Small business environment in Croatia

[Ribaric]

Mambo's post in "favourite things" prompted me to start this thread. I now a bunch of the regulars here are owner/operators of small enterprises. I don't do that any more (but I do miss it) and was wondering about the circumstances which enabled me to run my own enterprise in the UK and how the Croatian experience might differ.

It seemed to me that, to have a chance of making a living and enjoying a little growth, it is necesary that...

• There are enough customers with enough money to make it pay.
  
• I can find a local supplier (maybe Croatian) who will be reliable in supply, quality and costs to make a 3 year plan a realistic thing to do.
  
• My access to customers is reliable, eg: phone, www, fax, shop etc.
  
• A big enough marketing facility exists so I can reach enough potential customers.
  
• The beaurocracy is understandable and does not stop me doing business, I know it will consume time and energy.
  
• The tax system is also understandable and can be managed.
  
• The employment rules enable me to fire people who don't/won't add value.
  
• The market is big enough to support my business.
  
• I can compete on an equal footing with my competitors, as much as anywhere else!
  

I don't know the actual differences between my own experience and that of people running businesses here. However, I sense that getting a "level playin field" would be my biggest concern about things I could not control.

Frankly, I don't think the home market has enough spending power for me to try my luck here.

Views?

[mambo]

The strange thing in Croatia is that there are lots and lots of things that you can do here and all of them will be profitable.
The list with possibilities that I see still grows everyday, but the sad reality is that this country is not ready for anything.

First of all, try to get your project financed..........good night and good luck (in which order you want it).
Then you have to work yourself through the bureaucracy of permissions. In itself not bad that you need them, but it would be nice if someone can tell you which permissions you need, what documents you need to provide etc. They really have no clue themselves and thus you will be going from office to office, continuously finding out that nobody has a clue and in the mean time you cannot work.
It never occurred to them that a company needs to make some money if they want to survive, it is pretty normal to wait 2 or 3 years for permissions to be issued, by that time you are either bankrupt or you went the Croatian way.................working without permits.

Another nice one is that in order to get those permissions you need to spend some money, not a little bit, no.....you will be spending loads of money for all kinds of inspections that really don't help you a bit.
If you rent factory space and the owner has inspection reports for fire, electricity etc you could expect that these would be accepted...............well forget about that, you can do it all over again. Costs ? Well over 15,000 Kuna total.
For your using permission you need to have a risk analysis and your personnel needs to be trained. Doesn't matter if you don't have any risks (e.g. logistics or just storage), you will need to make this analysis, costs ? Over 10,000 Kuna total.

In order to get a building permission for a machine you will need to supply structural information of the building. If you happen to put a machine on a location which was designated storage by the owner you have just won the lottery or better, you lost the lottery, for now you can employ an architect and he will write a 200 page report with useless info, charge you 5000 euro and then, hopefully, you can set up that machine of 2000 euro.

For your location permission, building permission etc you need a 'projektant'. Nothing that you cannot do yourself, but you are not allowed. Jackpot, out go another 10,000 euro.

Before you have produced anything you will have spent at least 40,000 to 50,000 euro on documents, permissions, inspections etc. Nobody is going to read them anymore, they serve no purpose and the cost is way too high and the process takes forever.

Result ?
Many companies don't even ask for permission, they simply start.



Then of course you have your suppliers, customers and workers.

You are forced to treat them like total s , because none of them can be trusted. Your suppliers will not deliver what you asked them, but they require full payment in advance. Good luck trying to get any kind of service afterwards.
Your customers never want to pay you, always want credit, which you can't give because the moment you do, they will never ever pay you and you lose money.
Your workers and the companies that need to perform some work for you think that you are the rich foreigner. Whenever you show up the price goes atleast double, but most of the times triple or more. Quality is poor to put it mildly and warranty for a job performed ? Good luck.

It is this attitude and this behavior that makes business in Croatia extremely difficult and it is also the reason why no foreign investors are coming (at least not in Istria). I know many companies who would like to come, but when they hear how the investment climate is they simply turn around and go somewhere else.


The last few months I tried to get some guidance and promises on paper for a large winter project in Zagreb. Investors are willing to put up 1 million euro but they want reassurance that permissions will be granted. The project will run over a period of 2 months, is quite common in many other cities in Europe, nothing special, but you do need some permissions.

What is the answer in Zagreb ?

We have to start the project and then they will see if they are willing to give the permissions. It is possible that in November, when approximately 800,000 euro will already have been spent, they will simply say 'sorry, this piece of equipment cannot enter the country' which would mean end of project.

Conclusion. This project, although it would be a huge attraction in Zagreb, would draw hundreds of thousands from Slovenia, Hungary, even Rumania, perhaps even Italy and of course Croatia to Zagreb, will not take place because they cannot put guarantees on paper.

This is simply a bloody shame and Croatia will be in for a rude awakening if they ever want to join the European Union, because the moment they enter they will have to change, whether they like it or not.

[valiant]

mambo. i absolutely agree with everything youve said here. i know of people whove been waiti ng to get their house built in split, they been waiting for over a year for the urban plan to see if the parcel of land they are interested in is legal for building. the urban plan finaly came yesterday. in the mean time they havent been able to set up the businss they were hoping to set up in the ground floor of their future house. so theyve spent heaps of money just waiting , frustrating. ive had business experience here in croatia, and ive also worked for someone . all i can say is that if you want to live in croatia ...earn your million in another country before you move here . cos without atleast a million euros, you are an insignificant little ant .my sister has a small 2 bedroom apartment with 2 kids, she gets 500 kuna a monthe electricity to pay. i quit my job becasue the idiot i was working for was a power hungry creep who just yells like a wild pig at his workers like hes on some strange pills. i went to the employment office and my english qualificions dont mean anything to them at all...they catagorized me as an NKV.. uneducated . do you people see where this is heading??? this behaviour leads to corruption , bank robbery, auto theft, black market, drug dealing, etc... they masacre your will to do anything and then they fine you and in the end they dont even want to aknowledge your education. what the hell is this!? so as mambo says...you just work. by whatever means possible , you have to find a way to work and forget about waiting for the permits or anything.

[valiant]

i want to be able to work like radimir cacic!!! so that i can buy a 17 th century villa in istra for 80,000 kune, like those politicians in istra!!!its amazing what you can do in croatia if you have connections. its amazing what you cant do when you dont !!hahha
i know some people who have small businessesin croatia.,,most people are working at a loss, but they keep on going into larger debts beacuse they are hoping that they will get some big jobs that will save them and most importantly , their image.

[Ribaric]

Margaret Thatcher wrote about this problem in the UK of the early 1980's. She decided that the red-tape was too difficult to shift and so she had her "Tarzan" (Mike Heseltine) set up enterprise zones (IZs) where, as she put it, "different rules applied".
In brief, all the safety, ecological, tax collection rules plus some employment laws and nearly ALL local authority powers were stripped away for any company who entered an IZ. The IZs were operated by central govt because they didn't trust the local councillors. Any company owner in an IZ would have to make personal gaurentees, secured against personal equity, that all accidents, injuries, ecological and tax related incidents would be adjudicated by an industrial court and any fines would be levied personally if the company went bust. It paved the way for the UK's boom IMHO despite Blair disbanding most of the get-out clauses when he was elected. The local authorities were forced by the dept of industry to set aside land for IZs.

I believe this would work here. Light industrial parks blossomed throughout the UK in the 1980's and allowed entrepreneurs the room to make money and jobs.

[valiant]

good idea

[Ribaric]

Here's an old thread but today I experienced something worth adding to it...

ME - to man in post office
"You left a note on my letter box for me to come here and pick up my papers which show I am the new owner of this company"

HIM
"Got a company stamp?"

ME
"No, I can't get one without proving I'm the owner of the company, which I can only do with the documents in your post office"

HIM
"No stamp, no documents".

ME
"Ever heard of catch 22?"

I went home and cut off the address from the old company stamp and returned to get my documents. Why must it be this way?

[fidobsa]

Apr 2, 2006 0:57:35 GMT 1 Ribaric said:

....... It paved the way for the UK's boom IMHO despite Blair disbanding most of the get-out clauses when he was elected. The local authorities were forced by the dept of industry to set aside land for IZs.

I believe this would work here. Light industrial parks blossomed throughout the UK in the 1980's and allowed entrepreneurs the room to make money and jobs.

I don't remember Britain ever having a "boom". I lived in a mining area during the Thatcher regime and from my perspective Britain has been in constant recession for at least the last 35 years. I remember them talking about "yuppies" in the media but I never met one.

[crojoe]

Jul 1, 2014 16:28:52 GMT 1 Ribaric said:

Here's an old thread but today I experienced something worth adding to it...

ME - to man in post office
"You left a note on my letter box for me to come here and pick up my papers which show I am the new owner of this company"

HIM
"Got a company stamp?"

ME
"No, I can't get one without proving I'm the owner of the company, which I can only do with the documents in your post office"

HIM
"No stamp, no documents".

ME
"Ever heard of catch 22?"

I went home and cut off the address from the old company stamp and returned to get my documents. Why must it be this way?

So has much changed since 2006 when this post was written?

Some, but not a hell of a lot. You still need that stamp, taxes have gone up and to get permits still takes ages. The only good thing is you can open a company much quicker but not close it. And, with so many people still not paying suppliers and staff salaries, well, I doubt I would invest via a third party in Croatia. You still need an accountant. In fact I would say the government has an even stronger hold on business.

Yes, Croatia is a gold mine, but as I said before, the miners are still on strike.... more like holiday. The Last and current Gov. has no desire to see the country succeed in business. Highly educated work force (50% of youth unemployed), but all they can do is tax those that do work to death, make more red tape for small businesses and scare away foreign investment. Talk to any Embassy business attache and they all say the same thing about Croatia... to many regulations, red tape and bureaucracy.

[mijbil]

You can make a small fortune in Croatia !..........................................you just need to start with a large one :-)

[Ribaric]

Fourth visit to the Gruntovnica. I've paid my 250 Kuna, I have notarised proof I am the owner of the buying company, I have a notarised copy of the sale agreement, I have the fourth version of an application form which I had to make myself because they don't have one, I have a receipt for the tarif, I have the receipt that I paid the seller, my passport with valid borovak and now..... she doesn't like one of the clauses in the agreement and wants me to go find the recently deceased seller to make sure he is happy with what he already signed..... No wonder guns are forbidden here.