engleski

The Structure of Foreign Direct Investment in Croatia and its Impact on the Domestic Economy: An Empirical Analysis

The aim of this paper is to provide detailed analysis of the Croatian inward FDI, its structure and impact on the domestic economy, especially in the manufacturing sector. According to FDI per capita or FDI/GDP percentage, Croatia is ranked rather high among transition economies, even in comparison with those that have recently become full members of the EU. Nevertheless, its impact on the overall economy, especially employment, exports and productivity is much less evident than that in other Central European economies. In those countries, FDI companies have been playing a major role in productivity growth, exports, and job creation. More importantly, it ensured the spillover effects on other sectors of the economy, stimulating productivity and competitiveness as a whole. The results of analysis of FDI in the Croatian manufacturing sector confirm that companies that have received foreign direct investment are more successful regarding their capital, sales, employment and productivity growth than the domestically owned ones. However, the scale of positive effects in the Croatian manufacturing sector as a whole is almost negligible - FDI failed to significantly increase the employment rate, exports, productivity or competitiveness of the economy. This paper compares the structure of inward FDI coming to Croatia and to other Central European transition countries since its impact on the host manufacturing sector seems to be rather different. On the other hand, although Croatian authorities officially support FDI, they haven't put enough efforts to attract it during the last decade. This paper aims at helping Croatia produce its still missing investment promotion strategy.

foreign direct investment (FDI); employment; productivity; net wages

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