Interview: Renata Suša We invest around 130 million € in railroad renovation, says Board President of HŽ Infrastruktura
Public companies Profit quadrupled compared with 2013, but companies are still heavily burdened by accumulated debt
Attractive location Kupari ready for international tender; the right of building and lease - for 99 yearss
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Croatian Business & Finance Monthly Established in 1953 Tuesday / 4th May / 2015 Year VIII / No 0247 www.privredni.hr
S U P P O R T E D
CROATIAN CHAMBER OF ECONOMY (CCE)
Income from international markets improved results
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pvinternational pv international C R O A T I A N
C H A M B E R
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RESULTS FOR 2014: €1.3 BILLION NET PROFIT OF ALL ENTREPRENEURS
Profit of Croatian entrepreneurs increases 139.5% According to preliminary data, net profit totalled €1.8 billion. However, the final result is still €0.5 billion lower. Actually, these are the losses of company H-Abduco that took over Hypo Bank’s claims over Dina Petrokemija as well as a series of other claims
CCE’s analysts conclude that income movements on the international market, mainly linked to the EU accession, significantly improved the consolidated financial results last year. Furthermore, the increase of total expenditure was mainly affected by the costs of the sold goods. Actually, in 2014 the trade had significant influence over the movements of total financial result. Raw materials and other material, in the conditions of weak growth or fall of their prices on the global market, did not contribute to increased expenditure, but they probably had a significant impact on the export of entrepreneurs which reduced 4.6%. On the other side, staff expenses in the conditions of high unemployment and low net salary growth increased 3%. One of the factors which contribute to this growth is the fact employment increased 1.7% in relation to 2013. Other important data relate investment in new long-term assets, pointing to reduced value of these investments on a year level (-7.1%), according to assessment provided by the CCE.
Igor Vukić roatian entrepreneurs finished 2014 with total nett profit of €1.3 billion, 139.5% more compared with 2013, according to data collected by the Financial Agency (FINA). Preliminary data are even better. Nett profit totalled €1.8 billion; however, after collecting financial reports from all 104,470 entrepreneurs, it was concluded that the final financial result has to be reduced by €0.5 billion as this is the amount of loss from just one company - H-Abduco. This company took over losses, that is, Hypo Bank’s claims over company Dina Petrokemija (part of Dioki) as well as a series of other claims. The transfer of claims was confirmed by Hypo Alpe-Adria-Bank, who further explained that H-Abduco is a separate company, and that the cession of claims was implemented according to law and with the agreement of the Croatian National Bank.
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More employees than in 2013 According to data provided by FINA, Croatian entrepreneurs,
Profit of €4.6 billion achieved by 65,395 entrepreneurs, with 39,075 achieving €3.3 billion in losses profit tax payers (excluding banks, insurance companies and other financial institutions), employed 830,116 staff during 2014 (based on working hours), some 14,620 more employees than in 2013. A total of €81.4 billion in income was achieved, while expenditure totalled €79.6 billion. In 2014, 65,395 entrepreneurs (62.6%)
achieved profit of €4.6 billion but 39,075 entrepreneurs (37.4%) achieved losses of €33.3 billion. In relation to 2013, the number of employees increased 1.8%; total income increased 3.3%; total expenditure increased 2.3%, profit increased 17.4%, and losses reduced 2%. Altogether this results in a nett profit growth of 140%. Of €81.4 billion of total entrepreneurial income, €13.9 billion was achieved by exports, which is 9.5% more compare with 2013. A total of 14,405 entrepreneurs (13.8%) sold their products and services on foreign markets. A total of €13 billion worth of imports was bought, and the trade surplus stood at €0.95 billion.
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Privredni vjesnik Year VIII No 247
( 50 tenders
GOVERNMENT ANTICIPATES €0.4 BILLION IN SALE PROCEEDS
25% of HEP shares to be sold? According to Pejnović, certain investment banks and European as well as American funds have already expressed their interest in participating in the HEP public tender
This year, 25% of shares in HEP (Hrvatska elektroprivreda) will be offered to investors in Zagreb and London. The public tender of HEP shares was announced by Mladen Pejnović, Head of the State Office for State Property Management (DUUDI), in conversation with the Bloomberg Agency. The Government anticipates proceeds of around €0.4 billion that would be used for investing in HEP and its regional expansion. Possible takeover targets are located in Slovenia, Bosnia & Herzegovina and Montenegro, said the Head of DUUDI. He also noted that HEP is achieving good results and this is a good moment to direct the company towards new development on Croatian and regional markets. According to Pejnović, certain investment banks and European as well as American funds have already expressed their interest in participating. Consultations on this transaction will be
dealt with by Morgan Stanley, Zagrebačka banka and Sberbank. Croatia could invite a new tender for the privatisation of Hrvatska Poštanska Banka (Croatian Postal Bank – HPB) in June. The last attempt at a sale aimed at increasing budget income, but the sale did not go so well, Pejnović pointed out. This time, we should be satisfied with additional capitalisation, Pejnović added. He says HPB should increase its capital by €72.4 million, to a total of €105.3 million, and state companies could possibly participate in the tender. Croatia is looking for investors in Petrokemija, and will consider
Croatia is also looking for investors in Petrokemija the possibility of substituting its financial obligations with a personal share. The oil company, INA is one of the biggest creditors, Bloomberg points out. The government is looking for investors with a long-term interest in the company and the region, for example gas producers, and Pejnović also pointed out the state intends to continue the sale of hotels and other tourist facilities. (I.V.)
JADRANSKI NAFTOVOD
Janaf: profit and income growth During the first quarter of this year, Jadranski naftovod earned almost €3.8 million in nett profit, 52.3% more in relation to the same period of 2014, and 14.6% more than planned. Its core activities (oil transport, storage of oil and oil products)
brought Janaf an income of €18.2 million (31.4% more than last year) and 11% more than anticipated. At the same time, total income was €19.4 million, a rise of 34% compared with the same period of last year and 11.7% more than planned.
each month for the leas
INTERVIEW: RENATA SUŠA, BOARD PRESIDEN
We invest 130 m
We are investing around HRK1 billion in the renovation of th should show which property is significant for our core busin buildings, hotels and resorts will also be for sale Ilijana Grgić n 155 years of railways in Croatia, the company has never had a woman in charge. However, eight months ago, Renata Suša was appointed Board President of HŽ Infrastruktura. Her first meeting with railway workers was more than interesting. They said “We expected a lot of things, but never a female manager”. After the initial shock, no one wonders any more why this young and resolute woman is in charge of one of the largest public companies in Croatia. In addition to the development of the railway network, HŽ Infrastruktura, will intensify commercialisation of unused property through leasing and sales.
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HŽ Infrastruktura owns one of the biggest property funds in Croatia. What level of figures are we talking about here? We have a network of 2,700 kilometres of rail tracks, plus 600 terminals and stations. This property is a ‘public good’ and is managed by HŽ Infrastruktura –we are in charge of their commercialisation. We also own 1,100 apartments, some of which are ‘public good’, and others are owned by us. We also have 27 office buildings in the City of Zagreb, as well as resorts, hotels, 18,000 cadastral plots and other property. What is your plan regarding this property? As far as terminals and stations are concerned, we will increase the level of their commercialisation. We have around 50 lease tenders a month. During the first six months we managed to
increase our lease income from €3.9 million to €4.4 million. Our goal is to reach €5.26 million by the end of the year. We are also conducting a market survey to collect referential statistical data of people passing through the terminals, mainly located in the city centre where there is a large marketing potential. In addition to increasing the leases, we offered five-year contracts, so our lessors can feel safer when investing in these sites. I think it is a win-win situation. We have a higher and more stable lease income; lessors have a more stable business, and the users of our terminals have services and renovated facilities. Could mention some of the larger projects? We are currently negotiating with Split about urban regeneration. We own a large facility on the waterfront, and we will first draft a study that should show how much it would cost to move the Split terminal from its present location. After this study, we will draft another study on the demand. We are in talks with the European Bank for Reconstruction and Development that is very interested in this project and whose holder would be Split. Another big project is the tender for a 20-year lease of the Hotel Dora in Zagreb. Even though the hotel requires substantial investment, I think it will arouse great interest. We also announced a tender on a 20-year lease of a villa in Lovran, a project that will require considerable investment since the villa is an old Austro-Hungarian building. Furthermore, we are expecting results from the building we sold on Trg kralja Tomislava in Zagreb, which is more a
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e of the terminal and stations
( €50,000 a year
cost of the building in Trg kralja Tomislava square, Zagreb
NT OF HŽ INFRASTRUKTURA
million € in railroad renovation
he railway network, and negotiating with the World Bank on asset management. The outcome of these negotiations ness, notes Board President of the Croatian railway company, which is selling its vast property portfolio. Many tional. We have 1,100 apartments used mainly by our employees or children of ex-employees, and we doubled the lease to €26 a month. This increase came as a shock, but it is still far below market prices. Of course, this is all turning into a social problem, and there are cases where maintenance fees have not been paid for years nor adequate care taken of these apartments. The real solution will be found in four to five years, and our plan is to reach market rentals. What is your total investment for this year? Based on our investment plan for this year, we will invest around €0.13 billion in the renovation of the railway network. One of our bigger projects for October relates to completing the construction of the Okučani-Novska section, a project which is 85% financed by non-repayable EU residential type of building. We had already sold one floor and we have two protected tenants. Due to its structure, it is difficult to find one lessor since it is not possible to control the entire building. This is why we decided to sell it, especially since it costs us €50,000 a year. Could we say HŽ Infrastruktura is getting rid of activities that are not its core business? Exactly. We are negotiating with the World Bank on asset management. The outcome of these negotiations should show which property is significant for our core business. This programme should be implemented in cooperation with HŽ Cargo and HŽ Putnički prijevoz, and a series of
issues related to unresolved property relations should be resolved during its implementation. This kind of approach will make it easier to arrange ownership distribution of this property.
We announced a tender for the 20-year lease of the Austro-Hungarian villa in Lovran
What will the money earned from leasing and sales be spent on? Concerning the lease, one part now goes to settling current affairs. However, the goal is to invest even more in our terminals that have been underinvested in for years. As far as sale of property is concerned, we are now operating on five locations in Zagreb. Our goal is to plan the construction of a building where we would all work together, which would be more cost-efficient and func-
funds. There is also a tender for the construction of the railroad Gradec-Sveti Ivan Žabno, where we are building 12.2 kilometres of new track after 30 years. The contractor has been selected. However, the complaint process is in progress, so we expect to sign the contract within two months. This is especially good news for us, since we will celebrate 155 years of Croatian railways this year. There is another tender, regarding the Dugo Selo-Križevci section, but it has
been revoked. The tender was implemented and brought to conclusion with two offers, both of which were unsatisfying. However, the procedure is still ongoing, and as soon as the appeal is resolved, we will announce a new tender. We will work all summer. This is a big project worth €180 million, and we hope to sign contracts on the execution of work by the end of the year. We will also be working on the repair of the Ogulin-Moravice track throughout the whole year. We prepared another project for the beginning of next year. It is valued at €55 million and concerns electricity and repair works of the Vinkovci-Vukovar track. How do you plan to secure funding? We are preparing investment projects worth around €2 billion that should be financed through EU funds. We also applied for CEF funds (Connecting Europe Facility) for two projects in Rijeka where we financed, in co-operation with HŽ Luka Rijeka, a railway component with European funds. Our main priority remains the V.b Corridor, and they are big projects. I will mention only one example. We bought 1.2 million m2 of land for the Dugo SeloKriževci project. These are extremely demanding projects, and I believe the public is not aware of their complexity. We have several very big projects in line for next year. (€560 million for the Dugo Selo-Novska project), and we plan to announce the tender by the end of the next year. There are many activities and many projects. Each project has its problems, but what is important is to solve them and move on.
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Privredni vjesnik Year VIII No 247
global advocacy for free trade, American public procurements w “ Despite outside the U.S. It will be extremely important to expand this non-discr Davor Ivo Stier, Croatian Representative in the EU Parliament
to all American federal states, where the maj
TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP
If it reduces customs duties barriers, TTIP cannot be bad
The European Commission is obliged to consult with all 28 EU countries. Each item of the TTIP can be accepted or re Parliament, European Council and other institutions that constitute European democracy – as stated by the Martens the negotiations relate to trade and investment Igor Vukić n excellent agreement that will move transatlantic trade to a new and more efficient phase as well as make the European Union and the United States of America even richer, or a cunning regulation that will introduce GMO to the EU, reduce European standards of public protection and health and allow multinational companies to do whatever they please? The talks on the Transatlantic Trade and Investment Partnership (TTIP) have already caused intense debates and demonstrations, but an additional dose of caution was aroused by the process that allows members of the European Parliament insight to the negotiating process. In fact, they can access the room in which the agreement documents are kept without any recording devices and they are obliged to sign a non-disclosure agreement – enough material for conspiracy theorists. Members of the EU Parliament said that such secrecy measures are common
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for this type of agreement. It is simple –negotiators do not wish to reveal their negotiating positions to third parties. The EU is leading similar talks with Asia and has also negotiated with Canada recently. Each requires good co-ordination for the benefit of protecting personal interests. Different approach to each sector Discussions on potential solutions in the agreement, led by the European and American politicians, or outside official negotiating committees, reflect differences in approach to individual sectors. For example, the American negotiators criticize their European counterparts for using non-scientific arguments during discussions. This could, for example, relate to the American belief according to which scientists mainly claim that GMO food or beef with hormonal additives is actually not bad for human health. Member of the EU Parliament, Biljana Borzan, says the U.S.A. treats chicken with chlorine since they believe the European meth-
TTIP awaiting new U. S. President TTIP talks are actually moving at a slow pace, even though severe demonstrations prove otherwise. One round of talks is now in progress in the U.S.A. However, those informed of the negotiating process think TTIP will not be adopted during the mandate of the present U. S. President. His mandate expires in autumn 2016, and it will take some time thereafter before a new administration adopts and ratifies it in the parliaments of each EU country. This means a lot more patience before one can assess the impact of TTIP.
od of using hot air does not kill sufficient microorganisms. On the other hand, the Europeans fear chlorine is carcinogenic. She believes European negotiators will not allow European healthcare system model and health protection standards to be violated. Her belief remained even after her review of the current negotiating process. The agreement could allow European and Croatian companies greater access to U.S. public procurement, says Davor Ivo Stier, Croatian Representative in the EU Parliament. Despite its global advocacy for free trade, American public procurement was virtually closed to all companies outside the U.S. It will be extremely important to expand this non-discrimination regulation of European companies to all American federal states, where
the majority of tenders are usually implemented, Stier evaluates. Based on his past public statements, Prime Minister Zoran Milanović has no fear regarding the TTIP. If it is good for the EU, it is good for Croatia, he recently commented. Witnessing the growing intensity of the European and American criticism of the agreement talks, the analytical team of the Wilfred Martens Centre for European Studies (close to the conservative parliamentary group from which EC President Jean Claude Juncker originates) drafted a guide through the TTIP negotiations and the myths surrounding it. They do not accept comments relating to the violation of democratic principles and lack of public access to the negotiations. The European Commission is obliged to consult with all 28 EU
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were virtually closed for all companies rimination regulation of European companies jority of tenders are usually implemented.
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s and other d for business
ejected in national parliaments, governments, EU s Centre, which also notes that the most important parts of
According to the Martens Centre, negativity around TTIP mainly reflects the increased lack of faith in politicians and governments countries. Each item of the TTIP can be accepted or rejected in national parliaments, governments, EU Parliament, European Council and other institutions that constitute European democracy – as stated by the Martens Centre. New investment projects and employment growth They also noted that Juncker clearly said there would be no derogations from key European principles, and the most important parts of the negotiations relate to trade and investment.
Each member country will still be able to make decisions on their healthcare system: TTIP does not decide whether this will be exclusively public healthcare or a combined public-private system. On the other hand, European pharmaceutical companies could gain easier access to the largest market in the world. Commercial co-operation will lead to new investment projects for creating even better medicines. Martens’ analysts say there is no need to fear greater environmental pollution or violation of intellectual property rights or even privacy rights. Moreover, stricter protection of copyrights and brands will increase the individuality of European companies on the American market. Furthermore, 99% of European companies are small and medium-sized, employing two thirds of total employees in the private sector. SME’s are the backbone of the European economy, and every agreement that reduces customs duties (which TTIP will bring) and eliminates administrative obstacles to trade, will boost employment throughout Europe. According to the Martens Centres, resistance to the TTIP is more a reflection of the growing lack of faith in politicians and governments, motivated by the long-lasting crisis, dismissals and lack of faith in economic development. Therefore, politicians who will vote for the TTIP are responsible for providing additional deeper explanations to their voters and the public.
FINANCIAL RESULTS FOR THE FIRST QUARTER
€6.6 million – INA nett profit
During the first quarter of 2015, the EBIDTDA for INA stood at €93 million. Profit from its main activity was €41.8 million, and nett profit €6.6 million. During this period the company invested €31 million, of which €24.9 million was invested in Croatia, and the remainder abroad. The slump in the price of Brent oil and unfavourable regulatory measures significantly affected the company’s operating results. Reduced regulated gas price and doubled exploitation fees had a
negative impact – €17.6 million in relation to the first quarter of 2014. In spite of this, the financial position remains strong, with a constant 10% nett debt decrease in relation to the first quarter of 2014. Gas and oil exploitation as well as production increased 6% (production of hydrocarbons), due mainly to the increased local production of crude oil (20% in relation to the first quarter of 2014) as a consequence of intensive repair work and the optimisation of production activities.
ACQUISITION BY PODRAVKA
€33 million for Slovenian Žito
On 21st April, Podravka from Koprivnica signed a contract for the purchase of 51.55% of the shares of the Slovenian food company Žito in Ljubljana. The contract was signed with a consortium of sellers comprising the Slovenian State Holding, Modra zavarovalnica, KD Kapital, KD Skladi, Adriatic Slovenica and NLB Skladi. When it obtains approval from the Agency for Market Competition Protection, Podravka will pay over €33 million for Žito majority of shares (€180.1 per share). With the acquisition of Žito, we
will create a new food leader on the market of Slovenia with significant growth potential in numerous Podravka’s markets. Our intention is to make this company better and more successful, as well as use all the synergy effects we recognised in this merger, Podravka CEO Zvonimir Mršić said. After completing this transaction, Podravka will be positioned at the top of the food industry of the Slovenian market, with total annual income of €118.4 million. Total consolidated annual income of Podravka will be around €0.6 billion. (I.Z.)
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Privredni vjesnik Year VIII No 247
( €0.35 billion
gross profit of public companies in 2014
( €0.34 billion
reduction in public comp company pany expenditure
PUBLIC COMPANY BUSINESS ACTIVITY
Profit quadrupled compared with 2013 Public companies are still heavily burdened by accumulated debt of €8.69 billion. They are companies that used to be the beneficiaries of investment activity, but also accumulated liabilities. Such companies cover the motorway and railway areas and account for €5.92 billion of total debt. Igor Vukić ross profit of public companies and companies where the state is the major shareholder stood at €0.36 billion in 2014; in 2013, this figure was €77.2 million. Profitability more than quadrupled, primarily due to the restructuring of public companies and improved governance, stressed Branko Grčić, Vice-President of the Croatian government, during his presentation of public company business results. During the recently held conference that brought together members of Management
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and Supervisory Boards of public and state-owned companies, Grčić announced that in future Management Boards of public companies would be appointed through tenders with assistance provided by specialised employment agencies. Nevertheless, the selection of Supervisory Board members will still be considered a political issue, since politics is responsible for surveillance over Management Board operation, as is the case in private companies. Zoran Milanović also confirmed this stance and pointed out the fact that he was “reasonably satisfied” with the operation of pub-
Expenditure reduced by €0.34 billion In 2014, public company expenditure fell by €0.34 billion, to stand at €4.6 billion, which greatly contributed to overall positive results. In relation to 2012, the decrease in expenditure was larger at around €0.5 billion. Total revenues stood at €4.96 billion, which indicates a slight decrease compared with that of 2013. HEP, Croatian Forests, Croatian Motorways and HŽ Infrastructure accounted for the largest share of revenue. At the end of 2014, public and state-owned companies employed 62,357 staff, some 8,088 fewer compared with the end of 2011. Savings on salaries and material costs provided funding for new investment, say government sources. In 2014, investment by public and state-owned companies stood at around €1.1 billion.
lic company Management Boards over the year. A similar meeting was held in January 2014, during which operations concerning public company reform were allocated. Meanwhile, public
New investment cycle anticipated in energy and water-utility sectors companies revenue dropped by 1.3%, with expenditure seeing a decrease of 7.4%. Savings were achieved by reducing the number of employees. Prime Minister Milanović explained that his government is striving to foster employment, yet as a result of previous difficulties, it was forced to opt for redundancies in order to stabilise businesses. Burdened by debt Public companies are currently still heavily burdened by accumulated debt, totalling €8.68 billion. They cover several companies that used to be the beneficiaries of investment activity, but accumulated liabilities. The companies in question are in the motorway and rail sectors and account for €5.92 billion of total debt. Consequently, monetisation and concession of motorways was proposed. After renouncing this model, a model B is about to be presented, with a public tender of shares in motorways, an-
nounced Grčić. Siniša Hajdaš Dončić, Minister of Transport, highlighted that companies in these sectors have been faced with the gradual reduction of state subsidies and hence they are resorting to investment from their own profit. They are increasingly approaching principles of a market economy. Several companies – Croatia Airlines, HŽ Infrastructure, Croatian Post, HEP and Plinacro – presented their business results during the conference. A new investment cycle is anticipated in the energy sector. New investment will ensure stable supply and affordable energy prices for both the general public and industry, as announced by Ivan Vrdoljak, Minister of Economy. Substantial investment is expected primarily in the water-utility sector. According to Agriculture Minister, Tihomir Jakovina, a three-year investment plan for Croatian Waters is worth €0.53 billion. In addition to EU funding, investment may exceed €0.66 billion. Croatian Forests have also seen a positive trend. Irrespective of adverse weather conditions, investment implemented in the forests was worth €65.8 million. Other investment exceeded €19.7 million and profit was almost the same, noted Jakovina. Generally, 2014 was the best business year since the establishment of Croatian Forests, concluded the minister.
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( €2.5 billion
Croatian deficit in 2014 (5.7% of GDP)
( €36.8 billion
state debt (85% of GDP) last year
STATE DEFICIT TO REDUCE BY HRK2.1 BILLION
Government cuts deficit and non-tax levies The income side of the budget will increase by €0.17 billion with duties on tobacco and fuel as well as achieved profits of public companies. Reduced material expenses and cuts in public companies will gain €114.5 million on the expenditure side Igor Vukić
Differences due to the deficit calculation method
s announced by members of the Government, Branko Grčić and Boris Lalovac, the 2015 state deficit will reduce by an additional €0.28 billion. This reduction of 0.63% of GDP was organised at the meeting Grčić and Lalovac recently held with representatives from the European Commission. They demanded an additional deficit reduction of 0.4% of GDP, while the Government suggested even larger cuts if the EC evaluates some of the measures as insufficiently planned, the Government Vice-President explained. The income side of the budget will increase €0.17 billion a year with higher duties on tobacco and fuel (a total of €78.9 million). The remaining €78.9 million will be drawn from achieved profit of public companies.
In 2014, the deficit in the state budget totalled €2.5 billion or 5.7% of GDP. State debt reached €36.8 billion or 85% of the GDP, according to data provided by the Central Bureau for Statistics. The takeover of HŽ Cargo’s debt of €125.7 million will significantly influence an increase in the deficit. An additional strain will be caused by the statistical treatment of transferring social contribu-
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Fewer state agencies Reduced material expenditure and other cuts in public companies will accrue €114.5 million on the expenditure side. In addition to these, the Government will also try to improve the business environment. It was proposed
to reduce parafiscal levies by a further €43.4 million annually. Compared with the earlier €56.6 million, the economy will be eased of €100 million in tax levies, Grčić said. For the purpose of reducing total expenditure, an in-depth analysis of the work of state agencies has been prepared. A proposal on the decision to merge agencies has been alm o s t
tions from the second to the first pension pillar. Minister Lalovac stated that the main budget deficit is €1.6 billion and it is within the planned framework. The difference of up to €2.5 billion relates to deficits in public companies and the included public-private partnerships – and the difference is the result of the new deficit calculation method.
completed, and I am able to announce that at least 10 of them will merge with another agency that will make substantial savings, Grčić said. He also added
Higher duties on tobacco and fuel will add €0.17 billion a year to the income side that in line with the results of the in-depth analysis, material expenses of the agencies will be rationalised, which would save €65.8 million a year. Furthermore, he announced the Government wishes to harmonise salaries in independent agencies, without jeopardising their independence, since these salaries are presently above average compared with other agencies. In a time of crisis, we all need to share the burden, Grčić highlighted.
Introducing standard expenses Saving measures will also be implemented by introducing standard expenses Finance Minister, Boris Lalovac, pointed out. State bodies, for example, will not be able to lease more expensive office space for €11 (VAT included) per square metre. The leasing of office space will have to be coordinated with the State Office for Property. Furthermore, the number of business trips will be limited since the use of official vehicles will be reduced by at least 10%. Also, business vehicles may not exceed the cost of €23,650 (VAT included), and expenditure per ministry for consulting services may not exceed 2% of total expenditure. The expenses of computer services must reduce by 10%. Total expenditure on an annual level is estimated at €65.8 million. Regardless of the negotiations with the European Commission, which has to evaluate whether Croatia did enough to battle excessive deficit by May, state budget rebalance will not happen by autumn at least, Minister Lalovac highlighted.
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Privredni vjesnik Year VIII No 247
( 48% increase
in the number of ICT companies during the last 5 years
( 78% ris in IT industry ex
RON BROWN FORUM 2015
ICT sector as a leader of co tiveness and economic gene
The selection of topics at the Ron Brown Forum normally shows trends and significant issues for both social and eco Osijek was selected as host, due to its global recognition as a centre of excellence in the IT and ICT industry Tomislav Prusina CT industry, its growth and development in Croatia were the topics of the fifth staging of the Ron Brown Forum held in Osijek and traditionally organised as a tribute to the tragic death of the American Trade Minister, Ron Brown, who worked on strengthening trade and economic relations between Croatia and the US. The selection of topics at Ron Brown Forum normally shows trends and significant issues for both social and economic development of Croatia; Osijek was selected as host, due to its global recognition as a centre of excellence in the IT and ICT industry. The founders of Osijek Software City greatly contributed to the enhancement of its global recognition, as they have been co-operating with companies globally since its inception.
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Welcoming innovative solutions The operational segment of the forum, organised by the US Embassy in Croatia, was preceded by a business dinner attended by some two hundred guests, during which fascinating figures were presented showing the development of technology in Croatia. During the last five years the number of ICT companies increased by 48%, IT industry exports soared by 78%, employment was up 20%, whilst 30 new ICT companies were founded in Osijek-Baranja County over the last 18 months. This data fully justifies the inclusion of ICT
among the strategic industrial branches in Croatia. Moreover, it is important to highlight the fact that nearly every product currently includes some ICT solution and the fact that ICT is vital for competitiveness in any business activity. As a part of the “Osijek ICT story”, Ivan Vrdoljak, Minister of Economy, emphasised that Osijek identified talent and businesses without any political interference, which have been recognised by the market for their high quality, effectiveness, innovation and competitiveness. “They conquered a segment of the global market, including the American market, which is a demanding task. We need to welcome innovative solutions in ICT that enhance competitiveness,
Ron Brown Award for promotion of business co-operation between the US and Croatia was also presented during this forum and was received by Matija Kopić, founder of the company Farmeron by providing useful contacts, knowledge and experience and, through the Ron Brown Forum, also ensure future co-operation with American partners. ICT is fundamental for competitiveness in agriculture, health care and telecommunications, to name a few, since if they do not
develop in the ICT segment, they will simply cease to exist. The changes are extremely rapid and therefore it is of fundamental importance to establish direct contact with American technologies and targets. The decision to consider ICT as a strategic industrial branch is deemed to be appropriate. Our long-term problems will be solved exclusively by our innovations and the support provided to these young entrepreneurs, as well as the establishment of connections between them and the educational system”, noted Vrdoljak, expressing his belief in young people, as they are highly qualified and able to do their job well, having proved several times to be greatly more efficient, innovative and superior than any political structure in Croatia. “We
need to support them and follow their strivings; we can also learn a lot from them”, he added. The American Ambassador to Croatia, Kenneth Merten, told young entrepreneurs that the start-up seminar provided them with the opportunity to learn from American and Croatian mentors how to develop their software start-up ideas into sustainable businesses. He also expressed hopes to be able to show the way in which the government, the private sector and the academic community could work together to create a thriving entrepreneurial climate, both in Croatia and in Central and South East Europe, so that start-ups can “grow and thrive”. Luka Burilović, President of the Croatian Chamber of Economy,
www.privredni.hr Business & Finance Weekly
9 INTERVIEW: EVELINE BUCHATSKIY, TECHSTARS
se
ports over the same period
“I believe Croatians are very talented”
mpetieration D
The possibility of our investment into Croatian companies is considerable, due to a high level of technical and technological training provided. Croatians are excellent engineers, which greatly magnifies any investment potential Tomislav Prusina
onomic development in Croatia;
concluded that the number of members of the Croatian Chamber of Economy has risen from 2,500 in 2009 when the Information Technology Association was founded, to reach 4,500 currently. The Association promotes the professional interests of Croatian companies globally. Burilović invited investors to connect with young entrepreneurs. Connecting investors and young entrepreneurs One of the initiators of Ron Brown Forum since its inception has been the Croatian Employers’ Association on whose behalf Bernard Jakelić stated that the ICT industry is the new growth generator and a new industry that has the potential to replace everything we have had thus far. Furthermore, he believes it can be a driving-force for exiting the economic crisis and recession. Andreja Doko Jelušić, President of the American Chamber of Commerce in Croatia, noted that ICT industry is currently the most significant creator of jobs, a successful exporter and is currently seeing growth exceeding the overall Croatian growth rate. The Deputy Minister of Foreign and European Affairs, Joško Klisović, believes co-operation between American and Croatian faculties in this area needs to be strengthened. The Ron Brown Award for the promotion of business co-operation between the US and Croatia was presented during this forum and was received by Matija Kopić, founder of the company Farmeron.
uring the Ron Brown Forum Privredni vjesnik talked with Eveline Buchatskiy, Director of the premium start-up programme run by Techstars from Boston
Who is Techstars? Techstars is a company that is considered as the benchmark for start-up companies in the US providing facilities, the initial funding of $118,000 and mentors. It employs 270 mentors who have proved successful in business and have launched start-up companies or belong to other branches. Techstars provides comprehensive assistance from inception, from how to transform initial ideas into success. Following this first phase, the second implies the attraction of investors. Investors consider the ideas, which have been re-designed, and thus provide additional financing for start-ups, normally ranging between $1 million and $3 million. We are an investment fund of 25 investors, connected with institutions and have a network of people throughout the US who also invest their funds and whom we like to call investor-adventurers. What is the actual potential of participation in Croatian companies in your start-up programmes? They primarily need initiative. The Split-based company Codeanywhere with whom we co-operated with last year is extremely interesting. We believe that the potential of our investment in Croatian companies is considerable, due to the high level of technical and technological training provided. Croatians are excellent engineers, which greatly enhances investment potential. Following my experience
with the previously mentioned company and the history of your educational system, I believe you can be considered as a highly talented nation. What is your attitude towards companies and ideas from our region? We believe the entire region has ample potential for people who have been provided with higher education and top quality training in technology, and believe this region can provide people capable of solving highly technological problems. What is missing is insight into customer behaviour outside this region, which may negatively impact on the creation of functional social networks, primarily in the US, or websites involved in connecting people, as global insight into market behaviour is missing. In addition, design skills are also inadequate and insufficient. What would you recommend to innovative companies and people? Those with ideas first need to create a team, as teamwork is fundamental. Practice has shown that those with ideas normally avoid sharing them, for fear someone might steal them. Nevertheless, the reality is exactly the opposite – a person with a good idea needs to share it with others, talk about it to arouse the interest of others who would like to work on its implementation. If anyone is seriously striving to implement their idea, they need to work on it full time. There are a large number of people who are reluctant to take such a risk, leave their work and dedicate themselves primarily to the implementation of their idea. However, there are diverse methods of assistance available both in Croatia and globally. A good example of this is ZIP – the
Zagreb entrepreneurship incubator, which provides a wide range of assistance to people who are seriously committed to the implementation of their idea. There is a platform named F6S that brings together other companies and funds, such as Techstars, and a person with an idea can select assistance from diverse sources, which increases the possibility of finding assistance at a global level. Does your company invest in other companies and how do you select the company to invest in? Firstly, companies must be involved in technology. The principal criterion is human assets. We do not invest in ideas, but in people, the team. The original idea may subsequently change, whilst the people remain, and they need to be strong and effective enough to be able to co-operate to transform the initial idea into success.
10
Privredni vjesnik Year VIII No 247
( 1945
year RŽV Čakovec was founded
( 248
Number mber of people employed in RŽV
RAILWAY WAGON FACTORY, ČAKOVEC
From innovation to competitiveness Self-propelled rail carriage for transport of bulk cargo - Self Prop Rail is thee most advanced railway wagon made in Croatia for operators, which reduces energy consumption, harmful emissions and saves resources Boris Odorčić t the recently held international rail fair, infrastructure and logistics, RŽV – Railway wagon factory Čakovec and partners presented their self-propelled rail wagon
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RŽV Čakovec specialises in the maintenance of rail gas tankers for the transport of bulk cargoes – Self Prop Rail. It is the most advanced rail wagon made in Croatia for rail operators, which reduces energy consumption and harmful emissions as well as saving resources. In addition for use in construction and renovation of rail infrastructure, the self-propelled unit can be used for business activity in the logistics sector where it ensures greater flexibility of transport for more effec-
tive operation of cargo handling. Dražen Vidović, Director of RŽV, noted that the Čakovec-based company was founded in 1945, later merging with Overhaul of Railway Vehicles Bjelovar (Remont željezničkih vozila Bjelovar), which became a separate facility of RŽV. It should be noted that RŽV is wholly owned by HŽ Cargo. In addition to HŽ Cargo, as its owner and principal user of its services, RŽV has established successful long-term cooperation with INA, HŽ Passenger Transport, HŽ Infrastructure, Končar Electric Vehicles, as well as a dozen small Croatian businesses. In order to expand its op-
eration beyond Croatia, the company has been developing business co-operation with companies Ferriere Cattaneo SA from Switzerland, Knorr Bremse from Austria and ATAC S.p.A. from Italy. Excellent location According to Vidović, the location of the company RŽV near Čakovec railway station is excellent, since the factory is connected with the station by rail. “One of the principal advantages is good rail and road connections between the region and neighbouring countries. Čakovec is 10 kms from the Slovenian border, 20 kms from the Hungarian bor-
der, and Graz is 140 kms”, he added. RŽV employs 248 people and its principal business is the repair of various types of rail vehicles. RŽV is the only company in this part of Europe that specialises in rail gas tanker maintenance. “Repair and maintenance services are primarily on behalf of HŽ Cargo, which uses about 40% of company capacity. Annual repair capacity is 1,000 units”, he stated. Supporting activities are the construction of wagon bogies, the production of spare parts for units, the processing and cutting of metal using special tooling, as well as carpentry and varnishing operations.
CONSTRUCTION PROJECT VALUED AT €5.8 MILLION
Construction of competence centre for wood under way The contract for construction of the Pannonian competence centre for wood and valued at €3.3 million, was signed with the Split-based company Lavčević-inženjering. The centre will provide services for SMEs in wood processing sector in Croatia and Hungary, covering all phases of development of wood products and higher value-added products with particular emphasis on in-
novation. In addition to research and development the Centre will provide technology transfer services for SME’s as well as help with prototype creation of innovative wood products, product design services, packaging design for wood products and supporting industry products, as well as business consultancy services and brand creation services. Ivo Rako, Director of the Splitbased Lavčević-inženjering, an-
nounced the forthcoming start of work and pointed out that the estimated completion date is one year. The total project value is €5.88 million. 99% of the project value has been made available
via EU Structural Funds and the project co-ordinator, ViroviticaPodravina County, will provide the remaining 1%. “The concept behind the project originated in the wood sector which saw the requirement for such an institution. We have surveyed 163 companies and project will be developed in line with survey findings”, stated Tomislav Tolušić, Prefect of Virovitica Podravina County. (K.S.)
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( 400,000
pairs of leather and rubber shoes produced in 2014
AFTER THE PRE-BANKRUPTCY SETTLEMENT, THE VUKOVAR BRAND FINALLY STARTS ITS CONQUEST OF NEW MARKETS
NEW LIFE FOR BOROVO Borovo entered the pre-bankruptcy settlement process with €22.1 million of debt. Creditors – state, banks and suppliers – wrote off a share of the capital and interest thereby creating a base for a profitable business. This famous Croatian footwear company is now turning towards France, Germany and Sweden – markets with a higher price bracket fter the pre-bankruptcy settlement and years of losses, we will mark this year with a ‘positive zero’, and our new brands will lead us to sustainable business, stated Gordan Kolundžić, Board President of Borovo. The company from Vukovar presented its new brand designed by Hana Ciliga and Andreja Roškar My ballerinas in Zagreb. Borovo entered the pre-bankruptcy settlement process with €22.1 million of debt. Creditors – state, banks and suppliers – wrote off a share of the capital and interest, creating a base for a profitable business. We believe we have obtained a new dimension and we can continue to live normally and work sustainably, Kolundžić said. The new loan of €4.7 million, granted by the Croatian Bank
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The first quarter saw positive operating results for Reconstruction and Development, was used for restructuring financial obligations, the procurement of production goods and development of production lines. The loan guarantee was secured by the Government, earmarking a block of Končar shares at a recently held session. This means HBOR will obtain Končar shares if Borovo fails to return the loan. Kolundžić is convinced at a positive outcome. Two years ago Borovo saw a €23.7 million loss, which was reduced first to €6.2 million and then to €3.3 million. The first quarter of 2105 saw positive op-
erating results for the first time. Around 9% of production goes to export, and the company is now turning towards France, Germany and Sweden – markets with higher price bracket. Not easy to compete with importers The result does not depend only on Borovo. If one of every seven people in Croatia would buy our product once a year, we could save jobs in Vukovar and preserve Borovo, Kolundžić says. Vukovar is a city close to the eastern Croatian border that suffered horrific devastation during the 1990’s. Vukovar stands as a symbol of suffering and heroic resistance to occupation. Today, twenty years after the war ended, the economy is slowly recover-
ing. Borovo is one of the rare production companies in this city. However, any kind of special state support for its economic recovery is still missing. Gordan Kolundžić, Board President of Borovo, says it is extremely difficult to compete with importers under current conditions. Concerning state institutions, Borovo’s customers are mainly the Ministry of Internal Affairs and the Ministry of Defence. State companies or local administrations usually avoid them. It is difficult to win tenders where price is the only criteria. The President of Borovo thinks customers lack social responsibility, but he hopes the awareness of people and quality of their product will slowly change.
Our 500 employees mean a lot to us Borovo’s footwear and other products are produced by 500 staff. Another 290 people are employed in the trade network. The 500 employees mean a lot to Vukovar. This is important for us from the social aspect, Kolundžić highlighted. Last year, the company produced around 400,000 pairs of leather and rubber shoes. Full capacity would be reached with a total of 500,000 pairs. The new line of women shoes will be handmade from quality natural materials. We are focusing towards customers and their needs. Borovo offers a serious product, competitive price and design, Borovo’s Director of Marketing and Market Research, Jasmina Matiša, highlighted. (I.V.)
12
Privredni vjesnik Year VIII No 247
( €6.25 million
THE CROATIAN CHAMBER OF ECONOMY ASSOCIATION OF WINE PRODUCERS
Croatian wine promotion in Serbia The Croatian Chamber of Economy Association of Wine Producers is using funding provided by the national assistance programme for the wine industry – “the wine envelope” for promotion to third markets for the first time. Croatia has been visited by journalists, distributors and wine importers from Serbia who have seen Croatian wineries and wine shops in Istria and Kvarner, Dalmatia, Slavonia and the Croatian Podunavlje region, as well as in Central Croatia. The value of Croatian wine exports to Serbia in 2014 was $1 million, with wine imports worth $300,000. The most popular Croatian wines on the Serbian market are those from Istria and primarily Mal-
vasia, whereas the best-selling wines are those whose prices range between €7 and €10.The promotion of Croatian wines on the Serbian market in 2015 will cover a large number of activities and media promotions. The first meeting of Croatian and Serbian wine producers at the Serbian Chamber of Commerce is scheduled in May, as well as the first major wine tasting and wine promotion in the Crown Plaza Hotel. 19 Croatian wineries will participate in the promotion, and the value of the promotion project on the Serbian market exceeds €0.2 million, with funding through the “wine envelope” accounting for 80% and 10% being provided by the Croatian Chamber of Economy and wineries. (I.G.)
22ND VINISTRA ANNOUNCED
314 wines for sampling for assessment
The 22nd Vinistra, an international exhibition of wine and wine making equipment, will be held from 8th to 10th May 2015 in Žatika. “Istrian wines are fascinating and unique; they actually tell a story about Istria and the people. I believe that such competitions encourage wine makers to better the quality of their wines. Since the Croatian wine industry is still in its inception, I am aiming to provide encouragement to wine makers in facing global competition“, pointed out Caroline Gilby, a long-term co-operator with Decanter magazine and holder of the Master of Wine title.
According to Nikola Benvenuti, President of Vinistra Association, 314 wines for sampling have been submitted for the competition, whose assessment has already started. “There are 140 Malvasia wine samples from Croatia, Slovenia, Italy, Greece and Spain, as well as 50 of Teran wine. This year there are two special panels assessing sparkling wines and Teran wines respectively, since we were aiming to focus on sparkling wines and Teran as our principal red wine varietal”, stated Benvenuti, adding that 120 exhibitors will be participating. It should be noted that a humanitarian project will take place during Vinistra and donations will be allocated to a project helping children with cerebral palsy swim, as well as a wide range of professional lectures intended for winemakers and winegrowers. (M.P.)
olive oil trade deficit in 2013
CROATIAN AND ITALIAN OLIVE OIL PRODUCERS F
Following an olive produce
According to data provided by authorised institutions, annu 34,269 tonnes that were subsequently processed to obtain was merely 1,500 tonnes, the worst result on record and rep Jozo Vrdoljak n addition to olive fruit fly and Rhynchites cribripennis, commonly referred to as curculio, which olive producers faced last year, this year they are upset by the news of the appearance of the bacterium, Xylella fastidiosa, which has already infested olive groves in the Italian region of Puglia. The bacterium in question initially causes a darkening of the leaves (leaf scorch) and subsequently the entire olive tree dries out and dies. According to data, this bacterium has also had a catastrophic impact on other Mediterranean fruit such as pomegranate and figs. During ‘Noćnjak’, the recently held traditional olive oil producers night meeting in Seget, JeanLouis Barjol, Executive Director of the International Olive Council, pointed out to Croatian olive producers the fact that they are not alone in their fight against olive pests, since his association has warned all Mediterranean countries that are now jointly waging war on olive pests. According to data provided by authorised institutions, annual olive production in Croatia ranges between 30,000 tonnes and 50,000 tonnes, and in 2013 olive production stood at 34,269 tonnes that were subsequently processed to obtain 5,000 tonnes of olive oil. According to Juraj Orenda, Head of the Department for Agriculture and Food-pro-
I
cessing Industry at the Ministry of Agriculture, production of olive oil in 2014 was merely 1,500 tonnes, the worst result on record and represents a slump of 70% over 2013. At the mercy of weather conditions Višnja Šimunović from Advisory Services stated that olive production and all outdoor activities are directly affected by climate conditions. “2014 saw high rainfall throughout the olive growing area and substantial damage caused by diseases and pests. At the beginning of the new greening of olive trees, we saw a severe attack of Spilocaea oleaginea. Olive groves were
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( 1,500 tonnes
of olive oil produced in Croatia in 2014
( €8.26 million olive oil trade deficit in 2014
FACED WITH ADVERSE WEATHER CONDITIONS AND PESTS FOR SECOND CONSECUTIVE YEAR
extremely difficult year, ers fear a new bacterium
al olive oil production in Croatia ranges between 30,000 tonnes and 50,000 tonnes. In 2013, production was 5,000 tonnes of olive oil. According to Juraj Orenda from the Ministry of Agriculture, production of olive oil in 2014 presents a slump of 70% when compared with 2013 the Croatian Bureau of Statistics, in 2013 Croatia imported 2,484 tonnes of olive oil worth €7.3 million, whilst olive oil exports during this period stood at 126.5 tonnes and were worth slightly over €1 million, a negative trade balance of €6.25 million. According to Orenda, 2014 saw even higher negative foreign trade balance, with a deficit of €8.28 million. In addition to a poor harvest and the high price of Croatian olive oil, a serious problem is also competitiveness, primarily following Croatian EU accession, due to free trade among EU member states. “Following Croatian EU accession, Croatia has been in full compliance with EU legislation, greatly affected by Prays oleae, the olive fruit fly and Istrian, the island of Rab and Central and Southern Dalmatian olive groves were attacked by Rhynchites cribripennis. According to her, olive oil quality dropped, with the exception of several large producers in Central Dalmatia and Istria. “2014 has been one of the most difficult years for olive producers as a result of olive pest attack”, pointed out Šimunović. According to estimates by Lordan Ljubenkov, Head of the Co-operative Alliance of Dalmatia, in some locations last year’s olive harvest plunged by 80% compared with the previous year, whilst in other locations it dropped by 30%. “We launched
an initiative to establish an information system for olive producers, providing them with information concerning diseases and pests they are likely to face in the forthcoming future. Our initiative has already been welcomed in Italy and Spain”, highlighted Ljubenkov.
Bacterium Xylella fastidiosa, which dries out the entire tree, has already infected olive groves in the Italian region of Puglia
Trade in olive oil The Croatian olive oil market is now very inadequately regulated, primarily due to a large number of producers operating to meet their private needs. The quantities of olive oil produced in Croatia are insufficient to meet domestic demand and large quantities of olive oil are imported. According to data released by
and operates in the common market, participates in the enactment of regulations through commissions and working groups and has the opportunity to obtain EU funding. Active participation is fundamental, both in EU policy creation and in the enactment of regulations through acquisition of voting rights”, emphasised Orenda.
Two litres per year Due to the requirement of reporting to the European Commission, the preparation of the ordinance on record keeping in olive oil production is under way. The European Commission has amended olive oil regulations, aiming at improvement and enhancement of effectiveness of the control of olive oil on the market, protection, and providing information to consumers, determining conditions of olive oil storage, ensuring product traceability and combating counterfeit olive oil. According to senior officials at the Ministry of Agriculture, olive oil consumption per capita can easily be increased in Croatia, as it currently stands only at 2 litres per capita/year and subsequently a positive trade balance would be achieved. “Last year was an extremely difficult year for olive oil production as a result of adverse weather conditions. I hope this year will meet the expectations of both producers and customers. Through the rural development programme, Croatia has €2.4 billion in EU funding available over the next seven years, which is €330 million at an annualised level. €84.2 million will be allocated during the first stage of the tender and the second stage will occur in September“, pointed out the Agriculture Minister Tihomir Jakovina.
14
Privredni vjesnik Year VIII No 247
( 9%
Tourism as a percentage in European GDP
( 12 million people employed in tourism in the EU
CROATIAN TOURISM CONFERENCE
CONSTANT CHANGES FOR TOURISM IMAGE Strengthening of legal, tax and regulatory framework in Croatia is imperative in order to encourage foreign investment, stressed Davor Lukšić whose company has been investing in Croatian tourism for 20 years Sanja Plješa oth the public and private sector in Croatia are responsible for the development of Croatian tourism. According to this, improvements in quality and tourism programmes, primarily through the upgrading of the hotel industry that is fundamental in this sector, is imperative, pointed out Darko Lorencin, Tourism Minister, during the recently held Croatian Tourism Conference in Zagreb. He added that the perception of Croatia needs to be changed substantially by 2020 and thus several activities are currently being implemented in accordance with the Strategic marketing plan for Croatian tourism. According to the Development strategy, some €7 billion of investment into tourism is anticipated by 2020. Lorencin emphasised that this will contribute to the creation of between 20,000 and 22,000 jobs. He reiterated that the Croatia 365 tourism programme was launched at the end of 2014 and, as a result of immense interest and excellent impact on tourism destinations,
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the programme will be expanded in 2015. The programme currently includes 22 destinations, and it is assumed that, following the selection of additional tourism destinations, the programme will cover 90% of the entire tourism industry. “All the stated activities are being implemented in order to accomplish three most important Davor Lukšić
Tourism needs to undergo a specific reorganisation to keep abreast of new and creative industries, noted Alain Liberos objectives: rebranding of Croatia, tackling seasonality and increasing tourism consumption”, stressed Lorencin. Tourism reorganisation A panel discussion Croatia – a country of tourism or a tourist country was held during the Conference. Davor Lukšić, Management Board President of Lukšić
SELECTED BY THE ASSOCIATION OF CROATIAN TRAVEL AGENCIES
Group Croatia, pointed out that his company has been investing in Croatian tourism for 20 years. “In order to start investing in a country, investors look for political, economic and tax stability. The strengthening of the legal, tax and regulatory framework in Croatia is an imperative in order to encourage foreign investment”, highlighted Lukšić, adding that it would make Croatia significantly more competitive in Europe in terms of foreign investment. Alain Liberos, Deputy Director of the Tourism Department in the Main Administrative Office for Entrepreneurship and Industry
of the European Commission, concluded that tourism needs to undergo a specific re-organisation to keep abreast of new and creative industries. Irrespective of the fact that Europe currently still ranks as the first tourist destination globally, the trends have been changing and tourists have been showing increasing interest in further away markets, stressed Liberos. He added that the percentage of tourism within European GDP is currently 9%, and employs 12 million people. The European Commission will proceed with the launch of new initiatives to create a positive tourism climate, concluded Liberos.
FIRST PORT FROM VENICE
Zadar County as recommen- Split expecting over 260 ded destination of the year cruisers According to the members of the Association of Croatian Travel Agencies (UHPA), the recommended destination is Zadar County for the 2015/2016 season. A Marketing Co-operation Agreement signed between the Association of Croatian Travel Agencies (UHPA) and Zadar County will uprate the promotion of the County and create a platform for successful cooperation amongst the members
of UHPA as destination management companies (DMK) and Zadar County Tourist Board as a destination management organisation (DMO).
This year Split will see over 260 cruisers carrying over 200,000 passengers, according to estimates by the Split Port Authority. In addition, reservations for 265 new cruisers have already been made for the summer of 2016. Split is the first port after Venice for cruise tourists going south or the last port towards Venice on their return journey, in addition to Split and Dubrovnik, they also
visit Montenegro, Greece and Turkey.
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( about 11 million
number of tourist arrivals recorded in 2014
( 3.2 million arrivals to Zagreb
FORUM OF PRIVATE ACCOMMODATION HELD AT THE CROATIAN CHAMBER OF ECONOMY
Meeting the requirements of tourists interest particularly amongst German tourists who would prefer to holiday without their smart phone, rather than having to holiday without their pet.
Sanja Plješa he importance of private accommodation in Croatia is without doubt. There are currently 61,700 private accommodation lessors with around 500,000 accommodation units. 23 million overnight stays were recorded in 2014, up 8% over 2013. ‘What is the significance of private accommodation currently? Is it merely a passing trend or a new trend which is here to stay?’ were two of several issues addressed during the recently held Forum of private accommodation by Nedo Pinezić, President of Association of Private Accommodation which operates in the Croatian Chamber of Economy. He added that the trend towards private accommodation is increasingly popular globally and is gaining substantial popularity in Croatia. “Tourists staying in private accommodation aim to feel relaxed and comfortable. Host hospitality is fundamental”, noted Pinezić.
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Investment into training imperative Pinezić warned private accom-
modation owners that adequate and extensive knowledge and experience is vital for meeting tourist requirements. He pointed out that the level of knowledge required has increased significantly compared with 20 years ago, and thus investment in training is imperative, and computer literacy is critical. “There will soon come a time when the private accommodation supply exceeds demand, as opposed to previously when the situation was totally different. Hundreds of thousands of new accommodation facilities have been constructed, mainly of high quality. New tourism
products are imperative to meet the demand of tourists”, pointed out Nedo Pinezić. He added that in Austria, Switzerland and Germany private accommodation operators are clustered and are thereafter divided according into specific tourism programmes and tourist groups. Consequently, there are private accommodation lessors or hosts who provide accommodation for entire families with children, for cyclo-tourists, or for those interested in active holidays. Pet friendly private accommodation is gaining in popularity. Pinezić stated that pet friendly accommodation arouses
FIRST DOG-FRIENDLY BEACH IN SENJ
The number of dog-friendly beaches increases The city of Senj Tourist Board has arranged and equipped the first dog-friendly beach in the Senj area. The beach is located five kilometres south of Senj and is equipped with information boards, dog shades, waste bins, paths for dog-running and a park with tables and benches. As a result, Senj has become an
additional tourist resort providing separate beaches for tourists on holiday with their dogs. Amongst other Croatian cities with dog beaches are Split, Crikvenica, Rovinj, as well as Krk, Pag, Cres, Rab, Mali Lošinj, Poreč, Rijeka and recently, Omiš. All have public beaches with all
necessary infrastructure, including running water for removing salt after swimming, and waste bins. As a large number of tourists who have holidayed in Croatia are already aware, there are a large number of undeveloped beaches throughout the varied Croatian coast with permanently open access for dogs. (S.P.)
Tourism in Zagreb thriving In 2014, Croatia saw around 11 million tourist arrivals, of which 3.2 million were in Zagreb, representing 30% of total overnight stays. During the Forum of private accommodation, it was highlighted that Zagreb currently provides 1,170 facilities with 2,700 beds, covering 705 registered private accommodation lessors. According to statistical data, during the first three months of 2015,
Pet friendly private accommodation gaining in popularity private accommodation facilities in Zagreb saw 39,422 overnight stays, a 23% increase compared with the same period of 2014. The most numerous of Zagreb tourists are Italians, followed by those from Bosnia and Herzegovina, Serbia, Korea and Germany.
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Privredni vjesnik Year VIII No 247
( 13 hectares ( €100 million of ex-resort in Kupari
estimated value of the land in Kupari
ATTRACTIVE LOCATION ON THE DUBROVNIK COAST AWAITS INVESTORS ORS
Kupari ready for international tender Six potential investors applied for the initial invitation for expression of interest, and the selected concessionaire will be able to build new four and five star hotels in lieu of the devastated hotels Kupari, Pelegrin, Goričina I and II Igor Vukić fter two years of preparations, the Kupari Project – the sale of a huge exmilitary resort situated on an attractive location by the sea, close to Dubrovnik and its airport – is ready for international tender. Last week, the Government imposed additional conditions any future investor will have to fulfil, and the tender should be announced in a week or two. Six potential investors applied for the initial invitation for expression of interest. They are Valamar, Rixos, Avenue Group, Mir - co-operative of war veterans, Charisma Hotels Adriatic and Titan nekretnine (real-estate). Other bidders are also invited to apply with binding offers. “We have removed every dilemma relating to ownership; the right of building and lease will be for 99 years, and this is a very attractive investment package”, Tourism Minister Darko Lorencin said. The selected concessionaire will be able to build new four and five star hotels with 1,500 beds in lieu of the devastated hotels Kupari, Pelegrin, Goričina I and II, irretrievably damaged during the Croatian War of Independence. However, they will have to lease and renovate the old Grand Hotel, a monument of culture. The investment is estimated at around €100 million and covers 13 hectares. The advantage in selection will be given to the candidate offering the highest figure for the
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The right of building and lease will be for 99 years, and this is a very attractive investment package, Tourism Minister Darko Lorencin says right to build and lease the Grand Hotel; a larger compensation for the concession for the maritime domain. Court experts estimate that market compensation for the right to build should be at least €8 million, and the lease on the Grand Hotel should be at least €58,474 a year. Criteria for bidders Bidders will be obliged to prove they already manage at least 1,500 hotel rooms, of which 50% have to be of five stars status. They will also have to prove their tourism activities account for at
least €45 million income a year. In addition to the plan of investing at least €70 million, it is also necessary to submit a business plan for the hotel complex for the next 10 years. If tenders are equal, additional criteria would apply (deadlines for completing the investment, reputation or brand and the possibility to fill future capacity). Additional criteria will also include an employment plan and contributions to the development of the local community. In addition to the representatives of the Ministry of Tourism and the State Office for State Property Management (DUUDI), the committee for selecting investors will also include a representative of the local municipality. This vast project, which consolidates the right to build, the preservation of a monument of culture and the concession of the maritime domain, required complex legal-administrative prepa-
ration. The Government states the land registry documents are clean. Therefore, there should be no degree of property obstacles that would bring this project to a halt. “We waited a long time to announce this tender, since we wanted to harmonise the deadline of the concession on the hotel and the maritime domain, which is extremely important for completing the project. The Croatian Parliament gave its assent, and now the final phase of realising this big and significant project can start”, Lorencin said. Projects under preparation The experience learned from this investment project will be used in future similar state property investment projects, currently under preparation. For example, the Czech Villa on Vis, and the facilities of former military barracks in Pula and Minerska in Šibenik.
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