PV International 0223 by NEstar

Eight public-private partnership projects prepared The size of certain projects is overwhelming for potential Croatian investors

Branko Roglić, CEO of the Orbico Group Under such conditions Croatia must be managed as a company facing bankruptcy

Minister of Economy Ivan Vrdoljak on the gas market In two years Croatia will have the cheapest gas in the EU

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Croatian Business & Finance Monthly Established in 1953 Monday / 4th March / 2013 Year VI / No 0223 www.privredni.hr

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GfK RESEARCH ON LIVING STANDARDS IN CROATIA

Spending on cars and entertainment decreasing with spending on food and drink up A highest income of €939 found in Zagreb, whilst the lowest was €704 in Slavonia. In relation to the research conducted a year ago, expenditure on food and drink saw a 9% increase, with house expenditure up by 5% High cost telephony All Croatian households show substantial monthly outgoings on food, drink and housing. These are closely followed by the large number of household outgoings related primarily to mobile telephony services (92%) and transport (83%). 77% of Croatian households are spending on clothing and footwear, with nearly two thirds of households sourcing health care services (62%).

Igor Vukić ccording to research conducted by GfK, 2012 saw 32% of households in Croatia not purchasing durable consumer goods against the backdrop of a severe economic crisis. In addition, the number of households spending on goods not classified as those satisfying basic needs is shrinking dramatically. There was a 21% fall in consumer spending on culture, entertainment and recreation, 12% on clothing and footwear and a 21% decrease in health care spending per household. As a result, the number of households saving for additional education plummeted by 25% in 2012. In relation to research conducted by GfK a year ago, the figures showing household spending on food, housing, fixed and mobile telephony remained unchanged. Nevertheless, expenditure on food and drink has increased by 9% and housing rose by 5%. Moreover, there has been substantial increase in expenditure, ranging between 4% and 8%, on clothing and footwear, medical services, as well as on tobacco and cigarettes. However, culture and entertainment, mobile te-

lephony and education saw a decrease ranging between 7% and 10%, whilst expenditure in other categories of products and services have remained unchanged. By the end of 2012, the average Croatian household disposable monthly income stood at €840, a 5% drop from €881 over one year. 7% of income above sufficient Total household expenditure of €800 is almost identical to that of 2011. Nonetheless, according to a subjective estimate of those questioned, €1,194 is the amount needed to meet the basic needs of an average Croatian household. Irrespective of the fact that 76%

of Croatian households are believed to have below average income, there are those who generate sufficient or above sufficient income to meet the basic costs of living and their other requirements. Thus, 7% of Croatian households stated their disposable income is above sufficient to meet the basic needs, although 13% estimated their income to be “sufficient to meet their needs”. A high income of €939 was found in Zagreb, with the lowest of €704 in Slavonia. Consumer spending on food and drink accounts for 33%; 54% of Croatian household income is spent to meet the basic existence needs when housing expenditure is also considered.

The number of households spending on goods not classified as those satisfying basic needs is shrinking dramatically Moreover, 46% of Croatian households show a monthly spending on culture, recreation and entertainment, 45% on tobacco and cigarettes and 39% on durable consumer goods. Nevertheless, 30% of Croatian households showed spending on education (on average €69 per month).

Privredni vjesnik Year VI No 223

( around €1.5 billion ( around €2 billion invested by public companies last year

could be invested by public companies this year

EIGHT PUBLIC-PRIVATE PARTNERSHIP PROJECTS PREPARED

Justice Square (Trg pravde), wo is in search of a private partner

Tenders from private partners should be invited in March. Contracts with selected contractors would be signed durin start, according to information provided by the Centre for Energy and Investment Igor Vukić he Centre for Energy and Investment (CEI) has prepared eight public-private partnership projects worth around €0.32 billion. Tenders for private partners should start in March. Contracts with selected contractors would be signed in the second half of the year when construction could start. This

The size of certain projects is overwhelming for potential Croatian investors was stated at the CEI Open Day, during which projects were presented to potential private investors. The presentation was monitored by representatives from several foreign embassies, who will provide feedback on projects to potential entrepreneurs in their countries. The size of certain projects is overwhelming for any potential Croatian investors, although the CEI expects the potentially profitable projects could motivate local players to join forces. Six schools – one project The largest public-private investment scheduled for implementation, is Justice Square (Trg pravde), a complex of judicial buildings. The construction of this complex would include court buildings and an underground garage and would cost €0.17 billion. Expansion work is envisaged for the General Hospital, worth €40 million. Six schools in the Coun-

ty of Varaždin were joined under one project worth €23.1 million. Four schools in Istria would represent one public-private project worth €19.5 million. The Croatian State Archives would be provided with new buildings, a project worth €18.4 million. The Museum of History would be moved to the building of former tobacco factory at a cost of €16.8 million. The neuropsychiatric hospital in Popovača will receive new wards for €16.5 million, and the construction of two new schools in Dubrovnik will be a project worth €13.6 million. Everyone gains from the implementation public-private projects. Public partners will obtain facilities whose construction will not burden the budget or create public debt, whilst the private partner achieves profit. The CEI invested a lot of effort in preparing these projects, and when their implementation starts, the process will be unstoppable, pointed out the Minister of Construction, Ivan Vrdoljak, who fully supports Centre employees. The Director of CEI, Dragan Marčinko, says the projects were prepared according to a standard method and their implementation will not be affected by political changes. Investors can refer to CEI for information on PP projects and the planned investment of public companies. Last year, public companies invested around €1.5 billion, and this year they plan to invest around €2 billion, Marčinko highlighted. Utilisation deadlines The Agency for Public-Private Partnership is prepared for investors. Its Director, Damir Juričić,

Prepared public-private projects • Justice Square in Zagreb - tender in March - contract term – 30 years - capital value – €0.17 billion • Varaždin Hospital - tender in May - contract term – 27 years - value: €40 million • Schools in the County of Varaždin - tender in May - contract term – 27 years - value: €23 million • Schools in the County of Istria - tender in May - contract term – 27 years - value: €19.4 million says they have prepared 11 manuals with guidelines for implementing projects that are available to investors on the Agency website. According to the basic model, the private partner builds and maintains buildings, and the public partner pays the lease. Af-

• Facility for the Croatian State Archives - tender in June - contract term – 27 years - value: €18.4 million • Croatian Museum of History - tender in April - contract term – 27 years - value: €16.8 million • Hospital in Popovača - tender in May - contract term – 27 years - value: €16.5 million • Schools in Dubrovnik - tender in May - contract term – 27 years - value: €13.6 million ter 25-40 years of utilisation, the facility is handed over without a fee to the public partner. The contract regarding the publicprivate project of Justice Square would be concluded for a period of 30 years. The private partner would build the facilities cover-

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( 25 to 40 years usual duration of PPP contracts

rth €0.17 billion g the second half of the year, and then construction could procedure of public procurement. The contract term is 27 years.

ing 50,000 m2 intended for four courts and the Judicial Academy. The existing town-planning concept solution envisages the construction of four main buildings that would be directly connected with a large underground garage that offers the private partner the possibility to additionally commercialise the space. The tender should be invited in March and would be based on the principle of competitive dialogue. According to the definition, this procedure is a dialogue with the interested investors for the purpose of developing one or more appropriate solutions that can meet their demands. Such a procedure is somewhat time-consuming so the CEI expects the contract on the Justice Square to be signed in December this year. Therefore, the contractor of new facilities in the Neuropsychiatric Hospital Popovača could be known by July. The tender will be invited in March, and will be managed based on the limited

Tender invitations in spring In April, a tender will be invited for a private partner for the reconstruction of the building for the future Croatian Museum of History. The contract, with a term of 27 years, should be concluded in August this year. Danijel Kušljić, CEI Project Manager, says the building permit for transforming the former building of the Zagreb Tobacco Factory (TDZ) into a museum has been obtained. May is scheduled for the tender for schools in Dubrovnik, Istria and Varaždin. The contracts should be signed in September. The appropriate decisions of the local administration for project implementation are yet to arrive. The tender for the General Hospital in Varaždin will be invited for in May, and the contract should be signed in September. Here, the private partner will be in charge of procuring medical equipment in addition to construction work. New surgery and haemodialysis facilities will be built, and the majority of building permits has been procured. June is scheduled for the tender for an additional facility for the Croatian State Archives near Zagreb. The facility should meet the additional storage needs. The contract should be signed in October. The construction work would last two years and the private partner would manage the building and collect the lease for a further 25 years. CEI invites potential private investors to gather information and apply for the tender, since money for the lease has been procured for projects that will be covered by the state budget.

€4 BILLION TOTAL REVENUE

€0.25 billion - Ina nett profit Ina nett profit totalled €0.25 billion in 2012 with revenue coming in at €4 billion, mainly as a result of higher oil and gas prices. According to Board President Zoltan Aldott, Ina significantly increased investment in Croatia during the last year. Total investment stood at €0.17 billion, capital investment in local research and production reached €99.45 million. €30.5 million was invested in modernising retail areas, double that of 2011. Last year, the retail segment managed to achieve a profit of €2.5 million, despite the crisis and reduced consumption of derivatives. Research and Production improved business efficiency, and a positive contribution was made by Crosco’s results in Libya. On the other hand, total hydrocarbon production decreased due to war in Syria and lesser quantities of extracted underwater reserves.

Oil production increased by 8% in Egypt, and oil production in Croatia dropped as a result of over-exploited fields. Refining saw a loss, but improved efficiency and achieved higher refinery margins and a higher share of motor fuel sales (from 60% to 66%). Last year, Ina managed to improve its financial situation, decreasing nett debt 27%, to €0.89 billion. The debt/capital ratio decreased from 38.8% to 30.8% over the year, according to the Ina report. (I.V.)

€23.57 MILLION NETT PROFIT FOR KONČAR GROUP

Profit figures better than anticipated

Last year nett profit or the Končar Group totalled €23.57 million, exceeding their plans by 12.4%, according to the statement provided by them. Total consolidated revenue stood at €0.37 billion, or 4.7% more than in 2011. A total of €0.16 billion in sales revenue was achieved locally, the same amount registered on foreign markets. The most significant foreign markets include Germany (€18.12 million), Sweden (€14.29 million), the Czech Republic (€13.39 million), B&H

(€10.12 million), Finland (€8.71 million) and Turkey (€6.88 million). Capital assets (capital, longterm reserves and long-term obligations) were €72.29 million higher than capital assets and average state of supplies, pointing to a good resource structure. Končar’s current assets in relation to short-term obligations are three times higher, and point to solid solvency. “We are extremely satisfied with last year’s results, since we managed to operate profitably and increase revenue despite the crisis. We must also highlight that the majority of export revenue was achieved in the demanding EU market last year, which confirms our competitiveness and quality. Končar’s place on the global market will be secured by continuous investing in employees, development and production technologies,” said Board President, Darinko Bago. (I.V.)

Privredni vjesnik Year VI No 223

( 17 countries ( between €820-840 millionn Orbico Group operates

company turnover in 2012

BRANKO ROGLIĆ, CEO OF THE ORBICO GROUP

The EU will become o

We can increase revenue by bringing in investors, and reduce expenditure only by downsizing public spending. The recovery. It is also poor administration, and when corruption is added, which is everywhere, than we are in a bad situ Jozo Vrdoljak rivredni vjesnik spoke with the CEO of Orbico Group, Branko Roglić, on the state of the Croatian economy and plans for his companies that operate in 17 countries. Roglić invested profits in business or production and his companies have never been frozen.

How was your last business year? You opened new markets… Even though we have yet to receive our business results, I can

Under such conditions Croatia must be managed as a company facing bankruptcy say Orbico Group registered a turnover of between €820 million and €840 million. These results do not include our four new markets we opened last year: Hungary, the Czech Republic, Slovakia and Poland. The companies in these four countries are undergoing restructuring. The year before, we opened the German and Austrian markets. I am very pleased with that, since we earned a profit of €1.5 million in Germany. We introduced new brands so are anticipating our turnover to exceed €900 million. What are the features of the Croatian market? The biggest problem of the Croatian market is collection of debts. However, the fact we ‘patched the holes’ in Hungary from Croatia is one cause of our business problems in Croatia. When we

I am sure Slovenia will ratify the Croatian accession treaty What do you, as Honorary Slovenian Consul, think about the dispute over Ljubljanska banka? I have always had a realistic view of this dispute. It should be observed at two levels. It has been revealed that in addition to the claims of Croatian savers, Ljubljanska banka has claims on Croatian companies. The second level is Croatian EU accession. I know for a fact the majority of the Slovenian public want Croatia to join. The claims of Ljubljanska banka on these companies and the debt the bank owes to Croatian savers should be observed at two levels, since the people entrusted the bank with their savings. I am convinced Slovenia will ratify the Croatian accession treaty and that these disputes will not cause the two countries to jeopardise their friendly relations that have been nurtured for centuries. took over the company in Hungary, we discovered the signed balance sheet did not respond to the actual one, and that company personnel were incorrectly structured. In addition to problematic debt collection, business in Croatia is under the strain of higher VAT and other parafiscal and fiscal charges. This year I became the full owner of Orbico Zagreb, the original company of the entire Orbico Group, excluding our companies in Slovenia and Bos-

nia and Herzegovina. However, despite the crisis we achieve excellent results in some markets. Our profits in Bulgaria, Slovenia, Bosnia and Herzegovina and Moldavia exceeded our expectations, and that in Germany is excellent in relation to our turnover. Are you planning any new investments this year? We are planning to complete our investment projects on these four markets. Despite having a

consolidated balance sheet, we are working on consolidating all companies since many things can be done here, within the Orbico Group and the banks. Also, the debt of the Orbico Group is minimal. Including the investment in these four countries, our debt does not exceed 13% of Group turnover. Our goal is to have a maximum annual debt equal to 4% of annual profits and that we participate in business with 50% of personal capi-

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( over €900 million ( around 13% anticipated turnover this year

Orbico Group debt including investments

our local market

imbalance between public spending and the real sector is not the only thing standing in the way of economic ation tal. This is our goal, and we are not far from achieving it at the moment. Furthermore, these are the parameters of the healthiest world banks. What will EU accession bring for Orbico? We will be faced with consolidation. The EU will become our local market, and we will be able to rationalise our business and reduce expenditure that will reflect positively on our business results. Rather than from a warehouse in Hungary, the Hungarian market will be supplied from Ivanić-Grad. Some companies within our system will be integrated. Is tourism your greatest comparative advantage? Tourism is definitely our greatest advantage. Of course, we do have others. This includes our stone works that was completely ruined with poor privatisation. We also have wood in which we must focus more on design. Furthermore, we have Slavonia, which is underused. It is not only a granary. We must develop other cultures there as a foundation for products we will export and place through tourism. What can be done to reduce the known seasonality in tourism? How can we prolong the season? I believe Minister of Tourism, Veljko Ostojić, knows the answer to this question, and he has already taken very good measures. The recently presented Tourism Development Strategy is very good. We must all work on developing new tourist products. We must become more polite and try not to turn our great

The most successful companies in Croatia are those that are owned by foreigners What is the quality of Croatian managers? To put it simply, I would say our managers are good, and that we should monitor them. We must remember that we spent a long time under socialism where managers thought that they did their share merely by coming to work. Younger managers have been raised by the mentors of those times. Today, work must be constantly developed. To put it simply, this means better results must be achieved at the lowest cost possible. The most successful companies in Croatia are those that have foreign owners or are owned by Croatians who acquired their expertise abroad and have a business vision. Croatian EU accession should bring changes. Entrepreneurs with capital, who have developed their business for generations and know exactly what to do in a given moment, will arrive. It is certain they will use Croatia’s comparative advantages. They will know how to set up profitable business for their companies in Croatia. EU accession will be an occasion for serious foreign investors who will not only invest, but who will also bring in a new quality business model. pride into arrogance. For example, when you enter an Italian restaurant, you will be amazed by the fact they recognise the person they live from. Croatians behave like owners, which has taken its toll and brought us to the present situation. Everyone drives expensive cars in Croatia. On the other, abroad you know exactly who can afford what. We are not modest or rational in either business or daily life. Croatia is a three-four star destination, and we must build hotels accordingly. We must do something to attract the elderly or retired. What is your comment the credit rating fall? Will the price of capital go up? The credit rating fall will not increase the price of capital, and this is the only good thing about it. However, a fall still remains a poor indicator and sends a negative message. To put it simply, this means we will have to take extreme measures in terms of reducing public spending, since the measures so far have not been strong enough. The state must be managed responsibly, just like a company. In this situation, Croatia must be managed as a com-

pany facing bankruptcy, which means expenditure must be cut and turnover must increase. Cutting expenditure means reducing public spending. I am sorry but there will be wonderful people and workers in Croatia whose salary will reduce. However, the survival of Croatia must be taken into account now. Therefore, I am surprised with the reaction of those who think 5%-10% income cuts will jeopardise the entire system. What is to be done? If the budget does not stabilise, everything will be at stake. We can increase revenue by bringing in investors, and reduce ex-

Investors lack confidence in our legislative system penditure only by downsizing public spending. The imbalance between public spending and the real sector is not the only thing standing in the way of economic recovery. There is also poor administration, and when corruption is added, which is everywhere, than we are in a bad situation. We have reduced cor-

ruption, but it is still not within normal limits. This is what discourages investors. Also, investors have no confidence in our legislative system. Overall, I am not sure a lot can be done now in terms of increasing income, but a lot has to be done in terms of reducing expenditure to create balance between public spending and the real economy. Everyone is warning us about this. Maybe someone will say it is easy for me to talk since I am not at risk, but the fact is I have always taken care of the safety of my employees and my companies have never been frozen. What is the problem of this government in terms of attracting investment? I think they came across larger problems than expected, and this is why they are under time pressure. In order to activate the system, they are making moves faster than they should. This is why mistakes are made. I am not sure whether the higher VAT rate will be a good solution. I think the budget would be higher at the original rate. The structuring of a tax scale is a complex and timeconsuming process and it cannot be done overnight.

Privredni vjesnik Year VI No 223

( 21,859 or 23.6%

of 92,492 businesses reported on investment

( €1.97 billion

invested by businesses in Zagreb

FINANCIAL AGENCY

€3.63 billion invested into fixed assets The largest investment was reported in the processing industry, construction, trade, electricity and gas supply industry, steam and air-conditioning supply industries (41.7%) and 44.1% in equipment. Other tangible and intangible fixed assets saw an investment value of 14.2% over the same period, with investment in locally produced equipment rising by 9% over the first nine months of 2012 over the first nine months of 2011. Nevertheless, investment in foreign-produced equipment fell 0.7% during the same period, as did investment into residential buildings (down 0.2%) during the same period, whilst investment in other types of buildings increased 3.2%.

usinesses invested €3.63 billion in fixed assets during the first nine months of 2012, 2.4% up over the same period of 2011, according to the latest data released by the Financial Agency. It has to be stressed that most businesses did not invest in fixed assets during this period but 21,859 or 23.6% of 92,492 businesses reported on their investment in their statistical reports, although 70,633 businesses or 76.4% did not.

Primarily private investment Investment in various sectors by ownership showed considerable variations during the period from January to September 2012. Private-sector investment accounted for 70.8% of total investment (up by 1.4% compared with the same period in 2011). Investment in fixed assets by state-owned companies increased by 4% and accounted for 16% of the overall total. Additionally, the level of investment reported by other ownership sectors mixed-ownership sector and co-operative ownership sector - stood at 13.2% of overall total investment. In accord-

Private-sector investment accounted for 70.8% of total overall investment ance with the report provided by FINA, investment in fixed assets by businesses according to size, showed large businesses

dominant with 48.7% share of total investment. Their share decreased slightly in relation to the previous period, whilst the share of small businesses increased, accounting for 37.1% of total investment. On the other hand, that of medium-sized businesses stood at 14.2%. Investment in fixed assets by small businesses

rose 3.9%, large businesses were 2.2% up, although medium-sized businesses saw a drop of 0.6% which resulted in an overall 2.4% increase in total entrepreneurial investment during the first nine months of 2012. According to the investment structure, investment in construction was the most prominent,

County differences The largest investment was reported by investors in four economic areas totalling €1.93 billion, 53.3% of total investment: in the processing industry it was €0.62 billion (17.4% share), construction industry (€0.55 billion or 15.1%), trade (€0.48 billion or 13.4%) and electricity and gas supply and steam and air-conditioning supply (€0.27 billion, accounting for 7.5% in total investment). Investment in fixed assets in various counties showed noticeable deviations; 9 counties saw an increase and 12 saw a reduction in fixed asset investment. Zagreb recorded a value of €1.97 billion, (54.4% of total investment), followed by investors in Split-Dalmatia County (€0.25 billion and a share of 6.8% in total investment), Istria County accounted for €0.24 billion (6.8%), Primorje-Gorski Kotar County (€0.2 billion and a 5.4% share) and Zagreb county with €0.16 billion and a share of 4.2%. (V.A.)

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( €0.3 - €0.6

cost of each cubic metre of gas sold by local distributers

MINISTER OF ECONOMY IVAN VRDOLJAK ON THE GAS MARKET

In two years Croatia will have the cheapest gas in the EU Croatia already produces two thirds of its required gas. The production price ranges between €0.16 and €0.2. With new supply routes and new fields coming on stream, I do not see any reason why a cubic metre of natural gas should not cost around €0.26 in two years from now or sooner Igor Vukić here is no reason why Croatia should not have the cheapest gas in the EU during the next two years, Minister of Economy Ivan Vrdoljak pointed out during a meeting with the members of the Croatian Employers’ Association (HUP) held to discuss the Strategic Investment Act. However, the Minister did not have to put a lot of effort into presenting the benefits of the Act. HUP President, Ivica Mudrinić, expressed his support for investment efforts in his welcoming speech. Let the Ministers drag investors by their hands to Croatia if needed. But we need more than that, Mudrinić said. He added that many unsound regulations and excessive tax pressures in Croatia do not make it a

country in which to see a sound return on investment. The President of the Association of Small and Large-Sized Companies within HUP, Petar Lovrić, referred to a €930 fine he had to pay when inspectors found a burnt CD in his workshop. Lovrić says inspections have been relentless since the beginning of the year, and companies, barely surviving the crisis, pay fines for trivial or minor offences. Profit rather than loss Minister Vrdoljak was asked how long the price of gas for industry would be higher than the price for households. “I will soon go to Qatar, and would like investment in the LNG terminal to succeed. Not only because this would lead to new construction work, but also to gain diverse resources and stronger competition,” Vrdoljak said. The gas price offered by local distributors is between €0.31 and €0.57 per cubic metre. The Minister announced the prices will drop when the market

opens. Gazprom representatives also announced an awakening of the market during their recent visit. Croatia already produces two thirds of its required gas. The production price ranges between €0.16 and €0.2. With the new supply routes and new fields coming

fect the price. Instead of three or four larger distributers, Croatia has 36 small distributors, which is not sustainable. Vrdoljak says the Ministry discussed whether there were some regulations that could force them to concentrate, but this is difficult to achieve by decree.

Rather than three or four larger distributors, Croatia has 36 small distributers, which is not viable on stream, I do not see any reason why a cubic metre of natural gas should not cost around €0.26 in two years time or even sooner, Vrdoljak pointed out. He showed with some examples what will a 30-50% price reduction mean for some industries. Petrokemija d.d. from Kutina pays €0.39 per cubic metre for gas as a production raw material. The company finished last year with a €24 million loss. With lower prices, this could be transformed into annual profit of €13.3 million. This is money that could be reinvested or for the prices of artificial fertilisers to be lowered, and then everyone will benefit again, Vrdoljak said. 36 small distributors Hrvatska elektroprivreda (HEP), which pays €0.41 for one cubic metre, would reduce their costs. Vrdoljak also pointed to the inherited problem of too many gas distributers whose costs also af-

The price of gas will also be discussed with INA representatives, and the Government does not intend to sell its share in the company for now. Vrdoljak announced the project for promoting energy efficiency in building design and construction. The project is running slow due to administrative harmonisation, search for financing resources and lack of know-how in planning. It is not enough to copy successful models, like the German. We must take other measures, and I am convinced we will soon reach applicable solutions. When we manage to save energy costs in 30 large public buildings, it will be easier to do the same with private houses. Something similar will happen with the Strategic Investment Act. After a few bigger investment projects, the experience will be used to realise smaller and medium-sized investment projects, Vrdoljak concluded.

Privredni vjesnik Year VI No 223

( 9.000

( 500.000

beekeepers registered in Croatia

hives owned by them

INTERNATIONAL BEEKEEPING FAIR 2013, BJELOVAR

Croatian beekeepers preparing for the EU market Beekeepers need to primarily focus on retaining the current high quality of products and additionally work on the design and sales promotion, says Martin Kranjec, president of Croatian Beekeepers Association Goran Gazdek eekeeping Fair at Bjelovar-Bilogora County is the largest beekeeping fair in the region. The 2013 fair covered 120 beekeepers from throughout Croatia, Serbia, Slovenia, Bosnia and Herzegovina, Finland, France and Austria, attracting around 7,000 visitors. Dario Mustač, one of the youngest beekeepers, has won many awards. In 2012 his locust honey was proclaimed quality champion at the Osijek-based exhibition and his honey biscuits prepared according to the traditional recipe were also awarded. His current product range covers locust honey, linden honey and meadow honey. “I am merely an enthusiast and have been in beekeeping for 3 years. I own 30 hives producing 600 kilos and am planning

to expand and become a professional beekeeper”, says Mustač. Austrian experience In Austria the state provides hives and queen bees worth €300 for start-up beekeepers and consequently there are around 300 new beekeepers per year. Almost 90% of beekeepers remain in beekeeping and some become professionals. “Croatia needs to consider similar measures”, ac-

cording to Wolfgang Messmer, an Austrian beekeeper. “Due to the high quality of their products and a wide range of innovations, Croatian beekeepers have vast potential in the European Union whose annual imports stand at 200,000 tonnes”, highlighted Messmer. Croatia adopted the National Beekeeping Programme three years ago. The state provided €2.4 million for beekeepers in 2012, which is double that of 2011 and it is planning to provide similar funding in 2013 and over the next two following years. “We believe beekeeping is an extremely important branch of the economy and are anticipating clustering and the formation of co-operatives. Education is fundamental, as well as creation and preparation of quality projects in order to foster the absorption of

EU funds”, emphasised Tihomir Jakovina, Minister of Agriculture. Beekeeping on the rise As a result of these measures, last year saw a slight increase in the number of beekeepers and beehives - there are currently 9,000 registered beekeepers owning 500,000 hives. “It might have even been a result of the recession, as alternative sources of income are currently fundamental. There is an increasing number of young beekeepers who have not inherited this business”, explained Martin Kranjec, President of Croatian Beekeepers Association, adding that beekeepers need to primarily focus on retaining the current high quality of products and additionally work on the design and sales promotion of honey and bee products.

THE FOOD PROCESSING INDUSTRY FOR THE FIRST NINE MONTHS OF 2012

€0.47 billion in exports ccording to data provided by the Financial Agency, gross profit (revenue exceeding expenditure) generated by the food processing industry over the first nine months of 2012 stood at €123.6 million. 1,434 entrepreneurs employed 44,211 staff, generating total revenue of €3.15 billion, total expenditure of €3.03 billion, and investment of €130 million. The food processing industry (Podravka, Kraš, Dukat, PIK Vrbovec, Ledo and Vindija, to name a few of the larger), managed to

retain its international market share with exports of €0.47 billion with foreign revenue by increasing by 5.9%. Moreover, employment in the food processing industry rose by 1.9%, total revenue increased by 3.2%, expenditure up by 2.8% and gross profit rose by 11.9% with fixed asset investment up by 4.4%. As a result of a relatively healthier revenue over expenditure ratio, operational effectiveness saw a slight improvement compared with the first nine months of 2011. Companies in this indus-

try are an extremely important, primarily due to their high level of involvement in enhancing employment, production and exports. During the first nine months of 2012 according to the overall results of business activities, the food processing industry accounted for 1.6% of overall business numbers, 5.2% of the people employed, 5.2% of total revenue and expenditure, 4.6% of total exports, 3.7% of gross profit and 3.6% of fixed asset investment. (V.A.)

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( 145 dm stores ( around 26% in Croatia

their market share of beauty and health products

INTERVIEW: MIRKO MRAKUŽIĆ, DIRECTOR OF DM

We are delighted to sell Croatian products We want to give all Croatian producers the possibility to place their products on our shelves as there is definitely room for co-operation Krešimir Sočković rogerie markt is a wellknown chain store that started to expand in this region when almost no other foreign investor had the courage to do so. As a result of this brave move, today it has stores in every larger city in the region. For many years they have been considered the most desirable employer and a store people like to shop at, due to their excellent communication with employees and customers. Their satisfied workers have the highest average salary in the trade sector, and customers always return, thanks to their loyalty card policy offering products at more favourable prices. Privredni vjesnik spoke with Mirko Mrakužić, Regional Director of dm (Croatia, Bosnia and Herzegovina, Serbia, and Montenegro) about the company’s work in Croatia.

What is the secret of your good public rating? There is no secret. We have been investing in our employees for many years now. Our entire business is based on the philosophy – Here I am a man. Here I shop. Our good mutual relations have to reflect on our customers. And customers have recognised this as well as many others wishing to work for us. Very low staff turnover proves we know how to work with people. All lmost 95% of our employees stay with the company for a long period. od. I am a good exx-

ample of this with my 18 years of experience. You have been present on the Croatian market for a long time now. Are you satisfied with your position? We registered our company in Croatia in December 1994. dm was the first international trade company that chose Croatia as a country in which to expand, and one of rare companies that believed in this market. We opened our first store in May 1996. Today we have a total 145 stores in Croatia. Our growth rate was good, not too slow and not too fast, enabling our workers to grow with the th company. In the first year, we opened two stores. opened another six, and Then we ope then tthe pace accelerated. Today, we open 8-10 stores a year.

We have 76 suppliers and producers from Croatia with over 1,300 product What is the competition like and are you satisfied with your share? The competition is similar to any other activity. This is good for customers, and it keeps us alert. Our share of the entire market of beauty & health products stands at 26%. We have a 77% share in other beauty & health product companies, and are very pleased with this. We are satisfied with our development rate and the fact that the arrival of competition on this market offered our customers the possibility to shop in these stores at lower prices.

What is the quality of your cooperation with local suppliers, and what criteria do they have to meet to be able to place their products on your shelves? Our co-operation with local suppliers is extremely good. We work with 76 suppliers and producers with over 1,300 products, which is almost 10% of the total number of products on our shelves. What we want to do is give each Croatian producer the opportunity to place their product on our shelves; help them position themselves and obtain better conditions and product presentation. Unfortunately, there are not many Croatian producers of cosmetic products, so few of these products of local origin cannot be found on the shelves. Ever since dm started its work in Croatia, we have been co-operating with a few Croatia companies and grown together as a result. Can you help Croatian producers to access the regional market and beyond? We can certainly help them. They can place their goods under their or our brand. Each market is specific, but there are products with potential, i.e. Croatian sea salt, which is sold in the Czech Republic and Slovakia. Croatian products in dm stores across the region are appreciated. There is certainly room for co-operation. If anyone has a product, they should contact us, and we can draft a project. This can include production of olive oil, beauty products or similar. We will do all it takes to realise it.

Privredni vjesnik Year VI No 223

( €2.7 million

total donated by Zagrebačka bank

( €0.9 million

donation and sponsorship value by HT in 2011

CORPORATE DONATIONS

Humanitarian projects irr recession In compliance with the Income Tax Act, non-cash or direct cash donations or contributions up to 2% of annual business revenue are considered as taxdeductible expenses although non-cash donations are eligible for VAT Drago Živković orporate social responsibility also covers donating; as opposed to sponsorship, donations are wholly unconditional and hence enjoy privileged tax treatment: in compliance with the Income Tax Act, non-cash or direct cash donations up to 2% of annual business revenue are considered as tax deductible expenses. Nevertheless, non-cash donations are eligible for VAT, as such donations are considered non-deductible. Direct cash donations are not eligible for VAT, since financial transactions are not considered as “deliveries of goods or services”. The largest corporate donors in Croatia are, naturally, the largest companies and banks. Zagrebačka bank (Zaba) has,

through 14 programmes, donated €2.73 million for 1,139 projects throughout Croatia. Over 400 projects applied for funding last year and 15 projects entered a second round with an initial donor value of €1,350. The remaining funds up to €100,000 were allocated through ‘Facebook’ voting by 16,000 individuals. The winners of the official contest for an original product having a traditional motif or a product using traditional craft skills, organised in co-operation with the Croatian Chamber of Trades and Crafts, were also selected in this manner. The product ILI ILI, a pendant lamp, produced by Studio Grupa and designed by Filip Despot, Ivana Pavić and Tihana Taraba, won the first award of €20,000. Zagrebačka bank launched its annual donor programme in 2005 and the

Adris Foundation – the most active corporate foundation in Croatia Corporate foundations, which are an innovation in Croatia, are the most widespread channel for donations in the West. The largest and most active corporate foundation is the Adris Foundation, financed by the Adris Group through 1% of profit made in the previous year. It has so far donated almost €3.2 million over the last six years, of which €0.64 million was allocated to the most vulnerable social groups. It donated €0.6 million for scholarships to the most talented pupils and students, €0.08 million for cultural development and creativity, €0.83 million for knowledge and innovation and €0.69 million for environmental protection and natural heritage preservation. It donated slightly over €0.4 million from its sixth round of donations and applications for the seventh round are anticipated in accordance with the usual schedule, at the end of April.

winners have been selected via Facebook since 2011. It has not reduced its budget for donations irrespective of the recession and this year the donor level will remain on par with previous years. INA demining Amongst a large number of projects and institutions that INA has supported over the last several years, it particularly emphasises its long-term partnership with the Association SOS Children’s Village Croatia, which provides welfare services for around 250 children having no parental care. In addition, in May 2011 INA donated funds for demining in Stari Jankovci municipality and in 2012 it provided assistance in demining the area around Petrinja. Also, it made a direct cash donation to the Intensive Care Unit at the Traumatology Institute of the Rijeka-based Clinical Hospital Centre, and a direct cash donation was made to the Clinical Hospital Centre Zagreb for the purchase of two devices for the Department of Neonatology and the Intensive Care Unit at the Paediatric Clinic. INA points

out its Volunteer Club that encompasses some 200 employees gives the company tremendous satisfaction. Since its foundation in September of 2011, Volunteer Club members have participated in 19 volunteer initiatives throughout six Croatian Counties and Zagreb. They provided assistance for the beneficiaries of the Centre for Autism, the Croatian Downs Syndrome Association, the Centre for Rehabilitation, the Croatian Association for Assistance to Persons with Mental Re-

INA is rightly proud of its Volunteer Club that encompasses some 200 employees tardation, social care homes and kindergartens and also participated in many ecological initiatives. Applications for donations are submitted to INA throughout the year and projects involving children, youths and people with special educational needs, innovation, as well as projects in cul-

www.privredni.hr Business & Finance Monthly

( €1.29 million

value of Holcim donations from 2003 to 2012

respective of consecutive year, HT is the primary partner of UNICEF in Croatia; for the fourth consecutive year, it is the principal sponsor of the Museum of Contemporary Art and has continued its co-operation with the Croatian Olympic Committee and the academic community. “We participate in such projects to help in problem-solving and implementing projects of major importance to the community and society as a whole”, pointed out by HT. Irrespective of adverse market conditions, HT will continue to provide support to a wide group of socially useful initiatives.

ture and environment protection, are given priority. HT and UNICEF The value of direct cash donations and partnerships with cultural, sporting and educational institutions made by Croatian Telecom (HT) in 2011 stood at almost €0.9 million. Modern technology projects, as well as projects in digitisation of businesses, education and humanitarian projects are fundamental. HT has participated in a large number of humanitarian projects by providing associations with its telephone services. Most HT involvement in humanitarian projects is long-term and its employees are also often directly involved. In 2012, and for the seventh consecutive year, it participated in a project entitled “Together We Are Stronger” where 20 projects were selected from 125 applications and each granted a direct cash donation totalling €76,270. This traditional competition for donations to projects proposed by employees will continue through 2013. In addition, also for the seventh

Mercator providing for childcare homes Donations from Mercator have so far been estimated at several million kuna. Due to the dire economic situation, donations are given primarily to vulnerable social groups, through non-cash donations of food products and

Zagrebačka bank made direct cash donations to 1,139 projects throughout Croatia the provision of support to educational projects. In addition to corporate donations, Mercator is also striving to contribute at a personal level. At the end of 2011, its employees rather than involving themselves in team building, decided to paint the premises of a Zagreb-based Care Home for the Elderly, in addition to granting it a non-cash donation of Mercator products. Also, last year Merca-

( €3.2 million

donated by the Adris Foundation

Henkel: abolition of VAT on non-cash donations essential In 2012 the value of donations by Henkel Croatia was €22,500 comprising of both non-cash and direct cash donations. It is aiming to select organisations and institutions requiring assistance, and so its donations are most commonly linked to children. In 2012 it made a donation to the Slavonski Brod-based Social Welfare Home for Children and Youths, the Zvono Association for Children and Youths with Developmental Disabilities and the SOS Children’s Village Croatia. Henkel has the same donations policy at a global level and hence its initiative, launched in 1998, of “Make an Impact on Tomorrow”. Irrespective of the recession, Henkel has not changed its donations budget during the past several years and donations over 2013 will depend on both requirements in the community and on planned projects and initiatives. As opposed to other companies that have not expressed their stance on the tax treatment of donations, it is widely believed in Henkel, that abolition of VAT on non-cash donations is of primary importance. tor employees launched a collection initiative of children’s clothes, toys and other items for the Karlovac-based Vladimir Nazor Care Home. Nevertheless, the donation budget has been considerably slashed as a result of the current economic crisis. However, Mercator has recently made its main donation of over 5 tonnes of fruit and vegetables to childcare homes throughout Croatia, simultaneously providing food packs for 90 most vulnerable families throughout Croatia, selected by Social Care Centres. Holcim involvement in environment protection From 2003 to the end of 2012, the value of donations by Holcim was €1.29 million. Until 2012 the criteria for donations were set in accordance with internal regulations on sponsorship and dona-

tion, and beneficiaries were selected via tender. Such donations were referred to as ‘sponsorship’, since the company anticipated some return service from them. The company supported a broad range of environment protection and sustainable building projects, and in 2009 / 2010 it supported projects dedicated to the suppression of corruption. In 2011 they primarily supported human rights protection projects. The Holcim programme of corporate donations won the Indeks DOP award for three consecutive years (2008, 2009 and 2010). It co-operates with the civil sector and the criteria for the selection of beneficiaries are set in accordance with the critical events and issues in Croatian society, as well as in compliance with its corporate policy. Over the past several years, as a result of the economic

Privredni vjesnik Year VI No 223

CCE TAKES ENTREPRENEURS TO CANADA

Some one hundred Croatian companies introduced to Canadian investment projects Canada and the European Union are about to complete a new agreement which will reduce import duties on 90% of products and should be signed this spring Igor Vukić n co-operation with the Canadian-Croatian Business Network, the Croatian Chamber of Economy (CCE) will organise a Croatian entrepreneurs visit to Canada again in April. After previous business forums and the cancellation of visas between the two countries, economic cooperation is constantly growing stronger. Last year Croatia ex-

The high level of Croatian immigrants in Canada (around 250,000) represents a bridge between the two economies ported $68 million and matched imports from the country. New possibilities for co-operation were discussed at a recent seminar How to do business with Canada held by the CCE. Around one hundred representa-

tives from Croatian companies were given data on Canadian investment projects and opportunities that Croatian EU accession will bring. Canada and the European Union are about to complete a new agreement that will reduce import duties on 90% of products and should be signed this spring. According to Vesna Trnokop Tanta, CCE Vice President, the high level of Croatian immigrants in Canada (around 250,000) represents a bridge between the two economies. Job vacancies will be opened in the areas of energy, tourism, the wood industry, elec-

tricity industry and infrastructural projects. The number of Canadian tourists visiting Croatia is increasing; last year, 54,000 Canadian tourists visited Croatia by October, registering 145,900 overnight stays. Open to business cooperation with Croatia Canadian Ambassador to Croatia, Louise Larocque, highlighted Canada is open to business co-operation with Croatia. The Canadian Trade Commissioner Service in Zagreb provides all information on the markets. Senior

Minister Counsellor at the Canadian Embassy in Rome presented the economy of Canada and cooperation potential. Amongst others, Canada plans to substantially invest in natural resource preservation, and US$500 billion will be invested in energy and mining. Around $25 billion will be invested in the construction of combat ships and the development of merchant shipping. Croatian producers may apply to be suppliers to this industry. Excellent research results showing new oil and gas sites have transformed Canada into an energy exporter. For this reason, it now has a shortage of pipelines and LNG export terminals. The energy market is open; it does depend on political decisions, and the expertise of service providers. There are also many relatively simple models for entering other areas of the economy. All additional information on business co-operation with Canada may be obtained through the CCE, the Canadian business network and many private consulting companies.

KENNETH MERTEN, US AMBASSADOR TO CROATIA

Assisting foreign investment Ambassador Merten pointed out the importance of the foundation of the Agency for Investment and Competitiveness that began operating with considerable success The Croatian government has thus far been successful in its development of the business and investment climate, as well as in attracting foreign investment, as stated by Kenneth Merten, US Ambassador to Croatia during a meeting at the American Chamber of Commerce held at the end of February, in Zagreb. Ambassador Merten pointed out the importance of the creation of the Agency for Investment and

Competitiveness that has started operating with considerable success. He also expressed his utmost satisfaction with the Strategic Investment Act and the new incentives for investors, as well as with the amendment to the Company Law, as it promotes small business start-ups. The Strategic Investment Act is a significant and positive move, as well as the creation of working groups aimed at tackling investment hurdles. “It is

merely a beginning, yet the government needs to be encouraged to implement the reforms with more determination”, he emphasised. He highlighted that during the 19th century, Americans showed distrust towards foreign investors, primarily British investors, who opposed to the War of Independence. Nevertheless, that faded and the US has been transformed into a country with

the largest foreign investment inflow, whilst simultaneously retaining her independence. In 2011, American companies with foreign capital provided goods and services worth $670 billion and created many new jobs with above-average salaries. “Such trends can be followed by Croatia, primarily following the Croatian EU accession and the continuation of reforms”, stressed Ambassador Merten.

www.privredni.hr Business & Finance Monthly

COMPETITIVENESS AND HNB

::: news

Vujčić: By protecting the banks, we protect local saving HNB maintains that low inflation and a stable exchange rate aiding all debtors with a currency clause, says Governor Boris Vujčić he Croatian National Bank (HNB) has a positive €0.67 billion within the monetary system as a result of which the state can borrow at a record low interest rate level on the local market, and the Croatian Bank for Reconstruction and Development can offer an interest rate reduced by 2%.

“This is all HNB can do to avoid risking more damage than benefit”, Furthermore, HNB maintains that low inflation and a stable exchange rate aiding all debtors with a currency clause, and by protecting the banks, it also protects local savings. And this is in a situation where 80% of deposits are in foreign currency. This is all HNB can do to avoid risking more damage than benefit, said Governor Boris Vujčić at the 2nd International Conference organised by the central bank. Although he says he is tired of

responding to the same criticism of those who do not even understand monetary policy, Vujčić refuses to yield to despondence, repeating that only structural reforms, rather than monetary policy, can help Croatia exit its crisis. The Minister of Economy, Ivan Vrdoljak, agreed with Vujčić and referred to past reforms initiated by the Government, and announced a new Construction Act, substantially shorter and simpler than the existing one. After implementing these reforms, in a few years from now, Croatia will be a small, beautiful and smart country in the south of Europe, Vrdoljak is convinced. In order to achieve this goal, the Chief Economist of the World Bank in Croatia, Sanja Madžarević Šujster, thinks it is crucial to reform labour laws in order to pro-

tect work instead of ‘working positions’. Croatia has a record rate of labour inactivity of men between 25 and 40, she warns. This is partly due to the fact a family of four, with parents of a lower education level, are better of being on welfare than on the labour market. (D.Ž.)

General government consolidated gross debt comprising of central government debt, extrabudgetary funds and local government debt stood at €23.51 billion at the end of October 2012. The increase is primarily the result of a rise in debt by internal components, since central government debt reached €0.21 billion, whilst extra-budgetary funds and local government debt saw a monthly increase of 9.5% and 3.8% respectively. The external component of public debt was 74.7 million up

compared with September 2012, due to a slight increase in external debt by central and local government, as well as of extra-budgetary funds. General government consolidated debt grew by €2.71 billion or 13% in relation to the end of 2011. Central government

Rise in investment in tourism Investment into Croatian tourism is anticipated to reach almost €0.4 billion in 2013, which is double that 2012. In 2013 investment is anticipated to stand at between €0.35 billion and €0.4 billion, which is nearly double the amount invested in 2012 when investment was €0.21 billion. CEMEX exporting to Libya and Israel The Cemex cement factory has operated only for two months over the last two years as a result of the recession. Nevertheless, it has put into operation its rotational furnace yet again and now both Cemex factories are currently operating at full capacity. The first delivery of over 10,000 tonnes has already been delivered and in addition Cemex is expected to export nearly 200,000 tonnes of cement and clinker to Libya and Israel based on the recently signed contracts.

GENERAL GOVERNMENT CONSOLIDATED GROSS DEBT

€23.5 billion debt

Increase in mutual fund assets Mutual fund assets stood at €1.84 billion in January that was 6.53% up in relation to the end of 2012, according to data released by the Croatian Financial Services Supervisory Agency (Hanfa). Assets of funds with public offering stand at €1.79 billion, whilst assets of funds with private offering currently total €46.7 million.

debt stood at €22.1 billion at the end of October 2012, €0.28 billion up over the end of September 2012. Extra-budgetary fund debt in October increased by €75.5 million, reaching €1.2 billion. At the end of October, local government debt, which is a minor component of public debt, stood at €0.24 billion, which implied a monthly increase of €8.1 million. According to data released by the Ministry of Finance, general government consolidated debt rose in October, accounting for 52.1% of GDP.

Organic farming up 1,494 Croatian farmers were involved in organic farming in 2011. Nevertheless, according to currently incomplete data for 2012, the figure has reached 1,757. Organic products are currently grown on 32,000 hectares, which accounts for 2.9% of arable land, according to data provided by the Ministry of Agriculture. In 2011 organic farming output stood at around 18,000 tonnes, with 16,290 tonnes produced on ploughed fields, 1,280 tonnes in orchards, whereas aromatic herbs, vegetables and vineyard and olive grove produce accounted for the remaining output.

Privredni vjesnik Year VI No 223

( 95,000 people employed

in tourism and hospitality industry (7% of total number of those employed)

CROATIAN TOURISM DEVELOPMENT STRATEGY DEVISED

Principal objective: to rank in the Top20 countries according to tourism competitiveness Croatian tourism industry is planning to invest around €7 billion by 2020. Revenue is expected to rise by around €6 billion, creating 30,000 jobs in the industry Sanja Plješa Croatian tourism development strategy has been recently devised. This defines the future of Croatian tourism up to 2020. The Strategy itself, developed by the Zagrebbased Institute for Tourism, is to be discussed by the Croatian Parliament that will also decide on its adoption. It defines guidelines for increasing the competitive-

Investment in 100 new small floating hotels ness of Croatian tourism, as well as the attraction of investment into the sector. This development strategy is the principal idea behind a definition of tourism development and spatial planning at lower levels of administration in the country. Tourism has a fundamental role in Croatia, in the attraction of new investment, in fostering economic growth and developing employment. Croatia is aiming to present itself as a tourism-

oriented country. Veljko Ostojić, Minister of Tourism, believes it is imperative for Croatia to rank amongst the top 20 countries by tourism competitiveness in order to be considered a tourism-oriented country. He also pointed out that by 2020, and in accordance with the defined vision, Croatia needs to become a globally recognisable tourist destination, a highly competitive country, attracting substantial investment, creating jobs and promoting sustainable development. Moreover, it needs to foster quality culture, providing visitors with hospitality, safety and a unique variety of authentic experiences and activities”. Tourism development and natural heritage preservation Ostojić expressed his hope that the document will be of crucial importance for investors, assisting them in their ideas and plans concerning tourism promotion. “One of the plans is to invest around €7 billion in tourism by 2020, as well as to increase total revenue by around €6 billion. In

addition, we are planning to create 30,000 new jobs in the industry. Consequently, our principal objective is to foster tourism development and simultaneously focus on natural heritage preservation”, stressed Ostojić. During the presentation of the strategy, several statistical data on the current situation in Croatia were highlighted. Thus, there are over 852,000 registered beds, 13% of which are in hotels, 25% in camps, 49% in private accommodation and 13% in other types of accommodation. Nevertheless, only 40% of Croatian hotels are ranked either 4 or 5-star hotels. According to data released by the Croatian Bureau of Statistics, over 60.4 million overnight stays were recorded in 2011 in registered commercial accommodation and every third overnight stay was in private accommodation. Tourism and the hospitality industry employ over 95,000 staff, some 7% of the total number of people employed in the country. Exceptional seasonality is due to production structure and hence 87% of total overnight stays in

Croatia are recorded from June to September. Operating irrespective of the crisis Ostojić pointed out a vast range of problems concerning the competitiveness of Croatian tourism, such as insufficient differentiation of products and services, the lack of innovative and high quality tourism programmes, insufficient investment and lack of new hotel facilities. Nevertheless, tourism achieved superior results compared with other Mediterranean countries even against the backdrop of the economic crisis. In order to achieve its specific tourism development objectives by 2020, improvement of accommodation structure and quality is essential and hence there are plans for the construction of 20,000 new rooms in hotels, new tourism programmes in camps, investment in 100 new small floating hotels, as well as the upgrading of quality in family accommodation. In addition, tourism consumption needs to be increased to reach €14.3 billion and to record 86 million overnight stays in the near term.

www.privredni.hr Business & Finance Monthly

( €4,700

Cost of cosmetic nose surgery in Great Britain

( around €1,500

for the same procedure in Croatia

Cosmetic surgery to prolong the tourist season

Only in Croatia: beauty at half the price Prices of reconstructive and cosmetic procedures in Croatia are over 50% lower than in the EU. Patients who choose Croatia for the operation, will be able to do so at the expense of their health insurance after EU accession lights that Croatian prices are over 50% lower compared with the EU due to lower prices of doctors and nurses compared with the majority of EU countries.

Sanja Plješa lastic reconstructive and cosmetic surgery is one of the most important branches of medical tourism that could certainly prolong the tourist season. Price is the main reason why so many people decide to have the operation performed outside their own country. CroMedicor portal conducted a survey, and compared Croatian prices of certain procedures to those in Great Britain, Spain, Germany, Italy and Slovenia. They collected the prices of around ten clinics from the mentioned countries, and calculated the average price for the most common cosmetic procedures. According to the results, cosmetic procedures in Slovenia, Germany and Spain cost almost the same, whilst prices are higher in Great Britain and Italy. For example, the average price of breast lifting in Italy is around €6,200. The same procedure costs less than €3,000

Average price of breast lifting in Italy is around €6,200. The same procedure costs less than €3,000 in Croatia in Croatia. Cosmetic nose surgery costs €4,700 in Great Britain, €4,500 in Italy, and only around €1,500 in Croatia. President of the Croatian Society for Plastic, Reconstructive and Cosmetic Surgery (HDPREK), Rado Žic, high-

Huge differences The average prices of various minimally invasive procedures and operations depend on whether they are performed in Croatian private surgeries, clinics or hospitals. The price range varies since procedures which are significantly different from one another are represented under the same procedure. For example, with liposuction this can include removal of excess fat tissue on one or several areas of the body, therefore the complexity and duration of the procedures are different, Žic said. He added that some procedures are performed under a local anaesthetic and others with general anaesthesia, which also defines the price. In Croatia, liposculpture, aspiration and/or transplantation of fatty cells rang-

es between €1,350 and €3,300, and blepharoplasty (correction of eyelids) costs between €890 and €1,900. Otoplasty (correction of ears) costs between €800 and €2,100. Abdominoplast or “tummy tuck” ranges between €2,800 and €4,000. Face lifting costs between €1,600 and €4,000. Prices for breast enlargement depend on the type of implants or operation procedure. Co-operation with insurers Žic says there is a huge underused area for other reconstructive procedures performed by licensed, reconstructive and cosmetic surgeons. In compliance with EU practice, reconstructive procedures can be covered by health insurance even if they are performed in a foreign country if the price is not higher than the price offered in the patient’s own country, Žic said. Therefore, when Croatia enters the EU, there will be more room to negotiate with insurance companies from the EU, Žic said.

LOWER FEES FOR PRIMARY REGISTRATION OF YACHTS

New fees and charges for vessel registration According to the recently adopted Regulation on fees for registering ships, yachts and boats in the register of ships, yachts and boats, fees for the first registration of boats of up to 7 metres in length currently stand at €13, whilst for those exceeding 7 metres in length fees are €133.

Fees for the initial registration of yachts have decreased and instead of the previously charged €1,330 and €3,330, owners of yachts up to 24 metres in length will be charged €533, with fees for yachts over 24 metres being €1,100, irrespective of whether they were constructed in Croatian or foreign shipyards.

In addition, fees for the registration of ships with a gross tonnage exceeding 10,000 tonnes, (which previously stood at €13,300), currently stand at €3,330. The Regulation entered into force on the 5th February 2013 and replaces the Regulation on fees for registering ships, yachts and boats in the register of ships, yachts and boats dating back to 2006. Following co-ordination between the

appropriate ministries, and the definition of registration procedures, from 31st May owners of vessels temporarily imported into Croatia have been charged VAT at a rate of 5% and a more favourable customs duty. Comprehensive information on the procedures and registration has been published on the website of the Ministry of Maritime Affairs, Transport and Infrastructure. (J.V.)

Privredni vjesnik Year VI No 223

Regional Chambers of Economy announced the launch of a joint brand at the International Fair of Tourism in Belgrade

The Balkans as a single tourism destination Representatives from Croatia, Macedonia, Bosnia and Herzegovina, Serbia, and Montenegro launched an initiative for a regional tourism brand to attract tourists primarily from Asia, Russia and South America Ljiljana Lukić epresentatives of the Chambers of Economy from Croatia, Macedonia, Bosnia and Herzegovina, Serbia, and Montenegro launched an initiative for a joint brand, a regional tourism brand to embrace the best features of each country. A working group is expected to be created as announced during the round-table discussion entitled South-Eastern region – on par with Europe at the Belgradebased 35th International Fair of Tourism organised by the Serbian Chamber of Commerce. The working group will focus on a South-Eastern Europe tourism product aiming to adapt it in order to attract third country markets, primarily to the increasing number of tourists from Asia, mainly China and Japan, as well as from South America. Zoran Novaković with the Association for Tourism and Hospitality of the Serbian Chamber of Commerce pointed out the importance of the recently held meeting in Tirana organised by GIZ where it was concluded that the co-operation of seven chambers of economy (Albanian Chamber of Commerce being the seventh), is fundamental for the implementation of the project of presenting South-East Europe as a newly-discovered destination to the global market.

Croatia as a partner in EU projects According to Dragana Šabić, Secretary of Tourism Association at the Serbian Chamber of Commerce, tourism industry results show significant variations, with Serbia currently seeing a fall-off in domestic tourism, whilst simultaneously recording an increase in the number of arrivals and overnight stays by foreign tourists. In addition to emphasising the crucial role of a unique regional tourism product, Dragana Šabić pointed out the fact that the participating countries are CEFTA members and also highlighted the importance of the forthcoming Croatian EU accession on 1st July 2013. “We are expecting to become a fully-fledged member of the EU on the 1st July 2013, which will make us an important partner in

EU projects throughout the region”, stated Leila Krešić Jurić, Director of the Tourism Department at the Croatian Chamber of Economy. She stressed that according to analyses of the global tourism market, it is anticipated that Europe as a whole

Međugorje, a religious tourism centre Mirko Bošković, Secretary of Tourism Department at Foreign Trade Chamber of Bosnia and Herzegovina stated that Bosnia and Herzegovina is planning to contribute substantially to the project and he pointed out Međugorje as a religious tourism centre for the whole of Europe. “Tourism is considered of primary importance in large countries and the entire region of former Yugoslavia is a rather small tourist market. Consequently, joint appearance on third markets is imperative”, opined Bošković. Sanja Marković, Secretary of Tourism Department at the Chamber of Commerce of Montenegro, stressed that Montenegro provides tourists with a remarkable opportunity of skiing and sea bathing in the same day. Moreover, rep-

Istria presented as a unique South-European product and a rôle model by representatives of Croatian Chambers of Economy will see stagnation in the near term. Nevertheless, South-East Europe will see growth. A joint brand will foster tourism growth of between 6% and 8% in the area, according to Leila Krešić Jurić.

resentatives of the Croatian Chamber of Economy presented Istria as a unique South-European product, comprising of a vast array of historical, cultural and traditional events and a rôle model for a joint brand in South-East Europe.

100,000 Serbian tourists anticipated 1,000 exhibitors from 46 countries throughout the world, including Croatia, participated at the recently held 35th International Fair of Tourism in Belgrade. The Croatian National Tourist Board presented tourism programmes provided from Istria to Dubrovnik, emphasising the immense potential of Croatian continental tourism. “Croatia has participated at the Belgrade-based International Fair of Tourism for the fourth consecutive year. Serbi-

an tourists opt for their desired holiday destinations primarily via the internet and are mainly individual tourists arriving by private vehicles opting primarily for beach holidays. Furthermore, there are many tour operators in Serbia providing booking services for holidays in Croatia”, explained Slavija Jačan Obratov, Head of Department at the Croatian National Tourist Board Main Office. Croatia has seen an increase in the number of

tourists from Serbia over the last several years and 99,055 Serbian tourists visited Croatia and 606,727 overnight stays were recorded in 2012, a 6.2% increase in arrivals and 12.4% in overnight stays in relation to 2011. “We are anticipating the results for 2013 will be on a par with those last year. In addition, we expect to see over 100,000 Serbian tourists this year”, concluded Slavija Jačan Obratov.