CROATIA : CROSSROADS OF CONFLICT

CROATIA

The Republic of Croatia is a southern Central European country at the crossroads between the Pannonian Plain and the Mediterranean Sea. Its capital and largest city is Zagreb.Croatia is a member of the United
Nations, the Organization for Security and Co-operation in Europe and the Council of Europe. The country is also a candidate for membership of the European Union and received a NATO membership invitation on April 3, 2008. NATO member nations signed accession protocols for Croatia on July 9, 2008, bringing it into the final stretch of its quest for membership. Croatia is expected to formally join the 26-nation pact in April 2009 on NATO’s 60th birthday,[3] making it the second former Yugoslav nation to join NATO following Slovenia which entered in 2004. On October 17, 2007 Croatia became a non-permanent member of the United Nations Security Council for the 2008-2009 term. Additionally, Croatia is also a founding member of the Mediterranean Union upon its establishment on July 13, 2008.

FLAG DESCRIPTION

Three equal horizontal bands of red (top), white, and blue superimposed by the Croatian coat of arms (red and white checkered)

PEOPLE AND HISTORY

The Croats are believed to be a purely Slavic people who migrated from Ukraine and settled in present-day Croatia during the 6th century. After a period of self-rule, Croatians agreed to the Pacta Conventa in 1091, submitting themselves to Hungarian authority. By the mid-1400s, concerns over Ottoman expansion led the Croatian Assembly to invite the Habsburgs, under Archduke Ferdinand, to assume control over Croatia. Habsburg rule proved successful in thwarting the Ottomans, and by the 18th century, much of Croatia was free of Turkish control.

In 1868, Croatia gained domestic autonomy while remaining under Hungarian authority. Following World War I and the demise of the Austro-Hungarian Empire, Croatia joined the Kingdom of Serbs, Croats, and
Slovenes (the Kingdom of Serbs, Croats, and Slovenes became Yugoslavia in 1929). Yugoslavia changed its name once again after World War II. The new state became the Federal Socialist Republic of Yugoslavia and united Croatia and several other states together under the communistic leadership of
Marshall Tito (born Josip Broz).

After the death of Tito and with the fall of communism throughout eastern Europe, the Yugoslav federation began to unravel. Croatia held its first multi-party elections since World War II in 1990. Long-time Croatian
nationalist Franjo Tudjman was elected President, and one year later, Croatians declared independence from Yugoslavia. Conflict between Serbs and Croats in Croatia escalated, and one month after Croatia declared independence, civil war erupted.

The United Nations mediated a cease-fire in January 1992, but hostilities resumed the next year when Croatia fought to regain one-third of the territory lost the previous year. A second cease-fire was enacted in May 1993, followed by a joint declaration the next January between Croatia and Yugoslavia. However, in September 1993, the Croatian Army led an offensive against the Serb-held Republic of Krajina. A third cease-fire was called in March 1994, but it, too, was broken in May and August 1995, after which Croatian forces regained large portions of Krajina, prompting an exodus of Serbs from this area. In November 1995, Croatia agreed to peacefully reintegrate Eastern Slavonia, Baranja, and Western Sirmium under terms of the Erdut Agreement, and the Croatian government re-established political and legal authority over those territories in January 1998. In December 1995, Croatia signed the Dayton peace agreement,
committing itself to a permanent cease-fire and the return of all refugees.

The death of President Tudjman in December 1999, followed by the election of a coalition government and President in early 2000, brought significant changes to Croatia. The government, under the leadership of then-Prime Minister Racan, progressed in implementation of the Dayton Peace Accords, regional cooperation, refugee returns, national reconciliation, and democratization.

On November 23, 2003, national elections were held for Parliament, and the HDZ, which had governed Croatia from independence until 2000, came back into power. The HDZ government, headed by Prime Minister Ivo Sanader, was narrowly re-elected in a November 2007 ballot, and the new government assumed office on January 12, 2008. The Sanader government’s priorities remain membership for Croatia in the European Union and in NATO Presidential elections were held in January 2005. President

Mesic, having defeated the HDZ candidate in that election, was inaugurated for a second term on February 18, 2005. Presidential elections will next be held in January 2010.

ECONOMY

Once the wealthiest Yugoslav republic, Croatia’s economy suffered badly during the 1991-95 war as output collapsed and the country missed the early waves of investment in Central and Eastern Europe that followed the fall of the Berlin Wall. Since 2000, however, Croatia’s economic fortunes have begun to improve slowly, with moderate but steady GDP growth between 4% and 5% led by a rebound in tourism and credit-driven consumer spending. Inflation over the same period has been controlled and the currency, the Kuna is stable. Nevertheless, difficult problems still remain, including a stubbornly high unemployment rate, a growing trade deficit and uneven regional development. The state retains a large role in the
economy, as privatization efforts often meet stiff public and political resistance. While macroeconomic stabilization has largely been achieved, structural reforms lag because of deep resistance on the part of the public and lack of strong support from politicians. The EU accession process should accelerate fiscal and structural reform.Basic features of Croatia’s economy are industry, agriculture, forestry,fishing industry and food, drink, and tobacco production, construction,transport and communication, and trade.

Croatia is included in the group of countries with small and open economies, which are largely connected to other foreign markets. The priority of Croatia’s economic policy is the continuation of making a stabile and strong market-oriented economy which is competitive in the global market, constant reinforcement of macroeconomic stability and the continuation of structural reforms for the purpose of securing stabile and sustainable economic growth, increase in production, especially import and increase in employment. The particular emphasis is on creating a favourable business environment harmonized with the business environment prevalent in the European Union, further development of market economy, stimulation of
private investments, promotion of international competitiveness, and entrepreneurial and market freedom.

HITRO.HR service was introduced in 2005 as a means of strengthening entrepreneurship with the specific goal of simplifying administrative procedures, and in January 2006 Croatia’s Tax Administration activated
e-PDV, a service which allows all the users who are in the VAT system to file their VAT tax return in electronic format. Also, the Government started the e-Hrvatska programme, using which they plan to introduce information systems into the entire education system and also one of the plans is to introduce on-line access to health service, which would enable better medical service. Future plans include designing and setting up networks, which would enable on-line access to civil service, health service,
education service, and justice before 2007. During 2006 an initiative was started together with the science community in Croatia in order to advance the cooperation between Croatia’s economy and science.

Creating conditions for sustaining high economic growth rates was also initiated, especially through enhancing competitiveness and flexibility of the market, which will help in tacking the problem of unemployment. Through the growth in production and export and through stimulating export activities, restructuring large Croatian companies owned by the state and increase of competitiveness of Croatian products on the global market will have a positive effect on Croatia’s foreign debt and balance of payments deficit.

Basic economic goals include export growth, quality standards introduction, meeting ecology requirements and achieving expenditure efficiency. Climate, relief, and soil diversity enables a wide agricultural range of products, while low level of pollution is good for the development of ecological production. Croatia, as one of the significant tourist destinations in the Mediterranean, has a long tourist tradition and big development prospects. During the past couple of years Croatia is classified as one of the European destinations with the highest growth rate. Construction restructuring trend in Croatia, relevant during recent years, is in accordance with modern European trends, where it is easier for small
and medium companies to adapt to modern market requirements. An advantageous geographical position provides opportunities for the development of transport infrastructure and activities as one of the
important factors of the entire economic and social development of thecountry.

One of the primary goals of the economic policy of Croatia’s government is to create a stimulating business environment, harmonized with the standards used in the EU and countries with developed market economies. The Government plans to achieve its dedication to reforming national economy, with the goal of attracting foreign investors to Croatia, on domestic, as well as on international level.

Since 2002 Trade and Investment Promotion Agency has been active and its basic activities are directed towards proactive searching, informing, attracting and realization of qualified investment projects which include production of goods and services with high added value intended for export, as well as projects which will generate new jobs. Export orientation is necessary for presented the “Croatian Export Offensive” (Hrvatska izvozna ofenziva – HIO). The main objectives of the strategy are directed towards
solving crucial issues for export growth, such as small capacities, production fragmentation, and insufficient competitiveness. The strategy gets a special meaning from the founding of six export clusters,namely: water, small shipbuilding, textile and clothing, ICT solutions, wood and furniture, and mariculture and Croatian fish.

It can be expected that the EU accession negotiations will have a positiveeffect on a larger inflow of foreign capital, especially into greenfield investment projects, which should eventually increase the economic growth and global competitiveness of the Croatian economy.

Croatia achieved its greatest accomplishment on the international level on October 4, 2005 by starting the EU accession negotiations, after a positive avis from the Council of the European Union. The screening process is currently in progress. Croatia is also, as a member of the WTO, in the process of active harmonization of its legislation in accordance with the standards of the WTO. Croatia has signed the Stabilization and Association Agreement with the EU, and this agreement came into force in 2005.