HUP-ICT: Accelerating the digital transformation of the economy is essential

The Croatian information and communication technology (ICT) sector has shown robust growth, reaching nearly eight billion euros in revenue last year, according to the HUP-ICT Association during a press conference. Despite geopolitical turbulence and strategic challenges faced by the European Union, the sector recorded an increase in revenue, employment, and exports. However, experts warn that further measures are needed to enhance competitiveness and accelerate the digital transformation of the economy. The association emphasized that while progress is visible, achieving the goals set by Croatia's Digital Strategy 2032 requires faster processes of transformation. The HUP-ICT Association highlighted that the share of companies using artificial intelligence (AI) in Croatia is below the EU average. According to Hrvoje Stojić, chief economist at the Croatian Employers' Association (HUP), the cost of labor as a percentage of total revenue rose from 20% in 2019 to 26.5%. This trend threatens to make the sector globally uncompetitive, prompting calls for tax relief on wages comparable to the top five most competitive countries in the EU. Additionally, the association suggested reducing para-tax burdens by 20% and doubling subsidies for research and development to reach the average of OECD countries. Hrvoje Josip Balen, president of the HUP ICT Association, stressed the importance of continuing investments in broadband internet development and supporting small and medium-sized enterprises through voucher systems to digitize their operations and integrate AI into business models. He also noted that vouchers should encourage citizens to access high-speed internet. The association warned that digital infrastructure alone does not boost productivity; rather, it is the businesses utilizing AI, cloud computing, and data to change processes, products, and business models that drive productivity gains. Regarding the impact of AI on employment, Balen cautioned that AI negatively affects all trainees, not just computer programmers. He called for renewed efforts to employ young graduates, emphasizing that training is currently undervalued. He advocated for the reintroduction of incentives to hire young people through exemptions from paying health insurance contributions. Siniša Đuranović, vice-president of the HUP ICT Association, stated that the growth of the ICT sector must drive the overall economic expansion since its purpose is to digitalize society and the economy to enhance competitiveness. When examining digital infrastructure, Croatia exceeds the EU average in optical network coverage and 5G networks. The goal is to ensure high-speed internet covers the entire country, with current coverage around 77%. The final step, which is also the most challenging, involves expanding coverage to rural areas, which are generally commercially unprofitable. Therefore, subsidies and support from the state and EU funds are necessary to bridge this gap. Đuranović, who is also a member of the board of the Croatian Telecommunications Company (HT), emphasized the need to prevent a digital divide within Croatia and eliminate the digital gap between rural and urban areas, which would reduce social disparities. The association continues to push for policies that will ensure the digital transformation of the economy accelerates, making Croatia more competitive in the global market.