Illustration: Luo Xuan/GT

Chinese Premier Li Keqiang paid an official visit to Croatia and attended the Eighth Summit of Heads of Government of China and Central and Eastern European Countries (CEEC) held in Croatia last week. The visit was intended to deepen economic and trade cooperation between China and Croatia and inject new vitality into the 16+1 cooperation mechanism, which encompasses China and 16 Central and Eastern European countries. With Greece signing up on Friday, the mechanism has grown to become 17+1.

Croatia, situated in southeastern Europe and positioned at the intersection of the Belt and Road, is a member of the China-CEEC grouping. Chinese businesses need to seize the opportunity of the 17+1 format to explore the Croatian market to contribute to prosperity and stability of both sides. 

Croatia is a relatively developed country in the Balkans and is well-grounded in economic terms. There are three major areas of benefit for foreign investors seeking opportunities in the Croatian market. 

First, it offers an attractive investment climate. The nation is politically stable and its economic growth prospects are bright. These qualities, along with its openness in trade, convenient transportation, increased transparency in policy and a stable kuna - the Croatian currency - have lowered the risk of investing in Croatia. The nation ranked 68th among 140 economies in the World Economic Forum's 2018 Global Competitiveness Index released in October 2018. It placed 58th in the World Bank's latest rankings for ease of doing business covering 190 countries and regions.

Second, the nation boasts rich national resources that range from various minerals to oil reserves and lignite coal.

Third, Croatia's access to third-party markets also adds to its attractiveness. The nation signed the Central European Free Trade Agreement in 2002 and became the 28th member state of the EU in 2013. Croatia's current government is pushing for the Three Seas Initiative, also known as the Baltic, Adriatic, Black Sea Initiative, and pursuing an expansion of its clout within the EU to boost its economic competiveness.

There are also some constraints, notably its issues with foreign workers. As Croatia's overall unemployment rate remains high and its market is limited, the government has imposed a strict annual quota system for recruiting foreign workers. The system makes it tough for foreign workers to be hired in Croatia. 

Three sectors - infrastructure, tourism and manufacturing - are believed to provide a potential opportunity for Chinese investors.

Over recent years, the Croatian government has announced an array of plans for infrastructure development allowing foreign investors to participate in infrastructure projects. Chinese companies should capitalize on the opportunity to seek a foothold in the Croatian market and take advantage of the nation's geographic location to mull plans to enter the Central and Eastern European markets. Considering that many local projects require contractors to fund the projects, Chinese businesses could actively cooperate with Chinese and Croatian financial and insurance institutions to find innovative ways of fundraising. In light of Croatia's tough restrictions on foreign workers, Chinese companies ought to prepare cost budgets carefully, hire as many local staff as possible, and localize their operations. 

Tourism is also a pillar industry for Croatia, a prominent tourist destination on the Mediterranean Sea with more than 1,000 islands, eight national parks and 11 nature parks. The nation is encouraging tourism business, and Chinese investors could make inroads into hotels, catering, travel agency, and other related services and promote Croatia as a destination for Chinese tourists. 

Croatia maintains competitiveness in the manufacturing sector, especially shipping, food processing and pharmaceutical manufacturing. In an effort to boost local manufacturing, the Croatian government has set up multiple special economic zones. Companies operating in the zones are offered tariff and value-added tax deductions and exemptions. But thus far, Chinese companies entering the zones have remained a rarity. More progress is expected on the side of Chinese businesses in this regard. 

In so doing, new areas of economic cooperation will be opened, enabling new sources of growth in bilateral trade.

The author is an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. bizopinion@globaltimes.com.cn