Strategic investment project legislation was first introduced into the Croatian legal system through the Strategic Investment Act that came into force in 2013, which, after two amendments (in 2014 and 2016), was replaced by the new Strategic Investment Act in April 2018.
This piece of legislation provides that a strategic investment project is either (1) a private project, financed by natural persons, domestic or foreign companies registered in Croatia; (2) a public investment project whose project holder is a legal entity owned by the state or local government; or (3) a public-private investment project whose project holders are private and public legal entities from various areas and industries ranging from mining, energy, tourism, transport, and infrastructure to science, technology, and education, and which includes the construction of buildings and has to be recognized and proclaimed as strategic by the Republic of Croatia.
In addition to these types of investment projects, the Act includes another category – potential strategic investment projects, which can be executed on real estate wholly or partially owned by the state or local government that is provided in the zoning plans for investment project development or on the maritime domain, if it forms a functional and economic unit with those real estate assets. The selection of investors for the implementation of a potential strategic project is carried out through a public call, usually in two rounds.
Currently, there are 29 proclaimed strategic investment projects with a combined value of approximately EUR 3.4 billion, announced in the period from 2014 to 2023, most of which are public projects (20 out of 29). Except for 2020 when no new projects were proclaimed as strategic, at least one project was proclaimed as such every year. 2017 and 2018 have the most significant volume of newly proclaimed SI projects: eight and six, respectively – almost all of them being public projects and the majority concerning the construction, reconstruction, expansion, and development of the water utility and communal infrastructure, watery supply systems, and wastewater collection and drainage systems. Out of those nine private SI projects, the majority are in the tourism sector, either entirely or in combination with other activities, apart from one project in the industry sector.
For a project to be proclaimed as strategic, it must meet certain requirements – financial thresholds depending on the type of investment and eligibility for EU funding and programs support (ranging from the minimum of approximately EUR 10 million to up and over EUR 10 billion) and compliance with spatial plans and strategic Croatian and EU documents.
It is also expected that the implementation of such a project creates conditions for significant employment depending on the type and location of the project; significantly contributes to the development or improvement of manufacturing and service-providing conditions and standards; introduces and develops new technologies that increase competitiveness and efficiency in the economy or the public sector and/or raises the overall level of safety and quality of life of citizens and environmental protection; positively affects several economic activities and its implementation creates added value and which to a greater extent contributes to the sustainable development and protection of space, environment, and culture as well as significantly contributes to the competitiveness of the Croatian economy.
Additionally, a project can be proclaimed as strategic if it concerns certain activities ranging from production and processing activities, high value-added service activities, and health activities to the energy sector and infrastructure activities, to name a few.
In addition to proclaimed SI projects, the Ministry of Economy and Sustainable Development holds a List of Strategic Investment Projects with the potential to be proclaimed as SI projects. This List contains a total of 47 projects with a combined value of approximately EUR 8 billion – 38 public projects, eight private projects, and one public-private project. Public projects are planned in a wide range of the infrastructure and construction sectors – from the construction and reconstruction of airports and seaports, transport (with a significant volume of works in railway and road transport), waste disposal, energy, and water infrastructure.
Since the avowed status advantages of projects proclaimed as strategic investments include their faster implementation, with fewer necessary procedures, it remains to be seen how many of those 47 projects that are in the waiting phase will be proclaimed as strategic investments, as well as the level of their potential positive impact to some new investment cycles.
By Ana Vrsaljko Metelko, Head of Real Estate, Ostermann & Partners
This article was originally published in Issue 10.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.