Croatia Infrastructure Report 2007

The value of construction projects covered by building permits issued in Croatia in 2006 rose to 26.68bn (US$4.8bn) from 24.56 (US$3.94bn) in 2005.The industry is likely to contribute 5.7% to GDP till 2010. BMI's newly released Croatia Infrastructure Annual Report forecasts the construction industry to grow at an average of 7.15% during the period 2007-2010.

The country is recording huge activity in port development. The Croatian passenger and cargo sea ports plan to invest about EUR540mn (US$708.08mn) in reconstruction by 2008. World Bank, European Bank for Reconstruction and Development (EBRD) loans, the central government budget and the concessionaires of the six largest ports are to provide funding for the port projects. Split, Sibenik and Zadar will also reconstruct its port facilities. A number of road development projects are also currently underway. In 2006, the European Investment Bank (EIB) funded road infrastructure projects in Croatia worth EUR270mn (US$356.78mn). A major ongoing project in Croatia is the tourism infrastructure project, due to the large number of tourist visits in the country. The project is to include the construction of about 1,500 luxury apartments, a number of hotels with casinos and trade centers, as well as a marina for 650 to 900 vessels. There are more than 7,000 construction companies operating in the infrastructure industry in Croatia as per a 2005 figure. Major companies include Croatia-based Viadukt, Rijeka- Zagreb Motorway, Hrvatske autoceste d.d and Hrvatske eljeznice (Croatian Railways).

However, the industry is faced with a number of downside risks. There has been a partial slowdown in infrastructure related activity due to the IMF's fiscal requirements. Other major challenges arise from a weak legal system, backlog of property related cases, restrictions relating to coastal property ownership and a bureaucratic setup that inhibits foreign investment.

Despite the drawbacks faced by the industry the industry is forecast to reach HRK35.17bn (US$6.57bn) in 2010 from HRK26.68bn (US$4.8bn) in 2006.The housing sector is to drive the construction industry with the government investing US$525mn during 2007-2012 for providing housing to those who had failed to buy socially owned apartments during the 1991-95 war of independence.