Croatian Export Croatian trade with the world showing positive signs this year: it increased 7.9% and reached almost 9 billion euros
Interview: Robert Škifić Our business is completely selfdependent. And it has managed to increase, says Board President of Viktor Lenac Shipyard
Rijeka Gateway project Investment in the Rijeka Port valued at €0.2 billion. Concession holder to be selected this year
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Croatian Business & Finance Monthly Established in 1953 Monday / 2nd June/ 2014 Year VII / No 0237 www.privredni.hr
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DEFICIT GROWS
European Union and healthcare increased budget deficit Last year, budget income totalled €14.3 billion and expenditure €16.5 billion. The deficit was €2.14 billion higher compared with 2012 Igor Vukić ayment to the EU budget (€0.22 billion) and debt servicing of the healthcare system (€0.34 billion) were the main reasons behind the deficit growth of the state budget in 2013. These, plus the expense incurred due to the high interest rate meant overall growth to €0.13 billion, Finance Minister, Boris Lalovac, stated at the Government session on budget income and expenditure for 2013 held last week. According to a detailed report, total income was €14.3 billion and expenditure €16.5 billion and the deficit totalled HRK16.3 billion more compared with 2012. Total income decreased by €0.13 billion. Income from profits tax decreased €0.2 billion (17.3%), which is a consequence of tax relief on reinvested profits that aimed to help the economy and promote investment, Lalovac said. The Minister explained the Government managed to decrease certain expenditure, for example, €92.1 million for the unemployed, €30.2 million for material expenses, and €29.5 million for subsidies. However, the pressure of debts inherited from the
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Health Sector and others, which increased the interest rate, was too intense. What now follows is the European Deficit Decrease Procedure. The assessment and recommendations of the European Commission regarding Government measures for deficit decrease should be announced this week. Efficient tax collection Income tax totalled €0.2 billion (8.1% more compared with 2012). This is the result of a more efficient collection system and a 10.8% lower tax and surtax return according to annual tax returns. Last year was marked by several changes in the value added tax rate. The general rate increased to 25% and the zero rate was cancelled. The rate for hospitality services decreased to 10% and was later increased to 13%. A fiscal system was introduced for cash sales, partly hid-
den in the grey zone. The result: the amount of VAT collected was almost the same as in 2012 – a total of €5.3 billion or 1% down.
Total income decrease was €0.13 billion
Duties brought in 4.3% more income (a total of €1.5 billion) as the result of changes implemented due Croatian EU accession. Income from contributions totalled €4.9 billion, a 1.8% decrease. The Government explained that the decrease is the result of movements on the labour market and the effects of the amendments to the Act on Contributions from 2012 when the
Kristijan instead of Kovačev HBOR new Board President will be Vladimir Kristijan, who will take the place of Anton Kovačev who ran the financial institution for 19 years. The Government proposed to the HBOR Supervisory Board to appoint Martina Jus as an additional Board Member. Vladimir Kristijan comes from Erste Bank where he was Head of t Corporate Sector. Martina Jus has already worked in HBOR, but currently holds a position in HAMAG Invest and the Supervisory Board of Hrvatske pošte (Croatian Post).
rate on gross salaries decreased from 15% to 13%. Expenditure On the expenditure side, subsidies totalled €0.7 billion, a decrease of €29.5 million. Subsidies for agriculture and railways decreased, but those for shipyards and the Croatian Bank for Reconstruction and Development (HBOR) increased. HBOR received €32.9 million for promoting competitiveness. The shipbuilding industry received €81.9 million - 79.3% of all subsidies in the economy. However, all this is still within the shipyard restructuring plan. During 2013, a total of €0.3 billion was allocated to agricultural production, which is 19.0% less compared with 2012.
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Privredni vjesnik Year VII No 237
( 101,196 entrepreneurs employed 830,928 staff last year
FINA FORUM AND GOLDEN BALANCE AWARDS EBRD for flood stricken areas The European Bank for Reconstruction and Development will try to speed up the projects it is implementing with Hrvatske vode in the region jeopardised by recent floods. It is also ready to direct a share of its technical assistance to assess the damage and remove its consequences, announced the Bank Director in Croatia, Vedrana Jelušić Kašić. The EBRD and Hrvatske vode co-operate on 15 projects related to water supply and drainage, construction and pollution of waste water, that is, it is financing the national component of these EU funded projects with around €200 million. MZLZ begins construction The construction of a new passenger terminal of the International Zagreb Airport (MZLZ) has recently begun. Total investment is worth €331 million, of which €243 million will be invested in the design and construction of a new passenger terminal, and €88 million is reserved for servicing the airport infrastructure during the period of the concession. At the end of 2016, when the construction work ends, the new passenger terminal will be able to receive 5 million passengers. At the moment the companies Viadukt and Kamgrad are executing the largest share of the work. 21.1% unemployment rate
The registered unemployment rate in Croatia stood at 21.1% in April according to data provided by the Central Bureau for Statistics. Due to seasonal movements, the rate decreased 1.2% compared with March when it was 22.3%. The rate is 0.2% higher on a year-on-year basis.
Correct information business incentive
Overall, income for Croatian entrepreneurs was 1.7% higher last year, with profits up 27 entrepreneurs who are successful despite the crisis Drago Živković roatian entrepreneurs achieved total income of €80.6 billion and net profits of €0.5 billion last year excluding banks and insurance companies. Income increased 1.7% and profit 27% compared with 2012, confirming that there are ample entrepreneurs who are successful despite the crisis. According to data provided by the Financial Agency (FINA) and presented at the traditional Golden Balance Awards, held in May, a total of 101,196 entrepreneurs employed 830,928 staff last year, up 22,235 compared with 2012. Even though small-sized enterprises have the majority in terms of quantity, the Croatian economy is highly concentrated in the financial sense: the top 100 biggest companies (1% of total number) earned 35.2% of total income. However, better days for small-sized enterprises are coming if one views last year’s data when they earned €21.8 million in nett profits compared with 2012 when they incurred losses.
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Capability varies To make this year and those to follow more successful, entrepreneurs need quality information so they may make the right decisions. FINA offers them a variety of information, and those presented in the form of a web service are the most popular, FINA Board President Anđelka Buneta mentioned. One of the most popular services is Transparentno.hr, launched in July 2013. Since then, it has been
Croatian economy is highly concentrated in the financial sense: the top 100 largest companies (1% of total number) earned 35.2% of total income used by 240,000 users and the site has been browsed over a million of times. A new version of the service has recently been made available with an updated browser and data on entrepreneurial operations in 2013. Quality information is highly important for local administrations, especially those competing for EU funds. However, the level of their capability to do so varies significantly. One of the best ex-
amples is the city of Ivanec that obtained the international BFC certificate for business friendly cities. According to the mayor, Milorad Batinić, this is the result of a long-lasting reform that started in 2005 in spite of the initial resistance of officials who used to work in the old fashion. A municipality is not only a utility service provider Even though it is important to post information on the Web, it is even more important the information is correct and updated, and it is the general updating that Batinić sees as the greatest challenge of providing quality information. In other municipalities and cities, the service of providing information is chaotic, Dean of the Faculty of Economy in Rijeka, Heri Bezić opined. As an
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( 22,235 up compared with 2012
is the best
FINA: ENTREPRENEURIAL RESULTS FOR 2013 BY COUNTY
Zagreb entrepreneurs rank first According to the results showing entrepreneurial activity in Croatia in 2013, the Financial Agency ranked counties by the number of entrepreneurs, numbers employed, total revenue, profit / loss during the period and nett entrepreneurial profit. According to expectations and due to their overall dominance, Zagreb-based entrepreneurs ranked first.
% compared with 2012, confirming there are ample
example, he mentioned a municipality they thought had 40 entrepreneurs, when in fact it had
160. There also municipalities, mainly on the coast, that do not know the number of permanent residents, which makes it difficult to plan the water supply and drainage system. The problem is that municipalities and cities are used to routine utility works, and now they have to deal with development projects for which they lack staff, experience and data, Director of the Institute of Economy, Dubravka Jurlina Alibegović, warned. Academic institutions and other institutes could help in gathering data, but for additional work, especially when preparing EU projects, additional training is necessary. However, it was concluded at the FINA round table that this is difficult if the municipality lacks funds to pay additional staff or experts, which is why they should seriously work on concentrating local administrations.
Zagreb entrepreneurs, the most numerous, accounted for €43.3billion revenue in 2013 33,329 Zagreb entrepreneurs employing 335,381 staff generated €43.3 billion total revenue, €2.1 billion profits and €1.8 billion losses during the period, giving a nett profit of €0.3 billion. Split-Dalmatia county ranked second with 11,436 entrepreneurs and 69,209 employed. Entrepre-
CROATIA RANKS 59 OF THE 60 LARGEST ECONOMIES
Almost the worst amongst the best
Winners of the Golden Balance Awards The Golden Balance Awards is organised by FINA. The award is given to the most successful entrepreneurs in a certain activity, based on total rank determined according to 11 financial indicators in five categories – profitability, liquidity, debt, activities and efficiency. Based on total financial rating, the winner for 2013 was ZAGREBINSPEKT, a Zagreb based company. In the category Activities, the Golden Balance was won last year by the following companies: POLJOPRIVREDNO PREHRAMBENI KOMPLEKS, (agriculture, forestry and fishery), ANTENAL, (mining and excavation), YTRES, (processing industry), TERMOPLIN, (electricity, gas and steam supply and air conditioning), UNIJA NOVA, (water supply, waste water disposal, waste management and environmental rehabilitation), FORSET, (construction), ABBOTT LABORATORIES, (wholesale and retail; motor vehicles and motorcycle repair works), VIATOR & VEKTOR PROJEKTI, (transport and storage), NEWREST DUBROVNIK (accommodation, hospitality), PET MINUTA, (information and communications), ZAGREBINSPEKT, (expert science and technical activities).
neurs generated €5.1 billion total revenue, profits of €0.32 billion and losses of €0.3 billion, a nett profit of €51.4 million. Požega-Slavonija County and Lika-Senj County ranked bottom regarding the number of entrepreneurs. In 2013, PožegaSlavonija county had 674 entrepreneurs with 7,431 employees, generating total revenue of €0.4 billion. Lika-Senj county, traditionally with the lowest number of entrepreneurs, accounted for only 0.7% of the total and the overall results in terms of profitability and revenue confirm this fact. (B.O.)
According to the results of the World Competitiveness Yearbook 2014 published by the Lausanne-based Institute for Management Development (IMD), Croatia ranks 59 of the 60 largest global economies. Because of the one place fall, Croatia ranks amongst the leastcompetitive economies amongst developed economies. The competitiveness ranking uses over 300 criteria, of which two thirds
are based on statistical indicators and one third on opinion polls amongst business people. The IMD methodology is based on the analysis of four key indicators of competitiveness: economic results, public sector effectiveness, business sector effectiveness and infrastructure, as well as five indices for each aspect. “The analysis indicates that the immediate implementation of priority reforms is vital; processes need to be initiated by anyone in a position to do so in order to improve the competitiveness ranking of Croatia and hence create the necessary systems for investment launch and the creation of new jobs”, pointed out Ivica Mudrinić, President of the Croatian National Competitiveness Council, which is a partner-institute to IMD.
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Privredni vjesnik Year VII No 237
( €8.95 billion
total Croatian exports in 2013 (6% lower in relation to 2012)
CROATIAN TRADE WITH THE WORLD SHOWING POSITIVE SIGNS THIS YEAR
EU should still be regarded as a full membership
Regardless of the limitations of certain sectors, Croatian exports are expected to be one of the generators of economi trade increased by €0.16 billion or 7.9%. Igor Vukić xports are one of the best tests for any company, especially those specialising in production. When companies export, there are usually no relatives to help you obtain a better price for your goods. In many cases, there is no regional lobby or support from your political party. You are alone with your product and its price. You depend on its quality and the customer decision. This is how Filip Filipec, Board President of Tehnika, views exports. He is a manager who had worked in the demanding German market prior to becoming Head of Tehnika. He is therefore aware of the limitations of Croatian companies, especially in construction, in international tenders. For example, in construction such limitations include high staff costs particularly in middle or lower positions. At the recently held conference (Leaders for Leaders), Filipec gave an account of his experiences in Germany. He said that in some
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cases Croatian civil engineers might be subcontractors due to their expertise. However, it is difficult for them to compete in the rapidly-developing Eastern market having a cheaper work force from India and Pakistan. Regardless of the limitations of certain sectors, Croatian exports are expected to be one of the generators of economic recovery after six years of recession. Initial results give a glimmer of hope. During the first quarter total Cro-
Even logistic companies see higher trading with external markets atian trade increased by €0.16 billion or 7.9%. Since imports grew at a slower rate (1.8% or €67.9 million), the import/export ratio moved from 56% to 59%. Government Vice-President, Branko Grčić, suggests this indicates that local companies picked up the pace after the initial shock of EU accession. Despite all the problems they are facing, it is
clear they are making progress in creating relations with foreign partners, Grčić said. Slow recovery In 2013, total Croatian exports were €8.95 billion, 6% less than in 2012. Many feel that because of the long recession and the restructuring of local companies (shipyards and numerous prebankruptcy settlements), exports have hit their nadir and growth will now follow. Even logistic companies notice higher external trading. Alma Suhić from the transport-logistic company Gebrüder Weiss says the number of lorries carrying Croatian goods across the border increased 20% during the first quarter. Since Croatia became full member of the EU, more and more local companies are asking about the conditions for transporting goods to the EU and further. Companies are slowly getting used to the fact the EU has become a ‘local market’ and that goods can now be delivered more effectively since there are no duty barriers or waiting at
the border. Exports to countries outside the EU have become slightly more complex. Declarations have to be completed in more detail, but freight forwarders are more than willing to help, Alma Suhić said last week at the conference on export Business Take-Off, organised by Poslovni dnevnik. Even though the EU has become ‘local’ in the formal and
ON A GLOBAL LEVEL, WE LAG BEHIND
Exporters are lacking information, scientists and engineers Our information science is at a global level, but we are starting to lag behind, says Goran Car from Combis. The reason is that we do not have enough graduated information scientists: three colleges produce 800-900 a year, which has become insufficient for the needs of existing Croatian companies and numerous new start-ups.
Zdenka Lončar, Deputy Minister of Entrepreneurship and Crafts thinks that colleges should respond quicker and expand quotas for the professions in demand. Borel also noticed the lack of trained machine and electrical engineers. The state promotes clusters so that companies may join forces on the market. This co-operative approach to the foreign market is subsidised
with up to €65,750. However, Ivan Bračić from company PIP, specialising in the production of honey and honey products, says the process of issuing subsidies is highly bureaucratic. PIP applied for a subsidy in co-operation with PMF for honey products with added health value, but a reply from the Ministry of Entrepreneurship still has not arrived.
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( 7.9%
higher exports during the first quarter of 2014
an export market, regardless of
ic recovery after six years of recession. Initial results give a glimmer of hope. During the first quarter total Croatian ers in Germany or England. This is the formula of Borel, a producer of elevators. According to its co-owner, Dejana Borevković, they had worked with the local market until 2008 when cheaper imported standardised elevators appeared. When it started to lose market share, Borel turned to export. The company participated in showrooms; they found their first buyers; their quality and design to the standard required and rumours started to spread.
legal sense, Western countries should still be considered as export markets, Goran Car from Combis says. It is still more difficult to export to the West than to the East. The Western EU is still setting similar obstacles as before; it demands special skills, innovation, quality and competitiveness from anyone wishing to sell goods and services. Howev-
er, it also offers great opportunities. Car says companies should look for niches in the IT sector in which they could offer additional value and special skills. Those who work seriously and with dedication can do everything. For example, elevators: Italian design plus German quality and this becomes a Croatian product that will find its custom-
What is HBOR doing? Today the company sometimes applies for a tender issued by a local company in need of elevators. We say: “These are our elevators. We sell them in England and they are used in shops like Victoria’s Secret”. And they say: That’s great. Keep up with the good work”. But they do not buy, Dejana Borevković says. A series of financial instruments is available for companies that wish to export. According to Ivanka Maričković-Putrić, Chief Executive of the Croatian Bank for Reconstruction
and Development (HBOR), the bank has already started to act according to the instructions issued in the recently adopted Export Promotion Action Plan. The Bank Board made the decision to halve the 4% interest rate for new exporters. HBOR will be additionally reinforced with new capital of €0.13 billion, as announced in the Action Plan, which will be used for credit for exporters and the insurance of exports. HBOR gained experience in exporting through 12,000 export loans worth a total of €7.25 billion. There is almost no Croatian exporter that has not used a service provided by HBOR. HBOR has intensified credit to buyers of Croatia exports; customers often expect the sellers to secure a favourable loan for the goods in addition to quality service. This is where HBOR comes in, since banks reduced credit lines during the crisis. In arrangement with the banks, HBOR participates with its share in the distribution of risk that is one thing that simplifies overseas trade.
EXPORTS IN THE FIRST QUARTER
Exports to the rest of the EU increased 12.3% According to preliminary reports provided by the Central Bureau for Statistics, exports increased 7.9% in the first quarter. The increase was 21% in January and 12.1% in the first two months. The structure of exports for January and February shows that the export of electricity, products of primary activities (agriculture, forestry and fishery), chemical
products, machines and devices, and wood products registered the highest increase according to CCE issue of Economic Movements. At the same time, pharmaceutical products showed a considerable fall as well as oil derivatives and electric equipment. Moreover, in addition to shipbuilding, the negative export trend of oil derivatives was responsible for virtually all the
overall export decrease in 2013. The structure of exports by country points to a growing trend to the EU (12.3%), where the highest increase was seen with the most important foreign trade partners (Slovenia, Italy, Germany and Austria), but also France, Slovakia and Hungary. Despite the data showing that last year total imports from the EU continued to fall (3.7%) as well
as imports from certain members (Italy, Slovenia and Austria), Croatian imports increased dramatically. CCE analysts have identified significant growth during the first two months with CEFTA countries (15.5%), especially Bosnia and Herzegovina and Serbia; that is a positive in terms of Croatia leaving this association at the moment of joining the EU.
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Privredni vjesnik Year VII No 237
( £37 million (€45 million)) invested in the Great campaign
BRITISH BUSINESS CENTRE CROATIA, BBCC
( €35,000
Viktor Lenac profit in 2013
INTERVIEW: ROBERT ŠKIFIĆ, BOARD PRESIDENT OF VIKTO
Our business is
Since it exited bankruptcy, Viktor Lenac has not received an production costs. This year they were authorised to renovate overhauls, they also specialise in ship renovation and offsho
A NEW BRIDGE TO THE BRITISH MARKET In addition to attracting investors to Britain, the centre will assist British companies interested in investing in Croatia roatian companies aiming to engage in business activities in Great Britain are now provided with comprehensive advice at the British Business Centre Croatia (BBCC). In addition to attracting investors to Britain, the centre will assist British companies interested in investing in Croatia. “We are hoping to contribute to greater business generation in Croatia, stated Vedrana Likan. In her view, there is now increasing interest in Great Britain for original Croatian products such as wine and olive oil, as well as intellectual services. During the opening ceremony of BBCC, the Great campaign
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We are hoping to contribute to greater business generation in Croatia was presented, which promotes business activities in Great Britain and the British way of life. A large number of celebrities participated in the campaign to show Great Britain as a most desirable destination for study, fashion, business, innovation and culture. Conrad Bird, the Director of the Great campaign, and adviser to Prime Minister, David Cameron, pointed out that the value of investment in the campaign would be £37 million (€45 million), and
it is estimated that the campaign could generate revenue of £500 million (€600 million). The campaign has been launched in 144 countries throughout the world; “We are striving to present Britain as a country pulsating with life, creating ample business opportunities and the implementation of innovative ideas”, emphasised Bird. Tourism creating business connections All ambassadors of the United Kingdom will participate in promoting the British market. David Slinn, the UK Ambassador to Croatia, stated that by 2020, British exports need to be doubled, in addition to creating 100,000 new jobs. “Our relationship with Croatia must not be a one-way street and we need to achieve much more than thus far. The interest in Croatia is always increasing, which is shown in the rising number of British tourists to Croatia”, stated Slinn. Darko Lorencin, Croatian Tourism Minister, confirmed that an increase in the number of tourists is generally followed by a rise in the number of business connections. “Following a visit to a particular country, business people normally change their previous opinions about it and become more interested in investment”, explained Lorencin. BBCC will operate as a function of the British Embassy in Zagreb.
Jozo Vrdoljak rivredni vjesnik spoke with Robert Škifić, Board President of Viktor Lenac, about the shipyard business, new contracts, overhaul problems and a general perspective on Croatian shipbuilding.
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How was your business year 2013? Last year was a year of stabilisation for us after 2012 when Viktor Lenac incurred a loss of €3.95 million. Last year we managed to neutralise the loss and halt the fall, so we ended the year with a profit of €53,000. Total revenue increased 10% in 2013 and we decreased production costs. In addition to salary cuts, we reduced the number of employees from to 570 in 2012 to 495 by the end of 2013. Our expenses are now under control. In fact, Viktor Lenac has three core businesses. In addition to overhauls, we also specialise in ship renovation and offshore construction. The share of the three segments varies depending on the market needs. In addition to the final calculation, what else encourages you?
After the fall trend and losses, profitability has encouraged us. We had 66 ships under overhaul in 2013 compared with 50 in 2012. Unfortunately, the average overhaul price is going down. For example, in 2008 the average cost of a ship overhaul was around €550,000; it was €300,000 in 2013, and fell to around €225,000 in the first quarter. This definitely depicts the current situation on the market.
We had 66 ships under overhaul in 2013 compared with 50 ships in 2012 However, are you still satisfied with the year? We were authorised to renovate a cable-laying ship for a leading company in the energy and telecommunication systems industry. The contract is worth €20 million. Seven world shipbuilders competed for this job; this means we have managed to cover this year in all three business areas. What about competition in the overhaul segment; who is your main competitor?
What is the biggest problem facing Croatian shipyards? The problem of the work force has become more evident, since young experts and specialised workers leave to more developed countries due to the situation in our shipyards. The poor situation with subcontractors is another problem. I have to say that not a single shipyard in the world can function without subcontractors, especially overhaul yards where the work force oscillates. This means that if the level of work should increase, there is a danger we would not be able to keep up. Our former subcontractors had a chance to work in other countries where the price of their service was higher. Our work force will have to be imported and we can only import it from countries outside the EU, which is very complex in terms of work licenses and quotas.
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( 570 to 495
reduction in the number of employees last year
( 30%
lower overhaul price
R LENAC SHIPYARD
s completely self-dependent
y type of support or state intervention. In spite of this, it has managed to increase revenue 10% and decrease e a cable-laying ship, a contract worth €20 million. Moreover, Viktor Lenac has three core businesses. In addition to ore construction. In addition to the price of maintenance and overhaul, what are other market disruptions? We have not executed any renovation work since 2011, so our business depended on offshore construction and overhaul. The construction of the IKA JZ platform, worth €30 million, started in 2012 and to contractor satisfaction, this work is approaching its end. Viktor Lenac is mainly a shipyard with a long experience in the offshore programme. It constructed 17 platforms with the Italian company Rosetti Marino for INAgip and Edina. Our advantage is that we have the most experienced and trained workers in the area of offshore construction and that distinguishes us from others. In addition to a general deceleration in shipping activities over the past couple of years, we were forced to make a 30% reduction on the price of an overhaul. Besides the Montenegrin shipyard Bijela, our main competitors are Turkish shipyards and Bulgaria to a certain degree. In order to obtain this contract, we had to reduce our price substantially yet remain competitive despite stricter control over our expenses. Why are Turkish overhaul shipyards at an advantage? Turkey is not in the EU and is regulated by different rules and regulations resulting in lower outgoings related to environmental protection and business. Their shipyards do not have any problems regarding the work force and employment regulations. Turkish overhaul shipyards are supported by the state with a population of 60 million people, economic growth, and steel produc-
tion. All this allows them to be more aggressive on the market. On the other hand, Turkey has a good geographical position with oil terminals on the Black Sea, and the demand for the overhaul of ships passing nearby is high. Deviations on the route from Gibraltar to the Black Sea and back are minimal as opposed to our company which is positioned on the North Adriatic and a couple of days away from this main busy sailing route. Do you think the need for ship overhaul might increase during the crisis? I agree, although this is not simple in practice. The worst thing is that the crisis had such a negative impact on shipping companies. Their scope of work decreased and they are in a very difficult situation. Furthermore, costs of maintenance and overhaul plummeted at the expense of the overhaul shipyards.
Due to a general deceleration in shipping activity over the past couple of years, we were forced to make a 30% reduction on the price of overhaul How do you feel about the fact that more Croatian shipyards are searching for work in this market niche? Just like us, other Croatian shipyards are searching for their place in the offshore segment since these types of contracts are very interesting and cost-effective. However, the Mediterranean market is in its decline since it has lost many platforms. As a result, the demand for overhaul and construction has reduced. Political instability in North Africa is another problem. All this has
resulted in offshore decline and less traffic on the Mediterranean. Does the state support you? Since it exited bankruptcy, Viktor Lenac has not received any type of support or state intervention. This means we are totally dependent on our own business and we can share only what we earn. Then how would you comment that other shipyards receive state subsidies worth millions of Euro through the restructuring programme, and they are becoming more involved in work that Viktor Lenac used to perform or still performs? Croatian shipyards under the restructuring process managed to secure funds for the next four years, which makes it easier for them to compete, enables lower prices and market placement of projects relating to activities we have not participated in so far. Will this cost you the overhaul contract for the Labin platform? We have sent our offer and Crosco will decide who will win. Viktor Lenac is an overhaul shipyard with a long experience and references regarding the overhaul of platforms. Since we cannot compete with other shipyards in construction, they cannot compete with us in the overhaul segment. We export 99%, and only a small share of our work concerns local overhauls. We overhaul the ships for Tankerska plovidba and we worked on a ship for Atlantska plovidba. There is simply very little large-sized work in Croatia. If the Pelješac Bridge could be built, there could be more work for Croatian shipyards on the local market.
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Privredni vjesnik Year VII No 237
PUBLIC COMPANIES
Development goals more important, but profit also welcomed For the past year, public companies have helped save the state budget. A total of €0.21 billion will be taken from them, and if what was announced in the development programmes of some companies comes true, a profit of €0.26 billion could be transferred to the state budget Igor Vukić elling a public company on the stock exchange, that is, distributing shares to the public, is always a political decision, the Head of the Office for State Property Management, Mladen Pejnović, says. At a conference Investors – generators of economic growth organised by Večernji list, Pejnović stated that the methods and goals of development are more important than profit made by public companies. It is much better to first implement a well-elaborated development programme for a public company than it is to rush into privatisation. In such cases, what usually follows is a sale without any economic significance, Pejnović opines. Public companies helped to save the state budget with their profits during the past year. Around €0.21 billion will be taken from state companies, or 60% of their available profit. If what was announced in the development programmes of some companies comes true, a profit of €0.26 billion could be transferred to the state budget at the end of 2014, Pejnović noted. In addition to development programmes, discussions on the state of public companies often touch on the topic of management methods. Is it possible to successfully manage a company with thousands of employees and a salary the Government has limited to €2,105? The owner of the distribution company, Orbico, Branko Roglić says he would have to think twice before accepting to work for this amount – perhaps only as an exception and with a specific goal. He thinks a good salary is an important precondition for good business. The average salary in Orbico is €895, and senior managers receive eight times more than board presidents of public companies. The Labour Act pre-
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sents an even bigger problem. We can no longer dismiss a lazy worker, and the unions do not understand where they live, Roglić added. Liberalisation and price reductions There was a time when public companies used their monopolistic position; however, this is becoming rarer. Board President of Hrvatska elektroprivreda (HEP) says that market liberalisation brought new competitors and the consumer does not find it difficult now to opt for the best offer. This is why the need to operate public companies as if they were private will increase. The announced privatisation of HEP is often followed by comments that a private owner would immediately raise the price of electricity to achieve quick profits. After market liberalisation, this type of scenario will not be possible, Šerić thinks. Public companies often have limited investment possibilities. It is difficult for them to obtain state guarantees for loans if the state has excessive debt. But there are other investment schemes. One of them is called project financing which will be implemented with a strategic partner in Plomin C. foreign investors will provide funds, and HEP will secure the
market for energy that would otherwise be imported to Croatia. This model is already used in Plomin B in co-operation with the company RWEE. Successful execution of such projects will secure both parties additional benefits, for example the export of energy, Šerić highlighted. Dragan Kovačević from Janaf explains that public companies take more time to make decisions compared with private companies, since any idea has to go through more management levels before the finalisation of a decision. In addition to business, there are also political circles. When a decision is finally made, it is very probable it will be changed or adapted to new political circumstances. In the present situation in Croatia, it is a huge thing that for the first time in 20 years the state knows what it actually has, Kovačević said, appreciating Pejnović’s efforts, and the fact DUUDI even managed to create this list. How to attract investment from the public Pejnović responds that it is even more difficult to activate ‘dead capital’. Notwithstanding, some things are not progressing. A series of former state hotel companies have new owners after pre-
bankruptcy proceedings. Private investors, excellent companies like Valamar, Falkensteiner, Charisma, will introduce new dynamics into lifeless companies. It would not be a bad thing to attract public savings. In a safe banking environment, it would
Due to market liberalisation, the need to operate public companies as private ones will increase be possible to have €20 billion in five or six crisis years. However, investors are cautious until a more widespread recovery trend starts. Perhaps the announced end to this vicious circle is the news to sell state bonds with a yield of only 3.75%. This is the best sale for the state in 20 years, with the exception of the sale of the Japanese ‘samurai bonds’. Branko Grčić, Government VicePresident, tried to convince participants at the conference that this is not only the result of current high levels of money in the market, but also about investors who are anticipating growth in the Croatian economy during the forthcoming years.
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WORSE THAN EXPECTED
Industrial production annualised growth rates continue Throughout 2014, industrial production will continue to be negatively affected by weak domestic demand and the lack of export competitiveness ccording to the latest data released by the Croatian Bureau of Statistics, industrial production saw positive annual growth rates in April 2014. Following a 1.5% annual growth rate during the first quarter, in April it stood at 0.6% (according to calendar amended indices), which was below analyst expectations. It was due to a slowing of growth compared with the previous month (March 2014 industrial production saw a 0.7% year-on-year growth), whereas it dropped by 2.8% month-onmonth. During the period ranging from June to April, industrial production showed 1.3% growth over the same period of 2013. According to the Main Industrial Groupings (MIG), annual growth rates for industrial production continues in the categories of intermediate products (+1.3%)
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Production of rubber and plastics saw the most vigorous annual growth rates (+23.1%) and non-durable consumer goods (+1.5%). On the other hand, energy production continues to
show negative annual growth rates (-11.5%). Following a fourmonth annual decrease, capital products showed only mild growth of 0.2% irrespective of indications of recovery in foreign demand for these roducts. According to National Classification of Activities, the processing industry continues its positive
annual growth (+2.7%) which may be due to stock run-down during both 2013 and 2014, as well as of an increase in exports. Production of rubber and plastics showed the most vigorous annual growth (+23.1%), as well as clothing production (+16.5%) and motor vehicles, trailers and semi-trailers (+16.6%). On the other hand, tobacco products continue to see negative annual growth rates (-45.5%), as well as other transport vehicles (-13.1%). According to Raiffeisen Bank analysts, throughout 2014 industrial production will continue to be negatively affected by weak domestic demand and the noncompetitiveness of exports. Nevertheless, a slight recovery in neighbouring countries and the low comparison basis may have a positive impact on industrial production. (RBA info spot)
LOCAL CURRENCY ANNIVERSARY
20 years of the national currency The kuna was introduced after the implementation of a stabilisation programme in 1993, only after inflation had been eliminated and the exchange rate stabilised performing a significant number of monetary functions which former currencies could not perform”, highlighted Vujčić.
Boris Odorčić he 20th anniversary of the introduction of the kuna as a monetary unit has recently been marked at the Croatian National Bank. The Croatian National Bank Governor, Boris Vujčić, emphasised that the kuna as a national currency was introduced during the war, albeit only after the conditions for it had been met and macroeconomic stability reached. “The introduction of a currency which would follow the fate of the Yugoslav dinar and subsequently of the Croatian dinar - the fate of a weak currency - with decreasing value and that cannot perform any fundamental mon-
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etary function, would certainly have negative consequences. It was introduced following the implementation of the stabilisation programme in 1993, but only after inflation had been eliminated and the exchange rate stabilised. Consequently, it has been a stable currency since its introduction,
A saga of four nails If one assumes that a heavy picture representing the Croatian economy is hammered on to the wall with four nails –fiscal, monetary, structural and institutional – and only one of those nails is fastened correctly whilst the others are all somewhat loose, Vujčić considered the issue of which nail to fasten first so that the painting does not fall. “A skilled workman should be aware of the fact that if one tampers with the only nail which is fastened properly, rather than dealing with the
three remaining loose nails, the consequences will be dire. Nevertheless, many would opt for the properly fastened nail rather than the loose ones and this is significant as it will have a fundamental impact on the future of the kuna and on whether we will mark its 30th anniversary in 10 years”, he stressed. Nikica Valentić, who was President of the government at the time of the introduction of the kuna, added that administrative reforms are an imperative; administration needs to be more effective and the level of legal security raised in order for the country to be considered as a financially sovereign state that is prepared for investment.
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Privredni vjesnik Year VII No 237
( 600,000 tonnes annual capacity of Rijeka Port
RIJEKA GATEWAY PROJECT
Investment in the Rijeka Port valued at €0.2 billion According to Minister Ivan Vrdoljak, 310 new jobs will be created, and a further 1,000 in ancillary activities Igor Vukić he modernisation project for the Rijeka Port (Rijeka Gateway), was included in the list of strategic projects for Croatia in mid-May 2014. The value of the project has been estimated at €0.2 billion and will be implemented as a public-private investment. According to Minister Ivan Vrdoljak, 310 new jobs
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Concession holder to be selected by the end of the year will be created, and a further 1,000 in ancillary activities. The annual capacity of the port will reach 600,000 tonnes. The most important aspect is the
construction of the Zagreb pier container terminal that will be developed following the concession model. The investors will be jointly the Rijeka Port Authority and the concession holder. In accordance with the decision on the inclusion of the project amongst strategic projects, the concession grantor will construct and make available a 400-metre wharf with
20-metre draught. The concession holder will construct the entrance to and exit from the port, the parking area, the road system within the terminal, an area for container storage, as well as the remaining equipment and facilities. The concession holder will be selected by the end of the year. According to previous announcements, the Portuguese port op-
erator Tertir, the French logistics and port operator Bollore and the French shipping company CMA CGM have expressed their interest in the future Zagreb pier container terminal. The Chinese shipping operator Cosco has also allegedly shown interest. Additionally a new road is being built as a result of the new terminal project in order to avoid traffic congestion in the centre of Rijeka. In addition, the construction of rail infrastructure is also an imperative. Consequently, project documentation for new capacities of the Rijeka-based rail station is being prepared, as well as the reconstruction of the marshalling yard. The infrastructure and the entire project will be financed through EU funding and loans granted by international development banks, stressed Minister Vrdoljak. (I.V.)
CROATIAN ENERGY ASSOCIATION
867 power plants using renewable energy sources Renewable energy sector in Croatia has seen over €0.5 billion of investment In mid-May 2014, Croatia provided support for its 867 power plants using renewable energy sources The capacity of these plants in the grid provided by HEP stands at 316.43079 Megawatts (MW), according to data provided by the Croatian Energy Association based on data released by the Croatian energy supplier. According to Tomislav Marjanović, Editor-in-chief of Croenergo. eu portal, the stated capacity is sufficient to meet energy consumption requirements for some
350,000 users. The renewable energy sector in Croatia has thus far seen over €0.5 billion of investment and
Renewable energy sector in Croatia has seen over €0.5 billion of investment wind power plants rank first with a total installed capacity of 254.25000 Megawatts, followed by solar power at 26.98679 MW
and cogeneration at 11.493000 MW. During this year or by mid-2015, Croatia is planning to implement 445 projects with a total capacity 561.9457 MW, according to the analysis of power purchase agreements with power plants using renewable energy sources that have not yet started operating. According to a report provided by the Association, there were 684 unfinished projects, with a planned capacity of 248.32800 MW. According to the planned capacity of these plants, wind power plants rank first, fol-
lowed by biomass and solar power. (B.O.)
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DARKO MEŠTROVIĆ, GENERAL MANAGER, PLOVPUT, WRITES FOR PVINTERNATIONAL
Safe navigation across the Adriatic Sea During the peak season, over 100,000 vessels cross the Croatian part of the Adriatic Sea and it is implied that the standards of protection need to be fully complied with he safety of sailing across the Adriatic Sea, dealt with by the company Plovput, in compliance with the Maritime Code, is also in full compliance with international standards. During the peak season, over 100,000 cross the Croatian part of the Adriatic Sea and it is implied that standards of protection need to be fully complied with. There are currently 1,054 facilities for maritime signalling operating on the eastern seaboard of the Adriatic Sea of which 869 have lighthouse systems. In addition, of 48 lighthouses only 16 are manned. All open sea lighthouses are manned and the Glavat lighthouse will also soon be manned. All lighthouses are automated and monitored by remote control in order to provide a continuous monitoring of operating conditions of the equipment and instruments and to ensure urgent interventions in the event of light failure. One of the principal reasons why open sea lighthouses (such
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Darko Meštrović, Plovput general menager Plovput is a limited liability company involved in the maintenance of maritime waterways and radio services, 100% owned by the state. It is a member of the International Association of Lighthouse Authorities (IALA).
as the Blitvenica lighthouse, to which there is no access for over two months annually) need to be manned is the difficulty of access during adverse weather conditions. In addition, all manned lighthouses are also monitoring stations, in accordance with the National Maritime Rescue Co-or-
dination Plan co-ordinated by the Rijeka-based National Maritime Rescue Co-ordination centre. Following a decision by the government of Croatia in 2009, some lighthouses are used for tourism. We currently have 12 lighthouses, built between 1818 and 1899, which have been reconstructed for that purpose. This exclusive tourism programme provides added value to Croatian tourism. Moreover, we are currently preparing a tender for the reconstruction of five lighthouses for tourism (11 lighthouse facilities have been leased to date), based on investment in accordance with projects approved by conservation institutes. The lease will be a result of a public tender and the selected investor will have use of the facility for a 10-year period.
We are currently preparing a tender for the reconstruction of five lighthouses
Aqua Maris produce 100 millionth dose The Rijeka-based pharmaceutical company JGL has recently produced its 100 millionth dose of Aqua Maris that is currently one of the most successful Croatian exports. Production was launched fifteen years ago and the product is currently sold in over 30 countries on three continents, with exports
accounting for 98% of sales. According to data provided by Nicholas Hall for 2013, Aqua Maris is the best-selling brand in saline solutions
and seawater-based solutions globally, with its market share currently standing at 9%. During the presentation of the product Teo Rakočević, Corporate Brand Director for JGL, pointed out the fact that JGL currently ranks amongst the top 100 largest generic drug companies globally. Moreover, the company ranks second in the national pharmaceutical industry as a result of
the €115.5 million in revenue generated by the Group in 2013. JGL exports account for 77% of sales. In addition, in 2013 JGL has 204 certified new registered products. Rakočević emphasised the fact that Aqua Maris nasal wash system, enriched with sea salt and essential Mediterranean herb oils, won a gold medal at INPEX America’s largest innovation exhibition.
12 ::: news Istraturist for sale
Privredni vjesnik Year VII No 237
( €780 million
to be invested in the construction of a rail bypass around Zagreb
INVESTMENT IN RAILWAYS IN 2013 STOOD AT AROUND €0.2 BILLION
Zagrebačka banka is trying to sell the tourist company Istraturist. Interest in Istraturist has been expressed by Plava Laguna from Poreč, Falkensteiner Group and Valamar Riviera Adria. UniCredit has asked its affiliate, Zagrebačka banka, to focus on its main activity, that is, to sell its tourist portfolio. Istraturist has 20,000 beds in five hotels, five campsites and four apartment complexes. It has 400 permanent employees and 1,200 seasonal workers and has an annual income of around €59 million. Badel wants five investors Five potential investors expressed their interest in taking over Badel 1862. The information was confirmed by the company based on the first round of offers for strategic networking and additional capitalisation. Badel 1862 collected the offers as part of the pre-bankruptcy settlement. Three years ago, the state became the co-owner of Badel 1862 due to its debts. However, despite the interventions in the management, pre-bankruptcy settlement proceedings were initiated. Co-operation on the Stock Exchange
The joint company of the Zagreb, Macedonian and Bulgarian Stock Exchange SEE LINK was established in Skopje in April. The company is viewed as a platform for forwarding broker orders and will offer trading in all shares listed on the three exchanges. At the start, only the shares of better-known companies will probably be available. The platform should start its work at the beginning of the next year.
Pan-European corridors replaced All the investment in Croatian railways to date has resulted in the average train speed today being the same as that some thirty years ago Drago Živković n 2013 investment in railways stood at around €0.2 billion, tripling the level of 2012. This year will see a further increase in investment, as pointed out by Darko Peričić, Management Board President of Croatian Railways Infrastructure, during an international symposium by the Croatian Association of Railway Engineers. The numbers employed by Croatian Railways Infrastructure has been reduced from almost 7,000 to 5,150, which has resulted in a substantial increase in productivity per employee. Croatian Railways has been allocated greatly reduced funding from the budget and the company needs to opt for new sources of funding. Company sources expressed their hopes to absorb €118 million in EU funding in 2015. All the investment in Croatian railways to date has resulted in the average train speed today being the same as that some thirty years ago stressed Peričić. The investment in the VinkovciTovarnik rail reconstruction has been successfully completed, as well as the signalling and safety system replacement project at the Zagreb Central Railway Station. In addition, tenders have been invited for reconstruction work on
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railways at Dugo Selo-Križevci and Sveti Ivan Žabno-Gradec, Podsused-Samobor; a second rail track on the Dugo Selo-Novska railway and similar track from Križevci to Koprivnica are being designed. Rail bypass A rail bypass around Zagreb is to be constructed which would redirect freight transport outside the city; the investment is worth €780 million. Investment in the Rijeka transport route will be €2.6 billion and the project could be eligible for EU funding Connecting Europe Facility that allocates over €23 billion and €425 million to Croatia, pointed out Lia Potec from the European Commission. She presented the proposal of a new Trans-European Transport Network (TEN-T) which will replace the former Pan-European
corridor network. The new TransEuropean Transport Network (TEN-T) will be adopted by the end of 2014. It will comprise nine corridors, but only a branch of the Mediterranean Corridor Budapest-Zagreb-Rijeka will pass through Croatia. The former Pan-European corridor X (Salzburg- LjubljanaZagreb, Belgrade-Salonika) is not included in the new corridor network, as it partly passes through non-EU countries. It will be replaced by an Eastern Mediterranean corridor connecting Budapest and Salonika through Romania and Hungary, bypassing Serbia. Lia Potec emphasised that the corridor map and the infrastructure standards enabling speeds in freight transportation over 100 kph need to be considered during the creation of the shortlist of projects.
€4 MILLION TO €5 MILLION PER LOCOMOTIVE
Đuro Đaković produces locomotives for Polish Newag High-tech electric locomotives will be produced in Slavonski Brod as a result of co-operation between the company Đuro Đaković and the Polish company Newag. One locomotive is worth between €4 million and €5 million and its passenger cars can reach a top speed of 200 kph. Newag undertook to provide technological solutions and Đuro Đaković will be entitled
to sell locomotives to third markets. The contract has recently been signed at the Ministry of Foreign Affairs. Minister Vesna Pusić highlighted the fact that the contract was also the result of support provided through economic diplomacy. Đuro Đaković was last involved in production of locomotives, albeit diesel locomotives, 23 years ago. (I.V.)
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( over €0.3 billion revenue
::: news
from motorway tolls generated by ARZ, AZM, Bina-Istra and HAC
Motorway concession holders
Increase in revenue from motorway toll collection Investment in the construction of new motorways in 2013 stood at slightly below €0.2 billion, and investment was valued at €35.8 million Boris Odorčić n 2013, companies involved in the operation of some 1,290 kms of motorways in Croatia – Zagreb-Rijeka Motorway (ARZ), Zagreb-Macelj Motorway (AZM), Bina-Istra and Croatian Motorways (HAC) generated revenue from motorway toll collection just above €0.3 billion before VAT, up 5.6% over 2012. It is important to note that all these companies have seen an increase in revenue. Hence, in 2013 Croatian Motorways (HAC) (according to a preliminary report) generated slightly less than €0.2 billion from toll collection (almost 6.2% up over the previous year). The Zagreb-Rijeka Motorway (ARZ) saw €64.5 million (an increase of 2.1% in relation to 2012); Bina-Istra generated €25.5 million, (6.1% up). Additionally, the Zagreb-Macelj Motorway (AZM) generated €26.2 million, (up 10.3% compared with the previous year). Motorway toll fees on the Istrian Y road system, including passage through Učka tunnel, operated by Bina-Istra, were
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level with inflation, at 4%. Other motorway toll fees remained unchanged. It is important to note the importance of the foundation of a subsidiary of Croatian Motorways – Croatian Motorways Maintenance and Tolling (HAC ONC) in 2013. The Zagreb-Rijeka Motorway focused on cost rationalisation and business restructuring. Moreover, Bina-Istra prepared project documentation and negotiated with a bank consortium over a financing plan and funding for the completion of the construction of a full profile for the Rogovići-Vranja motorway. The Zagreb-Macelj Motorway focused on the launch of new products and presentation of noise reduction plans.
ation of Toll Motorway Concessionaries (HUKA). The investment in motorway construction in 2013 stood at slightly below €0.2 billion, and investment was worth €35.8 million. The value of investment in motorway construction in 2014 is expected to reach €0.16 billion, whilst investment in already constructed motorway sections will be €48 million. It has to be stressed that 11 kms of new motorway will
New kilometres In 2013, only the Zagreb-Rijeka Motorway saw a slight drop in the number of vehicles, whilst other concession holders showed an increase over the previous year. Consequently, the total number of vehicles on motorways in Croatia was 0.9% up over 2012, according to data released in the National Report on Motorways for 2013 by the Croatian Associ-
be opened in 2014, with the start of construction of a further 10.7 kms of upgrade to full motorway profile is expected. According to data provided by HUKA, whose members are the four mentioned companies, in 2013 Croatian motorways saw 2,162 accidents, down 2.4% over 2012, resulting in 39 fatalities, 13.3% down compared with the previous year.
Total number of vehicles on Croatian motorways in 2013 was up 0.9% over 2012
Top female entrepreneurs The Croatian Association of Business Women Krug last Wednesday awarded the top female entrepreneurs during a celebration for the International Women Entrepreneurs’ Day held in the Croatian Chamber of Economy. The owner of the company Jan-Spider, Jasna Nemčević took the award for the best woman entrepreneur. Board President of Tehnomont Shipyard, Gordana Deranja, won the Sova Award for top manager of the year, and Director of the Institution for Healthcare and Home Rehabilitation, Maša Smokrović, won the Helena Smokrović Award for social entrepreneurship. Huge victory for Algebra In a competition covering 3,200 companies that applied their projects and achievements for the Microsoft Partner of the Year Award, the Croatian company Algebra, specialising in education, took the award for education. In each category, including education, Microsoft awards only one award each year. The success is much greater this year since for the first time the award went to a smaller country. The award ceremony will be held at the Microsoft Worldwide Partner Conference in July. Information scientists wanted The German project Troido, specialising in the development of Android systems and applications intends to hire a large number of information scientists by the end of the year, and they will turn to Croatia, as they know from experience that Croatia has first-class information scientists. Since Germany lacks information scientists, the company turned to Eastern Europe. It was obvious to focus on Croatia, highlighted Miroslav Šimudvarac whose German company Simvelop started the Troido Project.
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Privredni vjesnik Year VII No 237
( €22 million to €23 million invested in new factory
KANDIT – A NEW CHOCOLATE AND SWEET FACTORY
A new factory and new ambitions
The new Kandit factory focuses on what the Kandit brand actually represents to the market and this is its core value, quotes the director, Mario Müller. The specific objective of Kandit is to become a major player in the region for producing chocolate and sweets and the new factory will make this possible Svetozar Sarkanjac sijek finally has a new factory after 40 years of stagnation. The city has never seen such a long time lapse between the construction of two new factories. The previous period can be considered as a black hole in the economy of Osijek, since a large number of the local factories were closed. Hence, it is important to note that the development of new facilities at the Kandit chocolate and sweet factory is currently under completion. It is located in the eastern industrial zone and has excellent traffic connections. The factory covers an area of 23,000 m2 and comprises of a processed materials warehouse, production, packaging facilities, a finished goods warehouse and office space. The investment is worth between €22 million and €23 million. The final investment value will be known at the beginning of summer, when relocation of the facilities has been completed, since some of the existing production lines acquired several years ago will be relocated in the newly-acquired facility.
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Constructed in a year Just 12 months elapsed between the start of construction and laying the foundation stone on 16th March 2013 to the launch of the trial production. According to Marijana Javorović, commercial director for Kandit, the first sweets – Candy Menthol Green were produced in the new factory on 27th March 2014, marking the start of the trial production and the testing of the product range. “The quality of trial products
years ago at the former facilities”, emphasised Műller.
Chocolate from cocoa grains One of the lesser-known features of both the former and the new Kandit is the fact that it produces chocolate from cocoa grains rather than cocoa blocks. “We are a unique producer in the region as we base our production on cocoa grains rather than cocoa blocks, which are semi-finished products. Consequently, our final product is the direct result of carefully selected high quality raw material”, stressed Marijana Javorović. is in full compliance with high standards and hence full production began in mid-April. Facilities for production of chocolate products such as Rum chocolate bars, Choco-bananas and Praline, underwent a similar procedure. Full production is expected to be relocated to the new facilities and thus start a new Kandit development cycle”, pointed out Javorović. The fact that a new factory has been built is of fundamental importance both from the construction and technological aspects. Nevertheless, it does not necessarily have to have a significant impact on the market, according to Mario Műller, director of Kandit. “The new factory focuses on
what the Kandit brand actually represents to the market, and this is the core value, as a new factory can be constructed by anyone. The reputation of one’s products is a different story. The new factory focuses exclusively on the market. Nevertheless, Kandit has achieved a major breakthrough even in the former factory during the last three years, and the new factory will only increase potential and provide new opportunities. The specific objective is to become a major player in the region in the production of chocolate and sweets. The new facilities will enlarge the opportunities, and Kandit will move forward following the direction promoted several
New development opportunities The new factory will ensure higher quality production and a significant expansion of the product range, something that is already visible on store shelves. Kandit employs 340 staff and
Kandit planning to hire additional seasonal employees hires additional seasonal employees to meet production requirements. As highlighted by the Kandit Management Board, redundancies are currently not an issue – that being the number of seasonal employees required. The final answer to this question, as well as to the future of Kandit over the next 100 years, will be provided by the market.
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( 95%
Production exported to the EU, America and Japan
The company Dam, located near Virovitica, is the largestt Croatian ch chamomile hamomiile p producer roducer
Chamomile originating from Virovitica throughout the world Weather conditions cannot be influenced, so the owner of Dam, Marijan Mareković, focuses on features enhancing production enlargement to ensure survival: he has an on-going investment strategy for innovation, technology, cost-cutting, market research and staff Goran Gazdek he company Dam - involved in herb processing and located near Virovitica - is the largest Croatian chamomile producer. This year the company has planted 340 hectares on its own property and 500 hectares with sub-contractors making it the largest chamomile production area in Europe. The harvest has already started and will last until end of June. It is frequently interrupted by rain and the high level of rainfall on 3rd and 4th May 2014 flooded 30 hectares of land. “The flood damage is estimated at total, as combine harvesters cannot be used on the fields. In addition, a lack of sun could negatively affect the quality of this year’s yield of early chamomile varieties”, noted Marijan Mareković, owner and director of the company.
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Political support Nevertheless, he is optimistic and aware that agriculture is highly dependent on external factors with which man cannot meddle. Consequently, he focuses on those areas that can enhance expansion of production and ensure survival: he has an on-going investment strategy for innovation, technology, cost-cutting, market research and staff. As a result, he has managed to transform a local company into a well-respected exporter, exporting almost 95% of the crop to the EU, America and Japan. Global competitors are producers from Egypt and Argentina, and in the EU Poland, Bulgaria and
Hungary. Mareković has little concern at the number of competitors, as he strongly believes in adhering to regulations and rules on compliance with quality standards, competitive prices and meeting deadlines. “Neverthe-
is 36 hours. “Chamomile is a plant with a short harvesting season, hence the speed for drying at a specific temperature is fundamental for the preservation of the essential oils. Consequently, the process of drying is the most
By using mycorrhizal fungi, we make substantial savings on fertiliser and plant protection products; we have seen a considerable increase in both yield and quality, and the soil structure shows significant improvement less, state policy focused on the economic production of quality exports would bring significant support, as opposed to those countries exporting lower quality products, such as Germany, which has recently started subsidising chamomile production”, pointed out Mareković. During the visit to the company by Privredni vjesnik the installation of six new drying kilns fuelled by biomass (wood chips) was being completed. Each drying kiln is valued at €18,000, yet the investment will generate immediate returns as the biomass, which comes from a locust tree forest owned by the company, is between 20% and 30% more efficient compared with gas that the company has used thus far. The capacity of one drying kiln ranges between 500 and 600 kilos of chamomile, and the drying time
Marijan Mareković, owner and director of the company Dam
important aspect of production”, explained Mareković, adding that the company is planning additional drying kilns as production continues to expanding. Co-operation with scientists Company commitment to work and the willingness to co-operate with scientists has been recognised by the Zagreb-based Faculty of Agriculture; as a result, the company has been selected for a trial production of chamomile sown together with mycorrhizal seed. Mycorise is a symbiosis between the root and the mycelium of mycorrhizal fungi that develop a large number of small root hairs that penetrate the soil more vig-
orously and make more effective use of nutrients compared with a non-mycorrhizal plant, enhancing plant nutrition and developing a more vigorous and a stronger plant following germination. “Mycorrhization is applied to a large number of agricultural crops, ranging from farming and vegetables to fruit-growing and viticulture, generating excellent results. We are the first globally to have engaged in research on its impacts in chamomile production. Trials have shown that mycorrhizal chamomile has a far higher quantity of essential oils, in addition to showing a 30% increase in dry matter”, highlighted Ivan Kolak, professor of seed production at the Faculty of Agriculture. Mycorrhizal fungi for this experiment originate from a laboratory in Poland where strains originating from Croatia are reproduced. “This technology results in substantial savings on fertiliser and plant protection products. Moreover, we have seen a considerable increase in both yield and quality; also the soil structure has been greatly improved, as mycorise is an organic matter, a component of soil which decomposes and boosts the fertility of a new crop. The advantages need to be highlighted, as it surrounds us and should be widely available. Nevertheless, we have managed to eradicate it from our fields due to intensive agriculture, the use of pesticides and mineral fertilisers”, stated Robert Slezak, director and owner of the company Bio-budućnost involved in services and consulting in biooriented modern technologies.
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Privredni vjesnik Year VII No 237
( 2.4% rise
in cost of watches and jewellery this year compared with 2013
Zaks and Argentum co-operation on product range expansion
Gold and silver coins as a future investment Irrespective of the fact that Croatia has seen a plunge in the gold jewellery sector for years, Argentum and Zaks believe there is potential in gold and silver coins, as well as in similar long-term value products ing Croatian brands that the two companies are planning to export both to the EU and globally. According to Palić, the company will focus exclusively on exports in the near future.
Sanja Plješa n order to maintain a close contact with their clients and enhance their business activities, the Management Board of Zaks gold jewellery chain stores and Argentum silver jewellery chain stores have recently announced new plans on product range expansion with Croatian traditional products. Moreover, they have simultaneously announced their penetration on the Croatian wristwatch market. Nevertheless, the two companies have not merged. They are opting for co-operation to expand their product range. Hence, Mihael Palić, retail director of the Argentum chain of silver jewellery, explained that the company, which used to have gold jewellery only in specific stores, is planning to expand its product range with an additional 19 motifs of gold and silver coins which used to be sold only in the Zaks gold jewellery stores. Irrespective of the fact that Croatia has seen a plunge in the gold jewellery sector for years, as
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the public has been rarely opting for the purchase of jewellery as a result of the economic crisis, Argentum and Zaks believe there is potential in gold and silver coins, as well as in similar long-term value products. As pointed out by Argentum, this type of purchase is a future investment. Furthermore, according to Argentum company sources, clients will recognise the value and appeal of traditional Croatian jewellery whose designs and creations the company has been focusing on with substantial investment over the past several years. Gold and silver coins as artefacts have been created based on the con-
ceptual design of the academytrained sculptor Damir Mataušić. “A broad product range tailored to meet client requirements, as well as recognising their purchasing power, is currently fundamental for clients, and our two companies are providing such product range. In addition, our innovative campaigns, a result of our continuous market research, are vital. We also provide a large number of discounts where products become more affordable due to their lower price”, highlighted Palić. Gold and silver coins and the traditional jewellery provided by Zaks and Argentum are becom-
Increasing prices of wrist watches and jewellery Against the backdrop of the economic crisis, prices have seen an increase and in April 2014 Croatia saw a 0.3% increase in the prices of wrist watches and jewellery compared with those for the same month last year. Moreover, according to data released by the Croatian Bureau of Statistics, prices for these products in April 2014 were 0.3% up over those for the previous month. During the first four months of 2014, the price of wristwatches and jewellery were 2.4% up in relation to the same period of 2013.
Decline in silver jewellery sales halted Speaking about the gold jewellery market in Croatia, Palić stressed that it has seen a decline considering the current level of sales in relation to sales prior to the economic crisis. “Our stores are also seeing a drop in sales of gold jewellery compared with the pre-crisis years. The increase in sales of silver jewellery in Croatia has not been sufficient to compensate for the decline in sales of gold jewellery. Irrespective of the fact that we are successful and have managed to halt the decline in sales in Croatia due to our marketing campaigns, our outstanding product range and top quality services, it has to be highlighted that currently the average value of the best-selling silver jewellery items in Croatia is only HRK200 month-on-month. More expensive silver jewellery items are primarily sold through promotional sales”, stated Palić. He did not reveal data on the annual production and sales of gold and silver jewellery by Zaks and Argentum, as he considers this a trade secret. In the near future, Zaks and Argentum plan to expand their product range with traditional Croatian products. Zaks currently employs 42 staff, and Argentum has 163 employees. Moreover, there is a fellow subsidiary, Gold Partner, employing 48 staff, of whom 31 are involved in production.