Croatia, prior to the financial crisis, enjoyed steady growth in foreign investment encouraged by a growing economy, low inflation, a stable exchange rate and well-developed infrastructure. Despite progress in economic and administrative reforms, problems remain, including a judiciary plagued by case backlogs, complex bureaucracy, and corruption. Nonetheless, the desire to join the EU has created the political will to deal with corruption, vividly displayed with the arrest of former Prime Minister, Ivo Sanader in December 2010. Partly based on progress in the fight against corruption as well as judicial and administrative reforms, Croatia finalised the negotiations for EU membership in June 2011, with full EU accession scheduled to take place in 2013.

Positive developments in relation to corruption and investment:

• The past few years have witnessed a major anti-corruption crackdown, as several civil servants in the Croatian Privatization Fund, the Zagreb land registry and the Zagreb taxation headquarters, among others, were arrested on charges of bribery. Moreover, several high-level corruption cases have seen the light, including investigations of the former Defence Minister and the former deputy Prime Minister.
• The government has made progress in reducing bureaucratic barriers, particularly through the development of its e-government initiatives, such as the hitro.hr Internet portal. The government portal has an online business registration component that reduces the time it takes to register a company to 4 days.
• Recent reforms and the development of a digitalised land registry for direct Internet access to land and property registries have facilitated the acquisition of land records, while simultaneously reducing corruption risks.

Risks of corruption:

• SMEs are of the perception that the majority of civil servants expect to be bribed when meeting with companies, but in most cases SMEs do not report bribery actually occurring.
• Although the legal framework and regulatory system provide national treatment for foreign investors, Croatia's ineffective legal system and a lack of transparency within both private and public sectors have presented the greatest challenges to investors. Transparency in developing legislation and regulations is often hampered by an inefficient public administration and a lack of intra-governmental coordination.
• Another problem for companies has been the significant backlog of cases in the courts. Many cases have been pending for years, making dispute resolution via the courts an undesirable option for companies. As a result of the very long timeframes involved in obtaining judgements in court, companies often try to resolve disputes without seeking judicial remedy. Judicial reform, however, has improved judicial independence and efficiency and reduced the backlog of cases, according to the European Commission's Progress Reports on Croatia 2011.