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A market in Dubrovnilk

Croatia in EU: companies move to Bosnia

(Photo: Rambling Traveler)

Croatia's EU accession in 2013 will drastically change economic relations in the Balkans. Many Croatian companies that export their products to the Balkan countries, also EU aspirants, will face difficulties due to the Central European Free Trade Agreement (CEFTA) which guarantees free trade and ensures its members export-import benefits.

When Croatia officially joins the EU in July of next year, the country will leave CEFTA and enter the EU trading zone.

The price of Croatian products will rise in CEFTA countries because distributors will pay customs duties up to 15 percent for every imported product. This will increase price of products and decrease their competitiveness, potentially causing huge financial losses.

The food industry may face most of the problems. Management of these companies is urging the Croatian government to find a way to enter the EU and keep duty-free CEFTA status. Otherwise, the same companies are prepared to move their production to one of the CEFTA countries, mainly Bosnia and Herzegovina (BiH) because of its geographical closeness and a resettlement benefit offer.

Many companies decided to wait for the government's decision, but others have started relocation preparations. One of advantages of the relocation is cost-effectiveness for the Croatian companies. Salaries in BiH are as much as 50 percent lower than in Croatia and the company has agreed on some tax benefits with the RS government.

Zoran Pavlovic, an economic analyst from Banja Luka, said that factory relocation may become a trend due to pricing and the obligation to fulfil strict regulations in food production. "EU membership has its price. For all those who think that it is hard to meet the standards, it is cheaper to move to another country," Pavlovic told SETimes. He said that companies that are relocating from Croatia are advantageous for BiH, whose local authorities, should also understand this is a proper way to offer greater incentives for increasing employment.

According to the Croatian Chamber of Commerce, the average value of food export to CEFTA countries in last few years was about 523 million euros annually, 61 million more than in the EU.

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