Greater cooperation is possible on joint projects of environmental protection, energy, infrastructure, and mechanical engineering. However, there should also be quality sources of funding whether domestic or foreign and, in most cases, government support
Thanks to the joint efforts by Serbia and Croatia, economic cooperation between these two countries has improved and the trade has increased compared to previous years. We talked with Luka Burilović, the president of the Croatian Chamber of Economy, about economic cooperation, boosting the existing ties, chamber meetings, and the challenges that both the Croatian and Serbian economies will face.
What else can be done to improve economic cooperation between Serbia and Croatia?
As neighbouring countries, our trade relations are intertwined, in every branch of the economy. The trade is growing and in 2019, it amounted to €1,288 million. Further growth depends on the price and quality of goods as the competition today is extremely stiff. Croatian companies from the food, processing, chemical and wood industries have the biggest interest in this cooperation. The reasons are proximity and knowing the market, product recognition and customer habits.
Greater cooperation is possible on joint projects of environmental protection, energy, infrastructure, and mechanical engineering. However, there should also be quality sources of funding whether domestic or foreign and, in most cases, government support.
Currently, two such projects are being implemented in the Republic of Croatia – the overhaul of the Zagreb – Vinkovci railroad and the construction and overhaul of the Zagreb – Rijeka rail track, while the second is the construction of an LNG terminal. The first project will expedite the flow of goods to Serbian companies in export and import to and from overseas markets, and the second will provide Serbia with an alternative gas supply route.
The heads of the Croatian and Serbian chambers of economy are continuously highlighting good mutual cooperation. How do you see the current relations between the two chambers and to what extent are they now a driving force behind the cooperation between our countries?
Our businesspeople often meet at trade fairs and are members of business delegations put together by the Croatian Chamber of Economy and the Chamber of Commerce and Industry of Serbia (CCIS). They don’t only make sales deals, but also exchange experiences, agree on the exchange of technologies and cooperation in investment projects. County and regional chambers also organize such meetings.
With the aim of better connecting our business communities, the Croatian Chamber of Economy has reopened the Croatian Chamber of Economy’s Representative Office in Serbia, and the CCIS is in the process of reopening its representative office in Croatia. Earlier this year, before the outbreak of the coronavirus-induced crisis, the Croatian Chamber of Economy and the Chamber of Commerce and Industry of Serbia started preparing a business forum and B2B talks in Belgrade. If the coronavirus situation does not stabilize in the foreseeable future, we will probably opt for a virtual option of the forum.
We are closely monitoring the situation and are planning activities to annul the possible shocks in the global market, which will be most felt by the strongest part of the economy, that is export-oriented companies
Croatia is one of the largest investors in Serbia. On the other hand, there are very few Serbian investments in Croatia, and this ratio can sometimes be 16:1 in favour of Croatia. Which sectors have seen improvement in cooperation and more equal investments?
It is difficult to talk about striking a balance between investments because our countries do not possess this balance even when trading with larger countries. Capital chooses the markets that it believes will bring it the most profit or round off the business.
From 1993 to 2019, Croatia invested a total of €869.4 million in Serbia, and Serbia invested €6 million in Croatia. According to the structure of Croatian investments, the most important investments have been made in food and beverage production, retail, wholesale and trade intermediation, production of tobacco products and chemicals and chemical products.
In terms of Serbian investments, I have to underline that, unlike Croatian investments in the said period, there was a significant withdrawal of foreign direct investment funds. Recently, Serbian businesspeople have shown a growing interest in investing in Croatia. Matijević Meat Industry bought the agricultural cooperatives in Negoslavci and Jankovci in Slavonia, while MK Group became the owner of Skipper Resort and the Kempinski Hotel Adriatic in Istria.
What do you consider a special challenge for the Croatian economy this year, the year of crisis and pandemic?
The biggest challenge is the decline in the tourist traffic on which, unfortunately, our economy is still too dependent. Everybody has been affected by the crisis and, after the initial supply crisis, we have also been experiencing reduced demand. So far, we have largely managed to maintain the employment rate, but the real challenges are yet to come.
Reduced budget revenues are very likely to affect the state’s business with partners from the private sector in the second half of the year. Government spending is still a strong factor in economic activity.
The lack of tourism revenue will not only affect the strength of this sector, but also general consumption and sectors such as construction and commerce. This also applies to creative and entertainment industries, which cannot function normally for the most part.
We are closely monitoring the situation and are planning activities to annul the possible shocks in the global market, which will be most felt by the strongest part of the economy, that is export-oriented companies.
I am an optimist. We can already see from the number of tourists that are holidaying here that things are not as bleak as a month ago. But we must be aware of the seriousness of the situation and all the risks if we don’t want our optimism to be unfounded.
Earlier this year, the Croatian Chamber of Economy and the Chamber of Commerce and Industry of Serbia started preparing a business forum and B2B talks in Belgrade. We will probably opt for a virtual option of the forum due to the coronavirus
Tourism is certainly an industry that has been suffering the most from the consequences of the coronavirus crisis. Does Croatia have a strategy on how to overcome the crisis and improve the situation?
The EU set of assistance measures, devised in May this year, includes a revised EU budget in the amount of €1,850 billion and a new financial instrument called the Next Generation EU, with a total estimated financial budget of €750 billion. These funds should be available from 2020 and distributed according to a new key, while taking into account the impact of the crisis.
This financial package recognizes tourism as an important economic activity for the first time and the branch that has been especially hit by the crisis. It has been said that tourism could record a drop of over 70% in traffic in the second quarter of 2020. The SURE programme, that covers part-time work, as well as other measures to maintain the employment rate, as devised the Government of the Republic of Croatia, will additionally prevent layoffs.
Still, this sector will need support for a much longer period. A new allocation and continuation of interest-free or low-interest credit lines are needed, as are grants for those companies which have recorded a decline of over 90% in their activities, especially small and micro-enterprises. We hope that a large part of the budget for tourism will be integrated as part of infrastructure funds, as this approach makes it easier for companies to access the funds at the national level. Croatia should also use its comparative advantages such as the best epidemiological situation out of all Mediterranean countries and the structure of accommodation that ensures social distancing and lower flow of people, such as camps, secluded holiday homes and nautical tourism. We also count on domestic tourists, as well as tourists that can drive to our country.
This is an election year for both Serbia and Croatia. What do you expect from the new Croatian government?
I expect the continuity of the very effective and good practice of implementing measures and activities carried out in recent months during the coronavirus crisis, as well as the continuity of economic and financial policies that have led us to a stable financial position just prior to adopting the Euro as our currency. The announced new measures, especially shorter working week, represent an excellent basis for preserving the economy, with a special emphasis on the need to preserve the liquidity of the entire system. I believe that we can expect a further easing of business conditions, reduction of the tax burden on businesses and salaries and further removal of bureaucratic obstacles.
Also, and I consider this to be crucial, I believe that we have the capacity and competencies for targeted and quality programming of the use of EU funds in the coming years. Large funds await us, I and I would especially like to thank everybody who participated in securing these funds. We also need to focus on the private sector and the development based on digital and green economies.