Croatia Country Brief
Introduction
The Republic of Croatia, or Republika Hrvatska, extends in a crescent from the plains of the Danube, Drava and Sava Rivers in the east to the Gulf of Venice in the west and then southward along the Adriatic Sea to the border of Montenegro. Croatia is bordered by Slovenia, Hungary, Serbia, Montenegro and Bosnia-Herzegovina. Its extensive Adriatic coastline on the south-west includes nearly 1,200 islands and islets.
Croatia's population in 2007 was 4.43 million. Almost 90 per cent are ethnic Croats. Serbs, the largest minority group, comprise 4.5 per cent of the population but this figure is widely thought to understate the real number, the likely explanation being that many Serbs chose not to declare their ethnicity.
Political Overview
System of government
The Republic of Croatia is a parliamentary democracy. The President of the Republic is the Head of State, directly elected for a five year term. The President is also Commander in Chief of the Armed Forces and participates in foreign and national security policy decision-making and in the appointment of the heads of the intelligence services. The current President, Mr Stipe Mesic, was re-elected on 16 January 2005 for another five year term. The next presidential elections are due to take place at the beginning of 2010.
The legislative branch of government is a unicameral assembly (the Hrvatski Sabor). The current parliament has 153 seats with 140 deputies elected from the political party’s lists in ten constituencies, five deputies elected by districts for Croatian citizens living abroad and eight deputies elected as representatives of national minorities. Members are directly elected by popular vote and serve four year terms.
Political developments
Parliamentary elections were held on 25 November 2007. After a tight race between the two main opponents HDZ (Croatian Democratic Union) and SDP (Social Democratic Party), the centre-right HDZ won the largest number of seats and its leader, Dr Ivo Sanader, who had been Prime Minister since 2003, was given a second mandate by the President of Croatia to form a government.
In the elections HDZ won 66 seats in parliament, SDP won 56 seats, the Croatian Peasants Party – Croatian Social Liberal Party coalition (HSS-HSLS) won 8 seats, the People’s Party (HNS) won 7 seats and representatives of national minorities won 8 seats. The Istrian Democratic Party (IDS) and the regional HDSSB won 3 seats each, while Croatian Party of Rights (HSP) and Croatian Pensioners’ Party (HSU) won 1 seat each.
The coalition government, comprising the HDZ, HSS, HSLS and the Independent Democratic Serb Party (SDSS), was sworn in on 12 January 2008.
On 1 July 2009, Prime Minister Sanader unexpectedly resigned his position as Prime Minister of Croatia and President of HDZ. The Croatian Parliament then confirmed the former Deputy Prime Minister and Minister of the Family, War Veterans’ Affairs and Inter-Generation Solidarity, Ms Jadranka Kosor, as the new Croatian Prime Minister on 6 July 2009. In addition, Ms Jadranka Kosor also became the President of HDZ.
European Union (EU) accession remains the top priority of the Croatian Government. EU accession talks officially began on 3 October 2005 after the International Criminal Tribunal for the Former Yugoslavia (ICTY) Chief Prosecutor was satisfied with Croatia’s full cooperation. In 2005 the EU had postponed the commencement of accession talks due to Croatia’s failure to deliver ICTY-indicted General Ante Gotovina to the Hague Tribunal for prosecution. On 7 December 2005 Spanish police arrested Gotovina in the Canary Islands and he is now in The Hague facing trial.
In its November 2008 report on Croatian progress toward EU membership, the European Commission (EC).provided a clear timeframe for conclusion of EU accession negotiations during the 2009. Croatia also received a roadmap for closure of individual negotiation chapters and a task force to draft an accession agreement was recommended. The report concluded that accession would remain conditional on continuing reform, in particular in the judiciary and public administration, tackling corruption and organised crime, the promotion of minority rights, the prosecution of war crimes and the restructuring of shipyards.
During the EU Accession Conference, held on 19 December 2008, Croatia opened negotiations on one negotiating chapter and provisionally closed negotiations on 3 chapters. However, (on 19 December 2008), the Republic of Slovenia used its veto right to block the opening of negotiations in 11 negotiating chapters claiming that maps in Croatia’s accession documents prejudged borders between the two former Yugoslav states. Slovenia’s veto has brought Croatia’s accession talks to a standstill and no further accession conferences have been held. Out of 33 negotiating chapters, Croatia has so far opened 22 chapters. Slovenia is currently blocking the opening of nine policy chapters and the closing of five. EU accession is now not expected to be possible until at least 2012, assuming the blockade can be removed.
Croatia joined the North Atlantic Treaty Organisation (NATO) at its 60th Anniversary Summit in April 2009. Croatia currently has five personnel deployed in a NATO Provincial Reconstruction Team in Afghanistan (led by Hungary) and two police in the UN police (UNPOL) in East Timor. Croatia currently has 156 military and police officers deployed in 13 UN led missions; 17 military and police officers in 2 EU led missions (EUPOL and EUFOR) and 277 military officers and 1 diplomat in a NATO led mission (ISAF) in Afghanistan.
In October 2007 Croatia was elected as a non-permanent member of the UN Security Council for the 2008-09 term. Croatia is a member of the International Whaling Commission where it supports a pro-conservation position.
Former conflict in Croatia
Formerly a republic of the Socialist Federal Republic of Yugoslavia (SFRY), Croatia declared independence from SFRY on 25 June 1991. Fighting soon broke out in the east of the country as Croatian Serbs, with the help of the Yugoslav National Army, expelled Croats from the area. By the end of 1991 the Serbs controlled nearly one-third of Croatian territory. Despite deployment of a UN peace-keeping force in 1992, fighting continued until the end of 1995, when Croatia agreed to the peaceful reintegration of Croatian provinces that remained in dispute. On 15 December 2002, UN peacekeepers withdrew from the Prevlaka Peninsula giving control of all sovereign Croatian territory to the Croatian authorities for the first time since independence.
During 1992-1995, Croatia became involved in the war in Bosnia-Herzegovina (BiH). Then President Tudjman was one of the signatories of the Dayton peace accords in 1996, which ended the war in BiH.
Economic Overview
Analysis on the economy, economic performance and outlook
The then governing SDP Coalition introduced reforms in 2000 to rebuild the economy after the conflict. These reforms continued under the HDZ led government and accelerated following commencement of EU accession negotiations. Nearly two-thirds of the economy has been privatised and the small and medium-sized enterprise (SME) sector has significantly expanded. Of the forty three banks in Croatia, the share of foreign ownership is greater than 90 per cent and includes two-thirds of banking assets. Military expenditure has been significantly reduced in line with commitments made to cut the levels of military personnel.
Croatia's largest trading partners are EU members, particularly Italy and Germany. Foreign Direct Investment (FDI) in Croatia has been low compared to other countries in the region. According to government figures, in 2008 FDI stock fell to EUR 2.93 billion from EUR3.61 billion in 2007. FDI in Croatia in 2007 was about 30 percent higher than in 2006, with an increase in capital investments (but not “greenfield investment”) and a drop in retained profit. Capital investment, mainly in the financial restructuring of the banking sector, accounted for the bulk of FDI in 2007 (EUR 2.11 billion or nearly 60 per cent of the overall FDI). Most of the investment (nearly 95 per cent) came from EU countries, including Austria (29.5 per cent), the Netherlands (14.7 per cent) and Germany (13.1 per cent).
Croatia is also investing in its national infrastructure in order to make the country a key transit and economic hub for the region - a network of first-class highways is nearing completion and will link ports to markets in Croatia and elsewhere in Europe. Barriers to investment, particularly 'greenfield investment', remain, including slow implementation of land administration reforms and ongoing problems relating to corruption. However, in 2008-2010 the government aims to focus on judicial reform to speed up contract enforcement procedures. Administrative and judiciary reforms have been identified as key areas to be addressed in EU accession negotiations.
Although it has a smaller population than a number of its neighbours, Croatia is geographically central to importing markets (such as Germany and Italy) through its borders with Slovenia, Serbia, Montenegro and BiH. Trade relations with these neighbours have been improved by the expansion of the Central European Free Trade Agreement (CEFTA), which regulates trade relations among countries of South East Europe. CEFTA entered into force for Croatia on 22 August 2007. The gradual normalisation of relations between these former Yugoslav republics has also encouraged the re-emergence of former Yugoslav brands and familiar labels, arts, music and culture to boost and stabilise the economy. Together the populations of Serbia, Montenegro, Croatia and Bosnia and Herzegovina make up a market of 16 million people.
Key Economic Indicators
Croatia has a population of 4.43 million, GDP of EUR 47.3 billion and GDP per capita of EUR 10,724 (2008 estimates). Principal export destinations are Germany, BiH and Italy, while the main import sources are Italy, Germany and Russia (see Croatia- Fact Sheet). Figures released by the Croatian State Bureau of Statistics showed that real GDP growth in 2008 was 2.4 per cent, which is a considerable drop in comparison with 2007 when real GDP growth amounted to 5.6 per cent. The economy has been seriously affected by the global financial crisis, with a drop in GDP of at least 5% per cent now projected for 2009.
Inflation for 2009 is forecast to be 2.6 per cent, which represents a substantial decline from 6.1 per cent in 2008. However, the Government increased the VAT rate from 22% to 23% at the end of July 2009 and further price increases could be expected. Despite previous announcements that the budget deficit would be close to zero, the revised deficit as at July 2009 is 2.8 per cent of GDP.
Unemployment remains high at 14.0 per cent in June 2009 (although still lower than 17 per cent in 2006). Significant social inequality remains in Croatia, with GDP per head in Zagreb – the richest region – being much higher than regional, particularly war-affected, areas.
External debt has been rising over the past decade, increasing from 67.8 per cent of GDP in 2002 to about 87.5% of GDP in 2008, reaching 39.1 billion at the end of 2008. Croatia experienced a current account deficit of 8.6 per cent of GDP in 2007, rising to 9.8 per cent in 2008.
Australia’s relationship with Croatia
Short history of the relationship
Australia recognised Croatia on 16 January 1992, following its declaration of independence on 25 June 1991. Diplomatic relations were established on 13 February 1992 and the first Australian Ambassador to Croatia (resident in Vienna) presented credentials the following month. On 21 September 1992, an Australian Consulate was opened in Zagreb. Australia opened an Embassy in Zagreb in October 1999.
Community presence in Australia
At the heart of the bilateral relationship are the personal links built by the large Croatian community in Australia, the largest national group from the former Socialist Federal Republic of Yugoslavia (SFRY). This helps generate a significant two-way flow of visitors. The 2006 census recorded 50,990 Croatia-born persons in Australia, and 118,051 persons claiming Croatian ancestry.
The Croatian Diaspora is eligible to vote in Croatian presidential and parliamentary elections.
There have been two waves of voluntary Croatian migration to the Perth metropolitan area. The first group of Croatians were part of the late 1960s/early 1970s wave - the largest to have ever reached Australia. The second is part of the 1980s/early 1990s wave of Croatian immigration. What is nowadays perceived to be the Croatian community in Western Australia is still dominated by the 1960s wave, a large proportion of whom - according to some accounts up to 95 per cent - migrated from Croatia’s coastal region. Most of them are Dalmatians from the coast, islands or immediate hinterland. Predominantly from villages and small towns, with limited education and usually no English, many took low-status manual jobs upon arrival.
Bilateral agreements
On 13 May 2003, the Australian and Croatian Governments signed a bilateral social security agreement to give improved social security protection to people who have lived and/or worked in both Australia and Croatia. The Agreement came into effect on 1 July 2004.
Among other things, the Agreement provides that Australian employers do not have a double liability for certain social security payments for Australian employees in Croatia. Specifically, Australian employers will be exempted from the need to make superannuation (or equivalent) contributions under Croatian law where an employee has been temporarily seconded to Croatia, provided the employee remains covered in Australia by compulsory superannuation arrangements. Further information, including on how to obtain a Certificate of coverage is available from the Australian Taxation Office website.
On 8 December 2004, the Australian Government amended Australia's extradition legislation in relation to Croatia. The Extradition (Croatia) Regulations 2004 simplify the requirements for Croatia when making an extradition request to Australia.
In February 2007, Australia and Croatia finalised air services arrangements, including a Memorandum of Understanding (MOU) and text of an Air Services Agreement to be recommended to respective governments. The arrangement will enable airlines of both sides to operate daily services between Australia and Croatia and help to expand tourism and commercial links.
High Level Visits
Significant visits to Croatia from Australia include a 9-member Australian Parliamentary delegation in October 2008 led by the President of the Senate, Senator the Hon. John Hogg, at the invitation of Croatian Speaker of Parliament, Mr Luka Bebic. The Governor of New South Wales, HE Marie Beshir, visited Croatia in August/September 2007 at the invitation of Croatian President Mesic. The Western Australian Minister for Education and Training, the Hon Mark McGowan MLA, visited Zagreb in April 2007. Members of the Trade Sub-committee of the Joint Standing Committee on Foreign Affairs Defence and Trade visited Croatia in April 2003 as part of the inquiry into expanding Australia's trade and investment relations with Central Europe. An Australian Parliamentary delegation led by then Speaker of the House of Representatives, the Hon Neil Andrew, visited Croatia in April 2001.
Significant visits to Australia from Croatia include then Minister for Foreign Affairs and European Integration, Ms Kolinda Grabar-Kitarovic in October-November 2005; Ms Vesna Pusic, then Deputy Speaker of the Croatian Parliament in June 2004; a Parliamentary delegation led by then Speaker of the Croatian Parliament, Mr Zlatko Tomcic, in June 2003; Mr Antun Vujic, then Minister of Culture in March 2003; Mr Bozidar Pankretic, then Minister of Agriculture and Forestry in May 2002; and Mr Tonino Picula, then Foreign Minister in August 2001.
Bilateral economic and trade relationship
Bilateral trade is small. In 2008, two-way merchandise trade with Croatia was just over A$28 million. Australian exports to Croatia in 2008 amounted to A$7.7 million, while imports from Croatia totalled A$20.6 million. Australia’s trade in services with Croatia is negligible. Principal imports from Croatia include food products and electric power machinery. Opportunities for Australian exporters include the shipping sector, infrastructure, agribusiness, innovative technologies, water management and sectors relating to tourism.
The largest Australian investment in Croatia is co-ownership of the five-star Le Meridien Hotel Lav in Split which was opened by the Croatian Prime Minister in December 2006. Cochlear, the maker of bionic hearing devices, has established itself as a major player in ear implants market in Croatia.
Last updated: August 2009
Last updated: 21 August 2009