Croatia's Entrepreneurial Impulse Produces Results Fast
The landscape of Croatian business has been drastically changing over the last ten years. According to the Center for Entrepreneurship, Innovation and Technological Development of the Croatian Chamber of Economy, the number of small and medium sized enterprises in Croatia grew by 71% between 2001 and 2011. Currently, SME’s make up just over 51% of Croatia’s GDP, and this is still a ways behind of the contribution of SME’s to the Economy of the European Union, which stands at 58%. Despite this, SME’s contribute similarly to aggregate employment, with 66% of both European and Croatian workers employed with SME’s.
Considering Croatia’s current economic woes, the government has recognized the need to systematically empower and assist entrepreneurs and small businesses, as a foundation for future economic growth. The European Commission’s report on SME’s in 2012 states how SMEs “continue to be the backbone of the EU economy”, which represents a state of SME development Croatia seems to be willing to emulate. The Croatian government has stated that its overall goal for its current mandate is to accelerate economic growth to 5% by 2015, and to achieve that, the development of SMEs and entrepreneurship remains a crucial cornerstone.
For this reason, Croatia’s Ministry of Entrepreneurship and Crafts is currently undertaking the third round of its successful poduzetnički impuls, or Entrepreneurial Impulse program. As part of this initiative, a wide range of reforms was implemented: the threshold of revenues for Croatian companies to enter the VAT system was raised to 230.000 HRK, while companies operating in the tourism or hospitality sector that were in the VAT system, saw their VAT shrink to 10%. Croats can now form simple limited liability societies for just 10 kuna and within 24 hours. Contributions to Croatia’s state health program were lowered to 0% for new employees of SME’s, and the tax rate for reinvested profit was lowered to zero.
These measures, however significant, were just the beginning. In 2012, the Ministry of Entrepreneurship and Crafts of Croatia as part of its Entrepreneurial Impulse program distributed more than 2,400 grants with a total value of over 168 million kuna. These grants were distributed to SME’s for increasing their domestic and international competitiveness, supporting entrepreneurship among women, helping entrepreneurs increase quality standards, etc.
The results of this program in the first nine months of 2012 have been impressive, especially considering how the Croatian economy contracted by 2% during last year. Results showed that SME’s saw their revenues during this period rise by 1.5%, their exports rose by 9.3%, total employment in SMEs rose by 2.1%, and investments in SMEs grew by 3.2%.
As Croatia is going to enter the European Union this year, the Croatian Government is developing a strategy for entrepreneurial development for the period from 2013 to 2020. Considering the success of the Entrepreneurial Impulse, it would be realistic to expect further positive developments in Croatia’s entrepreneurial environment if such a consistent strategic approach was implemented.