EU and Croatia: Attractiveness of Business Environment

Focus of interest in this paper is the concept of competitiveness as measured by the originally developed index of business environment. Competitiveness is interpreted in the broader meaning of the term: it includes not only cost conditions, but also institutional and system conditions of different national economies that define the attractiveness of their business environment. Methodology of composite index decomposition and analysis is used to evaluate and compare Croatian results with the results of EU15 and EU 12 countries. Composite index is formed on World Economic Forum data collected in 2008. Comparisons are done on three levels: overall index, subindices of four distinct sectors of business environment (political-legal, economic, sociocultural and technological), and 22 pinpointed variables that constitute the index. Results show that Croatia lags behind the EU15 countries and has almost equal quality of business environment as EU 12 countries. Based on the results of the analysis of the specific variables, research implicates that in order to improve attractiveness of its business environment the most Croatia should direct its reforms towards following areas: antimonopoly, government spending, market dominance, tertiary enrollment, railroad infrastructure and Internet usage.