Investment Incentive Policies Toward Attracting Foreign Direct Investments: The Croatian Experience

National strategies across the world often emphasise the role of foreign direct investments (FDI) as one of means necessary to increase the overall national competitiveness. The benefits that FDI generates are traditionally recognized not only through acquiring capital but also through patents, knowledge, know-how, efficient technologies, management skills and the like. Croatia has continuously placed FDI on the top of the development agenda hoping that their inflow would help raise employment, exports and productivity. According to the EU statistics, Croatia is ranked rather high among ‘transition’ economies, even in comparison with those that have recently become full members of the EU. However, its impact on the national economy, especially employment, exports and productivity is much less evident than that in other Central and Eastern European countries. The purpose of this paper is to theoretically and practically discuss the role and importance of investment incentives offered by the national policy-makers in order to attract certain FDI projects. The paper will provide a theoretical overview of various approaches to investment incentives. Using the Croatian experience, the paper will provide an analysis of FDI inflows in Croatia in terms of numbers, investment climate and environment as well as it will delineate reasons, i.e. barriers which prevent Croatia to be more attractive to foreign investors. Particular attention will be given to investment incentive policies promoting FDI in Croatia.