Helena Miloloža: My Ten Recommendations for Export Growth

All moves are closely related, but everything stems from the adoption of a comprehensive strategy that we will adhere to, explains the postdoctoral researcher at the Department of Trade at the Faculty of Economics in Zagreb in her analysis of the activities of Croatian companies in the Eastern European market.

Helena Miloloža is one of the youngest PhDs in Croatia, but despite that, she has already gained rich experience in the private and public sectors. Although she says she did not plan it that way, her career has always revolved around the eternal theme of the Croatian economy – exports. From her employment in the Supervisory Board of Munja, through her work at HBOR, to her current position as a postdoctoral researcher at the Department of Trade at the Faculty of Economics in Zagreb, exports have always followed her as a leitmotif. She admitted to us that she sees her future in the academic community because she feels that by transferring knowledge and experience to students, she can have a much greater impact on the changes needed in the Croatian economy, although regarding a return to the real sector, she says, never say never. She emphasizes that she will continue to focus on exports, which is also the topic of her doctoral thesis ‘Determinants of Export Activities of Croatian Companies in the Eastern European Market’.

• You claim that Croatia has not managed to overcome inherited weaknesses and challenges in the export sector since its independence. What are these weaknesses?

– These weaknesses have been following us for much longer than the last twenty years, but they have now come to the fore because we are shaping our own destiny, so we bear the responsibility exclusively ourselves. The fundamental problem is the lack of a long-term strategy. Additionally, designed but unfounded short-term strategies, or rather plans, have not been in synergy nor have they ultimately been applied. Related to exports, the burning issues are the narrow base in terms of the number of exporters, market size, focus on a small number of close markets, unsatisfactory technological level of development, unfavorable ratio, and low added value of products and services, all of which stem from the absence of economic-political support.

• Why are we still so oriented towards the markets of Eastern Europe? Are we afraid of developed markets?

– The business of Croatian companies is mainly based on the principle of trial and error. They lack analysis, primarily of themselves and their own operations, and then of new markets, business partners, and existing and potential customers. Without thorough analysis, the risks are much greater and harder to recognize, so the fear is justified. Of course, the most important thing is to first establish oneself in the domestic market. However, it is small, and internationalization of business is necessary. It is logical that expansion begins first in neighboring markets, but our companies stop there. Croatia is traditionally oriented towards Eastern European countries, so it was interesting for me to study that segment, but on a larger and more comprehensive sample. We are quite similar to the countries we export to. We know Eastern European countries well, we have quite similar administrative and legal systems, and we are geographically close. Economic aspects are not crucial; they belong more to the category of a win-win situation. However, despite being oriented towards the markets of Eastern Europe, we are still at a low level of internationalization, as the 15 percent share of exports in company turnover is very small.

• It would be expected that innovation contributes to exports, but your research showed different results. How do you explain that?

– I studied, among other things, three segments: market orientation, organizational capacities for export activities, and innovation. There is a constant narrative that our companies are not competitive in the foreign market and have outdated technology. Therefore, it was interesting for me to investigate how innovative we actually are and whether it makes sense to spend time and money on innovation in markets where we have a stable position. It turned out that the essence is not in the development of innovations; rather, they negatively affect the operations of companies. Namely, these are markets that are considerably less developed than ours, and what is standard for us is new and interesting for them. So, it is a combination of the conservatism of these markets and the rationalization of resources in our companies.

• What can we improve regarding market orientation and organizational capacities?

– Aware of the lack of a strategic approach to business, I wanted to investigate how interested our companies are in market orientation, which does not only relate to the spatial market but also to consumers and competition. Respondents rated all elements approximately the same, although consumer orientation slightly dominated, which is somewhat logical. I was surprised that the problem is often not related to external markets but originates within the companies themselves. Employees do not exchange information; they practically behave like competitors, and the saddest thing is that they are not aware that they are harming the entire company. When it comes to organizational capacities, it turned out that managers are aware of the importance of giving initiative to promising employees, but there is still a high degree of distrust between superiors and employees, so strict control is still practiced. On the other hand, it is also problematic that employees lack self-initiative and poorly adapt to changes. Due to this routine, our systems are closed and stagnate. A significant problem is that for important decisions, especially in the SME sector, one person is often responsible, and due to being preoccupied with numerous obligations in the domestic market, they simply do not have time to prioritize exports. Through my research, I aimed to raise awareness that, in both small and large companies, there needs to be a person or department that will research and analyze new customers and markets because only in this way can they survive in the long term.

• You say that Croatia has an irreparable backlog in exports due to the state, citizens, and companies, and you criticize the lack of an economic strategy, high unemployment, and low production. That sounds quite depressing and bleak. What are your recommendations for positive changes?

– Here, blame is usually always placed on the opposite side. Someone else is always to blame – the war, privatization, the EU, but never ourselves. It would be ideal if only one segment were the problem so that we could fix it and eliminate all the troubles, but unfortunately, the situation is such that from citizens and companies to the state, the entire system does not function. Rarely does anyone among us have a vision of where they see themselves in five years, which is also transferred to companies that operate from day to day and ultimately to the state, which has no long-term strategy. The best part is that we do not have to invent new models; we just need to adopt existing patterns that other countries have tried and that work, and apply them according to our circumstances. We can learn from others’ mistakes, not our own. I proposed 10 recommendations based on specific cases that can somewhat improve the situation. They are all closely related, but essentially all stem from one, which is the adoption of a comprehensive strategy that we will adhere to. That is the beginning and the end, and without it, there is no progress! Of course, there is the reform of the administrative system that stifles competitiveness; we need to improve economic diplomacy and connect all institutions that deal with it specifically. We need technical improvements because we do not have enough production capacities, not even for these markets where we are strong and where there is high demand for our products and services. Additionally, the state must engage more effectively in supporting entrepreneurship. Overall, there is plenty of room for progress.

• Devaluation of the kuna in terms of encouraging exports?

– Such a move would certainly benefit some, but it is not the Holy Grail as it is often presented. In economic systems, everything is interconnected; on one side, you will have benefits, and on the other, losses. This is similar to the situation with entering the EU. Some profited, some were harmed, and precisely these last ones clung to it like a drunkard to a fence, forgetting that they had time to adapt during the long accession process.

• We have witnessed complaints about the loss of CEFTA, but we have adapted quite well, as highlighted in the latest data. Where are the new opportunities in the Union’s single market?

– Yes, we always dramatize too much. A drastic decline occurred because many companies waited for us to enter the EU before starting changes, but most quickly adapted and recovered. They found new financing methods or relocated production to CEFTA countries, but the smart ones did it in time. EU laws are not detrimental to anyone; on the contrary, they were created for the benefit of all member states. Companies must seek strategic partners who will nullify their weaknesses; it does not necessarily have to be the state; we still do not have that practice because everyone thinks they will be outsmarted. We must open up to partnership cooperation because two heads are smarter than one.

• Speaking of such agreements, what is your view on TTIP?

– Every agreement and alliance brings much more benefits than it has drawbacks. We must look at how to extract the greatest benefit for ourselves within that framework. It is not even a problem if one side dominates in that agreement; we need to see what they do well and introduce those behavioral patterns. Our economy shies away from foreign capital and is based solely on consumption without addressing the key problem, which is production that can strengthen the economy and stimulate exports. These alliances are no longer in the style of feudal relations, so in every niche of the economy, you have associations and alliances. We should not shy away from that; we just need to take a stand and extract benefits.

• That is precisely the problem, that we do not have a firm stance and are too preoccupied with the past. How can we change that?

– Yes, we are still shackled by childhood diseases even though we should have grown up long ago. I believe that the situation will improve when younger people unburdened by the legacy of the past system, the past, and other chronic ailments of this society come to management positions. The old guard is rich in experience that should be in the service of support, but I think that young people are more inclined to the changes that are desperately needed. The world is moving forward and will not wait for us!