The ICT sector recorded an 11 percent revenue growth in 2021, but without state support, it won’t be good forever

In the past year, revenue from the ICT sector recorded an 11 percent growth to 6.12 billion euros compared to 2020, which is 5 percent of the total Croatian economy that achieved 117 billion euros in revenue. The export of the ICT sector reached 28 percent, while in some subcategories that figure is as high as 50 percent (for example, in the computer programming segment), which accounts for 7 percent of total Croatian exports. Investments in research and development by ICT companies make up 34 percent of total R&D investments. Additionally, eleven percent of all investments come from the ICT sector.

On the other hand, the revenue growth of the entire Croatian economy in 2021 was 19 percent compared to 2020, according to FINA data. Thus, the revenues of the ICT sector grew almost twice as slowly as the revenues of the entire economy.

Although many believe that the ICT sector does not need support, it is often overlooked that the Croatian ICT sector must compete globally in all world markets. This was emphasized during the presentation of the analysis of the ICT industry in Croatia in collaboration with FINA by Hrvoje Balen, president of HUP – Association of Information and Communication Activities (HUP-ICT) and founder and co-owner of Algebra.

Balen noted as a comparison with other markets that the added value in the domestic ICT sector is 37,000 euros per employee, while in other EU countries it is 83,000 euros per employee.

– Supporting the ICT sector during a crisis and galloping inflation is a strategic decision that can help us recover much faster from the negative effects of the recession that increasingly threatens the Croatian economy and society. The ICT sector is the only sector that did not experience a decline in 2020 like the rest of the economy and which achieved a growth of as much as 11 percent even in the pandemic year of 2021. At the same time, in 2021, we were one of only three EU members, along with Finland and Estonia, that experienced a decline in the number of ICT professionals by as much as 2.8 percent – noted Balen, adding that labor costs in Croatia are rising faster than the number of employees, which stems from tax policy, for which HUP has also recently presented proposals.

It won’t be good forever

Why it is necessary to extend a hand to this sector was explained by Siniša Đuranović, vice president of HUP-ICT and senior vice president and procurator of Hrvatski Telekom.

– When we look at all these numbers, especially when we look at investments in R&D amounting to 96 million euros and investments in fixed assets of 440 million euros, we significantly participate in the development of the economy through our share in the overall economy. And that is precisely the reason why the Croatian state needs to help our sector in two segments, namely labor competitiveness because we have a problem with competitiveness due to tax burdens, and in terms of creating an investment environment, i.e., investing in infrastructure – said Đuranović.

He concluded that, although they are currently doing well compared to the rest of the economy, this will not be ‘forever if the state does not extend a hand on issues that are important to us and that are problematic for us’. They believe that the state’s interest is significant here, given the contribution of the ICT sector to the overall economy.

– Although we are currently facing an acute problem of rising energy prices that also affects our members, we must not forget the chronic problem of excessive labor burdens and alternative income methods that encourage employers without a presence in Croatia.

It is evident from all this that, as an extended arm of the Digital Strategy 2030, we also need a National Plan for Retaining and Attracting Digital Talent, which will enable the retention of highly qualified professionals in the country, thereby creating the prerequisites for the growth and development of export-oriented and internationally competitive companies, allowing society a quick and relatively painless exit from the crisis – said Balen.

New leadership of HUP

HUP-ICT also presented new members of the Executive Board at today’s press conference, who outlined the strategic guidelines for the activities and priorities of the Association in the future period. They emphasized the development of the Croatian digital industry and four thematic areas mapped on the Digital Compass of the EU’s digital decade, a strategic document of the European Commission that represents the vision and guidelines for a successful digital transformation of Europe by 2030.

The Digital Compass of the EU’s digital decade consists of four main points: skills, secure and sustainable digital infrastructure, digital transformation of businesses, and digitalization of public services. HUP-ICT has defined the overarching strategic guideline for the development of the ICT industry – ‘People and Innovations’, which it will seek to address through five areas essential for the accelerated development of the ICT sector, as well as society in Croatia. Each of the five strategic areas will be led by one of the Executive Board members, who is also the vice president of the Association.

The digital transformation of the Croatian economy and society will thus be the responsibility of Ivana Maglić, director of Calisto/Gartner Adriatic. The promotion of job creation and technological skills will be managed by Aleksandar Raić, vice president for transformation and human resources at Infobip.

Partnership with the government and EU institutions will be led by Miroslav Kantolić, a member of the executive management of Ericsson Nikola Tesla, connectivity and telecommunications by Martina Dragičević, director of regulatory affairs and EU funds at A1 Croatia, while the last area of profiling and structuring of the association will be overseen by Vladimir Kosanović, director of GlobalLogic Croatia.

Coordination for EU affairs will be led by Milly Doolan, director of Euronavigator, while coordination for cooperation with the scientific community will be led by Bojan Hadžisejdić, director of Nephos. The ultimate goal of all five working groups and two coordinations is to accelerate the process of digital transformation of the economy and society, as well as to create a more modern legislative and fiscal framework conducive to investments and innovations.