To attract investment from Asia and the Americas, government leaders in Zagreb must encourage a favorable business environment, creative partnerships, and a worldview that considers bilateral, multilateral, and regional collaboration.
While Croatian exports to China increased over the years, Zagreb should create a sustainable political framework for both countries to participate in joint projects that should result in concrete results that incorporate the entire region. The focus should be on Central Europe and the Western Balkans since both areas are of increased interest to China, Russia, and the United States.
The wider Mediterranean region is the cradle of busy shipping and air routes linking three continents: Europe, Africa, and Asia. Croatia has a rich but turbulent history but has all of the potential to become a prosperous and modern European Union state.
By coordinating with investors with an increased focus on Asia, Croatia can diversify its economy by connecting to new regions, driving development of high potential economic sectors such as energy, startups, and tech innovation. Croatia should also enhance its edge in areas in which it has traditionally excelled, like tourism.
Coronavirus hit the Euro-Med region and tourism-dependent countries hardest in Europe, and supply chains will continue to tighten due to the implementation of tariffs and politicized trade challenges. The tourism-dependent nations of Europe, especially Croatia, will need to anticipate geopolitical and trade shifts to avoid economic collapse for as long as the pandemic remains a challenge.
Using the decoupling to diversify partnerships
Croatian leadership must transcend domestic divides and regional animosities to identify its specialized role within the greater context of geopolitical and supply chain shifts. As with its Western Balkan neighbors, Croatia has not fully realized its potential as a consumer-based economy with a healthy middle class. For these reasons, Zagreb must identify creative ways to increase Croatia's business favorability, attract foreign investment, diversify tourism, and engage in regional infrastructure projects to maximize its role in global projects like the Chinese-led Belt and Road Initiative. For example, China wants a presence on the Adriatic coast through bilateral agreements and the 17+1 format, as Chinese firms actively pursue terminal acquisition or tenders to construct in coast cities Rijeka and Zadar.
China is actively improving its image through favorable newspaper publications in Serbia, Bulgaria, and Croatia, as evidenced by the European Council's claims on Foreign Relations. There is a parallel effort on social media, and Russia is equally active in the Balkans with pro-Russian media outlets.
Since Europe is divided on its economic and political relationships with Beijing, Croatia should formulate a nuanced foreign policy. Zagreb does not need to choose a side or dismiss particular partnerships. As evidenced by Hungary's foreign policy, Croatia can remain a NATO member and European Union country while still pursuing politically agnostic deals with Beijing, Brussels, Moscow, and Washington.
However, Croatia has primarily ignored its partnerships with Beijing and does not know enough about China. For these reasons, Zagreb must immediately encourage business deals and bilateral negotiations that consider the following principles.
First, Croatia must attract foreign investment from various sources to become more competitive and 'bait' additional U.S. investment through working with America's adversary. In working with China through diplomacy and international trade and finance, Croatia will seem 'more attractive' to the U.S. and Western allies. Hungary and Serbia, along with the Visegrad countries, Italy (to some extent) and Germany, have balanced national interests by working with both China and the U.S. Why should Croatia be different?
Second, China will remember its friends later. We can already see that Chinese donations and investments during the pandemic are not evenly distributed. Some countries receive gifts, while others have paid in advance or taken loans to pay for medical supplies and vaccine doses. Due to the legacy of the NATO bombings in 1999, which include the accidental bombing of the Chinese embassy in Belgrade, and the Chinese perspective surrounding it, Serbia has benefited the most because it has maintained friendly relations with China for decades. Belgrade benefits significantly from this, and there is no reason why Zagreb should not diversify its political and economic partnerships like other countries in the region.
Third, the world is becoming more multipolar due to the "decoupling" between the United States and China. This shift is pushing China and Russia to establish as many partners worldwide as possible to isolate the United States. By creating smaller projects in smaller countries, China is improving its international image, developing a more comprehensive network, and diminishing U.S. influence. The eventual arrival of multipolarity is not slowing down, and Croatia should increase its awareness now to benefit more later.
Lastly, Croatia cannot rely on a handful of partnerships or sectors if it expects to develop a solid middle-class. For example, the United States, and the Biden administration, are most interested in the liquefied natural gas terminal on the island of Krk, and could further develop Washington and Zagreb's security relationship. The issue with such deals is that they are exclusionary of other potential partnerships. Energy diversification of the Central and Eastern European countries is fine, but these deals simultaneously hope to undercut Russian geopolitical strategy. Also, weapons deals are not entirely productive. Instead, Croatia should diversify its energy sources through regional projects in Central Europe and the Balkans that focus on sustainable renewable sources. Through the Digital Transformation of the European Union and the green transition efforts, most of these projects would receive Brussels funding. Through partnerships with various stakeholders in Asia and the Americas, Croatia would benefit its private sector while also becoming more energy independent.
Currently, Croatia is dependent on the European Union for political stability and economic assistance, as evidenced by the recent earthquakes and coronavirus pandemic. Also, the ruling government is firmly committed to transatlantic European values, which will consistently view the U.S. as a primary ally. Once again, there is nothing wrong with this approach. Zagreb should keep Washington as an unwavering ally in its defense and energy pursuits while simultaneously generating private sector cooperation with Chinese firms.