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Cablegate: Poor Results On Croatian Competitiveness

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PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHVB #0561 2541453
ZNR UUUUU ZZH
P 111453Z SEP 09
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC PRIORITY 9526
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS ZAGREB 000561

SIPDIS
SENSITIVE

COMMERCE FOR INTERNATIONAL TRADE ADMINISTRATION

E.O. 12958: N/A
TAGS: ECON ETRD EINV EFIN HR
SUBJECT: POOR RESULTS ON CROATIAN COMPETITIVENESS

1. (U) In the latest World Economic Forum Global
Competitiveness Report, Croatia dropped 11 places to number
72 out of 133 countries ranked - the largest fall since the
country was included in the research in 2002. Hungary,
Romania, and Montenegro all passed Croatia in the rankings
this year. According to the National Competitiveness
Council, the local organization that partnered with the WEF
to gather data for the study, the results are partially taken
from statistical data, but mostly from surveys sent to
businesses and entrepreneurs. Compared with the other
countries in the study, Croatia ranked particularly poorly in
the burden of government regulation, the efficiency of the
legal framework in resolving disputes, and the rigidity of
the labor market. Croatia ranked relatively well in
questions covering infrastructure, health, and education.

2. (SBU) The Director of the National Competitiveness
Council told us on September 9 that the results should be a
wake up call to the government. She said the government had
never paid much attention to the recommendations of the
Council in the past, but that the release of this year's poor
results had finally led to a call from a member of Parliament
asking for their advice. She facetiously commented that if
the government was unwilling to listen to the report's
warnings, then the National Competitiveness Council might as
well become an academic think tank, and cease offering advice
on policy issues.

3. (U) The World Bank Doing Business report, also issued
this week, cited a modest improvement in the ease of doing
business in Croatia. Croatia moved up seven places to 103rd,
still within the bottom half of the 183 countries surveyed.
The Doing Business Report analyzes the effects of specific
regulatory reforms on the business climate. Croatia was
specifically cited for improvements to its construction
permitting process.

4. (SBU) COMMENT: While the two reports appear contradictory
in their assessments of Croatian competitiveness, the WEF
Competitiveness Report offers a broader picture of the
business climate, touching on areas such as corruption, red
tape, infrastructure, and public health. While a drop of 11
places could arguably be insignificant across the broad scope
of the subjective survey, it is a clear signal from the
business community that Croatia has not made progress in
tackling the problems that drag on the economy.
FOLEY

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