Position Paper on CROATIA Position of the Commission Services on the development of the Partnership Agreement and Programmes in Croatia for the period 2014-2020 Launch Event in Zagreb 31 January 2013

Introduction Strong alignment with the Europe 2020 strategy, thematic concentration and performance incentives Common Strategic Framework covering 5 funds to jointly foster competitiveness, convergence and cooperation at all levels Need for strong prioritisation and result orientation Cooperation at all levels is key Planning and implementation of CSF funds have to break through artificial bureaucratic boundaries in the next programming period and develop a strong integrated approach for mobilizing synergies and achieving optimal impact both within countries and across borders. The Europe 2020 objectives must be mainstreamed across the different CSF Funds, each of them bringing their contribution to smart, sustainable and inclusive growth. There is also a need to concentrate future EU spending on priority areas to maximise the results to be obtained, rather than spreading funding to thinly. We need strong prioritisation and orientation on results. We now have two active macro-regional strategies in place for the Baltic and the Danube regions. These strategies should form an integral part of programming for the next period. Cooperation within regions, within countries and across borders will help to deliver more effective results of our policies, so we should look for the benefits of cooperation in every policy measure we are planning. 2

Commission Services Position Paper vs. Partnership Agreement Framework for dialogue between Croatia and the Commission services Optimise the use of European Structural and Investment funds and concentrate future spending on priority areas The steps ahead Another new element is that the Commission services have taken a more pro-active approach in identifying up front the most urgent development needs and priorities as linked to the EU2020 objectives for each Member State and not to wait until the submission of the Draft Partnership Agreements by each Member State. This opinion is summarized in the so called Position Papers. The purpose of this Position Paper is to set out the framework for the informal dialogue between the Commission and Member State on the preparation of the Partnership Agreement and Programmes. Timely adoption of the OPs! What do Commission services see as the main priorities for investment for Member State? 3

Economic situation in Croatia Croatian economy has been in recession since 2008 the level of GDP lowered by more than 10% narrow export base and insufficient competitiveness unfavourable investment climate Unemployment rate close to 15% in 2012 Efficiency of public expenditure remains a challenge Regional disparities exist War affected areas Remote areas Urban-rural divide 4

Europe 2020 headline targets Current level in Croatia 3% of EU's GDP to be invested in research and development 0.73% 20% greenhouse gas (GHG) emissions reduction compared to 1990 / 20% of energy from renewables 14.6% 20% increase in energy efficiency   75% of population aged 20-64 should be employed 57% Reducing early school leaving to less than 10% 4.1% At least 40% of 30-34 years old should have completed a tertiary or equivalent education 24.5% Reducing the number of people at risk of poverty or exclusion by 20 mill. in the EU  / …and national targets ?? to be drafted in the economic programme (April 2013) 5

Main challenges Low labour market participation, inefficient education system and a difficult social situation Under-developed knowledge based growth factors and insufficient infrastructure Protecting the environment and natural resources and adapting to climate change Inefficient public governance at central/local level and weak involvement of partners 6

Challenge: Under-development of knowledge based factors of growth and insufficient infrastructure Lagging behind in knowledge based factors of growth Unfavourable business environment Transport and ICT networks are unbalanced and hinder competitiveness 7

8 Source: Eurostat

Funding priority: Strenghtening the competitiveness of the economy 9

1. Strengthening Croatia's innovation profile through smart specialisation Develop RD&I excellence and promote centres of competence Promote business R&I investment, support applied research and technological transfer to help companies develop more innovative products/ processes/ marketing/ services, and diversify the national/regional economy through high-growth activities 10

2. Supporting the modernisation and competitiveness of enterprises Promoting entrepreneurship Enhancing the competitiveness of SMEs by providing high-quality business support Facilitating SME's access to finance Modernisation of the agricultural, fisheries and aquaculture sector ! The effective removal of obstacles of business environment and to the growth of SMEs remains an essential condition for the success of the interventions supported by the Cohesion policy 11

3. The extension and upgrading of the transport and ICT infrastructure Developing high quality, interoperable railway system Investing in TEN-T network and investing in regional mobility Developing environment-friendly transport systems and promoting sustainable urban mobility Expansion of next generation access broadband infrastructure & ICT services, particularly in remote areas 12

Challenge: Low labour market participation, particularly of youth, inefficient education system and a difficult social situation 13

Employment rate in 2011, % of total population Source: Eurostat 14

15 Employment rate - young people in 2011, % of total population Employment rate – women in 2011, % of total population Employment rate - older people in 2011, % of tpotal population 15

Tertiary education attainment in 2011, 30-34 years old Source: Eurostat 16

People at risk of poverty in 2011, % of the total population Source: Eurostat 17

Funding priority: Increasing labour market participation, ensuring better education and skills and reducing poverty taking into account regional differences 18

1. Significantly enhance the labour market participation of most vulnerable groups, particularly women, older workers, long term unemployed & youth 2. Increase the employment of young people Access to employment for job-seekers and inactive people, including local employment initiatives and support for labour mobility Sustainable integration of young people not in education, employment, or training into the labour market 19

3. Improve skills level, address the challenge of matching labour market skills demand and supply, improve vocational education and training outcomes and enhance participation in the educational system Improving the quality, efficiency and openness of tertiary education with a view to increasing participation and attainment levels Enhancing access to lifelong learning, upgrading the skills and competences of workforce and increasing the labour market relevance of education and training systems Promoting knowledge transfer and innovation in the agriculture, forestry, maritime and fisheries sectors 20

4. Improve social inclusion of the most vulnerable groups, including elderly, children, persons with disabilities and Roma 5. Reduce discrimination 6. Ensure high quality, accessible and decentralised social and health services and invest in basic services for the rural population Active inclusion Combating discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation Enhancing access to affordable, sustainable and high- quality services, including health care and social services of general interest Promoting social inclusion, poverty reduction and economic development of rural, coastal and fisheries area 21

Challenge: Environment, nature and climate change 1. Waste and water management Meeting EU standards 2. Biodiversity and nature High nature value areas/Natura 2000 areas Agriculture/forests 3. Renewable energy/ Greenhouse gas emissions Meeting target of 20% Dependance on fossil fuel import Energy efficiency low Kyoto targets 4. Climate change adaptation and risk management Risk of droughts, fires and flooding Large investment projects are needed in the fields of waste and water management in order for Croatia to meet the EU environmental standards. Croatia is one of the richest European countries in terms of biodiversity and nature and it will be an important challenge in the coming years to protect it and to ensure their sustainable utilisation. The management of Natura 2000 and other high nature value sites is of particular importance, including the extensive management of important agriculture and forest habitats. In addition, environmental changes and human activities pose a potential threat to water and marine resources, including fish stocks. The current share of renewable energy sources is 14.6% (against the target of 20% by 2020) and there is a need to reduce the administrative procedures to facilitate the investments in this field. At the same time, Croatia is dependent on few energy sources, in particular on gas and oil import. Greenhouse gas emissions have since 2007 decreased, mostly due to a decreasing industrial output caused by recession. Overall Croatia is on track in fulfilling its Kyoto commitments but should stay on the course. As a consequence of climate change agriculture and forestry are at risk. Forests cover about 47% of the land in Croatia and forest fires pose a major challenge. Flood protection measures are not sufficiently developed. In view of constantly booming tourism special attention should be paid to preserving the unique sea and maritime eco-system of the Adriatic Sea. 22

Funding priority: Preserving and maintaining a healthy environment and protecting the natural resources and heritage, and adapting to climate change The challenges just described will be addressed through funding priority number 3. This funding priority relates to the thematic objectives on protecting the environment and promoting resource efficiency, supporting the shift towards a low-carbon economy in all sectors and promoting climate change adaptation, risk prevention and management. 23

1. Invest in waste and water sector to meet the environmental acquis Improving the efficiency of solid waste management Investing to reach full compliance with the European urban wastewater treatment directive Protecting drinking water resources and ensuring quality monitoring Applying an Integrated Water Management policy As far as protecting the environment and promoting resource efficiency are concerned, substantial investment should be made to improve the efficiency of the waste management and water management sectors to meet the environmental standards and the acquis. This includes measures contributing to the compliance with the Landfill Directive as well as preparation and implementation of Waste Management plans for both municipal and dangerous waste and Waste Prevention Programmes. Investments should also focus on measures to reach compliance with the urban wastewater treatment directive and the Drinking water directive. In addition, Croatia needs to apply an integrated water management policy in order to ensure sufficient quantities of water of appropriate quality for current and future needs. 24

2. Protecting biodiversity, improve soil and water management and promote sustainable management of Natura 2000 and high nature values areas, promoting ecosystem services including NATURA 2000 and green infrastructures Protecting and developing the natural and cultural heritage Promoting environmentally sound farming system Promoting sustainable management of Natura 2000 and other high nature value areas Promoting sustainable fisheries On what concerns the protection of biodiversity and ecosystems, Croatia needs to improve the management of soil and water and protect the natural and cultural heritage, while also considering its business potential. It is important to reduce the impact of agriculture on the environment by promoting environmentally friendly farming systems. At the same time promoting sustainable management of Natura 2000 and high nature value areas, including concrete measures for the restoration and preservation of habitats is very relevant for Croatia. Finally, Croatia should promote sustainable fisheries and an integrated maritime policy for sustainable growth.

3. Supporting the shift towards a low-carbon economy in all sectors Promoting energy efficiency, the use of renewable energy and technologies reducing greenhouse gas emissions Promoting the contribution of forestry to bio-energy production Improving the carbon retention capacity of soils and forests and reducing greenhouse gas emissions from farm operations Croatia needs to devote adequate resources to support the transition to a low-carbon economy. This involves stimulating the use of renewable energy and energy efficiency in order to reduce greenhouse gas emissions, looking especially at the potential of innovative technologies in small and medium enterprises, public infrastructures and the housing sector. In addition, promoting the contribution of forestry to bio-energy production and improving the carbon retention capacity of soils and forests and reduce greenhouse gas emissions from farm operations is also important. 26

4. Promoting climate change adaptation, risk prevention and management Applying measures for climate change adaptation and risk management Implementation of a national strategy for adaptation to climate change Measures to cope with potential climate disasters Creation of early warning systems for floods Preventive measures to address specific risks Improving drought and water management Supporting fire prevention and restoration measures in forests Finally, on what concerns promoting climate change adaptation and risk management Croatia could support the preparation and implementation of a national strategy for adaptation to climate change and the corresponding action plans, together with measures to cope with potential climate disasters including the creation of early warning systems for floods. In addition, Croatia should take preventive measures to improve drought and water management and to support fire prevention and restoration measures in forests 27

Challenge: Inefficient public governance at central and local level; weak involvement of civil society & social partners Public administration at all levels still not sufficiently effective, transparent and accountable and the risk of corruption is still present Involvement of civil society and social partner organisations in the policy making and in social dialogue is still limited 28

Funding priority: : Strengthening the administrative capacity, enhancing an efficient public administration and increasing the involvement of civil society and social partners 29

Develop an effective, efficient public administration Investment in institutional capacity and in the efficiency of public administrations and public services with a view to reforms, better regulation and good governance 2. Strengthen the capacity of social partners and civil society organisations to be involved in policy-making and policy-delivery Capacity-building for stakeholders, social partners and NGOs 30

European Territorial Cooperation Transnational and cross-border approaches Croatia should draw up with its neighbours approaches addressing specific needs (promote sense of partnership) EU Strategy for the Danube Region coherence between the Strategy and programming of ESI interventions and exchange of good practices devoting sufficient resources and attention to the role of Priority Area Coordinators and Steering Groups overall Maritime Adriatic and Ionian Strategy improving coherence, coordination and alignment of policies and instruments, including country-specific ones, having an impact on the maritime economy 31

Success factors for effective delivery structural reforms human resources ex-ante conditionalities (e.g. Strategy for smart specialisation, Active labour market policies, Strategy for reinforcing administrative efficiency including public administration reform) Also… mechanism for effective implementation of State Aid law existence of appropriate statistical systems and result indicators appropriate tendering capacity and procedures in place 32

Negotiation process for Partnership Agreement POSITION PAPER sent to Croatia LAUNCH EVENT INFORMAL DIALOGUE with Croatia Croatia sends PARTNERSHIP AGREEMENT through SFC Negotiation mandate / observations sent to Croatia ADOPTION of Partnership Agreement CPR adopted 2013 33

Thank you for your attention! We wish you a lot of success!