ECONOMY

Croat says delayed EU talks must not slow down privatizations

ZAGREB (Reuters) – Delay in launching Croatia’s EU entry talks must not be allowed to slow up badly needed economic reforms, a leading businessman said yesterday. Emil Tedeschi, who heads the Croatian Employers’ Association (HUP), told Reuters in an interview that the «business climate in Croatia has improved in the last five years, but many more reforms lie ahead. EU entry is an important motive, but we should keep on pushing them for our own sake, regardless of the EU.» Zagreb hopes to open EU accession negotiations this year. The talks were postponed in March as EU members were unhappy about Croatia’s cooperation with the Hague war crimes tribunal in tracking down its top fugitive, General Ante Gotovina. «Nothing tragic business-wise hit Croatia when the EU talks were postponed, but what matters is not to lose momentum in pursuing reforms,» said Tedeschi, who runs Atlantic Group, a top local food retailer and producer. The government has focused its efforts since taking office in late 2003 on starting membership talks as soon as possible, with the aim of completing them in 2007. An increasing number of observers say it has devoted far less time to economic reforms. «I think the government is aware of key problems in our economy and the need to tackle them, but the pace of reforms is slower than what businessmen would like. HUP represents local entrepreneurs and seeks to improve business climate through regular talks with the government and unions on the main social and economic issues. Fight gray economy Tedeschi said Croatia needed to further improve the legal framework to become a more secure place for investors. After the independence war ended in 1995, muddled property rights and slow judiciary have hampered major foreign investments. Another weak point in the last two years has been slow privatization. «We need faster privatization, but done in an expert and transparent manner. Still too much of our economy – around 50 percent of gross domestic product – is in state hands,» Tedeschi said. High social costs have burdened the state budget for years, but both the current conservative and the previous center-left government were reluctant to cut spending and enforce painful reforms that could result in job losses. Tedeschi said easing the tax burden could help the economy’s competitiveness, as well as the government’s pledge to crack down on the widespread gray economy. Official estimates say almost 25 percent of GDP is currently generated in the gray economy, which illegally employs 100,000 people and costs the budget some 7 billion kuna ($1.23 billion) in lost revenues every year. The «gray economy damages the image of employers, distorts fair competition, hampers reforms and does not bring money into the budget,» Tedeschi said. The government decided last November to reintroduce financial police to control the payment of taxes and other duties. It should start operating in the coming months.