Croatia Has Huge AI Potential, but the Economy Reacts Too Slowly

Croatia has a solid foundation for the real, reliable, and broad application of artificial intelligence, which is crucial for the next phase of economic development. However, the main challenge today is no longer the availability of artificial intelligence, but the speed and scope of its application in the economy and public sector.

This was the central message of the conference marking the 30th anniversary of Microsoft’s operations in Croatia, held today in Zagreb. On this occasion, the Minister of Justice, Administration, and Digital Transformation, Damir Habijan, also spoke, highlighting that Croatia ranks above the European Union average in key digital parameters.

Specifically, 5G network coverage is at 94.4 percent, optical coverage of households is around 75 percent, and citizens’ digital skills stand at 59 percent. He also reminded of the Shared Services Center project, a cornerstone of digital transformation in Croatia, which is in a phase of upgrading worth 53 million euros and concerns the introduction of artificial intelligence systems and cybersecurity.

The strongest part of the minister’s speech was directed towards Brussels. He identified three key challenges: excessive regulation of new technologies, mutual collision of regulations such as the Digital Services Act and the Digital Markets Act, and the slowness of administration.

– I am not a eurosceptic; I support the idea of European integration, but we must ensure that excessive regulation does not disrupt the balance between personal data protection and research, development, and innovation. When you want to regulate a part, it takes 5 to 7 years from the initial proposal to final adoption. The question is whether that topic will even be relevant anymore – warned the minister.

Habijan also revealed that judicial officials in Croatia are already using artificial intelligence tools and announced the need to develop guidelines for the safe use of AI in the judiciary.

– We need to create a framework, have at least some guidelines to know how to safely use these tools. I would not like sensitive data to go somewhere outside and be misused, even unintentionally – said the minister, announcing a meeting with Microsoft on this topic.

The Importance of Investing in Skills

It is no longer a question of whether we should use artificial intelligence, but how quickly and responsibly we can create real business and social value through its application, emphasized Kalin Dimtchev, director of Microsoft’s Adriatic region.

– Learning from more mature markets, Croatia has the opportunity to skip certain stages of development and accelerate its progress – stated Dimtchev.

He reminded that about 45 percent of Croatian companies use cloud computing, while the level of artificial intelligence application is estimated at around 23.7 percent. For smaller European economies like Croatia, he emphasized, the adoption of AI could bring five to seven percent GDP growth in the next decade.

Additionally, more than half a million students and teachers in Croatia today have access to Microsoft’s learning and collaboration tools, including the AI assistant Copilot, and Croatia is above average ranked in the EU for e-government and e-health.

– Artificial intelligence must work for everyone, not just for the government or large tech companies. By 2030, about 70 percent of jobs will change, and more than half of adults in the EU lack basic digital skills. Therefore, investing in skills is the most important investment we can make at this moment – concluded Dimtchev.

The greatest leap, therefore, comes from the ability of organizations to work with their own data, develop competencies, and integrate AI into everyday work, added Kristina Tikhonova, director of Microsoft’s multi-country cluster for Southern Europe.

– Here we see the biggest difference between those who create measurable value and those who remain in the testing phase – said Tikhonova.

She referred to the fact that so-called ‘frontier’ companies, which deeply integrate AI into redesigned processes, achieve three times the return on investment compared to the average. She warned that cyberattacks today occur at machine speed and that it is no longer possible to defend in real-time without AI.

By 2028, according to her, a billion AI agents will enter the market, functioning as an additional workforce and requiring a completely new management framework.

Security and Sovereignty

Ratko Mutavdžić, Microsoft’s global public sector consulting lead, emphasized that digital sovereignty is today a key determinant of organizational control, which implies the organization’s ability to fully manage its own data and clearly understand how it is used.

– This level of control becomes the foundation of trust in the modern digital economy – highlighted Mutavdžić.

He is the only speaker who personally participated in the opening of Microsoft’s Croatian office in 1996. Calling himself a ‘dinosaur’ of the digital age, he illustrated the conditions at that time by stating that 94 percent of the Croatian market was undergoing privatization, and today we literally hold artificial intelligence in our hands.

He also presented an interesting paradox; contrary to the common belief that tech companies want a completely free market, they actually actively seek a better regulatory framework. A state that focuses on artificial intelligence and replaces 50 percent of administrative activities with AI agents will free people for higher-quality work, Mutavdžić stated.

Tomislav Vračić, Microsoft’s regional technology director, emphasized that digital sovereignty is not possible without strong cybersecurity, which is the foundation of trust, control, and resilience in the digital world.

– Artificial intelligence raises security to a new level, from advanced threat detection to proactive defense. Organizations that continuously invest in security not only manage risks but also create the foundations of trust and resilience in the digital economy – added Vračić.

He also presented the five pillars of Microsoft’s European digital strategy, which include increasing infrastructure capacity in the EU by 40 percent with more than 200 new data centers by 2027, keeping data within EU borders with the possibility of using their own encryption keys, cyber defense based on experiences from Ukraine, and a social role through projects for the digitization of cultural heritage.

He particularly warned about the new paradigm of cyberattacks. Today, hackers no longer breach systems in the traditional way but use stolen identities, i.e., simply log in.

Over the past three decades, Microsoft has built a strong local ecosystem and today employs more than 50 professionals in Croatia and collaborates with over a hundred partner companies and institutions, such as the Ministry of Science and Education, CARNET, and SRCE.

At the same time, through startup support programs, nearly 80 innovative Croatian companies have utilized around five million dollars in Azure credits in the last four years. Through pan-European initiatives, free educational programs are available via LinkedIn, Microsoft, and GitHub Learn for the development of digital skills.