Croatia – what a complicated yet beautiful country, and as sports obsessed as any place that I have visited. Of the 4.19 million people, over 400,000 self-identify as active sports participants, with nearly 70% of that group enrolled as a member of a sports association (there are 4,000 members of the national chess association). Earlier this summer, the Croatian national soccer team faced disciplinary proceedings when its fans threw flares (as in fireworks – not my firm) onto the field during the European soccer championships. Notwithstanding how embarrassing these incidents were for the people of Croatia, they were bursting with pride when Dario Saric blocked Pau Gasol’s layup late in the opening Olympics basketball game in their upset win over Spain. Unfortunately for Dario, though, he is joining the NBA 76ers this fall.
Just over 20 years ago the War of Independence was settled, which exploded the former Yugoslavia into many pieces, creating Croatia. Over 200,000 Serb refugees migrated out of the country so that today over 90% of the population is Croatian; Serbs account for only 4%. The war was understandably a devastating event in the country’s history and frames many of the policies today. GDP contracted by 45% over the course of the nearly 5-year war. The Croatia Bureau of Statistics projects the population to decline to 3.1 million by 2051, which is a dramatic contraction from the start of this decade when it was 4.28 million. For a country that is smaller than West Virginia (which is the 41st largest state in the U.S.) at 22,000 square miles, Croatia is surprisingly the 18th most popular tourist destination in the world with 11 million annual visitors.
Since January of this year, the MSCI Emerging Market index has increased about 30% but unfortunately the Croatian stock market (only 22 public companies) has muddled along, increasing only 3.2% over the same time frame. With nominal GDP of $49 billion growing at an annual rate of 2.7%, the economic situation in Croatia is at best described as promising, and struggles with an unemployment rate of 13.3%. Government debt as a percent of GDP is approximately 87%. Like many other smaller economies, Croatia struggles to provide basic public services, particularly when it comes to healthcare.
Ironically, for a country so preoccupied with sports, there is an emerging issue of obesity and other chronic conditions; the European Observatory estimates that between 50%-60% of the population is over-weight. Total life expectancy for those born in 2012 is 76.9 years, which ranks lower than most of the other European Union countries. The World Health Organization estimated that over 27% of Croats over 15 years old smoke (2009). After the War of Independence, the government turned to a single payor model and created the Croatian Health Insurance Fund which is based on principles of “solidarity and reciprocity” such that contributions are made according to one’s ability to pay, and accordingly, receive care pursuant to their needs. In 2012, Croats spent $2.8 billion on healthcare which was 6.9% of GDP (it is ~18% in the U.S.) or nearly 18% of the overall state spending. There are 79 hospitals and 5,200 doctors in Croatia, or one provider for every 800 people.
Notably, there is a lack of healthcare technology infrastructure which has been flagged a few times by the legislature (2006 and 2013) in the context of broader financial reforms targeting the healthcare system. The Ministry of Health points to over 60 healthcare registries yet acknowledges that there is no central source of general health system information. Importantly, the Croatian health system has altered its focus from reducing the incidence of specific diseases to more improved population health outcomes, not unlike what is witnessed in more developed nations. While there is virtually universal coverage in the single payor framework, there is not the depth of services enjoyed in other EU countries, which is made more problematic with a declining population.
Given this backdrop, one might expect an emerging entrepreneurial community to address an obvious set of market needs, but as with many smaller countries, the level of “home grown” innovation is limited. The Croatian Private Equity and Venture Capital Association has 5 members and in fact, still advertises on its website a set of “recommended events” which all occurred in 2011 and 2012. In July 2015, the World Bank approved investing $22 million to seed a local venture industry, but has yet to disburse any of the ear-marked funds, and by its own admission rates the Overall Assessment for Risk as “substantial.” Curiously, the Croatian government recently announced the formation of a program to provide up to 135 million euros in “economic cooperation funds” via a 50% match to investment managers who raise at least 10 million euros for local investing.
To further explore the renewed Croatian focus on healthcare, I felt compelled to see another one of the “healthy” attractions while there, but I can assure you that I did not go swimming – much less, venture past this intimidating sign.