Business | Tourism
Croatia's tourism industry battles grey economy
Dazzling cruise ships are anchored in the azure waters off the stone-walled port and tourists throng the narrow marbled alleys of this medieval city.
- Reuters
- Published: 00:00 June 10, 2006
Dubrovnik, Croatia: Dazzling cruise ships are anchored in the azure waters off the stone-walled port and tourists throng the narrow marbled alleys of this medieval city.
Dubrovnik, a fortress port in the southern Adriatic, is steadily recovering after it fell off tourists' radar screens following Croatia's 1991-95 war of independence.
Since the war, during which Yugoslav army shells slammed into the Old City, Dubrovnik has been rebuilt and its hotels restored to their former splendour, making the city Croatia's most prestigious tourist destination.
But Dubrovnik also showcases some of the problems bedevilling the industry as the grey economy, tax evasion and semi-legal hotel services nibble away at revenues.
The grey economy, which illegally employs 100,000 people, is believed to suck up between 20 and 25 per cent of Croatia's tourist income.
Tourism is the main hard currency earner and, with revenues of around six billion euros ($7.7 billion), it accounts for some 20 per cent of gross domestic product.
But many small private tourist businesses here operate illegally.
Or, if they are formally registered, they don't declare all their guests to avoid paying taxes.
"In the summer, the behaviour of some of those who offer private accommodation is really shameful. For instance, they gather at the bus station and pull tourists' sleeves to lure them to stay in their houses," said Tonci Skvrce of the Dubrovnik tourist board. "Their aggressive approach sometimes causes quite unpleasant situations for guests," he said.
Analysts say the grey economy accounts for up to 15 per cent of the European Union candidate country's total GDP, which grew by 4.3 per cent in 2005 to 229 billion kuna ($40.15 billion) thanks to booming investment, tourism and exports.
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