THE FAME OF TOURISM, ENERGY, AND ICT: Croatia Cannot Enter the Post-Industrial Era Without a Strong Industry

Where is Croatia headed? Such a fateful question has only an indirect causal relationship with the fact that this text is being created on the eve of elections, and most readers will read it when the party distribution of parliamentary mandates is already known. This is not about whether politics in the upcoming period – whether in a few years or a few months – will shift slightly to the left or right, but about a view beyond the horizon. Here, of course, primarily in the context of the business scene.

So, when looking through a slightly stronger temporal telescope, what awaits us in five to ten years, or, more precisely, where do we want to go? Party pre-election programs do not provide an answer to that question. They are only interested in a magnifying glass that reaches a maximum of four years. And even for that cycle from one election to another, they mostly make promises while hiding operational models, and they do not have serious strategies. From something that has at least strategic outlines, we can only rely on the official National Development Strategy until 2030, which was adopted just over three years ago. This document – which we wrote about during its adoption phase – was skillfully presented on the website www.hrvatska2030.hr.

From State to HUP Strategy

It should be noted that this document is actually a list of wishes written to open the possibility of drawing money from the EU, primarily from the NPOO. In that sense, the domestic homework has been done almost impeccably. Eurocrats received from croatocrats material that could only be imagined in the backwoods of Brussels offices, and realized in the upper town. The state thus played the role of a flow boiler for European money, but which mostly goes to the public sector.

Entrepreneurs in the Strategy can find only declarative support for the private sector, which means that Croatia should remain a fortress of state capitalism by the end of the decade. Such a practice of extracting money from entrepreneurs and employees into the budget, from which it is then generously distributed around, has been most consistently applied in these three years.

Otherwise, the Strategy is designed in four directions: sustainable economy and society, strengthening resilience to crises, green and digital transition, and balanced regional development – within which 13 strategic goals are listed. All in all, the authors seem to have tried to write a sort of reconciliation among all existing sectors – they mentioned everyone, thus giving a little to everyone, but not enough to anyone. It could be said that behind the new facade there is too little strategic content.

A step further from such a Strategy was taken by the Croatian Employers’ Association, which organized a discussion last week on policies for faster development of key economic sectors. For HUP, the key sectors are energy, ICT, and tourism.

Global and European Trends

Well, that is something that could be discussed. These three sectors accounted for less than 16 percent of companies with 27 percent of employees in 2022, generated 19 percent of revenue and 13 percent of profit, and achieved 27 percent of total exports. (At the same time, tourist exports in the data from annual financial reports are just over one billion euros, as the ‘internal export’ from foreigners who pay in Croatia is not recorded here.)

On the other hand, of 9.5 billion in exports from key HUP sectors, 6.5 billion euros belong to energy producers, but a large part is actually revenue from trade in the international market. We export some electricity, but we are larger importers. However, to avoid getting tangled in statistics, it should be said that it would be desirable for all these sectors to achieve the best possible results, and that they should be enabled to do so through special state measures. However, it seems to me that this trinity is somewhat trend-driven – one component is in a global trend, another is in a continental one, and the third is somewhat more original, but it is all the more important for the national economy as the state is poorer.

Information and communications are relatively new drivers of global development. Here, the binary law of units or zeros truly applies: either you are in it or you are not. Without digitalization, there is no longer any production or services. We feel this best when our computer crashes or when we run out of network data. Digital literacy today is more important than knowing the alphabet and multiplication tables. However, ICT should be viewed more as an applied discipline, as infrastructural support for the entire business community, and less as a standalone discipline. And in that regard, it does matter whether domestic ICT engages in ‘lohn jobs’ for foreign clients or creates artificial intelligence tools and uses them in the broadest spectrum.

Renewable sources are a long-standing mantra of the European Union, although no one has ever calculated whether this continent has contributed more to ecology with large investments in ‘clean’ energy or reduced competitiveness compared to the USA, and especially in relation to the rest of the planet, particularly China and Russia. There is also energy self-sufficiency, which the EU further promoted after the Russian aggression against Ukraine, but apart from new renewable sources (which are at the energy bottom here, and we are only pulled out by the rich God-given renewable energy from hydroelectric plants), we are currently only shifting from dependence on Russian natural gas to dependence on American LNG.

The third strategic component, tourism, is somewhat more original. However, even here, there are exaggerated estimates of a 20 percent share in GDP, and the tourist orientation in Croatia is usually operationalized as support for short-term rentals, which is the most tax-efficient legal income in Croatia for landlords from Savudrija to Prevlaka, especially as a supplementary activity. At the same time, this ‘short-term rental’ is the least profitable product, especially in tourism, which is known for slow rates of return on investment, particularly in Croatia, which lives off three summer months.

Croatia’s Escape from Production

The main problem of state and HUP strategists is the escape from production. It is undisputed that Croatia is on the path to a post-industrial society. However, although it sounds paradoxical, it is difficult to achieve a post-industrial society without industry. Only this industry will no longer depend on thousands of people on factory assembly lines, but on hundreds of robots that manage production. The eternal story of the strategic geopolitical position from socialism to today has only been slightly innovated – the port of Rijeka, as a sort of European hot-spot for goods from the Far East, is now only supplemented by an energy and human/tourist component along with ‘logistical’ IT support.

Meanwhile, the forgotten non-strategic manufacturing sector of the processing industry generates 27 percent more revenue, double the profit, and 50 percent higher exports than the three HUP strategic sectors. Unfortunately, we only remember production in a great rush, when everything else fails – in war or in a pandemic.