Pvi0231 by NEstar

Foreign trade results Exports 6.2% lower - ships, EU and CEFTA took their toll. Imports down 1,1% and totalled 10.73 billion euros

Budget proposals for 2014 Budget can be saved by public investment and strict expenditure control. But is it planned realistically?

The IMF mission Croatia will achieve growth only if it intensifies its exports and becomes a more attractive to invest

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Croatian Business & Finance Monthly Established in 1953 Monday / 2nd December/ 2013 Year VI / No 0231 www.privredni.hr

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pvinternational pv international C R O A T I A N

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CROATIA IS ILL-PREPARED

With EU funds only €6 million in positive The Croatian plus in using European funds would be higher if the accreditation process of Croatian institutions participating in the system of using the EU funds had been finalised tection and Regional Competitiveness were approved in September.

Igor Vukić his year, Croatia will obtain from the EU funds €6 million more than it will pay into the European budget; Government Vice-President Branko Grčić pointed out in his opening speech during the conference Approaching EU Funds – investing in the future. Four operational programmes for the financial period 2007 – 2013 were presented at the conference. The Croatian plus in using the European funds would be greater if the accreditation process of Croatian institutions participating in the system of using EU funds was finalised. This process is now in its final phase. System accreditation is a precondition for Croatia to also obtain €150 million for prefinancing those projects that started this year, Grčić highlighted. The European Commission approved the operational programme Human Resources Development on October 17, 2013,

completing the work regarding the definition of the strategic framework for using EU funds during the first six months of EU membership. The European

Commission officially approved the National Strategic Referential Framework back in August, while operational programmes Transport, Environmental Pro-

Billions of euro on standby The operational programmes are the basis for using €450 million available to Croatia during the programme period 2007-2013. However, this is only an introduction to the crucial start-up phase of using funds from structural funds and the Cohesion Fund that envisages €8.3 billion (over €1 billion a year) for Croatia for the following programme period 2014-2020, Grčić added. We are heading for a challenging 2014. We have to work together to be able to prepare for as many quality projects as possible, since it is not important to merely spend the money; it is more important how we will spend it, Grčić said. He invited officials of local and regional administrations to strengthen their capacity in order to better prepare for the projects financed by the EU.

There will be funds for personal contribution The Operational Programme Regional Competitiveness is worth €223 million, of which it is possible to draw €187 million from the European funds. The programme is intended for strengthening the competitiveness of SME’s, supporting the economy based on knowledge. The sum of €330 million is

envisaged for the programme Environmental Protection, of which €281 million will be financed from the Cohesion Fund. The Operational Programme Transport will be able to spend €278 million, and €236 million will be provided from European sources. Human Resources Development is worth

€1679 million, of which €152 million will be financed by the European Social Fund. Government Vice-President Branko Grčić says the Government will procure funds from the budget and other sources to pay for Croatia’s contribution when drawing funds to avoid delays in the process.

2 ::: news The Ina/Mol situation – solution at hand The Hungarian oil company, Mol, is willing to hold talks with the Croatian government on the future of Ina, yet it is not currently prepared to tackle the issue of corporate governance. Mol’s information source stated that it is prepared to encourage the development of Ina together with the Croatian government if the latter is prepared to support the business plan. Mol is prepared to sell its 49.1% of its shares in the Croatian oil company if negotiations with the Croatian government, which owns 44.84% of the shares, are not concluded positively. Car market slightly recovering During October 2,194 new cars were sold in Croatia, 21% up in relation to September and almost 10% up compared with October 2012. Nevertheless, year-on-year sales growth in October was the result of a low basis for comparison from October 2012, which saw the sale of only 1,997 units. Business meetings on the increase 1,231 business meetings were held in Croatia from July to September, 2.5% up compared with the same period in 2012, with almost 1% more participants (or 76,700), according to data released by the Croatian Bureau of Statistics. The duration of all such meetings from July to September totalled 2,887 days, 1.9% up over last year. Zagreb 1 Rig leaving for Libya

Following its overhaul, which lasted slightly under three years, the Zagreb 1 Rig has begun its journey from Trogir shipyard towards Libya. The rig is owned by the Zagreb-based company Crosco and was constructed in 1977 in the French shipyard at Dunkerque. It is 110.6 metres high, 106.3 metres wide and 103.4 metres long. It is a semi-submersible rig and will be used for drilling in depths up to 6,000 metres.

Privredn vjesnik Privredni VI No 231 Year V

( €5.82 billion exports over 8 months

FOREIGN TRADE RESULTS

Exports 6.2% lower - s CEFTA took their toll During the first eight months, total exports from the processing industry were worth €5. Falls were registered in most sectors Igor Vukić uring the first eight months of this year, Croatian exports decreased 6.2%. According to data provided by the Central Bureau for Statistics, total exports came in at €5.82 billion, while imports totalled €10.73 billion (down 1.1%), resulting in a foreign trade deficit of €4.89 billion, and an import/export ratio of 54.3%. Shipbuilding had the greatest impact the decrease, with the results almost halved compared with the same period of last year. Exports to CEFTA countries decreased by over €92 million due to Croatian EU accession. The volume of goods exported to other parts of the EU also decreased.

Positive balance with CEFTA In the second quarter, and in June especially, local exporters intensified shipments of food products to the CEFTA market in order to mitigate the effect of Custom limits that entered into force at the beginning of July. Exports to other parts of the European Union are still holding up, decreasing by 2.5% (HRK700 million) over the first eight months. Exports to Slovenia were 15% higher, but decreased on other bigger markets. 12.3% fewer goods were exported to Italy and 12.9% to Austria. Only Germany remained at roughly the same level as last year (down 0.01%). Exports to CEFTA countries were 7% lower, but the positive trade balance was preserved. The export of goods to CEFTA to-

talled €1.18 billion, and imports €0.64 billion. According to the analysis of the Croatian National Bank, during the first part of the year, the export of electricity and certain industrial raw materials (leather) registered significant growth together with the export of food products. Against this, the export of capital products significantly decreased, and the majority of other products are still not showing any signs of improvement. Total imports for the processing industry stood at €5.16 billion for the first eight months of this year, 7.1% less compared with the same period last year. Falls were registered by most sectors. Better results were seen only by

the exporters of pharmaceutical products (+8%), wood producers (4%), tobacco products producers (7%) and textile producers (7.9%). EU accession motivated importers to make unusual moves. According to an analysis by the Croatian National Bank, the EU and China trade dispute arose in June over the import of photovoltaic products (mainly solar panels). This motivated importers registered in Croatia to import duty free goods worth €0.2 billion prior to joining the EU. This amount is several times higher than the usual import value of solar panels. Total imports from China increased by 64%, to €0.5 billion. Changes in the duty

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( €10.73 billion

TAX SYSTEM SURVEY

imports over the same period

ships, EU and

16 billion, down 7.1% over the same period of last year.

system in the second quarter encouraged the import of road vehicles that almost doubled in relation to the past few quarters. After high growth in June, July saw a strong decrease in imports. According to the results provided by the Central Bureau for Statistics, imports plummeted by 27.3% in relation to the average during the second quarter. Imports increase from EU countries The import of the majority of other goods stagnated, whilst energy products (crude oil and electric energy) plummeted dramatically. Economic Movements, published by the Croatian Chamber of Economy, show that

the export of metals considert ably decreased, which is partly a due d to the high value of gold exported in 2012. Last year’s e temporary import of ships and t aeroplanes for overhaul, affected a the t import of other transportation. The import of computers t and other electronic products, gas, machines, devices as well as clothes and food products increased significantly. The CCE also points to the fact that EU accession brought changes in the calculation method of imports according to countries. Import from the EU, but originating from other countries, is handled according to the country of shipment, rather than origin. Therefore, data for the first seven months show a significant increase of imports from EU member countries; that is, an import reduction from other countries. Consequently, imports from EU member countries increased from 60% during the first six months to 73.8% during the first seven months.

After high growth in June, imports decreased significantly in July Imports from China and Russia are particularly interesting due to their high value. Based on the new calculation method they reduced from €771 million, (€716 million during the first half of the year) to €444 million (during the first seven months). In any event, changes in imports/exports resulted in an increased foreign trade deficit compared with the same period last year.

Tax uncertainty is not specific only in Croatia Drago Živković ccording to a survey conducted by Deloitte in June and July, Croatia is not a special case in Europe regarding the problems entrepreneurs have with tax collectors, although certain aspects of these problems are somewhat more highlighted in Croatia. Tax Managers of almost 1,000 companies participated in the survey and around 18 Croatian mainly large-sized companies gave their responses. Some 72% participants complained about the high level of tax uncertainty in Croatia, whilst the European average is 61%. The most common reasons for uncertainty were vagueness, insufficient, and often disputable, publicly available instructions from the Tax Administration (92%) as well as frequent legal changes (53%). The situation is similar in other countries, where entrepreneurs (72%) complain mainly about the legal changes, says Natko Sertić, Tax Manager at Deloitte.

Development of tax departments The 78% of companies from Croatia that participated in the survey have a common financial service for tax issues. The percentage of these companies in Europe is significantly smaller (52%). According to Dražen Nimčević, partner in charge of the Tax Consultant Department at Deloitte, this result shows Croatia still has ample room to develop tax departments in companies. Over 70% of Croatian

participants believe that the timely submittal of tax applications and compliance with regulations is crucial for their department’s success. According to Nimčević, this shows that in terms of taxes, we still do not think strategically from the beginning of each business process, but only when we have to submit the tax application. This is also a consequence of the poor state of the profession of tax consultants in Croatia, which has only around 200 tax consultants, while Slovakia has over 4,000.

Croatia has only around 200 tax consultants, while Slovakia has over 4,000 Similar to their European colleagues, Tax Managers in Croatia believe they have good relations with the tax authorities. Almost half of participants from Croatia feel their relations with the tax authorities improved during the past year. On the other hand, the bulk of Europe (84%) feel their relations with the tax authorities is the same, and 5% feel it has deteriorated. The main reason for the improved relations with the tax relations in Croatia is the more aggressive tax strategy of companies and better communication with the Tax Administration, while most other countries believe the improvement (or the deterioration) is due to the more thorough inspection by the tax authorities, Nimčević concludes.

Privredni vjesnik Year VI No 231

THE WORLD’S LARGEST SUPER CARGO AIRCRAFT USED FOR DELIVERY OF A POWER TRANSFORMER PRODUCED BY KONČAR

Končar flying high The delivery price was around $3 million, whilst the power transformer itself is worth less than $2 million Drago Živković 318 MVA power transformer, which had only recently been seen by the public and made by the company Končar – Power Transformers (KPT), was the first to be delivered to the buyer by air cargo from Zagreb to the Philippines. The power transformer, weighing 140 tons, was airlifted to the Philippines by the world’s largest super cargo aircraft, an Antonov An-225. Product delivery by air cargo is a landmark event in the business operations of KPT and it was due to the urgent requirement for such a power transformer by the Philippine buyer, which saw the explosion of a conductive insulator, as explained by Ivan Milčić, Board President of KPT. Consequently, the Philippine-based San Lorenzo power plant was unable to produce the required amount of energy resulting in huge losses for its owner and requiring an urgent delivery of a new power transformer. The transportation of a power trans-

There are three Siemens factories in China yet they were not able to meet the deadline former by sea that is the usual form of transportation, would have taken between 40 and 45 days, whereas the Antonov aircraft delivered it in just two days, taking into account both loading and the unloading. The Philippine buyer obviously opted for rapid delivery, as they opted for the delivery of the power trans-

former worth around $3 million, whilst the power transformer itself is worth less than $2 million. Faster than the Chinese The power transformer delivered to the Philippines was the 42nd power transformer produced by Končar to have been delivered to the Philippines during the past two decades. KPT normally exports a remarkable 97% of its production, which is certainly also due to the fact that the company is under the majority ownership of the German industrial giant, Siemens. The company was founded in Croatia in 1921

as a Siemens factory only to be nationalised and renamed in 1947. Siemens regained majority ownership of the company in 1995 and KPT became one of 22 Siemens power transformer factories worldwide. Power transformers produced in Zagreb are exported to 84 countries and the value of exports during the last decade has exceeded €1 billion, emphasised Milčić. The Zagreb-based Siemens facility is highly acclaimed and hence it has been appointed as the producer of the power transformer for the Philippines, irrespective of the fact that there are currently three Siemens factories in China that are considerably closer, yet were not able to meet the deadline. Following the calamitous drop in demand since 2010, the global power transformer market has seen a recovery and consequently KPT is anticipating a 40% rise in the number of new contracts. “This is the most profitable Siemens power transformer factory irrespective of the continuous increase in salaries”, highlighted Milčić.

President of HBOR - Vice President of European Association of Long-Term Investors (ELTI)

Anton Kovačev – an important role in the Association whose assets are over €2 trillion During the first session of the General Assembly of the European Association of Long-Term Investors - ELTI - recently held in Brussels, Anton Kovačev, Board President of the Croatian Bank for Reconstruction and Development (HBOR), was

ELTI was founded in July 2013 by 16 European financial institutions appointed as Vice President for a three-year term. In addition, Branimir Berković, the Executive Director of HBOR, has been appointed as a member of the ELTI Management Board.

Dr. Werner Hoyer, President of European Investment Bank (EIB), was appointed as Board President, whilst Franco Bassanini, President of the Italian Cassa Depositi e Prestiti (CDP) was also appointed as Vice President along with Anton Kovačev. “My appointment as Vice President of the European Association of Long-Term Investors is yet another affirmation of the wide international recognition of HBOR”, highlighted Anton Kovačev. “Irrespective of its being a non-profit organisation, its influence and scope of authority are extremely significant, as we are dealing with banks and specialist financial institutions with total assets in excess of €2 tril-

lion”, stressed Kovačev. ELTI was founded in July 2013 by 16 European financial institutions including HBOR. Its principal objective is the promotion and protection of the interests of its members, as well as a strengthening of co-operation with European financial institutions at an op-

erational level. The action plan of ELTI for 2014 has been adopted during the first session of the General Assembly, with particular emphasis on the creation of favourable conditions for long-term financing and the strengthening of co-operation amongst members of the Association, striving to provide stronger support to national economies by encouraging sustainable growth and development. ELTI members are banks that grant incentive loans, plus two institutions with observer roles (EU and EIB). (A.M.)

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INTERVEW: ILIJA TOKIĆ, OWNER AND DIRECTOR OF TOKIĆ COMPANY

We are prepared for further regional expansion In 2012 we achieved over 20% growth. Moreover, there is a similar upward trend this year and we are also anticipating similar results next year. We are investing significantly in our employees and in employee training Drago Živković lija Tokić founded a private car parts business in 1990 by opening the first Zagrebbased store. He went on to expand the business considerably by involving other family members and creating an increasing number of jobs.

How many Tokić stores are there currently and how many employees? There are 15 sales outlets in Zagreb and 80 more franchise stores throughout Croatia. During the first 23 years of our business activity, we have managed to become the top player in the car parts market. We currently employ 225 staff in Zagreb; we employed 30 staff in 2012 and 20 new staff thus far in 2013. The Tokić Group, along with our franchise partners, employs around 850 staff. We are planning to expand our network throughout Croatia and in Western Europe. We have already started exporting in this region. We are also planning to open branch offices in neighbouring countries, having already opened two or three small stores in Bosnia and Herzegovina and received several co-operation proposals from Serbian partners, as well as from several partners from Bosnia and Herzegovina, Macedonia and Montenegro. We are planning to opt for franchis-

ing, as it has proved successful thus far in Croatia. What is the current situation in Croatia in the car parts market? Who are your competitors? What are the latest trends? Competition in the market is severe. However, a large number of businesses have failed due to inadequate business policy and their failure to consider the importance of investment into human assets, facilities or development. Consequently, we have taken over their

We are planning to open around one hundred auto-check centres as a result of assistance provided by the ATR Association market share. According to the latest indicators, we achieved over 20% growth in 2012. Moreover, there is a similar upward trend this year and we are also anticipating similar results next year. We are investing greatly in our employees, in employee training and are currently still the top player. Nevertheless, we are preparing to keep abreast with competitors who are preparing to penetrate our market, such as the Polish Intercars, German Stahlgruber, Slovenian Anet, Austrian Regnemer and the Hungarian Szakal Metal, to name a

Good deeds will come back to you Tokić is a company which has invested extensively in sponsorship and humanitarian action. Why is this so important in your opinion? My father used to say: “Good deeds will come back to you” and it has proved true. We provide scholarships to pupils, students and our employees’ children. We also provide assistance and support to the church, war veterans and their children, as well as gifts to the socially vulnerable at Christmas, Easter and New Year. I am a godfather to hundreds of poor children in Benin, who require only €0.25 a day to live. In my native Bosnia and Herzegovina we have a foundation through which we provide scholarships for 15 students from disadvantaged social backgrounds. We provide support for schools and some ten sports teams currently wear our kit. few. The Croatian market is small and specific. The idea behind our company has been confidence since its inception. We started off as a family business and that is the key to our success. You invest extensively in employee training and you are planning to open your own employee training centre. We are completing the implementation of our employee training centre project in Zagreb. We purchased the premises a year ago, reconstructed them and relocated our offices. We engaged several young people who had been involved in similar work in Germany and had spent 10 to 15 years working in similar companies there. We are planning to invest around €1 million in the employee training centre and are planning to open it at the beginning of next year. The centre will provide

training for our mechanics, sales staff and distribution partners. We are currently strengthening co-operation with Croatian vocational schools and faculties and we have also contacted similar institutions in Western Europe. We are planning to open around one hundred auto-check centres and car repair shops, providing our products and services as a result of the assistance provided by the ATR Association; we have been a member for six years. How has the business environment changed following the Croatian EU accession? We have seen significant positive changes concerning the increase of exports and imports of goods and time saving at customs. The inflow of goods has been accelerated which is fundamental, as we currently have over 100 suppliers globally.

Privredni vjesnik Year VI No 231

( €5.6 billion

planned VAT income (2.9% growth)

( €1.5 billion

income from duties (2.3% growth)

BUDGET PROPOSALS FOR 2014

Budget can be saved by strict expenditure control Finance Minister Slavko Linić says that Government efforts to keep income and Institute, thinks the planned budget is not realistic

Despite keeping the basic budget items under control, expenditure is growing due to interest on the over-large public debt

EU membership. Linić explains that an element of payments will be returned through European funds through the obligation of co-financing European projects with budget funds. The expenditure related to financing EU projects will increase by €0.3 billion, while additional contributions to the EU budget will total €0.24 billion. Even though the Government intends to save the budget with public investment, economic revitalisation is anticipated for next year due to the measures that will simplify entrepreneurial business. Although these measures will still reflect negatively on the budget - €0.75 billion income tax is planned for 2014, some €79 million less compared with this year. In 2015, the Government anticipates income tax to grow (€0.77 billion) and exceed €0.79 billion in 2016.

the central calculation will be expanded. There will be no Christmas bonus next year. Subsidies to the Croatian Railways (Hrvatske željeznice) have been reduced by €30.9 million. A system rationalisation and rehabilitation in health will be conducted. Social compensations have been consolidated into welfare. However, despite maintaining the basic budget items under control, expenditure is growing due to interest on the overly-large public debt. One item of expenditure growth was brought through

Duty income decreases Income from VAT tax should increase 2.9% (to €5.6 billion) in 2014. Income tax could collect €0.17 billion; duty tax €1.5 billion which would be an anticipated 2.3% growth. The elimination of borders in relation to the EU will cause the duty tax to decrease by €98.7 million, in the end totalling only around €55 million. Contributions will grow 1.8%, adding €5 billion to the budget, as anticipated by the Finance Ministry. The debt recovery in the health sector started

Igor Vukić ublic investment, subsidising and stabilisation of the budget expenditure side should be the Government’s main economic direction next year, announced Finance Minister, Slavko Linić, presenting the state budget for next year. We will keep the expenditure side under control, as we have been doing so far, noted the Minister. Control of the expenditure side is reflected in the structure of the proposed budget. Expenditure for the employed could decrease €43.2 million next year. The reform of salaries will be implemented and the scope of users of

this year by transferring €0.4 billion from the budget. Therefore, next year’s budget for the Ministry of Health should be lower and total €2.8 billion. The Defence Ministry will receive less money, that is, €15.8 million, which will mainly influence the work of Croatian soldiers on international missions, Defence Minister Ante Kotromanović evaluated. Income for the Ministry of Internal Affairs will increase by €39.5

expenditure under contr

million due to greater control over EU borders. The Finance Ministry will spend around €47.4 million for the construction and equipping of new border crossings as well as equipment for the Schengen system. Less this year, more next year During the same meeting when the budget for next year was proposed, the Government also

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( €43.4 million

lower expenditure for the employed in 2014

( €5 billion

anticipated from contributions

y public investment and

rol are recognised by the European Commission and the IMF. However, Katarina Ott, Director of the Public Finances presented this year’s budget rebalance. When data from these two documents are compared, it becomes visible that several ministries received less money due to the rebalance, but it is anticipated they will obtain more in 2014. In addition to the Army and the police, there is also agriculture, traffic, entrepreneurship, craft and economy. The rebalance in agriculture envisages €30.9 million less (to a total of €0.6 billion), while the budget proposal for next year anticipates a decrease to €0.7 billion. The rebalance envisaged for this year a 20% decrease for the Ministry of Economy (to €0.2 billion), entrepreneurship and craft (to €73.7 million) and regional development and EU funds (to €89.4 million). The contributions to several agencies which regulate the

economic sector will also be reduced. This year’s €73.6 million will be reduced to €59.8 million. The Ministry of Labour and Pension System this year obtained around €79 million below

Linić is disappointed with the results of the private sector that failed to increase investment according to plan this rebalance (a total of €5.1 billion). However, next year it will decrease modestly to €5 billion. The Ministry of Science, Education and Sport can count on €1.6 billion, or around €118 million more than in 2013. Minister Linić says Government efforts to keep income and expenditure under control are recognised by the European Commission and the IMF.

However, Katarina Ott, Director of the Public Finances Institute, thinks the planned budget is not realistic. She feels that the Government’s anticipation of 1.3% rise in economic growth is not justified since the European Commission anticipates only 0.5%. The European Commission is not certain this plan will be achieved, since the Croatian economy is not competitive; its financing sources are reducing, especially loans to SME’s. The capacity for attracting European funding is also relatively weak. State investment Katarina Ott agrees that the share of public investment as a percentage of GDP in Croatia is one of the lowest compared with other EU member countries with a similar income level. The investment spending in the budget is best reflected in the item of expenditure for non-financial assets.

In 2014, the Government anticipates expenditure for non-financial assets will increase to almost 70%. Is this realistic? This expenditure was excessively optimistic even before, and it was always lower than planned: 15% lower in 2012 and 20% lower in 2013. Based on this experience, is it possible to believe such expenditure will increase by 70% in 2014, Katarin Ott asks. Minister Linić repeated several times he is disappointed with the results of the private sector that failed to increase investment according to plan. Therefore, he announced that he and other ministries would participate more actively in the implementation of state investment. Government Vice-President, Branko Grčić, is preparing a detailed plan. Linić says investments will relate to railways, road construction and energy, and around €4.5 billion would be used from EU funds.

Public debt grows to 62% of GDP By the end of 2014, public debt should reach 62% of GDP, according to the Finance Minister. The restructuring measures and organisation of shipbuilding, health and transport as well as the settlement of unpaid bills from the previous period significantly influenced the increase of public debt. At the end of 2011, public debt stood at 47.2% of GDP. After 2015, the public debt should slow its growth (after reaching 64% of GDP) if the Government imple-

ments the announced stabilisation measures. Sell assets to achieve income The Government expects that income from selling Hrvatska poštanska banka (Croatian Postal Bank) will strengthen state finances this year, while money from the sale of Croatia osiguranje should arrive next year, Minister Linić pointed out. IMF experts advised Croatia to continue

introducing a property tax; therefore, next year Croatia can expect more debates regarding this tax. Linić assured that the 13% higher

VAT inter-rate, tax collection and increased duties will provide new sources of income. He also said the IMF’s advice is based on the real situation in Croatia. For example, they know Croatia needs €4.7 billion for pensions, which are not high on average, and that pension payments collect only half of the required amount. The experts understand the second half should also be secured, but they do not have a magic wand or instant solutions, Linić evaluated.

8 ::: news

Esplanade hotel achieves excellent business results Since the beginning of the year, the Esplanade hotel in Zagreb has seen a 5% increase in overnight stays plus a 2.5% increase in the average price in relation to 2012. According to Ivica Max Krizmanić, General Manager, 2013 has been the most successful business year since the hotel renovation in 2004. Revenue has increased by 9% and profitability by 15% in relation to 2012. The number of individual visitors has soared by 26.5% in 2013 compared with 2012. First year of DoubleTree by Hilton Hotel DoubleTree by Hilton Zagreb, a member of the Hilton Worldwide portfolio, is marking its first anniversary. During its first year of operation in Zagreb, DoubleTree has had a significant impact on the hospitality industry. Karin van den Berg, General Manager, stated that the hotel has seen over 28,000 visitors from sports, politics and business thus far. Around 40% of visitors were on business, with 30% visiting the hotel for leisure and/or holiday and 30% attending conferences. Romanian film on Zagreb

Privredni vjesnik Year VI No 231

Croatian innovators successful in London

PLATINUM AND D AWARDS TO CRO

Croatian innovators won 13 medals and held a large number of promising business mee Sanja Plješa roatian innovators and entrepreneurs won 13 medals, a Platinum award, two special Double Gold awards, seven gold medals, two silver and one bronze medal at the 13th British Innovation Exhibition which saw a large number of British innovators, as well as those from 10 European and Asian countries. Moreover, Croatian innovators held a large number of promising business meetings with representatives of British companies, as a result of the 2nd Innovation Forum organised in London by the Centre for Entrepreneurship, Innovation and Technological Development at the Croatian Chamber of Economy. The same Croatian innovators were awarded 20 medals at the Innovation Fair in Taipei, Taiwan, in October. Ivana and Roberto Legović were amongst the most successful innovators yet again with their product Detox Destress Lavander, winning the special award Platinum and a gold medal. Jana Žiljak Vujić, Vilko Žiljak, Klaudio Pap and Ivana Stanimirović Žiljak were also amongst successful innovators, as well as

the Zagreb-based Polytechnic whose Infraredesign camouflage uniform –dual design on textiles and leather - was awarded a special prize Double Gold and a gold medal. Innovators Ivan, Roman and Tomislav Krunić won a special award Double Gold and two gold medals for their “Ro-

tation grinding disc” and “Narrow band grinding disc”. Melita Pavlek-Moćan won a gold medal for Melli cream. Slobodan Rajić was awarded a gold medal for his innovation entitled “Rubber Road and Rail Crossing DR 1” arousing instantaneous commercial interest. A gold medal was

IENA 2013: Plaques for young Croatian innovators

A Romanian film on Zagreb won the first prize in the category TV reportage at the Baku International Tourism Film Festival held in the capital of Azerbaijan. The film “Zagreb, a city-break” was conceived as a result of the field trip of the Romanian TV crew of Travel Mix channel organised by the Zagreb Tourist Board.

Croatian innovators have also won a large number of awards at the recently held 65th international IENA Trade Fair 2013 in Nuremberg. The Croatian Association of Innovators exhibited 15 innovations and all of them were awarded gold, silver and bronze plaques, winning the highest and special recognition. Over 6,000 exhibitors from 32 countries participated in the fair with 750 innovations. The Croatian innovators presented technical and technological innovations which aroused immense interest of the German public and business visitors. The professional panel of judges expressed their utmost satisfaction with the young Croatian innovators participating in the fair. Four pupils of the Zagreb-based Faust Vrančić Technical College were also amongst those awarded. Jakov Šandrovčan won a gold plaque for his Universal scales, Filip Kuftinec won a silver plaque for his car operation by Bluetooth, whereas Naim Canolli for Innovations on Mercedes and Mišo Grgić for Tubular amplifier Marshall JCM 800 2205 won bronze plaques. Filip Beleta, the young innovator from the Innovators club Popovača was also awarded a golden plaque for his electro-mechanical candy machine.

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DOUBLE GOLD OATIAN INNOVATORS

etings with representatives of British companies rum, an innovation by Mirjana Brlečić from Priroda liječi (Natural cures), was awarded a silver medal. In addition, young Zagreb innovators Ivana Filipović and Filip Gluhalić presented their work entitled “Use of lightning bolt energy” at the 13th British Innovation Exhibition and were awarded a silver medal.

awarded for the “Nesu Smart Phone Card”. Drago Ćosić, Cor Brevis was awarded a bronze medal for the innovation entitled “Fuel and flammable substance used as a substitute for fossil fuels in coal-fired power plants and industrial furnaces for heating”. NIKEL pore minimising se-

Innovations on shelves The companies Cor Brevis, Roto Kruna, Cosmel, Presencia and Telecor Zagreb participated at the Innovation Forum following a public invitation. Company representatives presented their innovations prepared for sale on the British market to potential partners. The company Cosmel held business meetings concerning the exports of their wide array of cosmetics products to the UK market. The British partner showed particular interest in their products Green tea and Melli cream. The principal objective of the Innovation Forum is commercialisation of innovations exhibited at the fair creating added value for Croatian companies. Business to business meetings (B2B) were organised to meet the specific

Croatian innovators and Belgian companies The companies PIP, Cor Brevis, Čista zona and Bernarda participated at the 3rd innovation event held in Brussels on 13th November 2013 organised by the Centre for Entrepreneurship, Innovations and Technological Development, as well as the Representation of the Croatian Chamber of Economy. The opportunities for participation in Horizon 2020 were presented by Iker Ayerbe, the representative of Directorate-General for Research and Innovation of the European Commission, whilst the opportunities for participation in the creation of EU innovation policies were outlined by Bettine Gola. Meetings between Croatian and Belgian companies were organised during the Innovation Forum resulting in a strengthening of business co-operation. Croatian companies participated in the Brussels Innova which was opened a day after the Innovation Forum. The fair was organised by the Croatian Association of Innovators and co-sponsored by the Croatian Chamber of Economy.

Awarded Croatian innovators

requirements of Croatian companies and there was considerable difficulty attracting British companies to the fair. Nevertheless, excellent results were achieved and we succeeded in organising individual consultations for all our companies, which will lead to excellent business results and eventually exports to the British market”, stated Tajana Kesić Šapić, director of the Centre for Entrepreneurship, Innovation and Technological Development at the Croatian Chamber of Economy. She added that “it was a pleasure to see a Rotation grinding disc by the Croatian company Roto Kruna on the shelves of British tool stores”. Tajana Kesić Šapić highlighted that the assistance provided by the Croatian Chamber of Economy is crucial for small businesses for which joint appearances significantly reduce the costs of participation in fairs. Generators of economic development The round table discussion of the Croatian Bank for Reconstruction and Development (HBOR) covered also the issue of opportunities of financing the commercialisation of innovations. “Innovators are the generators of Croatian economy and HBOR will assist in the launch of its

development”, pointed out Anton Kovačev, Board President of HBOR. The roundtable discussion brought together innovators and supporting institutions in order to reconsider the issue of the importance of new and innovative products and services to enhance the competitiveness of Croatian economy. “Innovation and support are fundamental for the increase in gross domestic product, exports and the creation

Over 0.2 billion funding thus far is reached by loan programme for innovators launched by HBOR in 2006 of new jobs. We are striving to implement and commercialise innovations in order to create jobs in Croatia for creative young people”, stressed Kovačev. He added that HBOR launched a loan programme for innovators in 2006, which resulted in over €0.2 billion funding thus far. Negotiations with the World Bank on the formation of joint funding which are also likely to involve private investors are currently underway to provide assistance to innovators in the commercialisation of their projects.

Privredni vjesnik Year VI No 231

( 5.5% GDP ( over 60% GDP state budget deficit in 2013

public debt before the end of the year

Statements of the IMF mission after visiting Croatia

High risks related to recovery Croatia will achieve growth only if it intensifies its exports and becomes a more attractive country in which to invest. Structural reforms are necessary to improve competition, IMF evaluates roatia has entered its fifth recession year, primarily reflected in private sector efforts to control the debt level that increased steeply due to loans approved during the middle of the past decade, the IMF has evaluated. It also anticipates real GDP to decrease by around 0.75%, with a moderate recovery being anticipated in 2014, based on improved external prospects and higher investment from public sources. However, the risks related to any recovery remain high.

Croatian authorities have achieved progress in the area of structural reforms, but they should be intensified According to the IMF, growth potential in the medium term depends on stronger competition. Croatia will achieve growth if it intensifies its exports and becomes a more attractive country in which to invest. Structural reforms are necessary to improve competition, according to the statement published on the web site of the Croatian National Bank. Income setback Faced with a long-lasting contraction of economic growth, the Government is investing great effort in controlling the budget deficit in 2013, continuing to work in the direction of the good consolidation steps taken

in 2012. In this phase, the state budget deficit is estimated at 5.5% of GDP in 2013 compared with the planned 3.6% deficit. In line with this, it is anticipated that public debt will be over 60% of GDP. Deficit growth is a result income setbacks, higher expenditure for interest (due to the debt assumed from restructured and/ or privatised companies owned by the state), and arrears paid in the health sector. Almost the same deficit is anticipated in the Government Economic and Fiscal Policy Guidelines 2014-2016, even though it could change in conjunction with the budget. The forthcoming Excessive Budget Procedure of the European Commission could secure the necessary fiscal support under the condition that the obligations set by the policy are fulfilled. In defining the adjustment dynamics within the framework of the EBP, a rational balance should be created between achieving policy credibility and avoiding aggrava-

tions in the environment of reducing the debt of the private sector. Subsidies and welfare, pension reform, VAT efficiency increase, and the higher taxation of assets aimed in the right direction could be used as adjustment elements, the IMF Mission highlighted. Intensify efforts Due to the high level of â&#x20AC;&#x153;euroisationâ&#x20AC;? and the relating contraction effects any devaluation might cause, monetary policy support is connected to the euro exchange rate. In conjunction with the limitations set by this framework, the central bank made appropriate efforts to maintain higher kuna liquidity on the local market. The banking sector is still showing high capital and liquidity reserves, even though lending to the private sector is stagnant, whereas bad loans increased to around 15%. The central bank uses macrocredit worthiness instruments together with lending programmes

supported by the state development bank in order to promote loan growth. These efforts are welcomed under the condition that potential fiscal and banking lending risks are carefully managed, opines the IMF. The Croatian authorities have achieved welcomed progress in the area of structural reforms, but these efforts need to be intensified. In particular, the Government moderated the limitations related to employment; reduced subsidies for early retirement; introduced settlements out-ofcourt for insolvent companies and restructured several state owned companies. Praiseworthy attempts have also been made regarding privatisation. However, further steps will have to be made to increase adaptability and participation on the labour market, speed up pension reform, protect the predictable regulatory environment and strengthen the business climate, concluded the IMF Mission. (V.A.)

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( 2 institutions

::: news

HROTE and HOPS are working on a new stock exchange

ENERGY STOCK MARKET SOON

Anonymous trading for the price of electricity Boris Odorčić stock market for electric energy is in plan for Croatia next year. The Croatian Energy Market Operator (HROTE) and Croatian Transmission System Operator (HOPS) are responsible for its organisation and connecting it to other stock exchanges. Ivor Županić, Director of HROTE, says a stock market for electricity will boost the development of market competition and integrate the Croatian market with the EU. Its existence is vital, but it is also an opportunity to develop the business for Croatian market players, especially HEP (Hrvatska elektroprivreda), Županić points out. A stock market for electricity is mainly a separate economic operator mainly owned or co-owned by the transmission system operators. It actually represents an organised wholesale market for delivering agreed electricity hourly

A wholesale market for the physical delivery of electric energy a day in advance does not exist in Croatia transactions a day in advance. The trade is conducted in one place within the IT stock market platform that its members access with their offers to buy and sell. Sellers profit, customers save In other words, the stock market allows buying electricity between producers and traders, as well as buyers, that is, traders and suppliers. The sellers deliver

to the stock market the quantity and minimal purchase price of electricity for the desired hour or hours for the following day when electricity is supposed to be delivered. The customers also deliver the quantity and maximum price for the desired hour for the following day when the electric energy is transferred. The trade is anonymous, that is, buyers and sellers do not know one another, Županić points out. He also adds that the agreed prices offer higher profit for the sellers and savings for the customers, achieving greater total economic – social benefit. It is important to note that Croatia does not have a wholesale market for physical delivery of electric energy a day in advance. There is only the wholesale market of electric energy at a bilateral level where participants arrange the quantities and prices for the physical delivery, for example, annual, quarterly or monthly trade.

Polymer industry initiative

Plastic is not waste The Croatian polymer industry promotes plastic waste recycling and strongly opposes its disposal on landfills, as pointed out by Gordana Pehnec Pavlović, Business Secretary, at the Association for Plastics and Rubber at the Croatian Chamber of Economy, during the recently held 8th International Conference entitled Landfills without Plastics and Rubber. The Conference was organised by the Croatian Chamber of Economy – the Association for Plastics and Rubber, the Slove-

nian Chamber of Commerce and Industry, the Slovenian Plasttechnics Cluster and Plastics Europe, the European Association of Polymer Material Manufacturers. “The Croatian Chamber of Economy is striving to raise the awareness in this field, which will significantly assist in the creation of new jobs and the access to EU funding”, emphasised Vesna Trnokop Tanta, Vice President of the Croatian Chamber of Economy. “The Ministry of Environmental Protection is striving to recycle

immense quantities of waste and place them on the market yet again by implementing the regulation on waste disposal. According to Trnokop Tanta, Enterprise Europe Network and the EU Centre will provide significant assistance in the preparation for EU projects, whereas the Croatian Chamber of Economy will provide full assistance in finding inventive solutions. (K.S.)

Ryanair flying from Osijek Ryanair has included Osijek in its summer flight schedule that will begin on 31st March 2014. It will fly the route Osijek-London landing at London-Stansted. Osijek has been included in a list of 11 cities that will be connected with this airport by Ryanair and has also become the fourth Croatian Ryanair airport along with Pula, Rijeka and Zadar. Zagreb tourism blossoming Zagreb saw 79,320 tourists and 134,394 overnight stays in October, 18% up in relation to the same month of 2012 in tourist arrivals, and 10% up in overnight stays. It saw 64,597 foreign tourists with 108,482 overnight stays (an increase of 20% in arrivals and 17% in overnight stays). They were mainly German tourists, followed by Japanese, US, Italian and Korean tourists. Zagreb Tourist Board expressed its utmost satisfaction with the results and is anticipating a continuation of this positive trend. Organic products purchase

62% of individuals questioned in Croatia confirmed their purchase of organic products, bio and eco products at supermarkets, according to research conducted by the Research Factory agency in October. 27% and 23% respectively stated they order products from specialist stores and directly from the producers. Small-scale agriculture Only three agricultural units in Croatia own land exceeding 10,000 hectares, according to data released by the Agency for Payments in Agriculture. Of 150,000 agricultural units, 1,587 cultivate land covering between 70 and 10,000 hectares, and 39,000 cultivate land covering up to 1 hectare. Such small-scale agriculture prevents intensive production and higher yields, as suggested by the Agency.

Privredni vjesnik Year VI No 231

( €24.7 million

estimated direct value added of audio-visual activities

( €13.6 million

paid annually to state budget

CROATIAN AUDIO-VISUAL SECTOR: SMALL, YET EFFECTIVE

Why the state shou

The return on investment ranges between €0.02 and €0.30 per €0.01 paid as incentives to the film industry. The st In addition, filming is also cost effective for the local community in which it takes place, and where it subsequently in Jasminka Šikić research study “Economic and fiscal impact of audio-visual sector and state incentives” conducted by the Institute of Public Finance has provided a landmark comprehensive study of the finances flowing from public sources to the production of audio-visual work. Consequently, a clear idea has been provided on the func-

The audio-visual sector has extremely low expenditure concerning salaries, contributions and regular maintenance tioning of the model in its entirety. In addition to the obvious economic and social implications, the research has covered the fiscal results of the Croatian audiovisual function for the first time, following the enactment of the Law on Audio-Visual Activities, hence providing new scope for Croatian economic and financial experts who have not tackled the issue thus far. Slightly fewer than 500 companies, which are currently involved in audio-visual activities in Croatia, employ around 1,000 staff and generate around €100 million turnover. 2011 saw a 24.7% rise in pre-tax profits in relation to 2007, whilst the gross profit margin increased from 14% in 2007 to 18% in 2011. According to the results of the research conducted by the Institute of Public Finance, average annual mandatory payments to the state budget through the production and distribution of

films, video films and television programmes stood at €13.6 million. The incentives paid annually stood at around €9.2 million giving a return on investment ranging between 50.8% and 126.1%. “It is important to highlight that this activity creates significant added value, exceeding the value it indirectly receives through incentives. Direct value added has been estimated to stand at €24.7 million. There is a return on investment ranging between €0.02 and €0.30 per €0.01 paid as in-

centives for the film industry. Simultaneously, these are relatively small companies having a multiplier effect on other activities, such as catering and tourism”, pointed out Anto Bajo, the individual behind the research. Something good in Croatia “It feels extremely satisfying to see something good occurring in Croatia. The research conducted by the Institute of Public Finance provides answers concerning the effectiveness of the sector. The

audio-visual sector has extremely low expenditure concerning salaries, contributions and regular maintenance. The producer receives only 5% to 6% as compensation for basic expenses and the remainder is capital investment. Independent producers’ expenditures arising from basic maintenance are extremely low. This model applies also to the Croatian Audio-Visual Centre which uses 2% of total funding for basic expenses and the remainder is invested into production”, empha-

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( between 50.8% and 126.1% increase in returns on investment from paid incentives

ld love films

tate normally collects significantly more tax prior to the development of audio-visual ual work. ncreases catering and tourism, at least on a temporary basis Jadran film helping tourism Boris Dmitrović, producer at Formula Film highlighted the fact that in the mid-80’s Jadran film ranked third amongst providers for the American market. “Hotel Intercontinental was constructed in 1975 and in 1983 when the mini-series Winds of War was filmed, the travel agency Putnik, operating at the time, saw 13,000 overnight stays, with 9,000 overnight stays due to Jadran film. Film tourism According to a research conducted in 2012, every tenth tourist in the United Kingdom is a film tourist and the filming locations of Harry Potter saw a 50% surge in tourist visits. One year after the screening of Braveheart the number of visitors to the monument of the national hero William Wallace (portrayed by Mel Gibson), director of the film, soared by 300%. Similarly, the filming location of Troia saw a surge of 73% in tourist visits. sised Hrvoje Hribar, Head of the Croatian Audio-Visual Centre. “We have not been informed on the fiscal effectiveness or on the highly favourable return on investment through new tax to the state and the state treasury. The state normally collects significantly more tax prior to the development of audio-visual work, irrespective of the model of financing it has adopted”, stressed Hribar. The Institute of Public Finance is interested in further monitoring

this area. The research that was conducted from the end of 2012 to April 2013 but did not cover 2012 and 2013. “We would like to propose the continuation of the monitoring of audio-visual activities, as it would enable us to estimate the effects of the incentives more accurately. Incentive schemes began in 201; they are continuous and hence comprehensive research is fundamental. Audio-visual activity is highly propulsive and active in relation to other sectors. In my opinion,

institutional support in co-operation with the Croatian Bureau of Statistics is essential”, stated Bajo. Profitable Game of Thrones The fact that culture can be a profitable aspect of tourism is not surprising. Nevertheless, Croatian films have not been successful in that field. Film festivals have their audiences that are restricted to professionals and film enthusiasts and the interest they arouse cannot be on par with the mass popularity of the Game of Thrones, the American series with 14.2 million viewers globally. Similar instances of international co-operation have proved to be highly profitable for the Croatian film tourism. Hence, the film Diana, as well as several less widely-acclaimed Scandinavian films, fostered tourism promotion of Croatia. According to the data provided by the Tourist Board, Dubrovnik, which in the series depicts the imaginary city King’s Landing, generated significant profits. “According to the list published on the BuzzFeed portal on 16th October 2013, Dubrovnik is the most reputable film location in the world, which provides a new dimension to Croatia and its tourism. Consequently, several tourist agencies organise themed tours inspired by the series, achieving fantastic results. The film crew itself, the producers and the actors, have attracted a large number of tourists through social networks where they directly communicate with their fans highlighting the beauties of Dubrovnik”, stressed Jelka Tepšić, PR Co-ordinator at Dubrovnik Tourist Board.

Julianne Schulze, Senior Partner at Peacefulfish (a European consultancy operating on financing in creative industries with headquarters in London and Berlin) pointed out that the term Game of Thrones Croatia has been searched 1,570,000 times on Google, showing viewer interest for the filming locations of the series. “The figures show that international projects filmed in Croatia enhance the global presence of Croatia in an unprecedented manner”, she stated, adding that Croatia has been recognised as an excellent location on a par with Australia, France, the United Kingdom or Bosnia and Herzegovina.

Filming implies an immediacy of exports, stated Boris Dmitrović, Producer at Formula Film The filming of movies implies near-immediate exports and is certainly a complementary activity to tourism. Consequently, we need to create opportunities for filming in Croatia as often as possible”, emphasised Boris Dmitrović, Producer at Formula Film.

14 ::: news Croatia Bank a member of the Croatian Banking Association Croatia Bank has become a member of the Croatian Banking Association (HUB), an economic interest banking association, and has thus become a promoter of common interest and responsible banking. Croatia Bank has been present since 1989, operating through a network of 21 branches and subsidiaries throughout the country. In 2013, it has increased its activity in all market sectors, introduced new products and significantly increased the number of clients. Slight drop of gross external debt Following a highly significant rise of €1.2 billion in gross external debt during the second quarter, July saw a monthly drop. Consequently, the gross external debt at the end of July stood at €45.6 billion, 1.2% down in relation to the end of June, according to the latest data provided by the Croatian National Bank.

Annualised decrease in retail Retail trade showed a real decrease on an annualised basis of 0.5%, the first decrease after four consecutive months of positive real annualised growth rates, according to data provided by the Croatian Bureau of Statistics. According to non-seasonal data, retail trade saw a slight real decrease of 1.2% month-on-month. Pension fund asset value at €7.5 billion Total nett assets of all the four mandatory pension funds stood at €7.5 billion at the end of October. According to data released by Hanfa, the asset value of four mandatory pension funds currently stands at €0.86 billion, with Raiffeisen OMF showing the highest asset value. Its share portfolio stood at €0.28 billion.

Privredni vjesnik Year VI No 231

( 11% fall

in gross insurance premiums between 2008 and 2012

INSURANCE MARKET IN CENTRAL EUROPE

Croatian insurers more resistant to the crisis Regarding the level of life insurance within the overall total of insurance, Croatia is still a laggard with only Romania behind it. Its worse results relate to the share of life insurance related to saving or even two thirds in Hungary. Growth and the profit potential of insurance in the region has been lost during the crisis year, which is why it is necessary to evaluate the successfulness of existing sales channels and consider new ones, highlighted Frigyes Schannen, Managing Director of Budapest Office for Roland Berger. According to the results of the survey, concerning sales, insurers still rely heavily on repre-

Drago Živković ccording to a survey conducted by Roland Berger and EFM (nonprofit association of banks and insurers), Croatian insurers managed to preserve profit growth during the recession and prevent considerable premium decrease despite operating under the most demanding macroeconomic conditions in the region. Although Croatia registered the largest GDP fall and the biggest average annual fall rate of personal spending in the region, an 11% gross premium fall between 2008 and 2011 is still a far better result than that achieved by Hungary (26% fall), and is close to Poland’s 9%. Moderate profit growth during the crisis year puts the Croatian insurers at the top in the region, where better results were achieved only by the Czechs.

Life insurance lags behind Three of the biggest insurers achieved 52% of gross premiums, where Croatia is not so different from the regional average. A similar concentration is shown

According to the results of the survey, the importance of affiliates will decrease, as will the importance of bank insurance in the Polish and Czech market. Concerning the level of life insurance in overall total insurance, Croatia stills lags behind, with Romania the only country behind it. Its worse results relate to the share of life insurance related to saving (barely 6% in life insurance). The same levels range around one third in Poland

sentatives; the importance of affiliates will decrease, as will the importance of bank insurance. The internet will become a more important channel, but mainly with non-life insurance and simpler products. Social media are still not considered sale channels since insurers regard them only as support.

Insurance tax, instead of selling CO? This is not the best time for privatising Croatia osiguranje. However, if the Government decided to do so, then it should make the most of it, Frigyes Schannen commented when asked about the sale of Croatia’s biggest insurer. The best offer does not only mean the highest price, but also includes other elements, for example plans for the future. The future buyer will not only buy Croatia osiguranje, but also over 30% of the Croatian market. Therefore, his long-term plans will be important for the

entire market, Schannen opines. Of the two bidders, his opinion is that the Polish PZU has the advantage of being a strong regional group. However, Adris Group could be a better choice as a local company familiar with the work and client habits. If the main reason behind the Government wish to sell Croatia osiguranje is to top up the budget, then the same goal could have been achieved without privatisation, especially by means of special insurance tax, as in the case Hungary, Schannen added.

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15 ::: news

( 225,000

The number of voluntary pension insurance members

INSURANCE FOR ENTREPRENEURS

Expense on one side, investment on the other Over 90% of artisans and SME’s have either no insurance coverage or the insurance covers only a small element of the risk to which their business is exposed Drago Živković ressed by insolvency, Croatian entrepreneurs often forget to include insurance in their business plans. Insurance is an expense, but if an entrepreneur uses it to cover the most significant risks, it can also serve as a useful investment added to other expenditure. Even though small and medium sized enterprises in Croatia account for 99.8% of the total economy, over 90% of them have either no insurance cover or the insurance covers only a small degree of the risk to which their business is exposed. This will certainly change now, after Croatia joined the EU, since an increasing number of foreign partners demand insurance. This was promoted at a round table organised by the magazine Svijet osiguranja (The World of Insurance), the Association of Insurers and the Centre for Entrepreneurship within the Croatian Chamber of Economy. The new generator of the entire insurance market could be insurance against liability, anticipated Tristan Šker from Triglav osiguranje. Almost 30 activities in Slovenia are covered by mandatory insurance. Therefore, even licensed mountain guides have to be insured against liability towards third parties. Šker believes the number of activities with mandatory insurance will increase in Croatia, as doctors, lawyers and certified engineers have had them for years. Insurance has recently become mandatory for pharmacists, but since the law does not prescribe even a minimum policy or minimum risks, there is no practice accord-

Croatia Bank a member of the Croatian Banking Association Croatia Bank has become a member of the Croatian Banking Association (HUB), an economic interest banking association, and has thus become a promoter of common interest and responsible banking. Croatia Bank has been present since 1989, operating through a network of 21 branches and subsidiaries throughout the country. In 2013, it has increased its activity in all market sectors, introduced new products and significantly increased the number of clients. Slight drop of gross external debt Following a highly significant rise of €1.2 billion in gross external debt during the second quarter, July saw a monthly drop. Consequently, the gross external debt at the end of July stood at €45.6 billion, 1.2% down in relation to the end of June, according to the latest data provided by the Croatian National Bank.

ing to which insurers could orient. The price of this insurance varies considerably. Machine breakdown Insurance against product withdrawal, important in the food and car industry, is spreading as well as producer insurance against liability towards customers. The price of insurance against producer liability depends on three main factors: type of activity, scope of work and country of operation, since legal systems vary considerably. Insurance against machine breakdown is very common, but Šker warns that entre-

For entrepreneurs, insurance should be just like any other product or service preneurs who buy this insurance should also take out insurance against machine shutdown due to the breakdown in order to cover all risks. For entrepreneurs, insurance should be just like any other

product or service. If they need it, they should buy it, Zlatko Pozaić from GRAWE Insurance suggests. However, the risks an individual policy covers should be kept in mind, since any misunderstanding could lead to disputes for compensation, which could further lead to the termination of co-operation between the insurer and entrepreneurs. A special kind of insurance, which could be more cost-effective for entrepreneurs, is the voluntary pension insurance or the third pillar. There are presently 225,000 covered by this insurance, 23,000 of whom are in closed pension funds founded by 17 companies, syndicates and associations. The state still grants subsidies for the third pillar up to a maximum of €99 a year, and payments of up to €789 a year are tax exempt. According to Zoran Rivić from Raiffeisen Voluntary Fund, for an entrepreneur, who might increase a worker’s gross salary by €66, it would pay to invest this amount in a voluntary pension insurance. The difference is minimal, but this would be enough for supplementary medical insurance.

Privredni Pr P riv ri ivre red dn ni vvjesnik ni jesnik Year VII N No Ye Y ear ar V o 231

QUALITY OF SERVICE IN THE CROATIAN HOSPITALITY INDUSTRY

The issues behind the hospitality industry The Croatian hospitality industry currently requires both qualified staff and nd staff in ere staff general. According to statistical data, the food and drink sector has a severe shortage of 72%, implying that both chefs and waiters are in demand Sanja Plješa taff training and the improvement of professional skills in all areas of tourism, primarily concerning management, is an imperative. Irrespective of the long-term tradition in tourism, the quality of service in the Croatian tourism industry does not rank amongst the best in the Mediterranean, possibly due to insecurity and lack of appropriate management training, pointed out Kristian Šustar, President of the Association of Employers in the Croatian Hospitality Industry (UPUHH), during the recently held 16th Hotel Owners Conference. He added that the Croatian hospitality staff and primarily those involved in the hotel industry require specialist knowledge and skills.

Quality staff – satisfied visitors According to conference participants, in addition to the issue regarding management training, there is an issue with the short-

age of junior professional staff, primarily in the hotel industry. “On-going learning is fundamental against the backdrop of global changes and technological advancement. We lack quali-

The staff shortage in marketing stands at 67%, and in reception and household it is currently 50% fied chefs, waiters and chambermaids, as these occupations have recently been underestimated, and high school students mainly opt for vocational schools due to poor school performance rather than as a result of their interest or inclinations. Moreover, the educational system does not strive to meet the employers’ requirements”, stressed Josip Mikulić from the tourist company Jadranski luksuzni hoteli (Adriatic Luxury Hotels). He added that quality staff in tourism always implies satisfied visitors. “According to

statistical data, tourist ist companies, whose visitors express xpress satisfaction, normally equate ate to 30% higher revenue”, he noted. oted. Staff shortage It was highlighted during the conference that Croatia atia is currently experiencing a shortage of both qualified staff ff and staff in general. According g to statistical data, the food and drink sector sees the most severe staff shortage at 72%, with h marketing staff shortage currently ly standing at 67%, whilst in reception ception and household it is currently 50 %. Jože Perić, Dean of the Opatijabased Faculty of Tourism and Hospitality Management attempted to provide an explanation of the principal issues behind the Croatian hospitality industry and pointed out several solutions. He cited economic development and the rise in the standard of the general public were exacerbating the situation. In his opinion, the fundamental issues are the unrealistic local currency exchange rate, an uncompetitive domestic

hospitality industry and a shortage of foreign investment. “The macroeconomic framework is extremely unfavourable for hotel owners and hence for tourism and the entire Croatian economy. Fundamental changes are imperative. Croatia is a small country and consequently exports are crucial. Nevertheless, favourable conditions need to be created and the Croatian hospitality and tourism industry needs to become competitive, effective and profitable”, concluded Perić.

Presentation of Croatian wine in Warsaw

Slavonian Graševina conquering Poland Members of the Association of Wine Producers, Graševina Croatica, have presented their wines for the first time in Warsaw where Croatian wines, primarily continental wines, have been virtually unknown thus far. According to Robert Šlezak, a Polish chef living in Croatia, Poles are most pleasantly surprised by the high quality and the varieties of Graševina. Irrespective of the fact that the price of the tickets for the dinner package with the Graševina presentation stood at around €160, all

310 tickets were sold. 11 wine producers with 22 wines from Slavonia and the Croatian Podunavlje presented their wines: Adžić, Antunović, Belje, Galić, Iločki podrumi (Ilok wine cellars), Buhač, Kalazić, Krauthaker, Mirisna vina (Scented wines), PP Orahovica and Zdjelarević. The appearance on the Polish market was initiated last year, stated Vlado Krauthaker, President of Graševina Croatica. He announced similar appearances on other markets. The promoter of Graševina in Poland is Tomasz

Prange-Barczynski, editor-inchief of the Polish magazine Wino who pointed out a significant improvement in the quality of Croatian wines. The Poles are not prominent wine consumers, yet the market is slowly growing and providing opportunities to those who position themselves on time. Italian and French wine producers are currently present on the Polish market and Croatian wine producers are counting on Polish tourists of whom 650,000 spent their summer holidays in Croatia last summer. (D.Ž.)