After living here a year, registering a company, obtaining a business visa and operating my consulting and real estate firm, I'm able to provide a much more complete response: Croatia is an emerging economy with tremendous prospects for growth because of its location, its anticipated accession to the European Union by the end of the decade and its stable government that is working hard to encourage foreign investment.

The Heart of Europe
The Austrian Foreign Trade Office recently surveyed foreign investors in Croatia and found that 61% of them listed the little republic's location in the center of Europe as the primary motivation for their investing here. I 'd certainly include myself in that 61 per cent.  My business is located in Istria, a heart-shaped peninsula smaller than the state of Rhode Island that Innsbruck, Munich, Vienna, Zagreb and Budapest.  The local airport in Pula has non-stop flights to London's Gatwick, Amsterdam, Munich, Edinburgh and Glasgow, many of them on low-cost carriers like FlyGlobeSpan.  The seaport of Rijeka at the northeast corner of Istria is undergoing a $266 million makeover financed by the World Bank that will turn it into a world class port of the caliber of Baltimore or Barcelona and the Adriatic's "Gateway" to Europe.

Istria is also among Europe's top tourist destinations.  Visitors from around the world are drawn by the azure blue Adriatic that is clearer than the water around the Bahamas and unique towns like Pula with its Roman ampitheatre, the Venetian-flavored seaside village of Rovinj and medieval Motovun surrounded by ancient walls and perched atop a cone-shaped hill.  According to the Croatian Chamber of Economy, tourist visits to Croatia have increased 300% since the war ended in 1995, and the rate of growth is increasing - Istria's "room-nights" are up 35% this year over last.

Natural beauty and central location are also driving the real estate market.  London's Telegraph reported in March that Istria is the "regional hotspot, the fastest growing part of Croatia in both property and tourism."  The Italian fashion house Brioni is building a new luxury resort on its namesake islands off the coast near Pula while Jack Nicklaus has signed on to build Croatia's first championship golf course between Pula and Rovinj.

These location-driven advantages are propelling economic growth that is in turn producing more optimism and investment. The Croatian economy grew at a solid 4.3% in 2005 and spurted to 6% in the first quarter of this year.

Foreign investment increased by 36% in 2005 compared to 2004, and the Austrian survey of foreign investors would predict even greater growth in the future: more than 70% expect business to improve in the coming year.

Integration Into Europe
As part of former Yugoslavia under Marshall Tito in the 1970's and 80's, Croatia enjoyed the economic advantages of being a "middle man" between the Soviet Union and the West.  Croatian ports were busy handling goods making their way around various trade embargos while Croatian manufacturing was protected from foreign competition.

The death of Tito, the end of the Cold War and the breakup of Yugoslavia drove the economy into decline. Employment and deficits were high, and growth was slow.  The current Center-Right government, led by Dr. Ivo Sanader since 2003, recognized that serious reforms were necessary to make Croatia both eligible for European Union membership and also competitive in a global economy.  The Austrian-educated Ph.D., fluent in German and English as well as Croatian, has succeeded in moving his nation to the front of the line for EU membership while leading an effort to modernize and enlarge the Central European Free Trade Agreement to include all the former Yugoslav republics along with Romania, Bulgaria and Albania.

The drive for European integration makes Croatia attractive to investors for several reasons.  First, it provides additional incentives for the government to reduce taxes, trade barriers and regulatory burdens in order to meet EU standards.  Second, it offers to those who invest now the opportunity to enjoy the benefits of the kind of appreciation of assets that has attended EU accession in other countries like neighboring Slovenia and the Czech Republic.  Finally, once accomplished, it will provide Croatian companies with full access to European markets, especially those growing economies in eastern and central Europe.

Sanader summed up the status of the EU accession process in a recent interview with Leaders magazine:

'My country is rightfully cited as a leader in Southeast Europe, serving as an example to our neighboring countries. We remain determined to continue to play this important role in the future.  Regarding the pace of the negotiations and the target date for EU membership, I have stated on many occasions that substance is more important than speed.  However, I am sure that we will strive to conduct quick and quality negotiations.  It would be great if Croatian citizens could participate in the next elections for the European Parliament in June 2009.'

Policies Designed to Encourage Foreign Investment
Croatian leaders, recognizing that foreign investment is critically important if their economy is to grow, have implemented policies designed to foster the inflow of foreign capital.  According to the Croatian Foreign Ministry, three foundational principles shape these policies:

• Domestic treatment of foreign investors, equality of foreign investors with local companies, whilst fulfilling any reciprocal conditions.
• Constitutional guarantees that investment rights can not be subsequently annulled or reduced.
• Free repatriation of profits after the fulfilment of all obligations and payment of taxes.   The free repatriation of capital when withdrawing investments is also guaranteed by the Constitution of the Republic of Croatia.