ratified by Croatia. As an acceding country, Croatia has had the status of active observer during the
interim period before accession.
Legal framework: Croatia has adopted a number of laws to encourage agricultural and agro-industry growth and
rural development and to put the legislation in line with the EU acquis, including: the Act on Agriculture (2002),
the Act on Food (2007, amended in 2011), the Act on General Product Safety (2003, amended in 2007), the Act on
State Aid to Agriculture and Rural Development (2010); the Law on Budget (2008), the Act on Competition (2010),
the Act on Agricultural Land (2008, amended in 2010), the Act on Regulation of Agricultural Product Markets
(2009; amended in 2011), the Ordinance on obtaining the right to insurance support for possible damage in
agriculture, fishery and forestry (2004), the Act on Structural Support and Market Regulation in Fisheries (2009), the
Act on Designation of Originality, Designation of Geographical Origin and Designation of Traditional Reputation
of Agricultural and Foodstuffs (2008), the Law on GMOs, the Act on Wine (2003), the Act on Cattle Breeding, the
Veterinary Act, the Act on Marine Fisheries (2010), the Consumer Protection Act (2007, amended in 2009), the
Act on Competition (2010), the Law on Associations (2001), the Law on Cooperatives (1995; 2011), the Law on
Agricultural Chambers (2009; 2010), the Law on Special Conditions for Placing Flour on the Market, and the Law on
Sanitary and Health Inspection of Foodstuffs and Items of General Use
Supporting institutions: The main state body related to agriculture and agro-industry support and control in
Croatia is the Ministry of Agriculture, Fisheries and Rural Development. Other supporting institutions are: the
Croatian Centre for Agriculture, Food and Rural Affairs (established in 2009); the Croatian Agricultural Agency
(established in 1994); the Croatian Food Agency (established in 2004), which is mainly responsible for risk analysis
and risk communication in the field of food safety and animal food (feed) safety and also deals with the questions
concerning the health and welfare of animals and the health of plants; the Trade and Investment Promotion
Agency, which focuses on investments in Croatia with foreign majority participation to produce goods or services
which are predominately export oriented; the Extension Service Institute, which is responsible for collecting
annual information for the Farm Accountancy Data Network (FADN) (this is an obligation of all EU Member
States and represents an instrument of the EC for assessing income of farms and the impact of the EU Common
Agricultural Policy on their operation); the National Consumer Protection Council (established in 2008); the Agency
Croatian Agricultural Chamber (established 2010) requires all agricultural entities (both small farms and large
companies) to become members. ; and the Paying Agency for Agriculture, Fisheries and Rural Development, which
is responsible for the implementation of national support measures and pre-accession programmes for agriculture
and rural development, as well as Common Agricultural Policy measures.
Additionally, Croatia has established an integrated administration and control system (IACS) including a land
parcel identification system (LIPS) as well as a Central Veterinary Information System (CVIS), a fisheries monitoring
centre (FMC), and a vineyard register.
Since 1994, the Agriculture, Food Industry and Forestry Department has been organized in associations, councils
and groups, which constitute the basis for all departmental activities. Four associations have been created; namely,
the Agriculture and Related Industries Association, the Livestock Rearing and Related Industries Association, the
Fish and Fish Processing Industry Association and the Wood and Wood-processing Industry Association. These are
accompanied by 18 groups.3
2 http://ec.europa.eu/enlargement/countries/detailed-country-information/croatia/index_en.htm
3 CROATIAN CHAMBER OF ECONOMY (2010) Agriculture, Food, beverages and tobacco industry
3
Economic and social development and trends
Economic and social development: Croatia is a high income country with GNI per capita of US$ 13,850 in 2011.
The population is 4.4 million, of which 42 percent live in rural areas, and the annual population growth is -0.24
percent. Croatia enjoyed strong economic performance with average real GDP growth of 4.3 percent between
2000 and 2008. As a result of the global economic crisis, Croatia experienced one of the most protracted recessions
in the region when GDP declined in 2009 and 2010, and it experienced zero growth in 2011. The agricultural
sector contributed 5.47 percent of value added to GDP with 1.3 percent of annual growth in 2011, although its
contribution has been unstable over time, experiencing negative annual growth of 3.6 percent in 2007 and 0.17
in 2010. Agriculture employed 13 percent of the total labour force in 2011. The manufacturing industry generated
about 18 percent of GDP with a slight increase in 2011, employing around 20 percent of total labour force and 90
percent of the industrial labour force.
According to the EBRD Transition Report 20114, Croatia was upgraded in the governance and enterprise reform
category in 2011. Croatia achieved a major success in 2011 by completing accession negotiations with the
European Union, which necessitated a commitment to restructuring key state-owned industries as well as taking
the final steps towards adapting regulations to EU requirements.
Chart 1. Evolution of value added to GDP in Croatia (percent)
Source: WBDI, accessed in October 2012; UNIDO database; National Statistics; Author’s calculations
Growing demands and trends: The percentage of total household expenditure spent on food and no-alcoholic
beverages, as well as for alcoholic beverages and tobacco decreased from 33.21 percent and 4.0 percent
respectively in 2005 to 31.7 percent and 3.7 percent respectively in 2011. In 2011 the share spent on food was
92.1 percent of the total expenditure on food and non-alcoholic beverages.5 Consumption of meat and bread is
very high in Croatia and people prefer traditional meals, especially those using meat and fish. Croatia has a coffeehouse culture as well as strong wine and beer culture. Incomes are increasing and the average income (net/month)
was EUR 730 in 2010 (compared with to EUR 1,700 in Austria). There is high preference for branded products.
Due to insufficient production or relatively high demand, Croatia cannot fully cover its needs for products such
4 EBRD (2012) Transition Report 2011. www.ebrd.com/transitionreport
5 Central Bureau of Statistics of Republic of Croatia
4
as pork and beef, dairy products (demand: 1 billion litres; production: 600 million litres) and flour and bakery
preparations. Less than 80 percent of domestic demand for raw vegetable oils and fats, and only two thirds of
domestic demand for meat, vegetables and fruit is covered by domestic production. Croatia is self-sufficient in the
production of a few products; namely, potatoes, poultry meat, eggs, corn, wine, sugar and wheat.
In 2010, the five top agricultural products in terms of value in Croatia were: cow milk, grapes (ranked by
commodity in the world 39), indigenous pigmeat (ranked 59), wheat (ranked 53), and maize (ranked 52).6
Important commodities that are produced domestically are: hazelnuts, buckwheat, goose meat, olives, walnuts,
sugar beet, apples, cabbage, paprika etc.
Agro-industry outlook and performance
Agro-industry background and challenges: Croatia has an extremely fragmented structure of agricultural
holdings with about 63 percent being small family farms (with an average farm size of 2.4 ha) out of the total
190,000 registered farms. Medium sized and large farms (from 20 to 300 hectares), which own about 32 percent of
all agricultural land are gaining increased market importance. However, the largest share of market production is
focused on large farms, of which most are state-owned.7
Small parcel size is one reason for generally inefficient agricultural production. Despite the good climatic
conditions for growing many varieties, the country suffers from a deficit in the agri-food sector. This means that
Croatia is a net importer of agricultural commodities. Current policy is aimed at promoting and increasing the
production of various agricultural products. In the last few years, the agricultural budget has grown at a quicker
pace than the overall budget. This was necessary in order to ameliorate the effects of speedy market liberalization
and create the preconditions for successful adjustment of the support model in which the coupled payment
prevailed. The greatest changes applied to the direct payments system, which is now largely the same as the
model applied in the European Union.
Overall, cereal production is the most significant area of agriculture in Croatia and corn and wheat are the
dominant crops. Wine production in Croatia also has a very long tradition.
Croatia has diverse and well-developed food processing and manufacturing industries, the capacity of which can
satisfy the needs of the domestic market. It also allows some products to be export-oriented.
Organic products have become popular and expensive commodities in developed countries and since 2003
organic food production has begun to be actively developed in Croatia. The total agricultural land share under
organic products and the number of producers has drastically increased from 0.26 percent and 269 respectively
in 2005 to 1.8 percent and 1,125 respectively in 2010. 8 According to the Law on Organic Production and Labelling
of Organic Products (2010), imported, unprocessed products can be labelled as organic if it they were produced in
line with Croatian legislation on organic production. Imported, processed products can be declared organic if 95
percent of their ingredients were produced from organic inputs. Croatian organic legislation does not recognize
products as organic if they have traces of GMO, if they are genetically modified or if they have been irradiated. The
Regulation on Labelling of Food and Feed in Organic Production (2011) specifies the details on labelling organic
products.9
6 FAOSTAT, accessed in October 2012
7 Ministry of Agriculture, Fisheries and Rural Development of the Republic of Croatia (2009) Croatian Agriculture
8 Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012, http://
www.organic-world.net
9 USDA (2012) Croatia: Food and Agricultural Import Regulations and Standards – Narrative. GAIN Report. FAIRS Country Report
5
Food and beverage industry performance: The food and beverage industry in Croatia is well developed and
diversified. It forms a large part of the economy, contributing 3.2 percent to GDP. In 2009, the food and beverage
industry generated HRK 10.3 billion (US$ 1.8 billion) or about 23.4 percent of the total added value of the
manufacturing industry, with only 0.5 percent annual growth in food and 0.4 percent in beverages. The per capita
output was HRK 1,829 (US$ 319.2) in 2009.
In 2009, the food and beverage industry employed 45,200 people (or 18.9 percent of the manufacturing labour
force). Since 2006, employment has been growing on average by 1.7 percent a year. In 2009, there were 3,472
enterprises operating in the food and beverage industry (or about 14.5 percent of all manufacturing enterprises),
most of which were private small or medium-scale enterprises. Large enterprises represented only 1.2 percent of
all entities in food and beverage production.
Fixed capital investments in the food and beverage industry were increasing until 2008 but fell by 28 percent
in 2009, amounting to US$ 347 million or 28.7 percent of total investments of manufacturing industries in fixed
capital.
The capacity of food and beverage industry is sufficient to satisfy the needs of the domestic market and
production capacity is 75 percent for food and 79 percent for beverages. Important subsectors of the food and
beverage industry are: fish processing, beer production, processing of milk, tea and coffee and the production of
soft drinks. The fish processing industry is one of the prime industries in the Croatian coastal areas and islands,
where over 16 thousand tonnes of fish are produced annually at more than 60 enterprises. The processing and
packaging of marine and fresh-water fish as well as of other marine organisms is a relatively new activity which has
significantly developed in the past twenty years.10 Cigarette production and tobacco processing is also a large subsector in Croatia.
Chart 2: Evolution of the share of the food and beverage industry in the economy of Croatia over time
(percent of manufacturing)
Evolution of share of Food & Beverages industry in economy
of Croatia over time (percent of Manufacturing)
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Value Added
Employment
Enterprises
Investments
Source: Author’s calculations are based on UNIDO data and national statistics
10 CROATIAN CHAMBER OF ECONOMY (2010) FISHERY AND FISH PROCESSING
6
Chart 3. Distribution of output, employment, enterprises and investments in the food and beverage subsectors of Croatia in 2009
Breakdown of Food & Beverages branches in Croatia, 2009
100%
90%
80%
103,892,543
10,704
906
70%
60%
50%
40%
30%
20%
10%
Processed meat, fish, fruit,
vegetables, fats
Other food products
91,177,623
11,311,613
45,033,356
95,971,385
20,688
1,503
2,504
4,309
284
213
Dairy products
6,953
566
Beverages
Employment,
number
Enterprises,
number
Grain mill products; starches;
animal feeds
0%
Investments, US$
Source: Author’s calculations are based on UNIDO data and national statistics
Trade liberalization, WTO accession and trade performance
Trade regulation and trade unions: Croatia has a liberal import and export regime. The regulations are fully in line
with relevant WTO rules and the EU’s trade policy and internal market rules. The major legal documents are: the
Trade Act (2008), the Act on Trade companies (2009), the Decree on determining goods exported or imported on
the basis of licenses (2010), Act on Excise Duties (2010), the Law on Customs (2009) and the Customs Tariff Act
(2010).
By signing the Accession treaty on 9 December 2011, Croatia obtained EU accession country status and is now
preparing for EU membership and the implementation of the Common Commercial Policy of the EU. Therefore, all
Croatian laws and implementing regulations on trade policy will cease to be in force on 1 July 2013, when Croatia
officially joins the EU.
The Decree on Goods Subject to Export and Import Licenses is fully compliant with the relevant WTO rules, and
permits for all goods are issued automatically, provided they meet all legal requirements and are in accordance
with international conventions or agreements to which Croatia is a party. Under the Customs Tariff Act, the
Croatian Government annually prescribes the tariffs that will apply to imports of goods in the next year. The tariff
rate, depending on the type of goods, ranges from five percent to 25 percent. Croatia reduced its simple average
MFN tariff from 12.1 percent in 2000 to 4.9 percent in 2011. The export of goods from Croatia is usually free and
without restriction except tariff quotas on six categories of products, including meat of bovine animals, meat of
swine, wheat and muslin, cane and beet sugar, and chocolate. Alcohol and alcoholic beverages, tobacco products,
coffee and energy drinks are subject to excise taxes. Non-alcoholic drinks and coffee are subject to special taxes.11
Croatia currently applies four free trade agreements that include 39 trade partners with whom 75 percent of all
of Croatia’s trade is undertaken: 27 EU Member States (since 2005 under the SAA), four EFTA states (since 2002),
seven CEFTA Parties (since 2007) and Turkey (since 2003). Croatia is the beneficiary of the GSP scheme, and today
benefits from reductions from the following countries under the scheme: Canada, Japan, Australia, New Zealand,
11 http://www.ceftatradeportal.com/croatia/index.php?option=com_k2&view=item&layout=item&id=50&Itemid=66&lang=en
7
Russia and Belarus. Croatia has signed a total of 43 international treaties in the field of trade and/or economic
cooperation, and enforces an additional 10 contracts that were taken from the former Yugoslavia. 12
WTO accession: Croatia has been the 140th member of WTO since Nov 2000 and is an observer to the Agreement
of Government Procurement (GPA) accession with a 0.166 percent of contribution to WTO budget in 2012. The
simple average of import duties for agricultural goods applied in 2011 was 10.7 percent. The latest Trade Policy
review by the WTO was in March 2010.
Trade performance: In 2011, Croatia’s exports increased by four percent and amounted to US$ 12.3 billion. In
2009, exports contracted by 25.7 percent bringing them close to 2006 levels after several years of continuous
growth, which peaked in 2008. Imports increased by 1.6 percent and amounted to US$ 20.4 billion in 2011. There
was a trade deficit of US$ 8.1 billion in 2011.13
Croatia remains a net importer of agricultural and food products, but it is a net exporter of cereals. The trade
balance of processed food and beverage commodities was negative, amounting to US$ 520 million in 2011.
Food and agricultural exports and imports together accounted for 9.4 percent and 9.8 percent of Croatia’s total
merchandise exports and imports respectively in 2011. Processed food and beverage products accounted US$ 970
million or 7.3 percent of total merchandise exports and US$ 1.5 billion or 6.6 percent of total merchandise imports
respectively in 2011, with an annual growth of 16.1 percent and 22.8 percent respectively. This is in comparison to
negative growth of 11.8 percent in exports and of 14.9 percent in imports in 2009. Per capita exports of food and
beverage products were US$ 199.60 in 2011.
Both imports and exports of food and beverage products are relatively diversified. In 2011, the major share of
exports was composed of sugars and the sugar confectionery product group (19 percent, ranking in world exports
47), followed by miscellaneous edible preparations (17 percent, ranked 43), and beverages, spirits and vinegar
products (15 percent, ranked 55). The major share of imports is composed of the cereal, flour and starch product
group (14 percent, ranking in world imports 45); followed by residues and animal fodder (13 percent, ranking in
world imports 58) and miscellaneous edible preparations (13 percent, ranking in world imports 56).14
The main export-oriented products are: beverages, meat, live animals, tobacco and cigarettes, sugar, Vegeta
(seasoning), salted anchovies, beer, olive oil, canned sardines, instant soups and tuna fish (which accounted for
about 65 percent of total fresh and frozen fish exports). Major imported products include oil cakes, mineral water
and frozen pork.
In 2011, trade in Croatia was diversified across partners. Croatia’s main export partners; namely, Bosnia and
Herzegovina and Slovenia, received 47 percent of total exports of food and beverages from Croatia.
Top destinations for food and beverage products: BiH (33 percent), Slovenia (14 percent), Hungary (seven percent),
Serbia (6.6 percent) and Germany (5.5 percent) in 2011;
Top origins for food and beverage products: Germany (16 percent), Italy (12 percent), Brazil (10 percent), BiH (eight
percent) and Hungry (7seven percent) in 2011
12 http://www.ceftatradeportal.com/croatia/index.php?option=com_k2&view=item&layout=item&id=37&Itemid=18&lang=en
13 http://comtrade.un.org/pb/CountryPagesNew.aspx?y=2011
14 ITC (UNCDAT/WTO)
8
Chart 4. Food and beverages and agricultural trade performance over time
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
Chart 5. Share of product groups in total exports and imports of food and beverages in 2011
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
9
Chart 6. Evolution of the top five destinations of exported food and beverage products by Croatia over time
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
Chart 7. Growth of national supply and international demand for exports of food and beverage products by
Croatia in 2011
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
10
Foreign direct investments
Strategies, regulations and ranking: Croatia is open to foreign investment, and the Croatian Government
continues to prioritize it. All investors, both foreign and domestic, are guaranteed equal treatment by law. The
legal basis for foreign investment in Croatia is provided by the Act on Investment Promotion (2006), the Law on
Investment Incentive (2006); the Act on Companies (1999, amended in 2008); the Act on Investment Funds (2005);
the Act on Capital Market (2008); the Law on Takeover of Joint-Stock Companies (2007, amended in 2009); and
the Act on Free Zones (2008). In 2002, the Government established the Trade and Investment Promotion Agency,
which is responsible for assisting both foreign and domestic investors. In 2005 the government established the
“HITRO.HR” online service aimed at simplifying procedures for registering companies and ensuring quicker and
simpler access to information and services in one location. There are 16 Free Economic Zones in Croatia and the
country has signed a total of 59 agreements on investment promotion and protection, which enable Croatian
investors to show a greater presence in other countries.15
According to WIR 201216, Croatia was ranked only 84 (among 181 economies) by the FDI Inward Attraction Index in
2011, which is a decrease compared to 37 in 2000 (among 178 economies).
According to an IAB report17, Croatia is one of the EECA countries that is more open to foreign equity ownership.
Overt legal ownership restrictions are in place only in the transportation sector. It takes nine procedures and 23
days to establish a foreign-owned limited liability company (LLC) in Croatia (Zagreb). Foreign investors do not need
to seek investment approval. They must, however, authenticate the documents of the parent company abroad.
According to the Foreign Exchange Act, foreign investments must also be declared to the Croatian National Bank
within 30 days for statistical purposes. Companies in Croatia are free to open and maintain bank accounts in
foreign currencies. The minimum capital requirement for domestic and foreign companies is HRK 20,000 (~US$
3,720). At incorporation, investors must pay in a minimum of 25 percent of their declared capital. In Croatia, foreign
companies most commonly buy private land. The purchase of public land is a long and complicated procedure
requiring a public auction. It is possible to lease both private and public land. The maximum duration of a lease of
publicly held land is stipulated in advance in the public bidding criteria.
Foreign direct investments flows: According to WIR 2012, in Croatia, the State holds a minority stake in over 600
companies and more than 50 percent of assets in over 60 companies. Most Croatian investments are implemented
through privatization of the service sector and in telecommunications and financial services. It also included
Greenfield investments in the retail and the wholesale trade sector.18
Between 2004 and 2008 FDI in Croatia enjoyed steady growth, but it saw an almost 50 percent drop in 2009 and a
decrease of almost eight times in 2010. In 2011, Croatian FDI inflows started recovering and amounted to US$ 1.47
billion or 2.3 percent of GDP, increasing 3.4 times on the 2010 level. FDI inflows in the food and beverage industry
have not been stable over time. There were inflows of US$ 225 million in2006, which was 6.5 percent of total FDI
inflows, and US$ 124 million or 2.1 percent in 2008. However, investments were negative (outflows) in 2009 and
2010. In total, EUR366 million of FDI was generated in the food and beverage industries, which is about 1.5 percent
of total FDI in Croatia during the 1993–2010 period.
The vast majority of FDI is directed to the financial sector, followed by manufacturing and then wholesale and
15 CEFTA http://ceftatradeportal.com/croatia/index.php?option=com_k2&view=item&layout=item&id=37&Itemid=18&lang=en
16 UNCTAD (2012) World Investment Report 2012: Towards a New Generation of Investment Policies, UN Conference on Trade and
Development NY and Geneva, Switzerland
17 IFC/MIGA/WB (2010) Investing Across Borders: Indicators of foreign direct investment regulation in 87 economies. The World Bank
Group. Wachington
18 Faculty of Economics & Business (2012) The impact of foreign direct investments (FDI) on Croatian economy –comparisons with other
Transition countries. Zagreb
11
retail trade. Around 76 percent of FDI inflows originate from EU-15 Member States but Turkey, Russia and the US
are also investing in Croatia. In 2011, the major investors were from: Austria (43.8 percent), Turkey (15.2 percent),
the Netherlands (9.9 percent), Switzerland (5.5 percent), Slovenia (4.2 percent), UK (3.5 percent), France (3.3
percent), Norway (2.3 percent), Belgium (1.8 percent), and BiH (1.6 percent).
Chart 8. Foreign direct investments in Croatia over time
Source: WBDI; ITC (UNCTAD/WTO); accessed in October 2012
Food safety, certification and quality control
Food safety background and Croatia’s membership: Croatia is a member of the Codex Alimentarius Commission
and of the International Organization of Standardization (ISO). According to the EC progress accession report,
Croatia has adopted implementing secondary legislation aligned with the EU acquis in all sectors. The Ordinance
on the rapid alert system for food and feed has been created and an efficient system of consumer protection in
line with all the international standards has been developed.
Issues surrounding the protection of human health in general and especially from food-borne risks are dealt with
by the Law on the General Safety of Products (2009), the Act on Food (2007, amended in 2011), the Veterinary
Act (2007, amended in 2011), the Act on Animal Welfare (2006), Infectious Disease Protection Act (2007, 2009),
the Act on Livestock, the Act on Veterinary Medicinal Products (2008), the Act on Plant Health (2005, 2011), the
Act on Plant Protection Products (2005), GMO Act (2005, 2009), the Act on Consumer Protection (2007), the Law
on the Organization of Agricultural Product Markets (2009, amended in 2011); the Law on Sanitary and Health
Inspection of Foodstuffs and Items of General Use (2007), the Act on Sanitary Inspection (2008, 2010), the Act
on Standardization (2003), the Act on Technical Requirements for Products and Conformity Assessment (2010),
the Act on Accreditation (2009) and the Act on Metrology (2007). Other important Acts are: the Wine Act (2003,
amended in 2011), the new Act on Designations of Origin, Geographical Indications (GI) and Traditional Specialty
Logos for Agricultural Products and Foodstuffs (2012). In 2010, a number of procedures and rules were adopted in
the segment of official controls for food and feed safety.
The Food Act is harmonized with Regulation (EC) No 178/2002 and provides a general overview on requirements
of food and feed safety according to the national strategy. The Food Act applies to all stages of production,
processing, storage and distribution of food and feed, except primary production, preparation, handling and
storage of food in households intended for personal consumption and feeding of household animals, which are
12
not intended for sale on the market. Under the Food Act, 71 regulations have been adopted.
Quality control and certification: In accordance with the Food Act, the competent authorities such as the
Veterinary Directorate, the Directorate for Food Safety and Phytosanitary Policy and the Directorate of Agriculture
and Food Industry under the Ministry of Agriculture, Fisheries and Rural Development (MAFRD) have overall
responsibility for food safety, feed safety, animal health, animal welfare and plant health. The Directorate for
Sanitary Inspection of the Ministry of Health (MOH) is responsible for all issues regarding food, foodstuffs, and
feed, including biotechnology content and inspections. The Veterinary Inspection Sector has the Border Veterinary
Inspection and International Trade Service as well as the Veterinary Inspection Service. The Ministry of Health and
Sanitary Inspection is co-operating with the directorates of the MAFRD on the development of the multi-annual
national control plan and the development of documented procedures, among others activities.
The Croatian Standards Institute (HZN) has transposed nearly all European standards (in total, 21,368 standards
by 2010). The HZN became a full member of the European Committee for Standardization (CEN) in 2010. By
2010, the Croatian Accreditation Agency had accredited 1,551 laboratories, certification and inspection bodies.
Six food products have been certified to testify to their genuine and original characteristics or geographical
origin according to the Act on Designation of Originality, Designation of Geographical Origin and Designation of
Traditional Reputation of Agricultural and Food Products (2008).
In 2010, the establishment of the Phytosanitary Information System (PIS) began under a project funded by the
World Bank. This consists of three main components: Plant health care/Seeds and propagation material, Plant
protection products and Phytosanitary inspection.
Since 2003, under the Act of Food, the HACCP system of quality control became an obligatory procedure,
according to which operators in the food business have prime responsibility for food in all the phases of
production, processing and distribution that they control. However, the registration of Food Business Operators
is not yet fully operational. Further efforts need to be made in order to ensure that FBOs implement the HACCP
procedures.19
Retail, domestic market and international trends
About 44 percent of shoppers in Croatia claim supermarkets to be their main shopping destinations for food
and beverages and another 26 percent spend most on food in hypermarkets. Discount stores represent the
main grocery shopping destinations for five percent of households. New retail chains are emerging in Croatia;
namely Hofer, Tesco and Carrefour. The top five retail-chains in Croatia are: KONZUM – 28 percent; MERCATOR
– 8-9 percent, PLODINE – 7-8 percent, KAUFLAND – 7 percent, and LIDL – 6-7 percent. The most important food
wholesalers are: ATLANTIC TRADE, METRO CC, VELPRO-KONZUM, AWT INTERNATIONAL, ORBICO, ALCA, ROTO
DINAMIC (drinks), and GASTRO GRUPA.
19 Codex Alimentarius Commission, FAO/WHO (2012). JOINT FAO/WHO FOOD STANDARDS PROGRAMME
FAO/WHO COORDINATING COMMITTEE FOR EUROPE. Twenty-eighth Session Batumi, Georgia, 25-28 September 2012
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Business environment and competitiveness
SME development: According to the OECD SME Policy Index assessment 201220, Croatia has integrated the
basic business support services into national strategies including measurable targets. The Government, or more
specifically the Ministry of Economy, Labour and Entrepreneurship introduced the SME Promotion Programme for
the 2008-2012 period under the SME development policy and has adopted the annual SME Promotion Operational
Plan, which defines state aid (grant) projects and other support measures to be implemented. The Agency for SMEs
and Investment – HAMAG INVEST – is in charge of the operational implementation of this programme.21 Croatia
has shown all-round good performance in human capital and women’s entrepreneurship, where the value of its
strategy lies in its interdependence with other strategies, particularly the national SME strategy. SMEs account for
99.7 percent of all registered entities in Croatia and for 67.2 percent of all employment; In 2009 SMEs contributed
57.1 percent to GDP. The analysis of financial results by activity shows that the following are the three most
important activities: manufacturing, trade and information and communications, which together account for more
than 50 percent of all business transactions; this has been true for the past ten years. The government continues to
support SMEs through the Croatian Agency for SMEs (HAMAG Invest) and the State Development Bank (HBOR).22
Business Environment: According to the Doing Business Report23, through business reforms Croatia has made
it easier to get credit and register property and has made paying taxes less costly for companies by reducing the
health insurance contribution rate. The economy was ranked 84 (out of 185 economies) in 2012 (1 point down
compared to 2010 and 34 points up compared to 2006). Trading across the borders is ranked at 105, paying taxes
at 42, protecting investors at 139, getting credit at 40, and starting businesses at 80.
Croatia’s private credit bureau has started collecting and distributing information on firms, which has improved the
credit information system. Croatia is ranked 14 out of the top 50 economies that have improved most overall (by
12.8 percent since 2005). It also improved by 44 percent in getting credit but it is the least improved in providing
minority protection to investors since 2005.
Tax Relief: Changes to Croatian Value Added Tax Act came into force on 1 March 2012. The general VAT rate was
increased from 23 percent to 25 percent. However, a number of goods are taxed at a preferential 10 percent rate;
namely: eatable oils and fat of animal and vegetable origin; children’s food and processed cereal based foods for
infants and small children; water delivery, except for water in bottles and other packaging on the market; white
sugar from cane or beet. Changes to the legislation introduce taxation of dividends and shares in profit at the rate
of 12 percent. According to PwC report24, as of 2012 Croatia is also a party to 51 double tax treaties.
Competitiveness: According to the Global Competitiveness Report 2012-2013, Croatia is at a transition stage of
development from 2 to 3, and it received 81 overall on the Global Competitiveness Index among 144 economies
(76 in 2010-2011 among 139 countries). In spite of great improvements that have resulted from the move towards
EU accession, Croatia is ranked only 74 for Innovation, 96 for Business sophistication factors, and 143 (score 2.5)
for agricultural policy costs25. The five biggest barriers to doing business in Croatia are as follows: inefficient
government bureaucracy, corruption, access to financing, restrictive labour regulations, and tax rates.
20 OECD (2012) Western Balkans and Turkey 2012. Progress in the implementation of the small business act in Europe. SME Policy Index.
Supported by EC, ETF, EBRD, CEI.
21 http://www.hamag.hr/en/state-aid-grant-schemes.html
22 EC (2012) Comprehensive Monitoring Report on Croatia’s state of preparedness for EU Membership
23 WB/IFC (2012) Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises. 10th edition. Washington, USA
24 PwC (2012) Paying Taxes 2012. The Global Picture, PriceWaterHouseCoopers supported by WB and IFC
25 Agricultural policy costs: How would you assess the agricultural policy in your country? [1 = excessively burdensome for the economy; 7
= balances the interests of taxpayers, consumers, and producers] | 2011–12 weighted average
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Ranking Croatia
Doing Business Indicators Ranking in 2012
Agribusiness Indicators Values in 2012
Source: Author’s estimations and calculations; WB/IFC Doing Business Rankings online, accessed in October 2012
Source: EBRD database; UNCTAD; Author’s calculations of EECA average
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The designations employed and the presentation of material in this information product do not imply the expression of any opinion
whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status
of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of
specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been
endorsed or recommended by the Food and Agriculture Organization of the United Nations in preference to others of a similar
nature that are not mentioned. The views expressed in this publication are those of the author(s) and do not necessarily reflect the
views of the Food and Agriculture Organization of the United Nations.
For more information please contact:
Stjepan Tanic
Agribusiness and Enterprise Development Officer
FAO Regional Office for Europe and Central Asia
Email: [email protected]
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