Doing business in Croatia – Croatia, the War, and the Future

New Wave Of Businessmen In Croatia

March 21, 2018 by inavukic 13 Comments

Eugene and Michelle Brcic Jones

Almost a year ago we wished Eugene Brcic Jones and his Australian wife and two toddlers the best of luck with their big move to Croatia. I caught up with the Brcic Jones’ for a cup of coffee as light flakes of snow tried to stave off the start of Spring in the heart of the capital Zagreb.

How would you summarise your year? Is it all that you expected?

Yes and no. No, because some promises of great work opportunities were broken and we ultimately had to resort to our own devices and one or two of our back-up plans. Yes, because we know Croatia is still a basket-case country and we expected it to be a rollercoaster of ups and downs before we find our groove.

Eugene Brcic Jones

So, it’s a bad experience?

No, I wouldn’t say that. We that knew that while we were leaving Australia, tens of thousands of Croatians were leaving in the opposite direction – and not out of curiosity or sense of adventure. You need to be realistic. Croatia is a beautiful country, but it is highly dysfunctional and has limited opportunities. On the bright side, our little setback led to me starting my own business and being the master of our own fortunes.

What kind of business?

It’s called Venatus Jones http://www.venatusjones.com.It’s a consulting and coaching service for small to medium-sized companies to help grow their businesses to the next level.

And there is work for that kind of service in Croatia?

Most definitely, there’s a strong demand brewing. I compare it to Australia when our parents came out in the 1960’s and 70’s and started trades with no real experience running businesses. Luckily, the Australian economy was booming, so their businesses thrived too. So too, Croatians today have little experience in the private sector. Market economies are cyclical, consisting of periods of stagnation that can be very challenging for companies that don’t get expert help. There is lots of evidence even in the Croatian community in Australia of businesses failing because they did not hire managers or consultants, or educated sons and daughters, to guide them through the typical patterns of peaks and valleys.

There is a big gap for this type of work because most entrepreneurs running SME’s in Croatia don’t have any financial background and desperately need assistance to lift their businesses to the next stage. Obviously, they have great business intuition to build their companies from the ground up, but they lack the education and training to elevate operations, restructure or expand into new markets, etc.

Sometimes they only need a little hand in developing strategy, aligning processes, advertising or automating sales. Some clients are shocked that you could easily call your bank and ask for refinancing.

Demand for Western business knowledge is strong and companies here need to learn how to move away from socialist-type practices, like relying only of VIP’s – veze i poznanstva, rather than introducing new strategies or opening multiple channels.

Is getting clients easy?

Surprisingly, yes. Initially it was hard breaking down reflexive resistance, the stubborn Croatian know-it-all mentality. They ask “Where were you smart-ass when I built this business from scratch?” People here try to hide their ignorance by dismissing advice, saying “everything is corrupt here and this is not America; those Western theories won’t work here.” But as long as you are fair in pricing, they will give you the chance to demonstrate value and build a professional relationship.

Luckily, a large number of businesses here are at crossroads and delivering some low hanging fruit will allow you to develop trust and demonstrate value early on in the relationship.

One of the most rewarding things about this business is that it allows my clients to grow and employ more workers. I really believe that small to medium sized businesses will become the backbone of the Croatian economy, just like they are anywhere else in the developed world.

If you allow me to give Venatus Jones a plug, I think that we need to stop chest-thumping and start doing things at coal-face level to help lift Croatia to the next level. It’s something us ‘wogs’ know how to do.

So you are staying in Croatia?

At this stage we are still fighting like the average Croatian, but I’m also looking to recruit in the coming weeks. If there are any Australian/Croatians looking for a job in this field, they should send us a line.

How has your wife and children, Eden 4, Emerson, 3, settled?

Michelle loves being here and has created a close circle of friends, while the kids are like free- range chickens here, so care-free and full of life. Michelle enjoys the food, the downtime with coffees and the dramatic change of seasons. Croatians highly value social life and put friends, family, fun and relaxation ahead of material things and that suits us just fine.

What is the main difference to Australia?

The main difference is distinguishing between ‘standard of living’ and ‘quality of life.’ All the Western polls indicate Sydney and Melbourne among other Western cities as the best places to live based on living standards. Even Croatians fall for this illusion, thinking new buildings, cars, streets and all the material abundance translates into a great life, but it doesn’t. Quality of life is the key, how we spend our most precious resource – time. How long do we travel to work, how much time we spend with family, how often we see friends, how healthy we eat, how much time we get to just breathe and think about our spiritual happiness. I think we glorify being busy in Australia, we postpone life for tomorrow, which never comes. Croatians don’t even know there is a difference between standard and quality of life, they are morbidly cynical and pessimistic. I’m

sure their lives would be so much better if they were more optimistic and celebrated the few things they have that are better than anywhere else in the world. It would probably motivate them to participate in change and bring it about sooner.

So many people are emigrating from Croatia, what are your thoughts as someone who went in the opposite direction?

I think it’s good that people have the courage to try their luck outside their comfort zones. As long as they have realistic expectations of how hard it will be elsewhere, I truly hope they make it as most people would never leave Croatia if they weren’t forced to do so economically. It’s actually very sad that we have such poor government and that people are forced to leave just like in Tito’s regime, ‘trbuhom za kruhom.’

What do you think is the problem?

Well, the problem is quite simple and so is the solution. Croatia has serious structural problems but it does not have the political will to fix it. Reforms, from taxes to the judiciary, cannot be introduced because the people perpetuating the problems are also the ones required to introduce them. We are essentially asking them to cut the branches they are sitting on.

Is there any hope for change?

Sure, it’s not all doom and gloom. There are new entrepreneurs emerging, with lofty visions and strong work habits, independent of the government. If you look at what Mate Rimac is doing with the world’s fastest electric sports car or Ivan Mrvos with smart benches or Neven Bakic with his STEM revolution in schools, there is hope. I hope I can help a lot of SME’s adopt Western strategies and employ armies of young workers, the best we can do is to try and be the change ourselves.

Is there a secret to surviving in Croatia?

Given your experience, would you recommend others to follow your footsteps?

Sure. Croatia is a great country to live, it’s beautiful and the social fabric makes it easy to bond, but people need jobs, financial stability and opportunities to pursue their dreams. If you can’t find work or start your own company, then your future will be uncertain and you may be on a bus or plane out of here before you even get a chance to really appreciate it.

I would advise that people do their homework, prepare for the worst and hope for the best. Fingers crossed, it could be the best thing that ever happened, or you can always return back and pick up from where you left off, no regrets.

Eugene Brcic Jones/Ina Vukic

Filed Under: Uncategorized Tagged With: Croatia, Croatian expats return to Croatia, Doing business in Croatia, Eugene Brcic JOnes, Michelle Brcic Jones, starting business in Croatia

EU Data Protection Regulation To Apply to All Business Dealings May 2018

February 28, 2018 by inavukic 6 Comments

EU General Data Protection Regulation
Kicks in 25th May 2018

The European Commission’s January 24 2018 communication shows that only two member states, Austria and Germany, have adopted the required national legislation. Others, Croatia included, are at different stages of the process. To meet the May 2018 deadline, Croatia should promptly address its national approach to open issues. Croatian stakeholders are aware of the new rules concerning personal data treatment to a satisfactory level.

The EU General Data Protection Regulation (GDPR), which entered into force on May 25 2016, was enacted to harmonise the legal framework protecting the personal data of EU citizens by introducing stronger individual rights and powerful protections against data breaches. After a two-year transitional period, on May 25 2018 the GDPR will directly apply in 28 EU member states.

Key messages in GDPR:

The European Union General Data Protection Regulation (the GDPR) contains new data protection requirements that will apply from 25 May 2018.

Non-EU countries’ businesses with an establishment in the EU, or that offer goods and services in the EU, or that monitor the behaviour of individuals in the EU may need to comply.

The GDPR and the existing Privacy Acts of non-EU countries may already share many common requirements, including to:

• implement a privacy by design approach to compliance

• be able to demonstrate compliance with privacy principles and obligations

• adopt transparent information handling practices.

Non-EU countries’ businesses should determine whether they need to comply with the GDPR and if so, take steps now to ensure their personal data handling practices comply with the GDPR before commencement.

The GDPR applies to the data processing activities of businesses that are data processors and controllers with an establishment in the EU. Generally speaking, a controller says how and why personal data is processed and a processor acts on behalf of the controller. (‘Controller’ means the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; and ‘processor’ means a natural or legal person, public authority, agency or other body which processes personal data on behalf of the controller (Article 4, GDPR).)

Where a business has ‘an establishment’ in the EU, activities of the business that involve processing personal data will need to comply with the GDPR, regardless of whether the data is actually processed in the EU.

The GDPR also applies to data processors and controllers outside the EU where the business’ activities involve:

• offering goods or services to individuals in the EU (irrespective of whether a payment is required) (A processor or controller ‘offers goods or services’ if ‘it is apparent that the controller or processor envisages offering services to individuals in the EU’ (Recital 23, GDPR).

• monitoring the behaviour of individuals in the EU, where that behaviour takes place in the EU (Article 3) (A processing activity ‘monitors the behaviour’ of individuals where individuals are tracked on the internet. This includes profiling an individual to make decisions about that person or to analyse or predict that person’s personal preferences, behaviours and attitudes (Recital 24, GDPR).

Non-EU country businesses with customers in the EU, or that operate in the EU, should confirm whether they are covered by the GDPR, and if so, take steps to ensure compliance by May 2018. What information does the GDPR apply to? The GDPR applies to ‘personal data’. This means ‘any information relating to an identified or identifiable natural person’ (Article 4).9 Additional protections apply to the processing of ‘special categories’ of personal data, which includes personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person’s sex life or sexual orientation (Article 9).

Although by definition EU resolutions directly apply across the European Union, member states must adjust local laws to implement the GDPR. Further, the resolution left room for member states to decide on national approaches to certain issues. The GDPR calls for member states’ active participation in preparing for its application, which is one of the reasons for the long transition period. Another reason is the preparatory work regarding personal data protection to be undertaken by relevant stakeholders in order to comply with the resolution. This preparatory work is even greater considering that the territorial scope of the GDPR is expanded to every EU citizen, thereby bringing overseas businesses under its scope.

Croatian authorities, legislative and supervisory, are involved in preparatory work.

Following the meeting on the application of the GDPR held on December 6 2017 in Brussels, where member states reported on their preparatory work for the application of the GDPR and national approaches for specific GDPR articles, Croatian representatives publicly reported that:

• an intergovernmental group (made up of ministries, the Personal Data Protection Agency and academics) was set up to examine the necessary changes and that this group had finished its work; and

• a new law would be submitted to Parliament by the end of January 2018.

A draft of a law relating to personal data protection was not submitted to Parliament until February 8 2018.

The Croatian Personal Data Protection Agency – set up in 2003 under the Personal Data Protection Act as an independent supervisory authority – will remain the national supervisory authority under the regulation. In 2017 the agency began actively engaging in promoting awareness of the GDPR. Its activities intensified in the second half of 2017, when it organised numerous educational programmes aimed at public authorities, the private sector and the general public. The head of the agency has repeatedly confirmed that the agency is undertaking extensive reorganisation efforts, including acquiring staff and financial resources in order to meet the obligations and exercise its powers under the GDPR.

One of the issues that Croatia must address before the May 2018 implementation date is administrative fines.

Penalties under the GDPR – specifically, the administrative fines that may be imposed for any infringement of the regulation – are the centrepiece of stakeholders’ interests due to the substantial fines that may be imposed.

Undertakings in breach of the GDPR can be fined up to 4% of their annual global turnover or €20 million for the most serious infringements. The second tier of fines, applicable for the less serious infringements, is up to 2% of an entity’s annual global turnover or €10 million.

Although it has so far been focused on its advisory and educational role, the Personal Data Protection Agency has the power to impose administrative fines for personal data protection breaches under the existing legal framework. To implement the GDPR fully, Croatian legislation must set additional procedural requirements on the enforcement procedure to be followed by the agency.

Another important issue is that the resolution enables each member state to lay down the rules on whether, and to what extent, administrative fines may be imposed on its public authorities and bodies. The Croatian legislature should therefore address the issue, considering both normal functioning of public authorities and their compliance with applicable personal data protection requirements.

Anyone conducting business in Croatia (or any other EU country) would do well seeking legal advice within the EU country to check compliance with GDPR, if already not done. Ina Vukic

Filed Under: Uncategorized Tagged With: Croatia and GDPR, Data Protection, Doing business in Croatia, EU General Data Protection Regulation, GDPR, Privacy Act

Croatia For Sale!

April 24, 2014 by inavukic 38 Comments

The loud invocation for foreign (or domestic) investors in Croatia, whose arrival, as politicians and business high-rollers claim, would solve all the problems in the country, has been a daily occurrence in the economic-political circles. It’s been said over and over again that favourable conditions need to be created for investors to come, to bring their money and invest unsparingly.Mouthfuls of rhetoric such as “we need to accelerate the investment procedures, cut red tape, which chased investors away to other more flexible countries…”, ring in the ears of every city, town, village; they all wait – like a frozen figure waiting impatiently in the sun to defrost – for direct investments that would get the economy going and create new jobs.

Investors are seen as saviours that will shake up the stumbling, plummeting economy and lead the country out of the recession.
In this mad rush to see a meaningful upward turn in the economy the Croatian parliament had late last year passed the new Act on Strategic Investment that, without doubt in my mind, appears solely designed to serve large investors, many of whom will undoubtedly rush in with their long list of – potentially – white elephant projects. God knows, Croatia has had quite a few of those in the past decades via countless dubious and corrupt privatisation deals.

Specifically, the new law will give preference to investments over 150 million kunas (the equivalent of EUR 20 million) under the patronage and approval of the recently formed government’s Commission on Strategic Investment. Under the new law, approval times for large projects will be significantly speeded up.

The law allows for special ease for strategic projects when it comes to the availability of real property owned by the state. These availabilities include the sale of that real estate without public tender whose market value is determined by an authorised valuer and the release of forests from the state forest fund for sale or for formulating citizen’s rights to these forests. The “public good/use” of state owned properties has been removed and, hence, leading the way to abuse and wheeling and dealing not alien to corruption with which Croatia still struggles miserably. While the law refers to state owned property that is made available to investors it is not far-fetched to imagine that, in the euphoria of strategic investment that “will save Croatia”, the state will come up with more laws and regulations where it will seek to compulsorily acquire private property for the benefit of some strategic investment project in the pipelines. Compulsory acquisitions are usually reserved in the developed world for projects of wider public good or state importance. Indeed, the scenario of compulsory land acquisitions to benefit an aspiring “strategic investor” is very possible given the relatively low investment funds required for strategic investments in less developed areas on the mainland and on the islands. So, for example, if someone comes up with say 3 million EURO – which is not a large sum of money – and decides on establishing a farm of some sort or a fishery or say building a restaurant at a seaside spot and creating 5 new jobs an air of subservience to the investor at the expense of private property will in places, I fear,be created especially at the investor’s insistence on preferential locations. The state already has laws that enable it to acquire farming land in order to increase the size of farmland in its ownership on any particular lot surrounded by private ownership. Indeed the squabbles about rights to land ownership – and therefore transfer to a strategic investor – are likely to increase between the state and local governments even though the state has usurped the rights to absolute decision making, creating an administrative and other procedural nightmares which expose themselves to corrupt practices particularly given the land valuation process, which does not seem to have water-tight checks and re-checks.

A concerning aspect is also the creation of “new jobs” rule that applies to approved strategic investments. According to the Act there is a requirement to open the “new jobs” within three years of capital works completion and maintain/guarantee these jobs for five years in larger projects and three years in smaller and medium projects. Resulting from my personal research into the new laws and regulations so far, there is a lack of clarification as to how many of such new jobs are to be filled by Croatian citizens, locals etc., as opposed to the foreign strategic investor bringing in his/her personnel, as well as lack of clarification as to any monitoring or policing of adherence to the filling of “new jobs”.

The new Act on Strategic Investment in Croatia has as its goal the reduction of administrative procedures – or red tape, if you like – hence playing to a speedy realisation of strategic projects in Croatia. In order to declare a project “strategic,” it must meet several criteria. Beside the capital expense of at least HRK 150 million (approx. EUR 20 million) as said above, the project must be in accordance with spatial planning regulations, which one might well expect can be changed in order to appease a potential investor (?).

If it is possible to co-finance the project with EU funds, this amount can be equal to or greater than HRK 75 million (approx. EUR 9.8 million). If the project is being carried out on an island or in local or regional municipalities that have a lower than average level of development than the rest of Croatia, or the project is related to agriculture and fishery, the total amount of capital expense can be equal to or greater than HRK 20 million (approx. EUR 2.6 million).

In addition to these financial criteria, the criteria regarding the scope of activities pertaining to the strategic project must also be fulfilled. These activities include production and processing, infrastructure and energy projects, hospitality services, industrial engineering projects, logistics and distribution centres, as well as agriculture and fishery. When submitting the project, it is necessary to include an estimate of the number of new jobs and indirect employments, which are connected to the project.

After enactment of the law of Strategic Investment there have been numerous debates and public discussions and commentaries on doubtful purpose of the Act. The major opposition party HDZ has gone as far as saying that the Act provides legal basis for the Government to freely dispose of the state owned property by setting aside the influence of the public and the local governments in decision making process, seemingly empowering the State Strategic Investment Commission with “supreme” powers. Sadly, the public and oppositional debates have not made much difference.

At first glance, this system has the capacity to enable more flexible administration with the state owned assets and ease the procedures and formalities that are necessary for the implementation of projects. Digging deeper, though, bells of caution ring with deafening noise: such broad and supreme powers of few are fraught with the dangers of corruption and granting privileges in valuing and disposing of state property or valuable assets, whether temporary or for long-term, to selected individuals whose ultimate operations and reaping of profits may not be in Croatia’s interests. Certainly, a new door to almost extreme neoliberalism has been opened here and the people at large are sure to suffer in the end. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps.(Syd)