Friday, January 27, 2006

Croatia Online - Doing Business in Croatia, A Snapshot

You’ll see from an earlier posting that one of our 5 “worst” features about Croatia was the bureaucracy. That makes doing business difficult when you come from the relatively transparent UK environment. Many business visitors get very excited about the potential and then start drowning in red tape. My partner and I are involved in the marina industry here and we’ve sweated alongside our contacts as they wait for all the various permissions that they need, a process that can take two years or more. So if you’re an entrepreneur and spot an opportunity, it may be gone by the time you are allowed to start trading.

Exporting to Croatia is also problematic due to the ever changing rules on tariffs, and the limited number of reputable carriers that operate from England to Croatia. However, assuming you can get all the paperwork organised and you want to break into the Croatian market, have you done your market research?

The salient points to note are:

Market Size
There are less than 5 million inhabitants, about the same population as Southern Ireland, with 20% of the population living in the capital city of Zagreb.

National Characteristics
Croatians are proud and somewhat nationalistic. They are also very resourceful. Remember the “I’m Backing Britain” several years ago? Croatians Champion Croatian products and if it’s not manufactured here, they can probably come up with a decent clone given time.

Competition From Other Foreign Countries
Italy is just across the Adriatic. Germany, Austria and Hungary are a little further away but they have all been doing business with Croatia for some years. The UK doesn’t even make the chart, which means other countries have a head start.

This is not the place to explore the old boys network in detail but the village culture means everyone knows everyone else. A local competitor can normally find an “in” to most places via a school friend or a cousin and you will be starting from scratch.

Despite all of the above, there are many plus points. Taxation arrangements are favourable, there’s a good supply of relatively cheap and well educated labour, the market is beginning to open up, and the recent start of EU Accession discussions should eventually lead to a business environment that resembles western Europe more closely. On top of that, although negotiating a deal can be a slow process, our experience is that, once concluded, Croatians stand by their word and you can build a good relationship with them.

The best “beermat” advice is to get a good local accountant and lawyer, use the commercial services of the British Embassy, find a well connected local partner and stick at it for twice as long as you originally planned to. Many foreigners dip in and out of the Croatian market but once your local network knows you are here to stay, business will build.

This posting barely scratches the suface so we’ll be exploring the subject in more detail in the future and having a look at some of the websites that can help.


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