Damir Novinić, Agency for Investment and Competitiveness In some industries we have a competitive advantage which is visible; the most is in tourism
Energy renovation as an economic promoter Energy retrofit tenders are currently won by the most cost-effective bidders
Leather and footwear industry Several local companies have been operating successfully p against the backdrop of the situation
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Croatian Business & Finance Monthly Established in 1953 Monday / 4th February / 2013 Year VI / No 0222 www.privredni.hr
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pvinternational pv international C R O A T I A N
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GAZPROM IN CROATIA
Construction of the South Stream branch The gas pipeline branch will stretch from the Croatian border with Serbia to Slavonski Brod and is valued at €60 million Igor Vukić he Russian gas giant Gazprom wants to sell its gas on the Croatian market and participate in developing a liberalised Croatian market, said Aleksandar Medvedev, Deputy Chairman and main decision maker of Gazprom after a recent meeting with the Minister of Economy, Ivan Vrdoljak. Medvedev also announced Gazprom wishes to build a network of filling stations for liquefied natural gas for personal vehicles, business vehicles and buses. A similar plan was considered by the Austrian OMV prior to the crisis, but they did not achieve it, not only because of the crisis, but because of their new strategy. They have focused recently more towards oil and gas search, and less on retail. However, Gazprom wants to try out a new approach in Croatia. They sold gas to Ina for many years, and now, in line with longterm contracts, they wish to reach the end-user with their products. Medvedev announced that the final result would be a more cost-effective gas supplier for the public. The first step has already been made. Petrokemija from Kutina signed a contract with Gazprom regarding the annual supply of
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130 million cubic metres of gas at a lower price than Petrokemija paid in the past. The contracted quantity represents 20% of Petrokemija’s annual demand. Gazprom and Plinacro will build a gas pipeline branch of the South Stream project that will stretch from the Croatian border with Serbia to Slavonski Brod. They also signed a special action plan regarding this project. The project has a value of €60 million, and each partner will finance its own half.
Mladen Antunović, Chairman of the Board of Plinacro, says Plinacro will invest €10 million in the subscribed capital and take out a loan for the remaining sum. However, this is not a high-risk project, since Gazprom will rent the entire capacity of 2.7 billion cubic metres of the gas pipeline branch. Gazprom also announced their return on investment would range around 8%. The capacity of the new gas pipeline shows that Gazprom is extremely interested in market de-
velopment. However, the reasons are certainly not humanitarian. Medvedev announced their participation in the construction of gas power plants and the production of electricity, and that they would search for buyers in Croatia and the wider region. Analysts predict the price of gas could fall in the future, which is why gas producers look for possibilities of participating in the production of added value with higher profits. More information about the projects for producing electricity will be available by the end of the year, Medvedev announced. The construction of the gas pipeline branch will begin in July 2015 for Croatia. The first gas distribution is scheduled for December 2016. This will provide a safer supply. Along the supply routes through Slovenia and Hungary, it will be possible to obtain gas without mediators at a lower price. This will open the doors to other suppliers, which could result in lower prices. The Russian company is also interested in researching gas and oil sites in the Adriatic Sea and on land. The Government should immediately invite tenders for the search for hydrocarbons, and we are ready to participate with a concrete offer, Medvedev noted.
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Privredni vjesnik Year VI No 222
( €20 million
considered as a strategic investment
STRATEGIC INVESTMENT ACT
Permits will take For each decision regarding a project, the Government will indicate its value, the investor’s name and a con investment goal and effects, an explanation of why a project is strategic will also be indicated Igor Vukić nvestment projects over €20 million that could have a positive effect on overall economic development, will be granted the status of strategic investment by governmental decision, and will enjoy all the assistance of administrative bodies. This is a summary of the Strategic Investment Act the Ministry of Economy has recently published. This led to a public debate on another tool which Croatia could use to attract foreign investors and motivate local private investors. The Ministry of Economy proposed this act, and the Ministry of Construction and Ministry of Justice, as well as departments for traffic, tourism, agriculture, culture and environmental protection, participated in its drafting. This act will now offer concrete support to investment projects, evaluated Minister of Economy Ivan Vrdoljak. According to the proposal, for each decision regarding a project the Government will indicate its value, the investor’s name and concrete completion schedule. In addition to the investment goal and effects, an explanation of why the project is deemed strategic will also be indicated. An operation group in charge of project
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realisation will also be formed, together with the leader, group members and their individual assignments. A committee, consisting of ministers and other state officials, will prepare decisions for the Government. Certain projects would be selected from the list of strategic projects for which investors could elect themselves or they could be suggested by state administrative bodies. Study with an idea and assessment The act’s proposal indicates that interested investors may be Croatia, units of local and regional administration, companies or private individuals. The Government itself can issue a public invitation to potential investors
Certain projects would be selected from the list of strategic projects for which the investors or state administration bodies could apply themselves if it evaluates that that would be of state interest. In that case the Minister of Economy would negotiate with the investor. The
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Government and the selected investor would conclude a contract that would regulate mutual obligations regarding the investment implementation. The proposal for applying for the central list of projects may contain a study with a concept description and assessment of total investment. An overview of administrative and other procedures already conducted in the implementation must be submitted. The relating documents will also have to be submitted (land registry records, ownership certificates, copies of the cadastre plan). The operation group will be assigned to obtain all additional documentation for the project. They have the right to refer to the act that envisaged
that emergency procedures imply that all procedures regarding the implementation and preparation of the strategic projects have priority in the processing of this request. Drafting of documents,
State bodies will take over issuing location building permits and licences for use of strategic projects administrative acts and all actions related to the project must start immediately and must be completed within the shortest possible period. The leader of the operation group is responsible
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( some 100,000 ha ( which is 1,7% available for economic use
of the country
Contribution to exports and energy has priority
10 days
crete completion schedule. In addition to the
In order for a proposal to be defined as strategic, in addition to the investment amount, it should employ a larger number of people and contribute significantly to the development of tourism and the economy. Future export-orientation is a bonus. A project has a greater chance of being declared strategic if it is intended for less developed areas and if it includes important traffic and energy facilities. A percentage of the use of renewable energy is also a positive factor, as well as the implementation of new technology, development of science and higher education and contribution to re-activating derelict property owned by the state. Any level of monopolistic behaviour is excluded, and strategic projects, supported by the Government, must respect the freedom of market competition. for investors regarding the implementation of their projects. In some cases they would have to wait several years to obtain various approvals from local bodies or ministries. It will have to be determined within 10 days whether a project should also include an assessment of environmental impact. If such assessment is required, it would have to be conducted immediately. State bodies will take over the issuing of location building permits and licences for use of strategic projects. It will not be nec-
The Government will be the one to decide, based on present regulations for allocating concessions for maritime property for coordinating deadlines. 10 day deadline It is highlighted that all opinions required for issuing administrative decisions must be issued
within 10 working days. If the authorised body fails to do so, the principle of ‘administrative silence’ will apply, and the approval will be considered granted. This would pose a problem
New construction enabled The Minister of Construction, Anka Mrak Taritaš, says the adopted documents on physical planning envisage new construction on 6.7% of the total surface of Croatia. Around 100,000 ha are free for economic allocation, which is just 1.7% of the country, meaning the area will not be reconstructed. Croatian development requires new energy plants, infrastructure for energy transfer and a more modern railway system. After his helicopter flight over the Adriatic coast, Prime Minister Milanović said the coast was actually not that over-constructed. There are some overcrowded areas, but they are the result of irresponsible local policies. Such cases would be avoided with the centralisation of strategic projects in state administration, Prime Minister Milanović evaluated.
essary to draft detailed schemes of physical planning for strategic projects. This has been the greatest obstacle to investment. Permits will be issued on the basis of spatial plans. According to Anka Mrak Taritaš, Minister of Construction, every county has spatial plans, and plans of certain counties and cities were also made. Some of them are not top quality, but they allow the use of space, nevertheless, said the Minister. Since it is expected that many projects will relate to tourism and the coastal area, decision making regarding concessions for maritime property will be centralised. The Government will be the one to decide, based on present regu-
lations for allocating concessions for maritime property. The State administration will define the border of the maritime property, and the expenses will be incurred by the person who filed a request for this procedure. Commissioner for Srđ The Government was guided by the recommendations of the World Bank and the results of its survey on competiveness Doing Business during the preparations for the Act proposals. According to the latest survey, Croatia ranks 84th in terms of the ease of doing business, and these types of surveys send a clear signal to potential investors. Some recommendations from the survey have already been applied. For example, the project for a golf course construction and tourist complex on Srđ above Dubrovnik has its commissioner in the Government that will lead the project towards completion. He is Darko Lorencin, Deputy Construction Minister, one of the authors of the proposals. According to Lorencin, all future preparations would be conducted by the present departments. However, the Government will oversee the implementation and provide better co-ordination. For example, together with concessions for maritime property, the Government will directly allocate concessions for cultural property. In the past, investors were exposed to high risk, since they had to obtain one of those concessions, invest time and money, not certain whether they would obtain the other required concession.
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Privredni vjesnik Year VI No 222
( €26 billion
invested in Croatia by foreign investors
( €4 billion
value of projects in the Agency’s portfolio
INTERVIEW: DAMIR NOVINIĆ, DIRECTOR OF THE AGENCY FOR INVESTMENT AND
Free service for investm In some industries we have a competitive advantage which is visible; perhaps the most is in tourism since ‘product’ as such, but they are a foundation upon which a tourist product could be built Krešimir Sočković ver the past few years, foreign investors have invested €26 billion in Croatia. The majority of this foreign direct investment projects were the acquisitions of banks and highly profitable local companies, when there were actually only a few with vacancies. Privredni vjesnik discussed investment possibilities and the problems of investors with the Director of the Agency for Investment and Competitiveness, Damir Novinić.
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What is the structure of the current foreign investment in Croatia? In terms of investment sectors, this mostly refers to the financial sector, trade and telecommunications. They are mainly acquisitions, that is, brownfield investment – investing into existing companies. There were very few greenfield investments that start from zero and have the biggest positive influence on the economy or of creating new jobs. During the last 20 years Austrians, Dutch and Germans have invested the most, accounting for over half of all investment. What are the main problems facing investors wishing to invest in Croatia? The complex and time-consuming procedures as well as their unpredictable duration are the main issues. The second group of problems is related to local administration participation in big investment projects. Investors often receive different information at the local and state level.
For a large number of investors, especially those wishing to invest in industrial production, there are much fewer problems. The problems mainly occur with investing in tourism, where ownership or the allocation of land is particularly problematic. Fragmented land and parcels, as well as more than one owner is an historical fact. However, sometimes investors themselves are not right since some speculated with investment, buying land that is not allocated for what they need. In that case, there is a need to change the spatial documentation and often that will not occur. We cannot help them in that case. According to the Investment Promotion Act, we are focused on helping investors searching for a location, project structuring, and together with the investor we go through all phases of their project up to the investment or the moment a factory starts work. What is our level of competitiveness in attracting investment, especially in relation to other regional countries? In some industries, we have a competitive advantage that is visible; maybe the most in tour-
The complex and timeconsuming procedures as well as their unpredictable duration is one of the main issues ism since there are some things, like natural beauty, that are impossible to replicate. They are not a tourist ‘product’ as such,
but a foundation on which a tourist product could be built. There is interest now, and I predict it will continue, and even increase. There are areas in industry where we are competitive. The cost of labour is higher than in some regional countries, not to mention China or India. However, investors review many factors before deciding where they will invest. They take into account price, quality and availability of work force. Political stability, which will become unquestionable when we enter the EU, is
also important. Many things that caused problems ten years ago are no longer present. We have a good business infrastructure, the language skills of our people are very good, actually the best, compared with other regional countries, and innovation capacity is also very good. When we are preparing offers for investors, we do so according to sector. Everyone knows that we will soon join the EU with a market of 500 million people, but we tell our investors much more. If they are interested in
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2 of 100 investors after visiting a location, invest
COMPETITIVENESS
ent complexities there are some things, like natural beauty, that are impossible to replicate. They are not a tourist
We keep a close eye on investor projects What is the level of institutional support for foreign investors? During the period of the first investments, the state had an agency specialised in promoting investment and providing help to investors. Unfortunately, its work was not continuous. The first agency was founded in 1996, but was shut down four years later. A new Investment and Export Promotion Agency was founded in 2002. It started work in 2004; however, it closed in 2010. It was not a good move to shut down an agency that is supposed to attract investment, prior to the crisis. This government recognised this as a problem and changed the Investment Promotion Act, improved subsidies for foreign investment and expanded the areas they apply to tourism also. It founded the Investment and Competitiveness Agency as a centhe metal processing industry, we advise them on the concentration of related schools, the number of skilled workers and regional know-how. Furthermore, we have many business zones, some of which are strong economic centres. They solved all property and physical planning issues; business and utility infrastructure are provided, while the prices of land is favourable and competitive. We have been very competitive in offering subsidies to investors after the recent changes to the provisions. In only a few months
since we have been working, we have already had ten large investors who are very interested. Perhaps those companies and investors that have been present longer here and that successfully expand their businesses are the best examples of investment possibilities. When we enter the EU, we will receive huge global publicity. To what extent can this be regarded as an opportunity for new investment? This is definitely a great opportunity. The Agency is still trying to
tral contact and help for investors. We are organised in such a way that we are able to keep a close eye on investor projects. We monitor property-legal relations, physical and design documentation; together with the investors, we examine the problems in detail, and predict the course of the investment, on the basis of which we co-ordinate meetings with all bodies of state and local administration that participate on a particular investment project. Institutional support has not been good enough, which, in addition to the crisis, is another reason why there are fewer new investments. Coordination for Investment was also founded this year. It will not work directly with the investors, but rather collect information from us on how to improve the business and investment climate. gather a team able to accept the increased interest. We are in contact with almost all embassies of countries whose investors invest in Croatia. We have prepared two investment visits, in February and April, intended for participants from EU countries. Visits to locations from several economic branches are also scheduled for those who are already prepared to invest. I expect this interest will continue and even increase in the future. However, we must be aware that of 100 investors that visit a location,
only two will invest. Investment is a much more complex process than trade, for example. The projects in our portfolio ready for finalisation are worth â‚Ź4 million. They will certainly be realised over the forthcoming years, however, there are still many investors and projects of which we are not aware. I would like if all big investors who have an idea about investing, would come and talk to us in the initial phase. We will be happy to visit the site with them, help them and vouch for them so the state also would help them.
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Privredni vjesnik Year VI No 222
452.7 million invested in Croatia over 9 months in 2012
INVESTMENT ENHANCEMENT
Private investment as exiting the crisis
Irrespective of the fact that some investors, such as Luka Rajić, manage to achieve a return on their investment (as in issues insurmountable Igor Vukić he working group for investment founded by the government of Croatia has agreed with Croatian Forests on the delivery of biomass for the Koprivnički Ivanec power plant. Ivan Pavelić, Director of Croatian Forests, participated at the meeting and hence the agreement was reached to provide 160,000 tonnes of wood chips for the power plant. Consequently, this investment, which came to a halt two years ago primarily due to the lack of biomass, will finally be implemented. The investor in the power plant is E-two-energy having German capital. The investment value is €487 million and the 20 megawatt (MW) power plant will employ 70 staff.
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Red tape - a major hurdle for investors The working group for investment, managed by Ivan Vrdoljak, Minister of Economy, is currently discussing around 50 similar projects. The working group has been founded primarily to tackle concrete problems and accelerate the implementation of projects that have already been initiated. A new strategic investment bill concerning projects which will be eligible for special state incentives is also being considered. Providing an investment is considered of strategic importance,
all the required documentation will be issued within a 10-day period. In the event that does not occur, the principle of “administrative secret” will be implemented and it will hence be implied that the authorised body was consensual with the implementation of the investment. Real property fundamental Private investment is considered as the crucial lever for exiting the crisis. Irrespective of the fact that some investors, such as Luka Rajić, manage to achieve a return on their investment (as in case of PharmaS, a pharmaceutical company, or logistics centres), many investors find local administrative issues insurmountable. Foreign direct investment has also seen a slowdown; €452.7 million was invested in Croatia over the first nine months in 2012, which is half as much as over the same period of the previous year. According to data released by the Croatian National Bank, foreign investment into property totalled €99.2 million, followed by real estate activities standing at €92.2 million. Foreign investment in recreation, culture and sports stood at €86 million, with €74.8 million being invested in wholesale and intermediation in trade, whilst €71.6 million was invested in financial intermediation. “Foreign investors primarily object to the insubstantial legal framework and frequent amendments to regulations”, stated Ivica Mudrinić, President of the Croatian Employers’ Association
Government striving to rank 20th, rather than 84th The government has decided to focus on Doing business, the report released by the World Bank, according to which Croatia ranks 84th in terms of ease of doing business and concerning investment conditions. Analyses provided by the report and hurdles mentioned will be the principal driver behind the new regulations and will be used in the activities of the Working group for Investment, as well as in other initiatives for investment assistance. According to Ivan Vrdoljak, Minister of Economy, Croatia has set the ambitious goal to rank 20th in world competitiveness survey in several years.
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( €99.2 million
invested by foreign owners in property
s a crucial lever for
n case of PharmaS, a pharmaceutical company, or logistics centres), many investors find local administrative (HUP). He added that extreme red tape adversely affects investment. Investors will opt for countries with propitious investment conditions, rapidly generating the expected return on investment. Mudrinić believes that the recession is not the principal cause of the dire economic situation in Croatia. Problems have been overlooked for an excessive period of time and the crisis has merely highlighted them. According to Mudrinić, significant steps need to be taken over the next quarter, such as budget revision or amendments to the Labour Law. Investors need to be provided concrete guarantees to be adequately treated in Croatia. Commissioner for bureaucratic maze Damir Novinić, Director of the Agency for Investment and
Competitiveness, stated that state entities would primarily focus on this issue in the near term: high-value investors will be allocated commissioners to provide them with the guidance through administrative jungle.
At the recently held presentation of Irish investment model at the Croatian National Bank, it has been emphasised yet again that low income tax is fundamental for investment attraction. Sandra Švaljek, Director of the Institute
Industrial policy strategy to indicate profitable sectors Consequently, a law has been enacted on the enhancement of investment with substantial financial incentives per job created, as well as a large number of regulations to accelerate investment. “We have a broad range of tools to implement these measures, yet we need ample time”, pointed out Novinić.
Building permits dealt with rapidly The first IKEA department store in Croatia, as well as in the region, will be constructed in Rugvica, at the eastern entry road into Zagreb. The building permit was obtained extremely rapidly – in some 20 working days. Construction will commence in spring. Vladislav Lalić, Ikea Director for Real Estate and Development in Southeast Europe, stressed that obtaining the building permit was the last obstacle to the construction of the department store and hence a tender for a building contractor has recently been invited. “It is anticipated that construction of the facility will last 12 months and the opening of the centre is scheduled for spring 2014”, announced Lalić. It has been highlighted at Ikea that there are expectations concerning the strengthening of co-operation with local companies, as well as with suppliers and producers. “Ikea has been co-operating with Virovitica-based Tvin for years and, due to its highly qualified staff, tradition in wood processing and furniture production, as well as its availability of high quality raw materials, there is immense potential for the strengthening of co-operation. We have successfully completed the negotiations with Croatian Motorways for the construction of a southern access road and on the location of toll booths on the motorway. We would have opted for a more appropriate system, yet we complied with Croatian regulations and are focused on remaining in the country. In addition to Zagreb, in the long term we plan to open sales outlets in Split and Rijeka which we believe will be highly attractive locations”, concluded Lalić. The total investment by Ikea will stand at €100 million, and Ikea is anticipating the creation of 350 new jobs and indirectly twice as many. (K.S.)
of Economics, believes comprehensive reforms of the system are an imperative. According to a research conducted by international institutions, there is currently a relatively simple tax system in Croatia. Income tax was found to have been substantially lower compared with Ireland and several other competitive countries over a period of time. Nevertheless, sadly, Croatia often lacks promotional skills. Darko Lorencin, Assistant Minister for Economy and Investment, pointed out that foreign investment was primarily attracted by the best Croatian industries and markets such as telecommunications and the financial sector. Investors were in search of the most lucrative opportunities. Hence, Croatia will be focusing on a strategic industrial policy that will clearly indicate profitable sectors in the long-term. “They will attract most EU funding and subsequently additionally attract other foreign investors”, concluded Lorencin.
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Privredni vjesnik Year VI No 222
( 3 to 4 ‘Concept One’ cars planned for delivery this year
CONCEPT ONE AT ITS TURNING POINT
Can Croatian electric car remain Croatian over the long-term? Irrespective of significant recognition achieved globally for the Rimac ‘Concept One’ supercar and its being hailed as one of the landmark events of 2012 and referred to as a Croatian product by Bloomberg, it has not received any concrete support from the state Drago Živković he development cycle of a new type of car in the automotive industry takes between three and five years and requires both high investment and risk. A young entrepreneur and innovator, Mate Rimac, is currently facing his turning point, following a more than three-year period of development of his electric supercar ‘Concept One’. The time has arrived for its launch on the market, implying high investment and big risk. Rimac currently lacks funds required for production in Croatia and the major hurdle is homologation, since that requires largescale investment. “As a result, we are focusing on the provision of developmental services and the sale of components to the automotive industry, as well as searching for strategic partners who will provide the appropriate funding level. Meanwhile, we have been producing an extremely limited quantity of special vehicles that need to pass individual homologation tests in importing countries”, explained Mate Rimac. The first strategic partner will be a currently unnamed Spanish automotive company that has bought the first ‘Concept One’ unit. According to Rimac, longterm co-operation is anticipated. He pointed out that he has currently been focusing on “business-to-business” co-operation, since it fosters development without the need for production and the direct sale of cars to end buyers. The first unit sold will be delivered during January and the
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profit (some €750,000, according to previously released information) will be reinvested to cover six months of work on further development. Thereafter, the future is uncertain. Car engine components Rimac stressed that he would not give up his ambitious objective of becoming a significant producer of supercars. Nevertheless, he requires large investment that he is currently unable to provide by himself and consequently needs to sell his know-how and technologies to other companies in order to survive. Hence, he currently sells car engine components (primarily battery systems and engines), whilst working on the development of further cars for other companies who are entitled to produce them under their own brands subsequently. He is planning to deliver 3 or 4 Concept One cars this year, with planned annual production during the car model life cycle is
15 to 20. In addition, every two years, Rimac plans to present a new model whose price will be halved and thus exponentially increase market share and capacity. The second product he is relying on is an electric motorcycle and he plans to sell several dozen this year. This was supposed to be a gift to buyers of ‘Concept One’ cars, but has become a separate product. Negotiations with the Croatian Bank for Reconstruction and Development (HBOR) Irrespective of significant recognition achieved globally for the Rimac ‘Concept One’ supercar and its being considered as one of the landmark events in 2012 and referred to as a Croatian product by Bloomberg, it has not received any concrete support from the Croatian state. “Unfortunately, the project value has not been recognised locally thus far. I hope this will change in
the near-term”, stated Rimac. He added that he has contacted the Croatian Bank for Reconstruction and Development (HBOR) concerning the possibility of financing production capacity expansion, as well as the completion of the project and the launch of new. Anton Kovačev, Management Board President of HBOR has extended his support and Rimac is hoping to find a solution to his problems, so that his project can remain Croatian and he will be able to focus on creating new jobs. Should he succeed, Rimac will be able to retain, perhaps even increase, his currently high share of local production with his car. “Almost all the fundamental car components are Croatian products and even the tools used in the production of the components have been produced from Croatian sub-contractors”, emphasised Rimac. Certain generic components, such as discs, callipers for brakes, windscreen wipers and safety belts are imported.
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( 3.2%
inflation in 2013
9
( 15.2%
average rate of current unemployment
CROATIAN NATIONAL BANK
Recovery of economic activity Positive contribution to GDP growth of 0.3% should come from investment in the public sector as well as exports of goods and services Vesna Antonić gradual recovery in economic activity is predicted for 2013, but real GDP rate could reach just 0.3%. Positive contributions to growth should come from investment, mainly in the public sector, but also through the export of goods
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Rate increase of sustainable growth demands implementation of reforms and services. On the other hand, personal spending will still have a negative effect on GDP considering movements in the labour market, a fall in real available income and anticipated further, although slower, debt reduction by households. State spending will also similarly decrease. The main negative risk for achieving economic growth is related to an ambitious investment programme of public companies, as highlighted in the recent Newsletter of the Croatian National Bank. Concerning the labour market, the central bank does not anticipate any positive movements this year. As a consequence, the average rate of surveyed unemployment could
increase in 2013 to 15.2%. Under the conditions of a further decrease in employment, very mild growth of nominal and a fall in real salaries is anticipated. Increase in foreign debt A deceleration in the average inflation of consumer prices to 3.2% is anticipated in 2013 under conditions of weaker local and imported inflationary pressure. Administrative decisions related to EU harmonisation (cancellation of the zero VAT rate and an increase in tobacco duty) will increase the level of inflation however, but to a lesser degree than in 2012. This will have a positive effect on the export of goods and services, which will exceed imports, and the growth of nett transfers from the EU budget could also play a positive role. After a stagnant 2012, foreign debt could continue to increase under the influence of high state debt on the foreign markets. Croatia’s risk premium and expenditure of financing parent banks are visibly more beneficial than the indicators from the end of the second quarter of 2012. This reflected positively on the primary market for Treasury bills from the Ministry of Finance as well as
corporate debts abroad. However, these movements failed to influence the local interest rate, especially for long-term loans, which has a negative effect on local credit activity. Also, better clients are showing visible signs of substituting local financing with foreign financing. The fall in total lending to companies accelerated even more, pointing to a trend of debt reduction. The same trend was also visible across the public sector. Considering the high level of corporate and public debt, as well as weak business and consumer optimism, the trend of debt reduction will continue. This is an additional burden that will slow economic recovery. The banks’ slow reaction to improving foreign financing criteria shows there are limiting factors also on the side of offering loans. Kuna remains stable Monetary policy will still be based on supporting the stability of the exchange rate of local currency to the Euro, and kuna liquidity in the banking system will remain high. In the event of any pressure on the exchange rate, the HNB is ready to respond with foreign currency intervention or other instruments of monetary policy.
In 2013, a mild growth in credit is anticipated due to the continuing negative movements of lending offers and demands, and considering the fact that recent experience has shown that the reach of an expansive monetary policy in terms of credit growth, is limited. According to the state budget for 2013, the total state deficit could reach 5.8% of predicted GDP. The harmonisation of taxes with EU regulations was incorporated in the tax system, which additionally increased the total tax load. It is envisaged that any expenditure increase will exceed income increase, where expenditure for investment and financial recovery of hospitals would increase the most. With such a deficit, the state debt will continue to increase. Although the mood of the market towards countries in emerging markets improved, in Croatia also, such budget movements could cause a deterioration in the credit rating and an additional risk premium increase. The increase of the rate of sustainable growth demands implementation of reforms that would increase production and export potential within the economy, and significantly improve the business climate.
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Privredni P Pr Privr r vjesnik Year Y Ye ea VI No 222
( from 10,000 to 22,000 jobss created by energy efficiency renovation
CONSTRUCTION INDUSTRY IS (NOT) A CONTENTIOUS SECTOR
Energy renovation as a
Energy retrofit tenders are currently won by the most cost-effective bidders who often cannot provide an effective en Boris Odorčić nergy consumption auditors in public sector buildings have recently signed two-year frame contracts for two regions – Zagreb and Pannonian Croatia. The value of the frame contracts is almost €0.35 million and this marks the start of the energy retrofit programme of public sector buildings. Energy consumption audits and certification are planned for around 300 stateowned buildings with an overall usable surface area in excess of 1,000 m2. An energy consumption audit is a prerequisite for the implementation of the EnergyEfficiency Programme and the energy retrofit programme in public sector buildings striving to foster energy-efficiency. Potential energy savings are estimated to be €0.67 million annually due to enhanced energy-efficiency in buildings. Zagreb has opted for joint bidders ABACO, the Slavonski Brod-based ALFA-inženjering and the Đakovo-based Inel. The contracted work is valued at €0.2 million. Pannonian Croatia opted for the same joint bidders and the contract is worth slightly over €0.13 million, according to data released by the Centre for Monitoring Business Activities in the Energy Sector and Investment (CEI). It is important to highlight that energy-efficient renovation in buildings has proved extremely successful as an economic promoter in several EU countries. Germany implemented such a programme in over 1.3 million households, creating over 350,000 new jobs. In Ireland, thermal insulation fitting on fa-
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çades – which is one aspect of an energy retrofit programme in buildings – which comprises of fitting of thermal pumps, energyefficient windows, solar panels and photovoltaic cells – created around 3,000 jobs. Façade retrofitting in Ireland resulted in annu-
1% annual rate of implementation of energy-efficient renovation in buildings in the EU al energy savings of around €450 per household. In addition, Ireland received a return of €5 per €1 invested. The energy retrofit programme in Ireland clearly showed the fundamental role of political support through legislative framework and incentives. ESCO emerging Dorijan Rajković, President of Croatian Association of Façade Thermal Insulation Systems (HUPFAS), stated that productivity in the construction sector has been declining for over 40 months. “The construction sector is currently considered contentious. Nevertheless, this has to be changed, primarily due to the energy retrofit programme. There is huge demand for work, since 80% of buildings in Croatia have not been provided with adequate thermal insulation”, emphasised Rajković during a panel discussion entitled ‘Successful European Projects of Energy Retrofit Programme in Public and Private Buildings’, organised by HUPFAS. Ana Pavičić-Kaselj, from the Department for Resource Economics, Environmental Protection
and Regional Development at the Institute for International Relations, pointed out the fact that the public sector is merely a small area to tackle. “High-rise residential buildings are a real challenge. Consequently, we have opted for the energy retrofit programme implementation in public sector buildings first in order to set an example for residential buildings”, she explained. Nevertheless, in the current situation, energy retrofit tenders do not consider the cost-effectiveness criterion. “Hence, energy retrofit tenders are currently won by the most cost-effective bidders who often cannot provide an effective end-result and subsequently it is not possible to esti-
mate energy savings. Therefore, there needs to be a principal project guaranteeing energy savings and consumption rationalisation as the sole effective method of the energy retrofit programme implementation”, highlighted Ana Pavičić Keselj, who has until recently been Assistant Minister for Energy Efficiency at the Ministry of Construction and Physical Planning. She also highlighted the specific objectives and obligations of Croatia towards the EU, primarily referring to a 20% reduction in greenhouse gas emissions by 2020, a 20% increase in share of renewable energy sources in direct energy consumption, and to become a 20% more energy-efficient coun-
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( €119 million
required investment in energy efficiency renovation
an economic promoter
nd result which is essential as it guarantees savings and rationalisation of energy consumption also currently provides favourable conditions for ESCO companies. “We need to boost our industry, encourage solar panel and photovoltaic cell producers, improve façade systems and energy-efficient woodwork, as well as create jobs. In order to enhance energy-efficiency of a 1,000 m2 building, we need 50 staff. Since in Croatia there are around 11,000 public sector buildings, the implementation of energy retrofit programme can create between 10,000 and 22,000 jobs and the required investment is in the region of €119 million”, reiterated Ana PavičićKaselj, adding that a €1 million investment in energy retrofit programme implies the creation or preservation of 19 jobs, whilst the same figure in renewable energy sector is 7.
Ireland received a return of €5 per €1 invested try compared with 1990. In order to achieve the set objectives, the legislative framework has been amended several times. Hence, the Law on Efficient Energy Use in Direct Consumption (ZUKE) is encouraging companies in the construction sector to provide energy services (ESCOEnergy Service Company). During the last several years, only a few companies applied for and obtained the licence to provide energy services, primarily as a result of an inadequate legal framework and a large number of legal hurdles. “Currently, following the amendments to the Law, Croatia has seen a considerable number of ESCO companies and the state will provide a model of
work for all those interested”, she stressed. Energy as fundamental resource It should be stressed that ESCO companies are companies providing energy services and implementing measures for enhancement of energy efficiency on facilities or user areas implying a certain level of financial risk, since the payment of provided services is based on the overall improvement of energy-efficiency and other agreed criteria. Furthermore, in addition to the Law on Efficient Energy Use in Direct Consumption (ZUKE), there have been amendments to the overall Budget Law, which
Adrian Joyce, the Renovate Europe Campaign Director of the European Alliance of Companies for Energy Efficiency in Buildings emphasised that energy is an essential resource. “Consumption and imports of energy are increasing continuously. Each country needs to assume responsibility in order to increase energy efficiency and reduce greenhouse gas emissions, as well as provide an action plan and set specific objectives that need to be achieved by 2050”, he stated. The annual rate of energy renovation in buildings in the European Union currently stands at around 1%. “We have not been informed on whether this implies partial or comprehensive
renovation. What we are aware of is the fact that the renovation rate needs to reach 3% and this level needs to be maintained until 2050 which will imply €830 billion for the construction sector yearly”, highlighted Joyce adding that ambitious renovation programmes could create around 2 million jobs. Non-repayable funding Owen Lewis, until recently the Director of the Sustainable Energy Authority of Ireland, and Professor Emeritus of Architectural Science at UCD Dublin, stated that Ireland, which imports 90% of energy and is hence energy inefficient, has initiated the energy renovation of over 1 million buildings. In addition, general public awareness has been raised on the importance of the issue. Moreover, the best system of energy classification of buildings in the EU has been developed. “Building Energy Rating – BER certification has a crucial role in energy retrofit programmes in buildings. Ireland currently holds around 300,000 BER certificates and has hence created a large database. We have also seen a significant increase in the number of auditors of energy performance of buildings who enter the required data into the system. In the case that the registered certification does not comply with regulations, the system automatically informs the authorised persons who subsequently start with an audit of the collected data”, pointed out Lewis, adding that in Ireland there are also programmes to obtain non-repayable funding in order to encourage the general public to become involved in energy-efficient renovation of their homes.
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Privredni vjesnik Year VI No 222
( 9,000 people employed
( 400,
in the leather and footwear industry
Borovo ann
OUTLOOK FOR LEATHER AND FOOTWEAR INDUSTRY
Opportunities for succ irrespective of hurdles
Several local companies, such as Varaždin-based producer Bambi, one of the leading children based Borovo, Galko and the fast-growing producer, Inkop, have been operating successfully Sanja Plješa here are currently 9,000 people employed in the Croatian leather and footwear industry, which is a huge success bearing in mind current local market conditions, since only 8,792 people were employed in large Croatian shipyards at the end of 2011. It is important to highlight the fact that the leather
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Leather and footwear sector is primarily exportoriented, exporting around 70% of the output and footwear sector primarily employs less educated staff and thus reduced employability. Consequently, this sector has a significant social role. Sales revenue in leather and footwear industry accounts for 1.3% of total industry revenue and of gross value added. Irrespective of the presence of leather and footwear industries both at local and in international markets, they are primarily export-oriented. “We are anticipating a significant strengthening of the position and competitiveness of the leather and footwear industry following EU accession, since local leather and footwear industry production focuses on keeping abreast with trends in the European Union. Nevertheless, thorough restructuring and market repositioning are imperative”, highlighted Zlatko
Rabik, President of the Supervisory Board of the Croatian Society of Leather and Footwear Manufacturers (HDKO) and owner of the Zlatna nit company. Tradition and market experience The footwear industry in Europe is highly developed. It uses a vast range of materials, such as leather and textile fabrics, plastic and rubber materials. It comprises 26,000 companies, with total revenues standing at €26.2 billion, which accounts for 0.5% of gross domestic product in the EU. 388,000 people are directly employed in this sector; two thirds of the total production is concentrated in Italy, Spain and Portugal and there are no large producers. There are 13,900 companies in leather processing and production sector, such as fashion, the automotive industry, protection and hobby products, with a total revenue of €12.6 billion and employing 98,000 staff. Regarding the principal advantages of the Croatian leather and
footwear industry on the EU markets, Rabik pointed out the high level of expertise, skills and
professionalism in production, highly developed production capacities, high quality raw materials (leather from cattle), as well as the geographical vicinity of EU markets. In addition, a high degree of professionalism in product development,
Borovo: footwear and bullet proof vests for the security sector The company that was formerly considered a giant, employing 23,000 staff, has managed to survive. Production at Borovo has been re-launched according to the Management Board. Irrespective of its liabilities, which currently stand at €20 million, the company is anticipating a recovery from the crisis following current restructuring. It will focus on market niches, primarily in special use footwear, in the oil and gas industry, pharmaceuticals, agriculture, footwear and bullet-proof vests used by security forces, as well as a wide range of protective clothing for workers for winter, summer and even desert conditions. Borovo is opening stores in Serbia, Montenegro and Bosnia and Herzegovina and will subsequently open representative offices in Russia, the Middle East, South America, Canada and China. Additionally, liabilities exceeding €20 million will be settled in exchange for property, whilst liabilities to suppliers will be settled through loan reprogramming and disinvestment. (S.S.)
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000 pairs of footwear
BOŽIDAR LEDINKO, PRESIDENT OF THE CROATIAN SOCIETY OF LEATHER AND FOOTWEAR MANUFACTURERS
ual production
cess s
n footwear manufacturers in Croatia, Vukovary against the backdrop of the current situation flexibility and serial production are similarly significant. Moreover, we have the potential to produce so-called European products, in addition to our long tradition of production and our extensive market experience. Nevertheless, the leather and footwear industries also have several crucial weaknesses, such as insufficiently developed marketing processes and strategy, low profitability, inadequate capital equipment of local producers, as well as high production costs. According to Rabik there are several fundamental factors for the success of the Croatian leather and footwear products in EU markets, such as high quality design and products, competitive prices, communication with customers and successful distribution channel management. Croatian products wellknown throughout the EU Several local companies, such as the Varaždin-based producer Bambi, one of the leading children footwear manufacturers in Croatia, the Vukovar-based Borovo, Galko and the rapidly growing producer Inkop, have been operating successfully, against the backdrop of the cur-
rent crisis and irrespective of the fact that a large number of companies in this sector have drastically reduce or even halted production. Bambi has over 30 outlets throughout Croatia and currently employs 150 staff. It manufactures children footwear as a result of the advice provided by well-known orthopaedists, bringing together comfort and quality and innovative design. The Borovo factory has been producing leather, rubber and rubber and textile footwear as well as a wide range of technical rubber products for over 80 years. It has 138 outlets throughout Croatia and Slovenia, with annual production currently standing at 400,000 pairs of all-purpose footwear, as well as 500,000 metres
Top quality design and competitive prices fundamental for success in the EU market of V-belts. Galko is a considerable exporter and is the holder of the Zlatna kuna award for quality, as well as an award for the most successful of medium-sized enterprises. There is also Inkop, currently employing 278 staff. Annual output stands at 200,000 pairs of footwear for export, as well as 100,000 pairs of special use footwear. It produces for the French company Mephisto and its director, Vlado Rafaj, stated that lohn jobs account for just 15% of production.
Leather and footwear industry as social shock-absorbers he Croatian Society of Leather and Footwear Manufacturers (HDKO) has recently marked its 60th anniversary. Privredni vjesnik talked with Božidar Ledinko, President of HDKO, about the outlook for the leather and footwear industry and about its extensive business experience.
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are dealing with a labour-intensive industry and extremely low salaries. Leather and footwear industries have been severely affected by the crisis, resulting in redundancies and employees resigning over excessively low salaries. Leather and footwear industries are social shock-absorbers due to their revenue and salaries.
How many companies does the Croatian Society of Leather and Footwear Manufacturers comprise and how successful are they in overcoming the crisis? The Croatian Society of Leather and Footwear Manufacturers currently comprises 60 registered members. The overall Croatian leather and footwear sector comprises 129 companies, of which 120 are small, 8 medium-sized and 1 large. They are all primarily involved in lohn jobs. Companies with own-brand product lines have been the most severely affected by the crisis, as they need to invest in marketing and production. The purchasing power of the general public has weakened substantially against the backdrop of the crisis, consumption has been reduced and costs are excessive. 70% of production is exported, with 90% going to European markets with lohn jobs accounting for 80% of production.
How will they position themselves in the EU? We are optimistic, irrespective of the uncertainties, due to our high quality resources and workforce, as well as flexible production. Our transportation costs will be significantly reduced following EU accession, freight forwarding will cease, and we will be substantially closer to Europe, which will expand our potential.
What is the outlook for leather and footwear industry? The current situation is considerably complex and difficult, as we
Are large international fashion chains considered a threat and how interested are they in takeovers or acquisitions of Croatian companies? International fashion chains are a threat, yet I do not believe they will acquire companies in Croatia. They might consider acquiring the better companies. Nevertheless, it is uncertain whether they will consider acquiring companies involved in lohn jobs or those with own-brand product lines. Large retail chains primarily produce leather items in the Far East. However, I believe it is certain they will be interested in acquiring quality local companies with high quality products. (S.P.)
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Privredni vjesnik Year VI No 222
( 90% of production takes foreign markets
TVIN Wood Industry celebrate their 99th anniversary
Survival is regarded as success in recessionary times At the first sign of the crisis, five years ago, TVIN conducted expert assessments and adopted production restructuring programmes Goran Gazdek VIN Wood Industry from Virovitica, the most successful and largest Croatian company in the wood industry, has celebrated their 99th anniversary. The company from which TVIN developed was founded in 1913, when the Association for Casket Manufacturing built a sawmill. The joint stock company Drach took over the company in 1917 and gradually turned it into the current company. Through various forms of production organisation, TVIN has been producing state-of-the-art products since that time. Today, TVIN is a limited liability company wholly
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owned by former or present employees. They sell almost 90% of their production on the foreign market (England, France, Germany, Ireland, Belgium and the Netherlands), mainly due to their co-operation with the Swedish company, Ikea. The recession has been putting a strain on production for the last five years, resulting in lower demand, but it also taught us how to reduce costs and become competitive on the market. Survival is regarded as success in such conditions, said TVIN’s CEO, Ivan Slamić. He added they did not hesitate. At the first sign of crisis, they conducted expert assessments and adopted production restructuring programmes.
12 factories They currently employ 920 employees in 12 specialised TVIN factories in Virovitica, Grubišno Polje, Pitomača and Županja. They are also considering new vacancies in line with their envisaged investment. We did not downsize. We lost only workers who met retirement conditions. We did not reduce salaries; a worker who meets the norm earns the same salary as in 2008. However, today we produce in smaller series; we must be faster and more flexible, and the work force must adapt to this. We can raise standards with discipline, work and meeting norms, but workers must understand that, Slamić said resolutely.
According to TVIN, over the next two to three years, they will have to keep an eye on their production costs and prices as well as quality. Their main goals include technological development and the design of new products adapted to market needs in order to preserve their present capacities until demand increases. In 2012, we upgraded our lacquer workshops in Virovitica and Pitomača, and we are preparing two larger investment projects to remain at the top. However, we will reveal more when the projects are completed. Only work, responsibility and collectiveness of all of us who regard TVIN as our home will secure a bright future in the EU, Slamić concluded.
Croatian parquet flooring manufacturers’ success at Domotex
Products for demanding markets ight Croatian parquet flooring manufacturers were present at the International Trade Fair for the Floor Covering Industry ‘Domotex 2013’, held from 12-15 January in Hanover. The presentation was organised by the Croatian Chamber of Economy in co-operation with the Ministry of Agriculture. Pan parket, Parketi Požgaj, Spačva, Mopar, Drvoproizvod, PPS Galeković, Exportdrvo and for the first time DIN Novoselec presented their products across 425 m². This has been the most important trade fair for Croatian parquet flooring producers for many years now. Companies like Pan parket, Požgaj and Mopar con-
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firm the importance of presenting themselves at the largest and the most fashionable parquet trade fair in Europe, both for companies and branding. Their appearance at this one and other
similar trade fairs, as well as the manufacture of high-quality twolayer and three-layer parquets, these companies have managed to achieve recognition and build a brand in the EU. Using state-of-the-art technology and oak, the most valuable Croatian raw material, our parquet producers keep up with the trends on foreign markets, achieving high competitiveness, said Igor Barbarić, Secretary to the Association of Wood Processing Industry with CEE. Furthermore, companies like Galeković, Spačva, Drvoproizvod and DIN Novoselec achieve high sales results for classic type parquets as a result of the world
renowned Slavonian oak. We own an extremely valuable and quality product we can place on any demanding market. In the EU and Germany specifically, local producers sell around 80% of oak parquet that enables us to achieve positive business results. If we could lower prices further, our exports would increase several times. However, we must not neglect new markets, for example Turkey and Russia, but must keep up with the trends of threelayer parquets that will open new markets like India or China, explained Zdravko Požgaj, owner of Parketi Požgaj and President of the Wood in Construction Group with the CCE. (P.V.)
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( 30 gingerbread biscuit (licitar) shapes produced by Blažeković
MORE THAN JUST A CRAFT
Heartfelt economics Our work and production are based on skills, tradition and deep enthusiasm whilst these and similar products are not sold in stores and retail centres
Svetozar Sarkanjac ixty years ago Franjo Blažeković, a honey and wax producer, founded his workshop in Osijek. The tradition of gingerbread biscuit production and the production of other honey and wax products was successfully passed on to his daughter and her family in 1985. In 2009, Antonija Ranogajec (his daughter) was awarded the status of both artistic and traditional craft by the Croatian Chamber of Economy, which consequently gained wide recognition as one of the best honey and wax workshops in the country. In addition to the most widespread shapes of gingerbread biscuits such as heart, baby and tamburitza, the workshop also creates an additional 30 gingerbread shapes. Antonija Ranogajec has taken part in a vast array of significant projects and has contributed considerably to the intangible Croatian cultural heritage with her unique artistic expression and artisanship. A landmark event, an exhibition entitled Gingerbread Cookies (Licitar) and Honey Production- A Centuries Long Tradition organised by the Zagreb-based Ethnographic Mu-
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seum occurred at the time when the craft was faced with severe difficulties. Thereafter it participated at Zoete Zonde exhibitions in Rotterdam, as well as an international exhibition in Rome. Nevertheless, the highest recognition was when the workshop was included on the UNESCO List of the Intangible Cultural Heritage of Humanity. The Blažeković unit has proved that a small craft-centre can even now succeed in preserving traditional values and set an example for future generations, showing that determination and commitment are the cornerstones of success and the idea behind it being deep enthusiasm. Globalisation stifling tradition Irrespective of the fact that the production of gingerbread biscuits (licitars) considerably exceeds the production of candles, due to the predominance of the global market and candle products from the Far East, candlemaking by Blažeković still continues with hand pouring. Furthermore, candles are embellished with stunning wax appliqués, preserving the traditional production method, as in the case of gingerbread biscuits and
honey cakes. Gingerbread biscuits are made from sugar, flour and water. They were once classified as food products, but have metamorphosed into souvenirs or used for decorative purposes. In addition to the principal product, the Blažeković craft-shop is also engaged in the production of
honey biscuits as final food product. Nevertheless, they are produced only on special occasions, such as fairs or religious festivals and. In accordance with tradition, they are made solely from chestnut honey. According to Ranogajec, there are only some 20 similar producers in Croatia and only 5 producers have preserved the centuries-long traditional method of production.
Museums as customers The sale of gingerbread biscuits used to be linked exclusively with local festivals and fairs, but are now sold throughout the year, primarily as gifts or souvenirs. Nevertheless, the product is not to be merely placed on a shelf for decorative purposes, since there is an intriguing story in the background. Such biscuits, primarily the heart-shaped style, are a result of a long tradition, craftsmanship and deep enthusiasm - their major competitive advantages. “Many Croatian museums are our customers, such as the Zagreb-based Ethnographic Museum, the Vukovar-based Museum and the Osijek-based Museum of Slavonia, to meet the requirements of their souvenir shops. Our gingerbread biscuits are significantly different from classical retail items, as they are a result of long tradition, artisanship and deep enthusiasm. Similar products are not usually sold in stores and retail centres”. I prefer to call it “heartfelt economics”, since there is a story, as well as long tradition behind these products which makes them unique. We would not want our products to be classified as ‘usual’ retail items”, pointed out Josip Ranogajec.
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Privredni vjesnik Year VI No 222
( 60%
of Graševina wine produced in Slavonia
( 2,000 tonne
production capacity of House of Honey
‘En primeur’ tasting of Malvasia and Graševina NEW INVESTMENT FROM PIP
Wine tasting aiding investment decision-making Sanja Plješa ollowing the last year’s success of the first en primeur tasting of young Malvasia, the second tasting of young Malvasia and Graševina will be held in the Esplanade hotel Zagreb in February. The wine tasting will be organised by associations Vinistra and Graševina Croatica and sponsored by the Croatian Chamber of Economy, bringing together over 50 wine producers from Istria, Slavonia and Podunavlje. In addition, there will be a presentation of the visual identity of the Vina Croatia brand, as announced by Ivica Matošević, President of the Vinistra Association of Wine Growers and Wine Makers of Istria. According to him, en primeur tasting of young wine originates from the French regions of Bordeaux, Burgundy and Rhône.
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Graševina as a Croatian wine brand The idea behind this concept of wine tasting is the presentation of young wine aimed primarily at professionals in the wine industry and gastronomy to highlight the potential of the grape harvest, as well to assist in investment decision-making concerning the production of various wine varieties. This year the Vinistra Association was joined by the Graševina Croatica Association, an association of Graševina producers from Slavonia and Podunavlje, presenting their young wines. This tasting style is
implemented during a period with few wine events and we are striving to present young wine varieties that are yet to appear on the market both to professionals as well as the general public, tourists and visitors. It is simultaneously an opportunity to decide on their subsequent wine orders. Wine regions, as well as harvests, differ considerably and hence I believe that buyers and distributors need to be fully advised on our product range in order to assist their investment decision-making”, stated Matošević. Young wines from the last year’s harvest are ready for drinking in April and May this year and consequently young Istrian Malvasia and Slavonian Graševina will appear on the market not earlier than in three to four months time. “The forthcoming en primeur tasting is an opportunity for the joint appearance of two associations of wine producers. Croatia comprises four wine regions – Istria, Dalmatia, Slavonia and Podunavlje, as well as its central part, generally known as “hilly Croatia” and every region has its own association of wine producers and wine growers. All the associations jointly appear on the market, brought together under the Association of Wine Growers and Producers by the Croatian Chamber of Economy under the Vina Croatia Brand which we use for our presentation globally”, pointed out Vlado Krauthaker, President of Graševina Croatica Association. He added that Slavonia has been recognised as a wine region that primarily produces Graševina, accounting for 60% of overall Graševina production in Croatia. Krauthaker pointed out that the European Union has protected Graševina and thus it has become a Croatian wine brand.
Direct link between honey producers and the market Krešimir Sočković he company PIP, the largest Croatian bee product producer, has recently opened a new facility in Pisarovina, near Zagreb. The investment slightly exceeds €4 million and 30% has come from their own funds with financial support from the Ministry of Science and the Ministry of Agriculture, as well as with a reasonably priced loan from the Croatian Bank for Reconstruction and Development and a guarantee provided by the Croatian Agency for Small Business. The new investment will significantly boost production and increase exports. Exports account for over one third or between 33% and 38% of current revenue that previously ranged between €3.5 million and €4 million. The main concept behind the new project is the direct link between Croatian honey producers and the market. Hence, production material for honey producers, as well as their additional training and the purchase of bee products, product processing and preparation for the market will be provided in the new facility. According to Ivan Bralić, founder and Management Board advisor, the Management Board, the headquarters and production have been relocated to the new facility. “Our technology in this area is the most innovative in Europe. In addition, we have used our local expertise, as all equipment in the facility has been pro-
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duced in Croatia”, highlighted Bralić. PIP currently employs 43 staff, mainly women and with subsidiaries in Bosnia and Herzegovina and Serbia it employs a total of 70 people, whilst co-operating with around 800 sub-contractors. The company has employed an additional 4 staff in the new facility and is anticipating the creation of 10 new jobs over the next six months. Export growth The company initially launched honey production in glass jars, and subsequently expanded its product range to cover propolis and royal jelly production and has recently included a vast array of pharmaceutical products. Its broad range of products is its major competitive advantage, accounting substantially for recognition throughout the region and beyond. “In my opinion, the production of value-added products has been soaring over the past several years. In the case of the Farmakol project, on which we have co-operated with the Faculty of Pharmacy and Biochemistry, a significant breakthrough has been made both in Croatia and Europe. We have seen considerable export growth in both in the region and throughout the European Union”, emphasised Bralić. The annual output of honey by PIP is slightly below 700 tonnes, whilst production capacity of the new facility is 2,000 tonnes.