PERSPECTIVES OF INDUSTRIAL PRODUCTION IN CROATIA AND INTRA-INDUSTRY TRADE

Croatian economy during its transition process has been characterized by privatization, liberalization and deindustrialization. During the transition process structural adjustments were expected to enable shifts towards higher value added levels of production. In this respect high expectations were from foreign direct investments. Unlike expectations they materialized in takeovers predominantly in the service sector. Structural adjustments in the manufacturing sector were mostly of a passive form and the shifts had some specifics. So, for example the textile industry being among the export leaders by the beginning of the transition process has demonstrated a dramatic downscaling both in total output and in exports. Though this could be expected, however, a signifi cant downturn of output in industrial sectors of higher value added has been registered. A fall in comparative advantages of the manufacturing sector has been registered, as well as shrinking of specialization in intra-industry trade. Growing intra-industry trade specialization has been a key factor of successful restructuring among the leading transition countries. According to those experiences a tangible development of industrial production can be secured by enabling key factors of productivity growth and increasing competitiveness to come to full effect. This is fi rst of all related to full scale market reforms, thus infl uencing investment, the level of competitiveness, the ability to implement innovations derived from increasing levels of outlays for R&D, human capital and applications of new technologies. Institutional changes should correspond with the needs for increasing competitiveness of manufacturing fi rms on the domestic and international markets.