The business environment in Croatia is still more limiting than stimulating for entrepreneurial activity, it was said at the presentation of the latest Global Entrepreneurship Monitor (GEM) survey for 2019 and 2020 on Tuesday.

The Global Entrepreneurship Monitor is the largest study of entrepreneurial activity in the world. Croatia has been participating since 2002. The survey covered 50 countries in 2019 and 45 in 2020.

In Croatia, the survey was carried out by the SMEs and Entrepreneurship Policy Centre (CEPOR), which interviewed 2,000 respondents both in 2019 and in 2020. The results were presented by Slavica Singer of the University of Osijek, who led the research team.

Singer said that the quality of the entrepreneurial environment was rated from 0 to 10, noting that only components rated above 5 were considered stimulating. Only two components – availability and quality of physical infrastructure, and domestic market dynamics – have a stimulating effect on entrepreneurial activity in Croatia, while all other components are rated below 5, and this has been the case for years, she warned.

In 2020, the Netherlands was the best in 11 out of 12 components of the entrepreneurial environment, while Croatia was among the worst countries, with the average rating of 3.7. It received the lowest ratings for cooperation between the business and research sectors, cultural and social standards, government policies towards the regulatory framework, and primary and secondary education in building entrepreneurial competencies.

Singer said that certain problems can be resolved without money, but that this requires the political will and the commitment of state institutions. She cited the abolition of seals, which are still often used despite the government decision of May 2016. “If it is so difficult to abolish seals, how long will it take to simplify the regulatory framework?” she asked.

The survey showed that the growing trend in starting new business ventures had continued, from 9.6 percent in 2018 to 12.7 percent in 2020, which put Croatia above the average of EU countries included in the survey. Croatia also ranks high on expressed intentions to start a business venture.

On the other hand, when it comes to perception of opportunity for entrepreneurship, 2020 saw a decrease to 47.2 percent from 55.7 percent in 2019. However, Croatia was considerably above the EU average with regard to perception of own capabilities to start a business venture.

Singer also cited the problem of the entrepreneurial structure in Croatia, as there were too few “grown-up” businesses, those older than 42 months, as well as growing ones.

In the period between 2018 and 2020, Croatia maintained the density of grown-up businesses at about 4.2 percent, which is only 57 percent of the EU average in 2020 and a decline from 2018 when it was 62 percent, Singer said, adding that this was due to the fact that there are too many people who are starting a business out of necessity.

The survey showed that the most frequent reasons for closing a business were non-profitability (17.5 percent compared to other reasons), and the tax burden and red tape (16.1 percent, compared to the EU average of 6 percent).

Singer also stressed the importance of innovation for competitiveness, calling on the Ministry of Economy and Sustainable Development to continue promoting cooperation between the business and research sectors.

Minister of Economy and Sustainable Development Tomislav Coric said that the Ministry would study the results of the survey so that specific steps could be taken, such as innovation vouchers.

Croatian Banking Association Director Zdenko Adrovic said that banks were ready to increase corporate lending, but that right now there was no demand for loans despite the historically lowest interest rates on long-term loans. He said that the Croatian enterprise sector lacked capital and that without it it was not possible to embark on business ventures. He added that EU grants could be used to partly compensate for the lack of capital.