The European Commission has approved the disbursement of the second tranche of €700 million to Croatia under the National Recovery and Resilience Plan (NRRP), EC officials told a media briefing in Zagreb on Monday.

The briefing was held ahead of the first annual conference on the NRRP, which is being organised by the government and the European Commission’s Representation in Croatia.

The request for the second tranche was approved on Friday, and Croatia is due to receive over €2.2 billion before the end of the year, which is 40 per cent of the allocation.

The government adopted the 2021-2026 NRRP in late April 2021 and the Commission approved it three months later. Croatia received an advance of €818 million in August 2021 and the first tranche of €700 million in June 2022.

With the request for the second tranche of €700 million submitted in September 2022, Croatia joined the member states with the fastest implementation of the Recovery and Resilience Facility (RRF), on which the NRRP is based, the Commission said.

The NRRP is financed with grants in the total amount of €5.51 billion. RRF payments are based on performance and depend on whether Croatia implements the investments and reforms specified in the NRRP.

The Commission has said that the Croatian NRRP is ambitious and comprehensive, given that it covers reforms relating to the economy and business environment, the justice system, energy and energy efficiency, education, social and labour policies, health care, and post-earthquake reconstruction.

Second payment based on 25 milestones and targets

The second request for payment is based on 25 milestones and targets as part of which Croatia has implemented reforms and investments relating to the business environment, public administration, judiciary, social policy, employment, education, skills, energy and energy efficiency, water management, and connectivity.

More specifically, Croatia adopted an action plan with 33 measures to reduce non-tax and parafiscal charges and 17 measures to reduce fees for professional exams, and established a digital platform for the seven most common business fees.

Financial instruments were established to improve access to finance for companies that invest in green and digital technologies as well as for companies in growth and development phase. Amendments were made to the legislative framework to encourage the voluntary merger of local government units in order to make public services more efficient and transparent for citizens, regardless of their place of residence.

To contribute to reducing backlogs and shortening court proceedings, Croatia adopted amendments to the Bankruptcy Act, the Consumer Insolvency Act and to the Code of Criminal Procedure, and invested in digitalising the State Judicial Council and the State Attorney’s Council.

The social policy reform further progressed with the adoption of the Social Welfare Act increasing the adequacy of the main social benefits targeted at the most vulnerable groups and contributing to the reduction of inequalities, while reducing the administrative burden and increasing the transparency of the system.

Furthermore, the reform enabled the faster and more efficient provision of benefits by merging existing social benefits into a single benefit. The Act also introduced a new social mentoring service, and 253 new social mentoring professionals have already been trained.

To strengthen the labour market, Croatia introduced new active labour market policies in the green and digital transitions and the new voucher system for adult education, training and upskilling.

The implementation of the structural reform of the education system continued with the comprehensive analysis of secondary education needs, which in turn will support measures to increase the share of students enrolled in general secondary education, to reduce the share of students in surplus programmes and to align vocational programmes with labour market needs.

A document setting out recommendations to reduce administrative bottlenecks for a higher uptake of renewable energy sources was published.

The energy renovation programme for public sector buildings was adopted to encourage comprehensive renovation as a combination of energy-efficiency and seismic renovation. This will have a lasting impact on reducing energy consumption in buildings and increasing their safety.

Following the adoption of a detailed investment programme for water and wastewater investments, more than 115 km of public sewerage network and over 226 km of public water supply network have been constructed or reconstructed.

Some of the funding was allocated to improve water supply services in rural areas, and grants and financial instruments were secured to support companies and industries in adjusting their business and industrial processes to the green and digital transitions.

A number of measures related to the digital transition in the business, agricultural and justice sectors were delivered, including the launch of a new digital platform for the online payment of business fees, which is expected to alleviate the administrative burden for companies.

A new online platform promoting the circular economy in the agri-food sector will help raise awareness and educate about prevention and reduction of food waste and food donation.

Cultural and creative industries will benefit from updated copyright rules which facilitate the online licensing of creative, cultural and media content.

The legal and administrative conditions for the planning, licensing and construction of electronic communication networks were simplified and adapted to accelerate the internet coverage (high-capacity network) and 5G.

Fulfilment of milestones and targets for the third tranche on the right track

The Commission said that the implementation of 45 milestones and targets linked to the third request for payment is also on the right track.

Among the measures to be completed before the end of 2022 are the adoption of the strategy for the evaluation of the economic effects of regulation on the small and medium-sized enterprise sector, the implementation of action plans to reduce the administrative burden on business, and amending the public procurement framework to make the use of e-appeals mandatory.

Also amended will be labour legislation, the Health Care Act, the Mandatory Health Insurance Act, the social welfare system and the Science and Higher Education Act. It is also important to reduce the share of municipal waste being disposed of.