This research was prepared as a theoretical research using all available studies and researches of the SME sector in Croatia. Slavica Singer is the director of the Center for the Policy of Small and Medium Enterprises - CEPOR and the head of the master's study program Entrepreneurship at the University of J.J.
Status of the SME sector in Croatia
Criteria for defining the SME sector in Croatia and in EU
Chamber of Commerce (www.hgk.hr), which represents the interests of the SME sector. CEPOR (www.cepor.hr), SME Policy Centre, the only institution in Croatia focused exclusively on policy issues of the SME sector. Perception of the quality of commercial and professional infrastructure to support development of the SME sector - 2003.
The perception of quality of education supporting the development of the SME sector indicator for Croatia is in brackets). The Croatian timber cluster (Hrvatski drvni cluster) was established in 2002 under the USAID program. Report on the implementation of the European Charter for Small Enterprises in the Western Balkans, SEC Brussels, 2004.
Report on the Implementation of the European Charter for Small Enterprises in the Western Balkan Countries, SEC Brussels, 2004.
Place of the SME in Croatian economy
Major obstacles in the development of the SME sector in Croatia 17
Public procurement favors new firms, support for new firms is a high priority for policies at national and local level, supportive policies are effective. The GEM project is the only international project focused on entrepreneurship and the role of start-ups and new businesses in national economies.
Distribution of competences for enterprise policy
The institutional and legislative framework define the distribution of powers for formulating and implementing corporate policies among government organizations. The government elected at the end of 2003 returned the authority for formulating SME policy to the Ministry of Economy, Labor and Entrepreneurship, with HAMAG (www.hamag.hr) as the implementing agency, Small Business said. The Ministry of Economic Affairs, Labor and Entrepreneurship and its SME unit are responsible for policy development, but practice shows that the ministry is very closely involved in operational programs.
The Croatian Bank for Reconstruction and Development is active in its own loan programs, even in training programs for start-up entrepreneurs, but they are not operating loan programs of the Ministry of Economy, Labor and Entrepreneurship. Those agencies should help to better profile the Ministry of Economy, Labor and Enterprise as a policy and regulatory body, through the redistribution of tasks and responsibilities between the Ministry and the implementing agencies of the program.
SME national and regional policies
In 2004, the Government announced the establishment of two new agencies, InvestCroatia and EnterpriseCroatia. EU Charter for Small Enterprises, which Croatia adopted in 2003 The Ministry of Economy, Labor and Entrepreneurship is very involved in operational programs and needs it. There is no evidence that the signing of the EU Charter for Small Enterprises has had any impact on the updating of the strategy document, the Development Program for Small Enterprises, nor on any other policy document, e.g.
Croatian Employers' Association (www.hup.hr), with its SME section, which represents the interests of the employer and owner side of the SME sector. UHIPP, association of institutions supporting the development of SMEs, representing views from the supply side of the advisory services market.
Consultation of business
Towards the certification of consultants for SMEs in Croatia (position paper), prepared by USAID Croatia Enterprise Promotion in cooperation with the Association of Management Consultants (UPS), March 2004. In 2004, HAMAG started working on the development of an appropriate program for the certification of consultants , who work with SMEs in programs funded by the government13, with the support of USAID Croatia Enterprise Promotion. Certification is expected to contribute to the standardization of business quality.
The aim of the program is to introduce future consultants to theoretical concepts and practical experience of providing management consultancy services to small and medium-sized enterprises. On the demand side, the Government could introduce a voucher system to strengthen competition between suppliers for customers, based on the quality of BDSs.
Regulatory environment
Small business tax compliance costs are regressive, relatively more difficult for the smallest small businesses. The share of the costs of fulfilling the income tax in the respective tax revenues is extremely high, which leads to the replacement of self-taxation with a flat tax (estimated tax). This research on tax compliance costs is a very rare attempt to evaluate the impact of the regulatory framework on SMEs.
1, cited in Blazic, H.: Tax Compliance Costs of Small Business in Croatia, Institute of Public Finance,. Blazic, H.: Tax Compliance Costs for Small Businesses in Croatia, Department of Public Finance, Occasional Paper No.
Access to finance
NOA, a credit and savings cooperative (www.noa.hr), based in Osijek, was founded in 1996 with a USAID grant of 2.5 million USD, with the mission “to enhance multi-ethnic life in Eastern Croatia revitalize human dignity through the improvement of living standards". NOA developed its expertise in the field of microfinance with support from Opportunity International, Washington D.C. Operational involvement of the relevant ministry (Ministry of Crafts and SMEs in 2000-2003 and then the Ministry of Economy, Labor and Entrepreneurship) distracted the ministry from the policy and regulatory aspect of the problem.
Reality does not support such above-average scores, as there are not enough equity funds, no business angels and virtually no IPOs that support the development of the SME sector in Croatia. The GEM surveys showed a slight improvement in the perception of the professional infrastructure supporting the development of the SME sector in 2003 compared to 2002.
Access to information and consultancy
Croatian Association of Employers (www.hup.hr). HUP) is a non-governmental, non-profit organization of employers, regardless of the legal status form (company, trade) and the size of the business entity, organized on a voluntary basis. The Osijek Center for Entrepreneurship manages the entrepreneurial portal (www.poduzetnistvo.org), which has proven to be very well received by entrepreneurs due to the quality of the information. The Center for Technology Transfer in Zagreb (CTT- www.ctt.hr) was founded by the Faculty of Mechanical Engineering and Shipbuilding with the support of the Ministry of Science and Technology of the Republic of Croatia.
TIC www.ticri.hr), which assists entrepreneurs in establishing companies for the development of products or services based on advanced technology and facilitates their growth and development, was founded by the University of Rijeka. TPZ - www.tehnopark.hr), an entrepreneurial incubator for advanced technologies founded in 1994, within the Kon~ar Concern.
Education for entrepreneurship
In Croatia, there is only one university program (masters) focused exclusively on entrepreneurship (J.J. Strossmayer University in Osijek - www.psp.efos.hr), and one polytechnic level program (VERN, Zagreb - www.vern.hr). Strossmayer University in Osijek was founded in 2000 with the financial help of the Open Society Institute - New York. There are plans to start undergraduate as well as doctoral programs in entrepreneurship in the year 2005, and in three years to establish a specialized school in entrepreneurship offering undergraduate, master's and doctoral programs in entrepreneurship, as well as executive programs, together with the Center for Entrepreneurship in Osijek.
The purpose of the cluster is to improve the competitiveness of the Croatian timber industry by exporting products with a higher degree of finalization, that is, the cluster was established as part of the USAID CEP project, implemented by Deloitte.
Inter-firm co-operation and clustering
In 2003, the Ministry of Crafts and SMEs announced a program promoting clustering, which was continued in 2004 by the newly established Ministry of Economy, Labor and Entrepreneurship. Metal industry cluster in Osijek is establishing, through cooperation between one medium-sized growing company (MIO d.d.) and 15 smaller businesses. Croatian progress towards the EU is determined by the internal capacity in the implementation of reforms, based on the criteria set by the Copenhagen European Council of 1993 and the stabilization and association process conditionality, as defined by the Madrid European Council on April 29 1997, determined.
The application for EU membership was submitted by the Government of Croatia in February 2003. The first "National Program for the Integration of the Republic of Croatia in the EU" was adopted in December 2002.
Stabilization and Association process
EU assistance (human, technical and financial)
Economic criteria, even political criteria spelled out by Copenhagen and Madrid documents, are very relevant to the SME sector (from ensuring access to information and finance to empowering to participate in the exploitation of business opportunities, as well as eliminating administrative obstacles in starting and running businesses). 34;Croatia should further adapt its business-related legislation and rules, improve the administrative and judicial environment and continue the implementation of the European Charter for Small Enterprises. Alignment with the new Commission recommendation on the SME definition should be carried out.
In 2000, the EU consolidated its aid under the Community Aid, Reconstruction, Development and Stabilization Program (CARDS), at the same time as the stabilization and association process began. Under the national CARDS programmes, total financial resources for the period 2001-2004 amount to EUR 257 million for the following five main priorities: democratic stabilization, economic and social development, justice and home affairs, administration. capacity building and environment and natural resources.
Other donor assistance
The proceeds of the loan are on-lent to AJB for small and medium-sized enterprises (SMEs). Advent IC will invest in the fund and will take an active role in managing the fund. The aim of TA is changes to the legislative framework, which includes tax, legal and accounting issues.
There are several donor programs specifically aimed at technical assistance to SMEs, such as government programs from the US, the Netherlands, Germany and Italy. Improved public awareness and understanding of the need for privatization as an economic reform and balanced, issue-oriented media discussion of the process.
Donor co-ordination
Since 2000, there has been a Directorate for the Coordination of Aid Programs and Cooperation with the EU, located at the Ministry for European Integration. Strategic objectives for the ten-year period as spelled out by the National Competitiveness Council33 are. The role of SMEs is obvious: small businesses have already proven to be the only job-creating part of the Croatian economy, but the SME sector does not contribute to the generation of new values or to export as much as possible .
The entire SME sector must become a stronger job creator, but must also become a strong contributor to the GDP and export capacity of Croatia. Therefore, the National Competition Council specifically identified the following objectives for the SME sector:34.
Recommendations
Short-term recommendations
Long-term recommendations
Opinion on Croatia's application for membership of the European Union, Commission of the European Communities, COM final, Brussels, 20 April 2004. Croatia: A Political Agenda for Reforms and Growth, Review, World Bank, Volume 1, February 2000 38 Small and Medium Enterprises Incentive Program , endorsed by the Government of Croatia on 5 May 2004. Effective policies for small enterprises: A guide to the process of reviewing policies and strategic plans for the development of micro, small and medium-sized enterprises, OECD, 2004.
Gligorov, Vladimir: Recent Economic Developments and the Competitiveness of the Croatian Manufacturing Industry, Wiener Institut fuer Internationale Wirtschaftsvergleiche (wiiw), 2004. 1, aangehaal in Blazic, H.: Tax Compliance Costs of Small Business in Croatia, Institute of Public Finance, Af en toe Vraestel No.
