OECD Investment Policy Reviews: Croatia 2019

Preface
Foreword
Acronyms and abbreviations
Executive Summary
Chapter 1.  Assessment and recommendations
	Substantial reform and strong economic fundamentals
		Attracting investment is a key government priority
		Seizing opportunities to further attract and benefit from investment
		Tackling the challenge of low labour market participation and addressing skills shortage
		Strengthening SMEs’ insertion in global value chains
		Boosting state-owned enterprises reform
	Key findings
		Croatia is largely open to foreign direct investment
		Protection of investment
			Croatia's domestic framework provides investor protection aligned with international standards but could benefit from a justice system more responsive to the needs of business and people
			A large but outdated network of investment treaties adds protection for investors but requires active management
		Investment promotion and facilitation
			A more effective coordination on investment promotion and facilitation is needed
			Despite progress, administrative burdens remain a problem
			The transparency of the tax system and of the framework for investment incentives has significantly improved
		Public governance
			The legal framework for better regulations is improving but there is room for further progress
			Croatia's rather complex administration structure impairs the investment climate
			Public integrity and corruption
		Promoting responsible business conduct as a strategic choice to enhance attractiveness and sustainable development
	Summary and recommendations
Chapter 2.  Investment trends and sustainable growth in Croatia
	Croatia’s economic development
	Foreign investment trends
		Importance of FDI in the Croatian economy
		Evolution of FDI over time
		Greenfield and brownfield FDI in Croatia
		Croatian economy’s attractiveness and openness to FDI
		European countries dominate the FDI landscape
		Services account for the majority of foreign investment in Croatia
		Activities of Croatian companies abroad
	Outlook and policy recommendations
	Notes
	References
Chapter 3.  Croatia’s competitiveness: Challenges and opportunities
	Trade patterns and integration into regional and global value chains
		Manufacturing dominates in the export basket
		Trade in commercial services is in surplus
		Participation in GVCs is modest
	Enterprise reform
		SOEs reform has lost momentum
		Developing SMEs capacity for greater internationalisation
	Labour markets and skills
	The innovation system
		The state of infrastructures
	Outlook and policy recommendations
	Notes
	References
Chapter 4.  Croatia’s regulatory framework for investment and national treatment
	Croatia is open to foreign direct investment
	Croatia has few exceptions to national treatment of foreign-controlled enterprises
		Cross-sectoral measures affecting foreign investment
			Land and Other Real Estate
			Reciprocity Condition
		Sector-specific measures affecting foreign investment
			Agricultural Land and State-owned Forests and Forest Land
			Fisheries
			Rail Transport
			Inland Water and Maritime Transport
			Air Transport
			Professional Services (legal services)
			Construction, Architectural and Engineering Services
			Media
			Financial Services (banking, insurance and other financial services)
		Other policies affecting foreign investment and reported for transparency purposes under the National Treatment instrument
			Measures based on public order and essential security considerations
			Corporate organisation and key personnel
			Activities covered by public, private, mixed monopolies or concessions
	Starting and operating a company nevertheless remain cumbersome according to business surveys
	Outlook and policy recommendations
	Notes
	References
Chapter 5.  The protection of investment in Croatia
	The domestic legal framework
		Croatia’s domestic legal framework provides protection guarantees for investors consistent with a modern policy regime for investment
			Croatia's strong fundamentals
			Guarantees against expropriation
			Croatia has a modern system of protection of intellectual property rights
			Main traits of Croatia’s IP rights system
			Enforcement
		Dispute resolution
			Croatia offers an increasingly efficient and professional judicial system
			Reform efforts to improve the judiciary
			Alternative dispute resolution mechanisms: arbitration and mediation
	International investment agreements
		Brief history of Croatia’s investment treaties policy and current trends
		Availability of Croatia’s IIAs to treaty users
		Main features of Croatia’s IIAs
			Fair and equitable treatment clauses
			Investment dispute settlement mechanisms
		Treaty use: ISDS claims under Croatia’s investment treaties
			Croatia as a defendant
			Croatian investors as claimants
	Outlook and policy recommendations
		Domestic framework for investment protection
			Higher specification of investment protection provisions would help to better reflect government intent
			Procedural considerations: exit and renegotiation
		Policy recommendations
	Notes
	References
Chapter 6.  Investment promotion and facilitation in Croatia
	National strategy and the institutional set-up
		Croatia has elements of national strategy for FDI attraction
		The institutional framework for investment promotion and facilitation is evolving
		The recent reform could be used to rethink Croatia’s investment promotion and facilitation
	Investment facilitation and administrative simplification efforts
	Croatia's incentives scheme for investors
		Mapping Croatia's corporate income tax policy and investment incentive regime
			Croatia's tax regime
			Investment incentives
			Special economic zones
		Effective and efficient use of investment incentives
	Outlook and policy recommendations
		Policy recommendations
	Notes
	References
Chapter 7.  Public governance
	Regulatory quality
		Regulatory policy-making and quality
		Stakeholder engagement and transparency of policy-making
		The fragmentation of the public administration complicates business operations
	Corruption
		Effective prosecution and sanctioning of corruption
		Protecting sources of information
		Preventing misconduct in the public sector
		Preventing undue relations between business and politics
		Enhancing integrity and transparency of public procurement
		Corruption prevention in the corporate sector
		Ensuring transparency and integrity of state-owned enterprises
	Outlook and policy recommendations
		Policy recommendations
	Notes
	References
Chapter 8.  Promoting and enabling responsible business conduct as a strategic choice
	Croatia’s plans for establishing an NCP
		Institutional arrangements
			NCP Structure
			Stakeholder engagement
			Resources
		Handling of specific instances
		Promotional Activities
	General policies for promoting responsible business conduct
	Policies in specific areas covered by the Guidelines
		Croatia has largely aligned the legal framework with the EU standards in policy areas covered by the Guidelines
		Recent notable developments in policy areas covered by the Guidelines
			Non-financial disclosure
			Fundamental rights are protected under Croatian law but there is scope to increase the participation of women and minorities
			Environmental protection is of strategic importance for the country’s economy
			Despite significant efforts, corruption still weighs on the business climate
	Responsible business conduct and the state as an economic actor
	Outlook and policy recommendations
		Policy recommendations
	Notes
	References
		Annex A. Croatia’s exceptions to the National Treatment Instrument
Annex A. Croatia’s exceptions to the National Treatment Instrument
Annex B. Measures reported for transparency by Croatia
Annex C. Additional figures and tables for Chapter 2