Business Environment Survey: Zagreb Most Successful in Dispute Resolution, Split Has the Shortest Bankruptcy Procedures

The private sector worldwide is a strong driver of economic growth, but it requires a favorable environment to advance. The report Subnational Business Ready (Regional B-READY) in the European Union for Croatia for 2024, presented today, analyzes local business environments in detail based on data to encourage public policy reforms that promote balanced and inclusive economic growth, job creation, and sustainability.

Based on the analysis of key events in the business lifecycle, such as Business Start-up, Business Location (building permits, environmental permits, and property transfer), Utility Services (electricity, water services, and internet), Dispute Resolution, and Corporate Insolvency, the report provides guidelines for improving administrative processes and regulatory frameworks that directly affect businesses at the local level in five Croatian cities: Osijek, Rijeka, Split, Varaždin, and Zagreb.

– The results of the Business Ready project are a clear guideline for further strengthening the competitiveness of the Croatian economy and creating a more favorable business environment. Through concrete reform measures and administrative relief, we have already enabled entrepreneurs to save over 250 million euros, and with new action plans, we aim to further relieve business operations by more than 365 million euros. The Business Ready project, conducted with the support of the European Commission and the World Bank, has allowed us a detailed analysis of administrative procedures and their impact on entrepreneurs – stated Goran Romek Vidiš, State Secretary of the Ministry of Economy.

For property transfer in Osijek, it takes eight days, while in Split it takes 60 days

– These results provide a solid foundation for defining new measures that will ensure easier market access for entrepreneurs, increase transparency, and reduce administrative costs. This is a step towards an even better economic system in which entrepreneurs are key partners in developing a sustainable and competitive economy. Our intention is to position Croatia as a leader in innovation, sustainability, and efficiency of the business environment, both at the regional and European levels, and today’s conference shows that we are moving in the right direction – added the State Secretary.

– The development of a sustainable and inclusive private sector benefits everyone, employees, businesses, and communities. However, we know that success depends on the extent to which public policies and regulations establish a favorable business environment, promote the start of new businesses, facilitate the growth of existing businesses, and create high-quality jobs – said Jehan Arulpragasam, Director of the World Bank Office for Croatia.

The report found, as they stated, that each of the five Croatian cities can improve in most analyzed areas. It was concluded that there are opportunities for exchanging good practices among all cities and that no city is equally successful in all five categories. Of the five cities mentioned, four are leaders in at least one analyzed area.

Rijeka achieved the best results in the area of Utility Services and is one of the two most successful cities in the area of Corporate Insolvency. Of all five cities, it has the most reliable electricity supply with the rarest interruptions. In Rijeka, the pre-bankruptcy procedure lasts the shortest, requiring 18 months from the competent authorities. In Osijek, the same procedure takes 24 months, as stated in the announcement.

Split records the best results in the category of Corporate Insolvency due to the shorter duration of bankruptcy and pre-bankruptcy procedures (24 and 19 months, respectively). However, Split lags behind other Croatian cities in terms of Business Location. Its low scores in that area reflect the lengthy property transfer process. Additionally, in Split, obtaining building permits takes almost a year, while the same process is the shortest in Varaždin, where it takes four months.

For the registration of property transfer, it takes from eight days in Osijek to 60 days in Split. The difference mainly relates to the time required for registration in the land registry.

In Osijek, the fastest connection for electricity is obtained

Cities could learn from each other; Varaždin could learn from Split about more efficient bankruptcy and pre-bankruptcy procedures. On the other hand, Split could learn from Varaždin about speeding up the process of obtaining building permits.

Although it is the most successful in terms of Business Location, Varaždin lags behind other cities in the area of Dispute Resolution, mainly due to the perception of higher managers of commercial companies regarding the reliability of the courts (source: Enterprise survey of the World Bank).

Zagreb is the most successful in Dispute Resolution, mainly because the mechanisms of alternative dispute resolution in the capital are considered more reliable. Zagreb could further improve the provision of Utility Services, especially by shortening the time required to obtain a water connection.

Osijek stands out for the shortest time required to obtain a connection for electricity and for the fastest and cheapest procedures for obtaining a water connection. However, it lags behind other cities in the area of Corporate Insolvency as it lacks specialized judges for insolvency proceedings and technical equipment for organizing virtual hearings.

The Regional B-READY is intended for a wider audience, from public officials at the national and local levels to stakeholders from the private sector, development agencies, policymakers, and analysts. The purpose of this study is to help these groups identify examples of best practices, reduce regulatory bottlenecks, and promote a more uniform and efficient business environment in various areas. Additionally, the collected data can serve local authorities as an effective tool for comparing and monitoring results over time concerning national and international standards.

The study was conducted under the auspices of the Ministry of Economy of the Republic of Croatia and financed by the funds of the Directorate-General of the European Commission for Regional and Urban Policy and is part of a larger series of studies that so far includes 12 EU member states, it was announced.