Before the break-up of former Yugoslavia, Croatia had a thriving industrial sector concentrating on aluminium, chemicals, petroleum and shipbuilding.

The shipyards of Pula, Rijeka and Split have made Croatia the world's third largest shipbuilding nation.
The chemical industry was concentrated at Krk, Rijeka, Split and Zagreb; machine-tool manufacture at Karlovac, Slavonski Brod and Zagreb.
Heavy electrical engineering at Zagreb and textiles at Zagreb and in north-western Croatia.

After the break-up, Croatia was faced with the task of switching from a state-controlled to a privatised economy while rebuilding its infrastructure following a devastating war and dealing with the loss of its former markets. Unfortunately, the post-independence government was not up to the task. Instead of grappling with an economy in tatters, Tudman's regime turned the sale of state-owned assets into a vast scheme for enriching its cronies and rewarding its supporters. Politically connected tycoons took control of profitable enterprises, milked them for cash and allowed them to fall into ruin.
Wary of the political climate, foreign investors stayed away from Croatia in the 1990s and turned to other Central and Eastern European countries in transition.

In the past, a third of Croatia's national income came from tourism but the wars of the 1990s in Croatia and the surrounding region kept visitors away in droves. Although tourism receipts have been climbing the last few years providing a much needed influx of cash to Dalmatia and Istria, it has yet to achieve prewar levels.

Upon taking office in 2000, the new government was faced with the residue of a banking crisis, slowing industrial output and an unfavourable balance of trade. Exports are decreasing and imports are increasing even in the agricultural sector; except for wine, wheat, corn, poultry and eggs, most food is imported.

From the point of view of the average Croatian, life is difficult with no gleaming light at the end of the tunnel. The average wage is less than 3000KN (US$350) per month, and a high percentage of the population is unemployed (21% in 2001). Although inflation is low (6.2% in 2000), the reliance on imports means that prices are higher in real terms than they were before independence. There's a widespread perception that the standard of living has fallen since the prewar years and that the social safety net has eroded.

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