“I represent Croatia (and 15 other countries, including Ukraine) in the IMF Board and wrote a column for Atlantic Council a few years ago that Croatia is a country where Ukraine has something to learn.”, – WRITE: www.pravda.com.ua
The state, which in the 1990s passed through the war, partial occupation, economic decline and large-scale transformation, in one generation was able to integrate into the EU and Eurozone, stabilize institutions and ensure economic growth. Her experience shows that the transition from war to recovery is possible provided strategic planning and the correct balance between internal reforms and external integration. Unfortunately, she could not find this balance, for example, Bosnia and Herzegovina, which had similar starting conditions, inherited from Yugoslavia, but in the last 30 years she has not made her jump to the European Union.
But the Croatian lesson is not just about the last two or three decades. I recently participated in a regional conference in Dubrovnik organized by the IMF and the National Bank of Croatia. In the introductory speech, the head of the Croatian Central Bank Boris vujčić told the history of Dubrovnik in the XV -XVI centuries, which was new to me.
Advertising:
Vuychich reminded that long before the emergence of the concepts of smart cities (Smart cities) or Resilient Infrastructure, Dubrovnik (or rather the medieval Republic of Raguza, which was in the site of modern duber time.
Using its geographical location, Raguza has become a reliable mediator between East and West. Raguza merchants worked with Christian and Muslim markets, providing safe transit of goods and legal protection of contracts.
This was made possible by the fact that even before the emergence of international trade law, Raguz has built its own logic of predicted agreements and provided a stable regulatory environment that was valued by foreign traders. As a result, reputation, not a fortress (which is still a symbol of the city), became the main asset and the main currency of the city. And that is why many preferred to work with ragus.
Vuych also mentioned the treatise “The Trade and the perfect merchant” Benedict Korulian, in which Raguza merchant was described as an institute of trust, carrier of rules, and not just a profit seeker. Commercial ethics in the city was practical: without the army nor the colonies, the city created a model based on trade and diplomatic relations, not on strength or expansion, and trade itself not on privileges or luck, but on predictability. The constancy of the regulatory environment has indeed become part of public policy.
The customs and tax systems in the city were stable, with an empray focus. The Sponsa Palace in the center of the fortress served not only on the customs office, but also of the “financial hub” with elements of banking infrastructure for merchants. The own monetary system and developed financial infrastructure of the city (mint, accounting, insurance) allowed to avoid dependence on external shocks, and such an organization created a sense of order and professionalism, which attracted merchants even during periods of conflicts between empires.
Direct taxes were structured so as not to suppress business, but at the same time provide a resource for public investment. One of the key areas was the support of shipbuilding, which was strategic for the development of maritime routes. During his heyday, Raguza merchant fleet numbered hundreds of ships serving routes to Levant, Italy, Spain and Balkans: Ragua exported metals, salt, wax and wood, and imported spices, silk, fabrics, weapons.
As part of the same logic of the intended management of basic resources, the water supply system also functioned. Water was considered a public resource limited in volume. Entrepreneurs, especially artisans who used it for production needs (fabric painting, skin treatment, etc.) paid a separate rent or a water intake tax from fountains and tanks. This not only provided additional revenues to the city budget, but also allowed to control the load on infrastructure and reduce the risk of conflict between household and commercial use.
The city authorities were also clearly aware of the limits of their capabilities. For example, an attempt to create a competitive textile sector was unsuccessful and was quickly folded. Priority was given to areas where the city had real benefits. Today, it would be called Evidence-Based by industrial policy or smart specialization based on competitive advantages.
Particular attention is paid to the ragus approach to long -term safety. In the sixteenth century, the city invested underground grain tanks (RUPE) carved in the rock. They allowed to provide the population with food or drought. It was a form of strategic autonomy that strengthened the city’s negotiation in relations with larger states. For business, this meant reducing the risks of destabilization: in the crisis, traders could plan their activities even under external pressure, which strengthened the trust in the city as a reliable trading unit.
Dubrovnik’s history is not just an example of a successful city in the past. This is a model that is worth viewing today when Ukraine is looking for a formula for a steady recovery. Raguza lessons about the balance of openness and caution, ambition and awareness of boundaries, integration and strategic autonomy remain quite relevant to Ukraine, and this is what we also discussed during our joint dinner with the head of the Central Bank.
As well as Dubrovnik in the 15th century, Ukraine has been functioning for many years at the intersection of large geopolitical blocks. The modern map of the world is fragmented again, and the global value chains cease to be universal for us – we will not be able to continue to function as a logistics center between the East after the West. This means that the Ukrainian growth model should adapt to a more unpredictable environment at different speeds of changes in trade, industry and access to markets. For Ukraine it means a few things.
Firstly, Institutional predictability. Dubrovnik won not so much because of geography or low taxes, but through stable rules of the game. For modern Ukraine, this should be a benchmark – the investment climate begins not with tax rates, but with trust in the regulatory system. In conditions where resources are limited and competition for global and local investor is increasing, transparency of procedures, contract execution, predictability of administrative decisions and minimization of informal barriers are more important than privileges. This applies to both national levels and municipalities and communities, because they are increasingly becoming the first point of contact for business and partners era.
Second, Adaptive economic specialization. Raguza did not try to develop all sectors at the same time. On the contrary, it focused on areas where real competitive advantages: in logistics, shipbuilding, processing of goods and maritime insurance. A similar approach to Smart Specialization is also needed by Ukrainian regions today, taking into account new geography, changes in logistics routes, transformation of labor market and security risks. It’s not just about the agricultural sector or IT.
Ukraine should become part of the new European value chains in clusters such as renewable and nuclear power, rechargeable production, green metallurgy (including HBI), Miltech. The question is not to reach everything at once, but to the ability of our regions and cities to focus on 1-2 areas that correspond to its resources, location and human capital. Sasha Kravchenko from McKinsey wrote a wonderful column on this topic – it should be read and discussed. Together with our colleagues, we are now working on the idea of Radar’s project, which will help Ukrainian cities to understand what the main assets they have to be able to get into European indices of regional attractiveness for investment.
Third, themselves Ukrainian cities should become central actors in recovery. As Valera Perem and I wrote earlier, it is cities that respond to key modern challenges: from the integration of displaced persons to attracting investment in lug. They become not only a place where services are provided, but a space where new management models, business interaction and global partners emerge. Raguza lesson is also relevant to us here: even a small city, acting as an effective and predictable subject-subject, capable of forming its own development trajectory: because of the quality of institutions, a clear strategy and openness to the outside world. Ukrainian communities already have tools for this purpose: decentralization, direct contacts with donors, international counterparts. The question is the ability to convert it into a new urban economy, and even perhaps new Ukrainian cities.
Finally, ours Integration into a wider regional European context should be flexible and strategically coordinated. Ukraine is not yet a member of the EU, but it is already a de facto in a common economic space is Europe. Like Raguza, Ukraine must learn to combine integration into Western structures with openness to a wider geo -economic environment – our geography allows you to work with Asia countries, to participate in solving food security problems in Africa. Further success of integration into global value creation will also depend on the formation of a common regional strategy: post -war recovery should not become purely exclusively by our internal project. It will require agreed decisions with neighbors, joint investment in critical infrastructure, the construction of joint institutions of coordination and financing of reconstruction and new formats of cooperation, both economic and political and even security.
The experience of medieval raguza shows that stability is not a lack of threats, but the ability to work systematically with them: the city survived and increased not because it avoided risks at one time, but because they managed them. And this is probably one of the most important lessons that Ukrainian cities and country can generally learn from the experience of Croatia and Dubrovnik.
Vladislav Rashkovan
A column is a material that reflects the author’s point of view. The text of the column does not claim the objectivity and comprehensive coverage of the topic that rises in it. The editorial board of “Ukrainian Truth” is not responsible for the accuracy and interpretation of the information provided and plays only the role of the carrier. The point of view of the UP editorial board may not coincide with the point of view of the author of the column.