Croatia’s shrinking population is primarily due to a lack of jobs. I visited a business incubator in the country’s second-largest city of Split. Here I met with entrepreneurs starting businesses that could create new jobs and stop the exodus.
Cover Photo: Split, Croatia | Tricia A. Mitchell
Earlier this year, I spent a few weeks in the Mediterranean city of Split, Croatia. Known for its bountiful sunshine, Roman ruins, delicious wine, and enchanting coastline, Split’s population blooms during the summer travel months.
However, despite Split’s seasonal body bulge, the city is suffering from a challenging problem: Its population is actually shrinking.
The problem is not isolated to a few Croatian cities. The entire region is experiencing a decline in population.
Croatia’s current population is roughly 4.2 million. Its population has shrunk by roughly 500,000 people since 1995. The United Nations is forecasting a further decline of one million people over the next 30 years, resulting in a total population of nearly 3.5 million by 2050.
A Shortage of Jobs
The primary force behind the Croatian exodus is a lack of jobs — particularly for young people between the ages of 15 and 24. Croatia currently has the third-highest youth unemployment rate in the European Union at roughly 31%. While this figure has declined from a peak of nearly 50% in 2013, it remains at a dangerously high level.
Many of the employment gains in the past five years have been in tourism, which accounts for 20% of Croatia’s GDP — the highest in the European Union.
However, tourism is a volatile industry and is heavily dependent upon the health of the global economy. A recession could force Croatia’s unemployment rate back up.
Croatia must diversify its economy to withstand the impact of the next recession by creating new businesses and jobs.
It needs to promote entrepreneurship.
Entrepreneurship as a Remedy
The solution to Croatia’s demographic challenge lies in entrepreneurship. However, starting a business in Croatia is tough.
Every year, the World Bank ranks 190 economies on their ease of doing business. Each country is ranked based on several factors, including the steps required to start a business and the ability to secure funding, pay taxes, and enforce contracts.
Croatia ranked 87th out of 190 countries in 2017 for the ease of starting a business. It ranked 77th for getting credit, 95th for paying taxes, and 60th for dealing with insolvency. However, Croatia, together with several other European countries, ranked 1st for the ease of trading across borders.
In order to stem the country’s declining population, the Croatian government will need to make it easier to start and operate a business within its borders.
The government could also help by supporting more entrepreneurship training and education.
Split’s Business Incubator
Business incubation, or the process of nurturing entrepreneurs during the initial stages of their business, is an important area where international and regional governments can help stop Eastern Europe’s demographic decline. The Student Business Incubator at the University of Split is a case in point.
Launched in 2015 with the help of the European Social Fund, the business incubator at the university was launched with the goal of helping aspiring entrepreneurs improve the probability of success with their ideas. The program provides co-working spaces, mentorship, training, workshops, and networking events.
The incubator admits a maximum of 10 projects each year and offers openings for roughly 30-50 participants. Incubated companies spend 8-12 hours a week in the incubator improving their marketing plans, financial forecasts, and learning how to pitch investors. Incubation periods last for about one year and can be extended for a maximum of three years.
Coffee at the Incubator
On my recent trip to the coastal city of Split, I decided to seek out a few Croatian entrepreneurs and learn more about what they are doing. Thanks to a kind invitation from Lana Urgcic, the manager of the student business incubator at the University of Split, I stopped by and had a chance to talk to a few participants in the program.
After a brief tour of the incubator and its home in the Faculty of Economics, Lana and I, together with five incubator participants, gathered for coffee at the university’s café to talk. To begin, I asked Lana what she likes most about her job.
“Working with young, proactive, and creative people,” said Lana. “It is a great feeling to work each year with such a group and see them improve and progress in their projects day-by-day.”
I asked Lana about how entrepreneurship could be encouraged in Split. She replied with impeccable English — a highly-developed skill among many Croatians and a strong competitive advantage for the country.
“By cutting down slow bureaucracy, high taxes, and a generally still difficult and complicated legal framework for entrepreneurs,” said Lana. “Improvements have been made in recent years, but there is still a lot that needs to be done to simplify and encourage doing business in Croatia.”
Lana also advocates for changing the Croatian mindset to be more accepting of failure. Communities with high levels of entrepreneurship tend to support risk-takers in their efforts and avoid shunning them should they fail.
“[Split is] the most beautiful place to live and work from,” says Lana. “[I hope to see the creation of] a platform for connection and collaboration — engaging all players along the entrepreneurship spectrum in strengthening the local and national ecosystem.”
After learning from Lana about the incubator program at the University of Split, I was able to ask questions of the incubator participants who are working on everything from sailboats and smart tables to blockchain dental records.
At the time of our coffee chat, Josip’s company was already producing and selling sailboats. As a former naval officer, I was naturally intrigued and asked him what his company does.
“We are professional manufacturers of radio-controlled sailboats in the International One Metre class,” said Josip.
I was previously unaware of a large group of professional-level, radio-controlled sailboat enthusiasts around the world. They have formed several associations dedicated to racing boats with hull lengths of about one meter. Josip’s company builds and delivers sailboats to compete in these racing associations and for recreation.
Located on the sapphire-blue Adriatic Sea, Split, together with the nearby Dalmatian islands, is a natural proving ground for designing, building, and testing competitive sailboats. Sailboat RC uses its strategic location on the sea to build high-quality boats.
The company also gives back to the community by offering technical workshops to elementary and high school students. Their interaction with the youth of the region helps reaffirm Croatia’s historical relationship with the sea.
Josip would like to position Sailboat RC to be a global leader in remote-controlled sailboats. His co-founder, Zvonko Jelačić, is a world-champion racer and will even add his autograph to custom-built boats.
“Who wouldn’t want a sailboat signed by a world champion?” Josip said, with a smile.
Smart Tables and the Internet of Things
Their project, called SmarTable, is a digital table that is designed to cut wait times at high-turnover restaurants, cafes, and nightclubs. This electronic table will enable you to place orders immediately upon sitting down without having to wait for a server and will make supply chains and record-keeping more efficient.
“Currently, our main goals are creating a new, efficient way to monitor entry and exit of goods, cutting waiting times for customers as well as opening new jobs for people with social and psychological disorders that are keeping them from working in that field,” said Šimun.
After a successful deployment of the SmarTable, Šimun, Dario, and Ivan plan to use their technical expertise to offer bespoke consulting solutions in the realm of the Internet of Things (IoT).
“We are planning on establishing a company soon … named Elbatrams,” said Šimun. “[This] company will mainly be focused on offering personalised IT and IoT solutions to our clients.”
As tables, chairs, and every other inanimate object becomes “smart” in the years ahead, Šimun and his team will be well-positioned to capitalize upon their technological skills.
Tomislav Mamić has recognized the growing importance of blockchain technology in our day-to-day lives and is looking to take a bite out of a critical industry: dentistry.
After consulting local businesses in the Split area on cryptocurrencies and blockchain technology, Tomislav partnered with a dentist to help modernize record-keeping in the field. While their initial target market was dentist practices, their market research began to show that insurance companies were potentially more lucrative.
Insurance companies are keenly interested in how Tomislav is looking to employ blockchain technology in dental imagery to help reduce insurance fraud. By enabling a secure set of images between diagnosis and treatment, Tomislav’s technology will make it very difficult to submit inflated insurance claims.
Tomislav is also looking to create a network of verified and anonymous dentists that will be able to look at your secure images and determine whether or not a dentist is performing unnecessary work. For anyone who dreads the sound of a drill and has questioned a dentist’s recommendation for an extra filling or a new crown, Tomislav’s work sounds very reassuring.
The Future of Croatia
Croatia will need to take dramatic steps to halt the outflow of educated youth and the resultant drain on its economy. This will require streamlining tax and regulatory policies to encourage entrepreneurs to stay and start businesses that create jobs in the country.
Entrepreneurs will also need the type of training and education being offered at the University of Split’s Student Business Incubator to help improve their probabilities of survival. The more startup success stories that are seen in the media, the more Croatians will come to encourage and support local entrepreneurs — even if they fail.
Croatia has the incredible minds and talent needed to launch new and exciting businesses. The question is: Will the country be able to convince them to stay?