ICT AssessmentOctober 25, 2017

Table of Contents

Introduction...........................................................................................................................................2

e-Government Strategy and Action Plan................................................................................................2

e-Government Legislative Framework...................................................................................................3

Business Registration Ecosystem and Implemented Technology Platforms...........................................4

Business Registration at the Commercial Court.................................................................................5

FINA HITRO.HR Service...................................................................................................................6

Personal Identification Number (OIB) System................................................................................7

Registration functions at the State Statistical Office......................................................................8

Registration functions at the Tax Administration...........................................................................9

Registration functions of the Pension (HZMO) and Health Insurance (HZZO)................................9

Crafts Registry..............................................................................................................................10

Ministry of Public Administration Registries.................................................................................11

Registry of Agricultural Establishments (OPG registry).................................................................11

Register of Financial Accounts and Annual Financial Statements.................................................12

Interoperability Architecture and Standards in Government...............................................................12

Conclusion and Recommendations......................................................................................................14

Appendix – Short Analysis of Business Registration Cases and Involved Staff at Courts......................18

This technical note is the result of work of World Bank staff. Findings, analyses, and conclusions expressed here do not necessarily represent positions of the Executive Directors of the World Bank or their Governments. This Technical Note does not constitute legal advice.

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IntroductionThis ICT Assessment is a component of the analytical support provided by the World Bank team to the Ministry of Economy, Entrepreneurship and Crafts (MoEEC), concerning the modernization and integration of the business registration regime in Croatia. It summarizes the current ICT environment within the various agencies involved in business registration and outlines potential approaches for integrating the registries and respective registration processes.

e-Government Strategy and Action PlanIn June 2017, the Government of the Republic of Croatia adopted the e-Croatia 2020 Strategy and the Action Plan for the Implementation of the e-Croatia 2020 Strategy, which are prerequisites for the use of the EU Structural Funds for the period 2014-2020 in relation to the Thematic Objective 2 - Digital Growth. According to the Strategy, the activities will be financed from national funds, primarily from the European funds.

The main objective of the Strategy is to ensure the interoperability of information systems across all sectors to support the provision of e-services to citizens and reducing their compliance burden when interacting with government agencies.

According to the Strategy and Action Plan, the following five projects have been recognized as projects related to the modernization of the business registration:

1. Project No. 1 - “Development of electronic procedures for registering an establishment and obtaining approval for taking up a service activity via a Point of Single Contact”, with the Ministry of Economy Entrepreneurship and Crafts as the project owner. By the end of 2017, starting a company (simple LLC and LLC) should be simpler and conducted electronically (delivered through Project No. 100, under the responsibility of the Ministry of Justice). This will include automatic delivery of necessary information about the establishment to the Croatian Bureau of Statistics and the Tax Directorate without participation of a public notary, and will also include obligatory insurance policies and opening of a bank account. The e-services must be provided using a single form, with the capability to attach documents and pay fees electronically, ensuring adoption of the EU’s once-only principle. This will be enabled by the implementation of the interoperability of registers within the national information infrastructure. There are no planned costs for this project in the Action Plan, as all the component activities are contained in projects, with this project enabling the coordination and achievement of overall objectives.

2. Project No. 2 - “Establishment of the eBusiness”, with the Ministry of Administration as the Project Owner. The project plans to develop new services for businesses and citizens, integrate services for businesses, and enable interconnection of systems in order to develop an integrated service offering. Certain activities related to this project are planned as part of Project No. 6 “Improvement of electronic services system”, to introduce standards for development of e-services and leverage communication of citizens and businesses through personal and business user mailboxes. Planned costs for this project are 2.66 million EUR through 2020.

3. Project No. 3 - “Establishment of the Shared Service Centre”, aimed to establish the interoperability system among public administration bodies. Planned costs are 15.59 million EUR through 2020.

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4. Project No. 100 - “eCourtRegister (phase 1)”, with the Ministry of Justice as the Project Owner. Its aim is to integrate with the Business Registers Interconnection System (BRIS) and enable online registration of simple LLCs and LLCs. Total costs planned for this project are 311,067.00 EUR with a planned completion date in the 3rd quarter of 2017.

5. Project No. 101 - “eCourtRegister (phase 2)”, with the Ministry of Justice as the Project Owner. Its aim is to make technological and functional upgrades of the Court Register and establish the Court Register interconnection system. Planned costs are 1,728,933 EUR with a planned delivery date of the 4th quarter of 2018.

e-Government Legislative Framework The following legislation impacts the development of e-Government in Croatia:

- Decree on Organizational and Technical Standards for Connecting to the National Information Infrastructure (OG 103/15, 40/16), adopted in September 2015, lays down the corresponding organizational and technical standards, policies and activities necessary for the launch, implementation, development and monitoring of projects related to the national information infrastructure as well as management, development, and other elements necessary for the operation of the state information infrastructure;

- Decree on the Establishment of the Public Register for Coordination of Projects on the State Information Infrastructure (ProDII Register, OG 134/14, 40/16), adopted in November 2014, issued with the purpose of rationalization, development direction, and coordination of all activities and projects concerning the state information infrastructure;

- Law on the State Information Infrastructure (OG 92/14), adopted in July 2014, establishes a central government portal system as a single point of contact, introduces a state-issued mailbox for communication by public sector institutions with citizens, a national identification and authentication system, a system of basic and public registers, a public register for the coordination of projects established for State Information Infrastructure (ProDII), and a meta-register to facilitate interconnections among the information systems;

- Information Security Act (OG 79/97), defines information security measures and standards, along with areas of information security and competent bodies for the adoption, implementation, and supervision of information security measures and standards;

- Electronic Communications Act (OG 73/08, 90/11, 133/12, 80/13 and 71/14), regulates the area of electronic communications, in particular, the use of electronic communications networks and the provision of electronic communications services;

- Act on the Right of Access to Information (OG 25/13, 85/15) , introduces obligations for public authorities in Croatia to publish data in a machine-readable and open format;

- Services Act (OG 80/11), in Article 6, the Act on Services in the Internal Market translates into national legislation the obligation to develop e-procedures in order to establish a business, i.e. to set up a permanent establishment (company, trade, and other legal forms) and to obtain sectorial permissions for the performance of certain service activities (by certain public administration bodies, if thus stipulated). It also prescribes the establishment of an electronic Single Point of Contact which will assist interested persons in conducting the necessary procedures and meeting necessary conditions for access to, or performance of, a service activity;

- Act on National Spatial Data Infrastructure (OG 56/13), translates the INSPIRE Directive into the Croatian legislation, i.e. establishes the National Spatial Data Infrastructure (Directive

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2007/2/EC of the European Parliament and of the Council of 14 March 2007 establishing an Infrastructure for Spatial Information in the European Community);

- Other legal regulations governing this area are the following: Electronic Signature Act (OG 10/02, 80/08, 30/14), Electronic Documents Act (OG 150/05), General Administrative Procedure Act (OG 47/09), Personal Data Protection Act (OG 103/03, 139/04, 118/06, 41/08, 130/11, 106/12) and Electronic Trade Act (OG 173/03, 67/08, 36/09, 130/11, 30/14).

The Government has already launched the e-Business project by issuing the Decision of the Government on launching the e-Business Project (OG 70/16, OG 21/17). The goal is to provide access to public information and information about public services for businesses in one place, ensure safe access to the data of businesses and facilitate electronic communications between businesses and the public sector.

Business Registration Ecosystem and Implemented Technology Platforms The current business registration process in Croatia is scattered with many agencies involved utilizing multiple ICT technology platforms. Business owners need to visit government agencies multiple times (often in person), submit the same information multiple times (mostly in paper form), and follow numerous steps to formalize their business. On the other hand, the agencies involved in the process are bound to a complex legal framework and do not have a national interoperability technological platform with which to share information. The scope of this assessment covers the following institutions and registries they are managing:

1. Court Registry, including limited liability companies (LLC), simple limited liability companies (simple LLCs), and other form of legal business entities registered by the Commercial Courts;

2. Crafts Registry managed by the Ministry of Economy Entrepreneurship and Crafts;3. Registry of associations and foreign associations, and other non-profit entities registered by

the Ministry of State Administration; 4. Registry of Agricultural Establishments (OPG registry) managed by the Ministry of Agriculture

and the Paying Agency for Agriculture, Fisheries, and Rural Development;5. Registration functions at the Tax Administration and Personal Identification Number (OIB)

System; 6. Registration functions at the State Statistical Office (DZS);7. Registration functions handled by the HITRO.HR offices within FINA; and 8. Registration functions of the Croatian Institute for Pension Insurance (HZMO) and the

Croatian Institute for Health Insurance (HZZO).

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In January 2017, the Croatian Government adopted the Conclusion on introducing electronic procedures for business entry. According to this Conclusion, by December 31st, 2017, all involved public bodies are obliged to develop electronic forms for online services, and to connect to the state information infrastructure. The online services and electronic procedure shall be provided through the single point of contact.

Figure 1. Business entry process registered by the Commercial Courts – Current situation

BUSINESS REGISTRATION AT THE COMMERCIAL COURT

The business-related legal entity registries, the Commercial Court Registry and Ministry of Administration Registry of Associations and Foreign Associations, are operating on Oracle technology (Oracle Database and Forms), with online services developed in Java. There are 12 types of businesses registered by the court and currently, the online services are limited to searching and browsing data on businesses (see Figure 2), available only in Croatian.

In 2017 the Ministry of Justice started a project to introduce online submission of application forms for simple LLC and a LLC that includes integrated registration with the Croatian Bureau of Statistics. The project is financed 80% by the European Regional Development Fund (ERDF) with the finalization planned for the end of 2017 (contract was signed with the private firm IN2).

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Figure 2.Online Services of the Court Business Registry

The ICT solution of the Court Registry is hosted at the court’s data center, with backup servers at another location. Regional court centers are connected with the central location using HITRONET, a government communication network. For data exchange with external information systems, the court established a service bus based on Microsoft BizTalk. Since June 2017, the court register has been integrated with the EU Business Register Interconnection System – BRIS), which enabled the online search of business entities through the EU e-Justice portal in all EU languages.

At the end of 2015, the State Geodetic Administration implemented the GIS address registry. The integration was done with graphical and alphanumerical address data, and contains modules for house numbers and spatial units. The System is implemented almost entirely using open source technologies (e.g. PostgreSQL is used as a database server) and it enables integration with external systems using web services. Currently, neither information system in the business registration domain exchanges data with the GIS address registry, each has its own copies of address data maintained independently, and it is not integrated with any of the business registries.

FINA HITRO.HR SERVICE Since 2009, the Financial Agency (FINA) has operated the HITRO.HR service and on-line registration functions (e-Company), offering electronic registration of LLC companies (LLC and simple LLC with in cash capital) through any public notary or HITRO.HR office (see Figure 3). The Commercial Court Registry automatically receives the data and documents through the Simple Object Transfer Protocol (SOAP) web service from FINA.

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However, the Court still requires paper documents to be delivered, regardless of the use of digitally signed documents. Applicants still have to physically come to the HITRO.HR office, or to a notary, to submit a paper application for business registration.

Figure 3. Hitro.hr web site

So even though the data and electronically signed documents are received from HITRO.HR, the Court still requires paper documents to be forwarded. The integration stops at this point, and the registration with the State Bureau of Statistics, the Croatian Institute for Pension Insurance (HZMO), and the Croatian Institute for Health Insurance (HZZO) is done manually as a follow-up to the court registration.

FINA uses IBM and Oracle proprietary software to develop ICT services, and its own data center for hosting.

PERSONAL IDENTIFICATION NUMBER (OIB) SYSTEM

In 2009, Croatia implemented personal identification numbers for all citizens and business legal entities. Two primary reasons for introducing OIB’s were to harmonize with the EU legislation on the common VAT system, and for data exchange in order to support tax compliance efforts. A secondary goal of introducing OIB was to allow for the interoperability of official registries, ensuring information would only need to be requested once and later exchanged among the public administration bodies when needed (without asking for the same information again from a business or citizen).

Currently, the OIB system is exchanging data with 115 institutions/bodies using SOAP web services and it is automatically assigned to the company within the business registration process at the Court. For example, there is no separate registration process with the Tax Authority, unless the applicant decides to register a company for VAT or foreign trade. The OIB System is based on IBM

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proprietary software (DB2 database server, WebSphere application server, and IBM Tivoli directory server) with an active maintenance and support contract (outsourced to the firm APIS by the Tax Authority).

Figure 4. Operational Model of the OIB System

REGISTRATION FUNCTIONS AT THE STATE STATISTICAL OFFICE

The Croatian Bureau of Statistics is in the process of modernizing its information systems as it currently uses two IT solutions for the Registry of Businesses and Statistical Business Register, which are planned for integration. Using replication, the data is synchronized between the software applications and the OIB system is also integrated.

The Bureau of Statistics still uses an old software application (in use since 1997), making all the changes, including the registration of new business entities, using the old software which is then replicated to the newer software integrated with OIB. Businesses have to use a separate application form to register at Statistics1, and the application can be submitted through the HITRO.HR directly at the Statistics office in Zagreb or through the post.

1 The application form for registration at the State Bureau of Statistics is available at https://www.dzs.hr/Hrv/important/Obrasci/11-Registri/Obrasci/RPS-1.pdf

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Statistics is the only entity that registers branch offices of companies; the Court registers their business units. Branch offices are identified by the company’s OIB number and a sub-number assigned by the Bureau of Statistics.

The Bureau uses Microsoft for their current software (Microsoft SQL Server 2005 and .NET – for the newer software that enabled the OIB integration), and the integration and upgrade to the web application is scheduled for completion by the end of October of this year (outsourced to the private firm Ericsson).

REGISTRATION FUNCTIONS AT THE TAX ADMINISTRATION

The Tax Authority receives information on newly registered businesses from the OIB system. To register for VAT and foreign trade, a separate application has to be submitted to Tax and it can be done electronically using the e-Tax system.

The technology used for the Tax IT systems is based on IBM and Microsoft proprietary software. In case a business entity has to possess a fiscal cash register, it has to register to receive an electronic

certificate from FINA.

REGISTRATION FUNCTIONS OF THE PENSION (HZMO) AND HEALTH INSURANCE (HZZO)

Since 2014, the Croatian Institute for Pension Insurance (HZMO) has implemented an electronic service for the registration of workers. Using the same application form, the workers are automatically registered at the Croatian Institute for Health Insurance (HZZO) without submitting a separate application.

In cases where the business entity has more than three workers, it is obliged to submit the application online (87% of application forms are submitted electronically). The technology used by the HZMO is based on IBM (DB2 database server and WebSphere application server), and the integration with the HZZO was done without changes in legislation.

Figure 5. HZMO Online Services

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There are no technical limitations to including VAT registration as part of an integrated business registration process.

To register as a user of online services at HZMO, information on the business entity has to be provided, regardless of the existence of this data within the Court Registry and OIB system. The correctness of the submitted form is checked offline.

CRAFTS REGISTRY

The Registry of Crafts is maintained by the Ministry of Economy, Entrepreneurship, and Crafts, and the registration is handled through the public administration offices at the county level and the City of Zagreb.

Crafts are not only used in Croatia for the specific activities requiring vocational licensing (32 business activities), but also for many other activities. In practice, crafts became a business entity type, although without legal status, represented by the owner – natural person. Current practice allows registered crafts with several persons as owners, as well as cases of one owner with several crafts registered. There is no limit on the number of employees a craft can have, however if turnover reaches a certain limit, a craft must register as a sole trader with the Court Registry.

Together with LLCs, simple LLCs, and associations, crafts represent the most common form of business activities in Croatia (at the time of the mission the number of active crafts stood at 77,437 2). Furthermore, crafts have been assigned with a separate craft registration number (as multiple natural persons can own a single craft).

Figure 6. e-Obrt Online Registration Form

The technology platforms behind the registries maintained by the Ministry of Economy, Entrepreneurship, and Crafts are Oracle database, Linux-based operating system, and VMware virtualization. The development and maintenance is outsourced to a private firm (IGEA, IN2 Group), which also recently implemented an online service for the registration of crafts (e-Obrt 3, operating since the end of 2015, see Figure 6). The service is accessible through the Central State Portal gov.hr and is integrated with the government single-sign-on system, NIAS.

2 Number of active crafts on September 21st, according to information received from the Ministry of Economy, Entrepreneurship and Crafts.3 E-Obrt service is available at https://e-obrt.minpo.hr/

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There are no technical limitations to include the registration of workers with the health and pension agencies as part of the integrated business registration process.

After finalization in the back-office registration process, the applicant is informed through his Personal User Mailbox (OKP). The System also supports the registration of changes to registered

crafts.

MINISTRY OF PUBLIC ADMINISTRATION REGISTRIES

The Ministry of Public Administration maintains nine registries, including the registries of associations and foreign associations. The registration bodies are offices of the public administration at the county level and the City of Zagreb (21 in total).

The registration process also involves automatic assignment of an OIB number, and data exchange is realized using SOAP web services. All the registries the Ministry maintains are based on the Oracle technology platform, with Java and Apache Tomcat as the application servers.

The online services allow for searching and browsing of all the registries (see Figure 7) and it is also possible to complete the application forms online4, however the printed and signed forms have to be submitted either to the county office or sent by post to officially start the registration process. The development and operational support and maintenance is outsourced to a private firm (IN2).

Figure 7. Online Services for Registries Managed by the Ministry of Administration

REGISTRY OF AGRICULTURAL ESTABLISHMENTS (OPG REGISTRY)

The Registry of Agricultural Farms is managed by the Paying Agency for Agriculture, Fisheries, and Rural Development (PAAFRD) within the Ministry of Agriculture.

The technology behind this registry is based on proprietary Microsoft software (MSSQL database and MS .NET framework), hosted at its own data center. The development and support for the software is outsourced to an external company (KING ICT). 4 Online application forms for registration of associations and foreign associations are available at https://www.registri.uprava.hr/#!upisi.

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Currently, number of crafts registered online through e-Obrt is not significant (in average 1,600 out of 9,000 annually), however the Ministry expects this number to increase.

The significant legislative changes planned in the agriculture domain will also affect the operations of the related registries.

REGISTER OF FINANCIAL ACCOUNTS AND ANNUAL FINANCIAL STATEMENTS

FINA manages the Register of Financial Accounts and has been collecting annual financial statements of businesses since 2003. The reports have to be submitted by all businesses (legal and physical persons) with an income tax obligation.

The annual accounts can be submitted in paper and electronic form, and for electronic submission, the FINA RGFI web application5 has to be used together with FINA digital certificates. To submit the financial account, the Excel form has to be filled-in offline and submitted using the RGFI web application (Figure 8).

FINA uses Oracle and IBM database management systems and Java Spring Framework for all electronic services, and the software development, as well as the operational maintenance and support of FINA’s systems, is done in-house (17 IT specialists are supporting the platform for registers).

Figure 8. Submission of Financial Account using FINA’s RGFI System

Interoperability Architecture and Standards in GovernmentAdopting the Croatian Interoperability Framework initiated implementation of the interoperability system in Croatia, which is still being developed, though certain important segments are already in place with some level of maturity. For example, the Metaregister has been established as a registry of registries, holding important information about registry structures, administrative domains, and referenced services, however still only for informative uses (see Figure 9).

Implementation of the OIB system enabled a certain level of interoperability and, in accordance with the Strategy, was identified as a good starting base for implementing a national interoperability system. According to the Action Plan, implementation of the interoperability system is planned as part of the establishment of the Shared Services Center project (between 4Q/2017 and 4Q/2020).

According to the Law on State Information Infrastructure, the common standards for secure data exchange and interoperability tools (such as the Metaregister, technical standards, classifications,

5 FINA Annual Financial Accounts e-Service, available at: http://rgfi.fina.hr/IzvjestajiRGFI.web/main/home.jsp

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As a result of a lack of a consolidated business registry, FINA created its own copy of business registers and created an unofficial integrated registry database in order to enable its services. It is being maintained using periodic data exchanges with the registration agencies.

public registers, e-Citizen system, and the state information infrastructure networks HITRONet and CARNet) is identified along with the development principles and infrastructure management. In accordance with the Law, the Public Register for the coordination of the state information infrastructure building projects (Register ProDII) was established6.

The Decree on Organizational and Technical Standards to Connect to the State Information Infrastructure, adopted in June 2017, defines the connection of e-services to the Central State Portal and single-sign-on system (NIAS), as well as to the Personal User Mailbox (OKP). The Decree also defines the Shared Services Centre (CDU) and defined providers of the CDU services (FINA, APIS, CARNet7 and AKD8). The CDU will also run the government cloud, and a visit to one of the providers (APIS) shows the data center facilities are already in place with several government systems hosted (e.g. APIS hosts most of the Tax Authority services and systems, including the OIB system).

Figure 9. Metaregistry

Conclusion and Recommendations The IT analysis examined the current registry technology platforms being utilized by the agencies involved in the registration processes, including the structure of the registry in each agency, and the level of integration of the existing registry technology platforms.

The following table summarizes business registries in Croatia, government institutions and agencies managing the registries, and technologies utilized.

6 The Public register for the coordination of the state information infrastructure building projects is available at: http://prodii.uprava.hr:83/prodii/.7 CARNet – Croatian Academic and Research Network8 AKD – Agency for Commercial Activities

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Table 1. Business registries in Croatia and technologies used to manage the registries

No

Ministry/ Agency Entities registered

Online or front counter

application submission, or

both

Technologies employed

Technology management (in-house or firm name)

Part of meta

register (Y/N)

Existing interconnections to other registries and key databases

1 Commercial Court

LLC’s; Simple LLC’s; Public Limited Companies; Sole Proprietors; Other forms of business entities (Limited and Unlimited Partnerships, Representative offices of foreign entities etc.)

Front counter application submission (at Court or through FINA HITRO.HR)

Oracle Database 10gR2,11gOracle IAS 10gR2APEX 4.2.1Liferay 6.1EclipseOracle Designer 10gR2Oracle SQL developerOracle GlassfishApache TomcatApache HTTP serverMS BizTalk10

IN2 N

OIB SystemFINA (eCompany, GFI)Croatian National Bank (HNB)Free Legal Aid (BPP)Business Registers Interconnection System (BRIS)

2

Ministry of Economy, Entrepreneurship and Crafts

Crafts; Records of secondary occupations; Records of homecrafts

Front counter application submission (public administration offices at the county level)Online e-Craft

Oracle database, Linux-based operating system, and VMware virtualization

IGEA (IN2 Group) N

OIB SystemFINACroatian Chamber of Trade and CraftsMinistry of InteriorEmployment Agency (HZZ)Other agencies (20 agreements for data exchange were formalized)

3Ministry of Public Administration

Associations;Foreign associations;Foundations;Foundations (time-limited);Representative offices of foreign foundations; and Other non-profit organizations

Front counter application submission (public administration offices at the county level)

Oracle technology platform, with Java and Apache Tomcat as the application server

IN2 Y

OIB SystemOffice for Cooperation with NGOs

4 Financial Agency (FINA)

Registry of Company AccountsRegistry of Annual Financial Statements

Front counter application submission (at FINA)RGFI Web Application

IBM WAS 8.5.5Oracle Database v11.g, v12cIBM DB2 v10.5 (zOS)IBM DB2 v10.5IBM java v1.7Oracle BI v11.x

In-house Y

OIB SystemCourt RegistryTax AdministrationCentral Repository & Clearing Agency (SKDD)

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Paying Agency for Agriculture, Fisheries, and Rural Development (PAAFRD) within the Ministry of Agriculture

Registry of Agricultural Establishments

Front counter application submission

Microsoft SQL database and .NET framework KING ICT N

Ministry of AgricultureMinistry of InteriorMinistry of FinanceCroatian Agricultural Agency

6 State Statistical Office Registry of businesses

Front counter application submission (through HITRO.HR or at the Statistical Office)

Microsoft .NET 4.0, SQL Server 2005 and 2012, Visual Basic 6.0

Ericsson NOIB SystemCroatian National Bank (HNB)

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No

Ministry/ Agency Entities registered

Online or front counter

application submission, or

both

Technologies employed

Technology management (in-house or firm name)

Part of meta

register (Y/N)

Existing interconnections to other registries and key databases

7 Tax Administration

Registry of Taxpayers and VAT

Front counter application submission (at Tax Office)

IBM and Microsoft proprietary software Apis IT N

FINAState Statistical OfficePAAFRDCustoms Office

8 Tax Administration OIB Registry Through online

data exchange

IBM WebSphere DataPower Integration Appliance, WebSphere Application Server, WebSphere Process Server, WebSphere Message Broker, WebSphere Portal, IBM DB2 for zOS, IBM Tivoli Directory Server for zOS IBM Tivoli Access Manager for e-Business, WebSphere Service Registry and Repository

Apis IT N

Interconnected with all information systems listed in the table

Given that about 10% of applications for business registration, and 30% for name reservations are currently being rejected (see Appendix), trying to register online under the current policies and level of judicial discretion will require much back-and-forth that will make for a very frustrating experience for investors. Having an effective online registration process requires a set of objective business rules to allow the applicant to complete the procedures in one online session, particularly if one is combining name reservation with the actual registration. The Diagnostic Report and the ICT Assessment show that the modernization of the business registration system in Croatia can be done using an evolutionary approach. The options for reform can be viewed as phases from the digital transformation perspective so that the implementation aligns with the identified reform principles. The Government can decide to implement the first phase, the first two phases, or all three phases.

The proposed technology approach for the modernization of the business registration system in Croatia includes the following three phases:

(i) In the first phase, the process of registration (and changes) of Limited Liability Companies (LLCs) and simple LLCs will be integrated and moved on-line, including the simultaneous registration in the Court Registry, Tax, Statistics, and institutes for pension and health insurance, using a single point of contact and a single application form. Given that the process of registration of Joint Stock Companies (JSC) is identical to the process of registration of LLC from the point of submission of the application to the Court, JSC can also be included into the scope of the first phase from that point in the process. To enable efficient automation, all adjudicative/discretionary aspects of registration should be eliminated, including the discretionary power of judges to evaluate the “appropriateness” of business name reservation. The single point of contact for online services could either be the Point of Single Contacts portal (psc.hr, according to the Action Plan e-Croatia 2020), or the Central State Portal (gov.hr). The Central State Portal is already used as the services’ access point for citizens, with an initiative started

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by e-Croatia to introduce the online services for businesses (e-Business and PKP – Business User Mailbox, e-Croatia 2020 Action Plan, Project No. 2).

Figure 10. Court business registration after implementation of the Phase 1

(i) In the second phase, a state interoperability platform will be piloted to support the business registration process (and changes), and would include business entities registered at the Court as well as the associations and foreign associations, registries maintained by the Ministry of Public Administration. This phase would also involve a certain consolidation of registries (for instance, digitization of the court archive, integration with the address registry implemented by the State Geodetic Administration) and improvement of the Metaregister. The government portal gov.hr, with an initiative already started by e-Croatia to introduce the online services for businesses (e-Business and PKP – Business User Mailbox), could be used as a single point of access, employing single-sign-on using the National Identification and Authentication System (NIAS), and an e-Payment system which is also planned for introduction. The interoperability platform would allow for a single interface to all business registries as mandated under the EU Directive, and enable orchestration of business registration processes. According to the e-Croatia 2020 Action Plan, implementation of the interoperability system is planned as part of the establishment of the Shared Services Center project (Project No. 3, between 4Q/2017 and 4Q/2020), and Project No. 101 “eCourtRegister (phase 2)”, to make technological and functional upgrades of the Court Register and establish the Court Register interconnection system.

(ii) The third phase would integrate the remaining registries (e.g. craft registry, agricultural establishments - OPG). In parallel to improvements to the business registration processes, it may be decided at some point to have most of the crafts be transferred to

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the sole trader business type (while re-assessing the need to retain vocational licensing for the remaining 32 activities).

According to the Strategy e-Croatia 2020 and the Action Plan, a main objective is to ensure interoperability of the systems operated by public bodies in order to enable integrated e-services. The first project in the Action Plan is “Development of electronic procedures for registering an establishment and obtaining approval for taking up a service activity via a Point of Single Contact”, and the project owner is the MoEEC. Referenced as a sub-project, by the end of 2017, starting a company (simple LLC and LLC) will be simpler and will be done electronically via the Internet under Project No. 100 in the Action Plan, under the responsibility of the Ministry of Justice, with the automatic delivery of necessary information on the establishment to the Croatian Bureau of Statistics, Tax Directorate, Pension and Health Fund and commercial banks, without notarization of the incorporation act.

The draft Law on Distance Registration, currently being discussed within the Government, does not currently ensure even a basic integration as envisaged in Phase 1 of the roadmap. It only provides for an online registration in the Court, and as such should be reconsidered (see Figure 11). The version of the draft Law analyzed by the World Bank team does not integrate the registration process to include Statistics, Tax, Pension and Health Funds, nor does it address the discretionary powers which would inhibit an effective online experience for applicants. The momentum for improving the business registration process in the country can be channeled more effectively and much more can be gained from a more integrated solution. Hence, there is scope to reconsider the current draft law and expand it to include as a minimum integration of registration as in Phase 1 described above.

Figure 11. Business entry process at Court in case of adopting the Law on Distant Registration

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Appendix – Short Analysis of Business Registration Cases and Involved Staff at CourtsThis short analysis is based on data received from the Croatian Ministry of Justice, which covers the ICT solution supporting business registration process. Table 2 shows data on business registration cases, including the number of rejected applications9, business exits, and the number of other registration changes processed by the commercial courts.

Table 2. Business registration cases processed by Commercial Courts between 2014 and 2016

Rejections

Entries ExitsOther

changesNo. of cases

Rejections

Entries ExitsOther

changesNo. of cases

Rejections

Entries ExitsOther

changesNo. of cases

Bjelovar 16 389 395 838 1,638 11 332 166 1,512 2,021 9 375 751 1,913 3,048

Osijek 113 1,330 1,467 3,320 6,230 99 1,351 822 5,224 7,496 57 1,343 1,627 6,054 9,081Pazin 6 993 1,187 2,186 109 961 478 4,066 5,614 113 1,217 1,442 6,643 9,415Rijeka 334 1,248 1,546 5,201 8,329 176 1,157 658 6,490 8,481 197 1,326 1,650 5,521 8,694Split 101 1,622 1,330 3,814 6,867 179 1,554 715 7,915 10,363 124 1,768 2,180 9,068 13,140Varaždin 235 966 1,083 2,356 4,640 215 948 698 3,742 5,603 225 946 1,186 4,364 6,721Zadar 172 725 685 1,967 3,549 122 792 480 3,069 4,463 166 947 741 3,892 5,746Zagreb 354 6,047 5,941 16,136 28,478 317 5,807 3,876 28,556 38,556 389 6,281 5,564 30,915 43,149Total 1,331 13,320 13,634 33,632 61,917 1,228 12,902 7,893 60,574 82,597 1,280 14,203 15,141 68,370 98,994

Court2014 2015 2016

The number of rejected applications is about 10% of the total number of registration cases and varies according to the registration center (from 24% in Varaždin to 2% in Bjelovar – see Figure 1), which implies that the application of rules is not consistent across different centres. It is also evident that a lower ratio of cases per worker does not lead to a lower number of rejected applications and thus to a better performance (e.g. in Zadar, Varaždin and Rijeka, see Table 4 and Figure 12).

Figure 12. Percentage of rejected applications for business registration comparing to business entries

Table 3 shows that the rate of rejections of business name reservation is significant.

Table 3. Approved and rejected name reservations

Name Reservations 2014 2015 2016Approved 9,831 9,231 9,454Rejected 4,273 4,411 3,995

9 Table 2 shows only rejected applications for business registration. Applications for name reservations are submitted as part of the separate process (see Table 3 below).

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Figure 13. Percentage of rejected name reservations

Table 4. User roles in the Court ICT Solution and analysis of ratio of business registration cases per worker for 2016

JudgeSenior Judge

Advisor

Judge Advisor

Court Registry

Head

Authorized Court Clerk

Total StaffBusiness

Entries per Judge

Business Entries per

WorkerBjelovar 375 2 1 3 6 188 63Osijek 1,343 8 2 18 28 168 48Pazin 1,217 6 1 1 1 6 15 203 81Rijeka 1,326 7 1 4 1 9 22 189 60Split 1,768 13 9 1 21 44 136 40Varaždin 946 5 1 2 5 13 189 73Zadar 947 5 1 1 8 15 189 63Zagreb 6,281 22 3 11 28 64 286 98Total 14,203 68 6 30 5 98 207 209 69

Court

No. of Business Entries in

2016

User roles in the Court ICT Solution

Figure 14. Analysis of ratio of business registration cases per worker

In Norway, after the reform and introduction of the integrated business registration process (from 2007 businesses can conduct entire process electronically), less than 10% of applications were rejected in total10. Also, electronic rectification of an application that has been refused is allowed.

10 Business Registration Reform Case Study: Norway, 2011 The World Bank Group

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The entire staff of the Registration Agency, the Brønnøysund Register Centre, counts 560 workers11. However, it is important to note that filing company accounts (The Register of Company Accounts), business registrations (The Register of Business Enterprises), and identification of legal entities (The Central Coordinating Register for Legal Entities), are all part of the same public agency - Brønnøysund Register Centre.

Figure 15. Business entries and exits in Croatia and Norway between 2014 and 2016

11 See https://www.brreg.no/about-us/our-organisation/the-bronnoysund-registers/

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