A MEDITERRANEAN AND CENTRAL EUROPEAN COUNTRY, CROATIA HAS EMERGED FROM ITS DECADE-LONG ISOLATION READY TO DO BUSINESS WITH THE REST OF THE WORLD. FOREIGN PARTICIPATION IN THE COUNTRY'S LEADING COMPANIES IS ON THE RISE, WHILE HIGHLY-ATTRACTIVE SECTORS SUCH AS TOURISM AND TELECOMMUNICATIONS HAVE THE POTENTIAL TO YIELD TRULY SPECTACULAR RESULTS.

AS CROATIA closes in on its tenth year as an independent state, the nationalist tendency that was once a trade-mark of the former Yugoslav republic has given way to a healthy and steady move towards regional and international integration in both the political and economic spheres. Following the election in early 2000 of President Stjepan Mesic, Croatia has moved at lighting speed to become a serious candidate for European Union membership.

The nation has already been accepted into the World Trade Organization and has also concluded a pact with the fournation European Free Trade Association to become a full-fledged member in 2001. In addition, Croatia is working to fulfill the requirements to join the Central European Free Trade Agreement. Mr. Mesic demands transparency and accountability in his government. As proof that his country's p o l i t i c a l reforms are aimed at democratic progress and not just window dressing, he accepted constitutional changes late last year to limit the presidential prerogatives that Franjo Tudjman, Croatia's late nationalist leader, had used to maintain a tight grip on power.

The new Croatia is also committed to speeding up the privatization of state-owned companies and to creating a more investor-friendly environment. "We are a rather small country with big opportunities at the moment and are one of the leaders among transition countries," notes Goranko Fizulic, Minister of Economy and Privatization. "We could compare ourselves to the position Ireland was in at the end of the 1980s and the beginning of the 1990s," Mr. Fizulic explains. "The strategy of this ministry is to make direct contact with multinationals and try to negotiate the conditions we can adopt in order for them to invest here."

Foreign investment is on the rise, he says, and will contribute- along with the re-birth of the tourist industry and an increase in exports-to an economic growth rate of 4 or 5% each year for the next three years. "We have very attractive laws for foreign investors, offering tax holidays of up to ten years. In many terms and conditions, we are practically an offshore country. We are also actively seeking portfolio investments in our privatization fund for some of our leading companies," Mr. Fizulic points out. The president of the Croatian Privatization Fund, Hrvoje Vojkovic, says the biggest challenge of restructuring state-owned companies was completed successfully last year. "The Fund has a very diversified portfolio, with all the industries in the country present through various companies. Except for the big strategic enterprises, all of these companies will be privatized by means of public auction. We expect the whole portfolio to be privatized by the end of the year," Mr. Vojkovic notes.

Proceeds from the sale of shares in the firms are to be transferred to the Croatian Bank for Reconstruction and Development, which in turn disburses the funds mostly to reconstruction and infra-structure projects. Up for privatization are 45 companies within the nation's highly attractive tourism industry. "We want to see that portfolio privatized with s t r a t e g i c investors, with companies that can bring their know-how to Croatia to fill the hotels all year round and help in the restructuring of the country's tourism sector. The privatization process is a very important transitional factor because it has a strong political and social impact," Mr. Vojkovic explains.