The objective of this project was to estimate, in line with EU methodology, the size and structure of government aid in Croatia and to compare it with the aid that Member States allocate their firms (and the candidate countries as well).
State aid in Croatia is much greater than what is found in the EU. At the same time, Croatia gives much more support than the EU to individual sectors of the economy, particularly to transport, tourism and shipbuilding. Incentives to research and development, to SMEs or to environmental conservation, the fundamental forms of horizontal aid, i.e., the kind of aid that is used by all firms and all sectors, and not only in selected sectors, are much smaller. Accordingly, it is to be expected that during the process of harmonisation with the EU Croatia will have to reduce the size of government aid and gradually redirect it away from incentives given to selected sectors and towards the entire corporate sector via horizontal forms of government aid. At the same time, the transparency of the system for allocating and controlling government support needs enhancing.
The results of this project were published in the journal Financial Theory and Practice, No. 3/2003 and in Newsletter, No.10: State aid to enterprises in Croatia in 2001.