With 95% of Yugoslavia’s sea coast, Croatia played a vital role in the defence of the federation during the Cold War between Nato and the Warsaw Pact. Now the country, which has become a tourist haven, is looking for investors to turn its former military bases into luxury resorts.

Croatia’s stunning Dalmatian coast with its mix of picturesque fishing villages, Roman remains and fashionable resorts - the marinas at Dubrovnik and Hvar are now filled with yachts in summer - is attracting growing numbers of tourists. The lower-end is also catered for; Europe’s main budget airlines all fly to Croatia.

Given the large contribution tourism makes to Croatia’s GDP, the government is now looking to develop the old military properties along the coast. According to some media reports, the value of the sites inherited from the former Yugoslavian army amounts to around €10bn.

Kupari military resort, which was destroyed in Croatia’s 1991-1995 war of independence, is being transformed into a €100mn luxury resort by local group Avenue Ulaganja, Vienna-based Avenue Osteuropa and Marriott International hotel management company.

A similar project is planned on the Muzil peninsula, where Croatia wants to turn a former military recruitment centre into a high-end resort with several hotels, a golf course, a naval museum and even a hot air balloon launch pad, according to the tourism ministry. Croatian state property management office DUUDI announced in February it received bids for the Muzil project from France’s Bouygues Batiment International and US company Forbes Real Estate.

More than 20 years after the war, and 25 years since Croatia declared its independence from Yugoslavia, these sites are no longer used by Croatia’s now professional army, which has been downsized and modernised. Croatia entered Nato in 2009.

“Brownfield investments in Croatia are very welcome as there are various objects that can be enabled for economic purposes, including tourism. Preparations for an action plan to turn unnecessary military zones into tourist developments were recently announced,” a spokesperson for the tourism ministry told bne IntelliNews.

To date, the defense ministry has handed over more than 300 former military barracks to DUUDI for management, DUUDI told bne IntelliNews.

“The former military properties represent great potential for investments, particularly for tourism projects, due to the large area they cover and their position often in very attractive locations,” a DUUDI spokesperson said.

Not all are being transformed. Curious tourists are also attracted to old military properties and relics of the communist regime such as Goli Otok (Naked Island), the location of a former top secret high security political prison, and the military tunnels on Vis Island, but neither is yet for sale.

'Sun and sea'

Tourism was very popular in Croatia even before the country’s independence but back in the 1980s, tourist offerings in Yugoslavia were focused on the beaches. “Although 'sun and sea' remains the biggest and most popular tourist product in Croatia, in recent years there has been a significant change in the number and variety of tourism offers, with the aim of prolonging the season. The effect of this can be seen in last years’ results in the pre-season and post-season where the majority of months had double digit growth,” the tourism ministry said.

Last year, Croatia registered a record year in terms of both tourist traffic and income. The number of tourist arrivals rose 8.3% to 14mn, while the income from foreign tourists rose to €8bn from €7.4bn. With war now a distant memory, the country also benefited from political uncertainty and security issues in rival destinations such as Greece, Egypt and Turkey.

Developing the tourist sector is important for Croatia in its bid to take advantage of every opportunity for growth as it emerges from a deep recession. Croatia became the 28th member of the EU in July 2013, after a decade of negotiations, but its problems did not end with joining the bloc. The Adriatic country managed to post economic growth for the first time in 2015 after six consecutive years of decline, but unemployment is well above the EU average, debt is close to 90% of GDP and corruption is still an issue in the country.

The new government, led by ex-pharmaceuticals executive Tihomir Oreskovic, is pushing ahead with much needed reforms to attract investors to the country, but looks likely to fall before making any progress.

The tourism industry, a key sector of the economy accounting for 18.1% of the country’s GDP last year, will be an important part of any future government’s strategy. Tourism Minister Anton Kliman has already announced investments in the sector should reach €670mn this year, 35% up on the year.

This article is part of a series bne IntelliNews is running to mark the 25th anniversary of the split of Yugoslavia on June 25.