Employment in Croatia CCE in co-operation with HAZU presented the results of the project Employ Croatia
Croatian exports Croatia also exports horns, beaks, hooves and dried leaves
Business demography Every other company in the processing sector dies within four years
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December 2015, Year VIII, No 253
CROATIAN CHAMBER OF ECONOMY – ZAGREB CHAMBER
CHINA WISHES TO INVEST IN CROATIA by Igor Vukić vukic@privredni.hr
R
ecently, a delegation of entrepreneurs from the Chinese province of Jilin and Yanbian prefecture explored the investment climate in Croatia. They signed a memorandum of co-operation with Metroholding from Zagreb and sat with representatives of some 20 Croatian companies in the Croatian Chamber of Economy – Zagreb Chamber The meetings were useful for the future development of trade relations between the two countries, as Deputy Director of the Regional Trade Office of e Jilin province, Qian Fanglian highlighted. The Exim Bank of China is prepared to finance co-operation between Chinese and European companies, and some members of the delegation have already had experience of business activities within the EU. For example, Yanbian Flax Textile, represented by its leader, Zheng Nanji, is a long-term exporter of flax to the European and other markets. Zlatan Fröhlich, CCE President of the Zagreb Chamber, confirmed that the level of interest by Croatian companies in the Chinese market is growing. This was a topic of many meetings held in Zagreb, and the Chinese Suzhou, Ningbou and Shanghai, recently visited by the Croatian economic delegation comprising 14 company representatives, and whose visit was organised by the Zagreb Chamber. Co-operation in tourism is getting bet-
The Chinese delegation was interested in cooperating on various projects and investments, including infrastructure, the construction of retirement homes, and the export of dried fruit, wine and fish ter, as shown by the rising number of Chinese tourists proves. Co-operation could also be developed in industry and logistics, since Croatian ports could be the European doors for Chinese products, Fröhlich said. The Jilin delegation consisted of representatives of regional institutions and 16 companies from construction, agriculture, tourism as well as textiles, timber and other industries. They were interested in co-operating on various projects and investment, including infrastructure, the construction of retirement homes, the export of dried fruit, wine and fish. The Croatian side included representatives of
the Atlantic Group, Kraš, INKOP obuća, Zagreb Airport, Studio 92 and other. The province of Jilin has over 27 million people and it is situated in the northeast of China, bordering North Korea. It is rich in minerals and oil, and has a highly developed agricultural production, in particular corn. There are also large car factories. Co-operation between Jilin and Croatian companies could be even further stimulated through the event Croatian week in Jilin, which is now in its preparatory phase. Also, Croatian exports to China totalled around US$68 million last year, and Croatia imported $586 million of goods from China.
CROATIAN CHAMBER OF ECONOMY EMPLOYMENT IN CROATIA
EMPLOYMENT MUST BE THE PRIORITY CCE in co-operation with HAZU presented the results of the project Employ Croatia. The academics who worked on the project presented 39 guidelines for reform necessary to increase the employment rate by Krešimir Sočković and Ilijana Grgić
B
ased on co-operation between entrepreneurs and academics, 39 guidelines were established for reforms required to increase employment. The guidelines were presented before 200 participants during a conference Employ Croatia, organised by the Croatian Chamber of Economy and the Croatian Academy of Arts and Sciences. If the guidelines are to be implemented within a short time period, they could generate new jobs, the President of the Croatian Chamber of Economy, Luka Barilović, highlighted. “We expect the creators of these policies to accept these guidelines, since they do not have an ideological signature. Their only signature is of an economic nature, since politics will not hire people, but it should help, that is, it should not limit those who employ”, Burilović said and added that at the moment 1.3 million employed
TAX SYSTEM HAS CHANGED 18 TIMES, OR ONCE A YEAR ON AVERAGE feed 4.2 million individuals in Croatia. At the same time, it is estimated that only 750,000 are employed in the real economy, and it is obvious that even the strongest back can2 | PVinternational | December 2015 | No 253
not carry this burden any longer. The calls for painful cuts repeated periodically and as necessary, while the deterioration of the economy due to political inconsistency is the only continuous process within the Croatian economy, Burilović warns.
REFORMS NOW The CCE President stressed the end goal of this project is a society of equal opportunities for all, and as a result, better conditions for people, as well as an organised system where individual work is the basis of success. The Chamber has showed by its own example that it is possible to implement structural reforms in a short period of time, and adapt to those carrying forward economic development, for which it actually exists, and that the public administration should be the one to do it, Burilović concluded. Unemployment is still very high; the level of employment is low and public debt presents a growing problem which will escalate even further if we do not reach a growth rate of 4% a year, said President Kolinda Grabar-Kitarović, and sponsor of the project. Unemployment leads to personal insecurity and causes social instability. Two years after joining the EU, Croatia has the highest unemployment rate compared with other new members – over 15%, recorded in August. “It is time to stop talking about Croatian potential and opportunities, and get to work. There is no better time than today to start changing. We need to create an
CROATIAN BUSINESS & FINANCE MONTHLY
environment in which unemployed will find work and which will convince young people to stay in the country and build a future. We also have to create a framework for securing a long-term, strong and sustainable level of economic growth with high quality jobs and life”, President Grabar-Kitarović said.
THERE ARE NO SIMPLE SOLUTIONS One simple or quick solution to the problem of Croatian unemployment does not exist, and this is precisely the trap into which everyone falls, as President of the Croatian Academy of Arts and Sciences, Zvonko Kusić, warns. “We are missing a work ethos, and we need continuity and discipline in adhering to regulations regardless of the ruling party or ministers. We need a continuity of a thousand small changes to actually change something. The problem of unemployment must not be isolated since it is part of the economy, and the economy is part of society, meaning that society and its mentality should also change”, Kusić pointed out. During the past 25 years, Croatia has achieved cumulative GDP growth of 0%. At the same time, Poland’s cumulative GDP growth has grown 300% and by 200%-250% in other former socialist countries, Davorko Vidović, leader of the project Employ Croatia, warned. According to Vidović, around a dozen reforms should be implemented in order to increase employment. One of the key presumptions he mentioned was using the educational system for growth and development of the economy and
society as a whole. Employment has to be the country’s priority goal, and it should be measurable and act as key indicator of the government and economic success, Vidović pointed out.
LOW ACTIVITY RATE Academics working on the project presented the guidelines of the reforms required to increase employment. Iva Tomić, from the Institute of Economy in Zagreb, presented the conditions and problems of the labour market, and warned of the extremely low level of activity and employment rate as well as a high rate of those retiring early. Croatia had the fourth lowest activity rate (71%) and second lowest employment rate (59%) in the EU in 2014. The activity rate for men of working age is the lowest in the EU. Only 76% of men in Croatia work. This percentage is 83% in the EU. The unemployment rate of young people is another great concern. At 43.1%, it is more than double the unemployment rate of the general population and far higher than the EU28 average of 20.6%. The high unemployment rate was especially felt in the private sector, including crafts and the liberal professions, Iva Tomić says. The problems of other economic areas leads to a cyclic GDP fall and weak demand for the workforce. Therefore, the problems are not the labour market, they are elsewhere, Daniel Nestić of the Institute of Economy in Zagreb pointed out. He also explained the key factors of the problems of the labour market. A degree
We expect the creators of these policies to accept these guidelines, since they do not have an ideological signature. Their only signature is of an economic nature, since politics will not hire people, but it should help, that is, it should not limit those who employ. Luka Burilović, CCE President
No 253 | December 2015 | PVinternational | 3
CROATIAN CHAMBER OF ECONOMY
Danijel Nestić
Iva Tomić
Davorko Vidović
Ma
Željko Mrnjavac
Predrag Bejaković
Nika Šimurina
Jos
of the problems is definitely the result of structurally high unemployment, but also weak work offers, consistent discrepancies of offers and work demand, a long-term combination of both factors due to rigid regulations, insufficient normative flexibility as well as high tax load on labour, Nestić warns.
MORE FLEXIBLE LABOUR SYSTEMS Predrag Bejaković of the Institute of Public Finance talked about increasing the efficiency of active measures of the labour
| Jovana Đurić
| Telecor |
Unfortunately, entrepreneurship as a term has a negative connotation in the Balkans. Many think you are a criminal if you are an entrepreneur. To stimulate selfemployment, it is necessary to motivate young people to muster the courage and venture into business. This is the best way to fulfil your dreams.
4 | PV PVint PVinternational int inter tern ernatiiona ernati onall | December 2015 2 | No 253
| Ljiljana Kukec
market. He believes that in order to increase employment, it is necessary to implement carefully directed programmes that could increase employment, with an insignificant impact on pushing out the employed, and enabling the creation of a new value as well as efficiently increasing salaries of workers with low education levels. It is necessary to direct the programme at the people who have been unemployed for a longer period of time or those farthest from the labour market, Bejaković thinks.
| FIP |
| Nedjeljko Pinezić|Quanarius |
Entrepreneurs, especially SME’s, are the biggest employers in Croatia. A positive environment for their growth and development would generate more jobs. The new curriculum brings entrepreneurship and boldness. Youth will probably not learn about entrepreneurship in their first grade, but they can learn about how to become enterprising since this means you have to be proactive and take responsibility for the world around you as well as use the given opportunities.
Unfortunately, micro-entrepreneurs are not perceived in Croatia. Medium-sized and large-sized companies are discussed, but it seems micro-businesses do not even exist. This has to change. In an economic crisis, when we look for new ideas we have to have an open mind as well as communicate with the world, the only thing that can save you are small businesses. Many good ideas could position you as a lucrative hard-working and modern nation.
CROATIAN BUSINESS & FINANCE MONTHLY
aja Vehovec
sip Tica
Zvonko Kusić, Kolinda Grabar-Kitarović and Luka Burilović
The Croatian economy has various forms of work flexibility since the share of newlyemployed with temporary contracts and those working shifts and during weekends, is high. Furthermore, the percentage of those working in the evening and at night is low. Everyone must invest his or her efforts in creating a flexible workforce, and the stress should be on the development human potential. In order to achieve greater flexibility and security, the quality of legal regulations should improve, work flexibility should be adjusted to workers
and employers; the system of collective bargaining should improve, the process of starting or ending employment should speed up, and employers’ costs of redundancy management should be cut, plus more appropriate social welfare and worker protection after dismissal should be secured, Bejaković concludes. Simpler self-employment and the generation of small jobs are necessary to employ Croatia, Željko Mrnjavac from the Faculty of Economy in Split thinks. Croatia’s dysfunctional legal state is reflected on working relations,
Unemployment leads to personal insecurity and causes social instability. Two years after joining the EU, Croatia has the highest unemployment rate compared with other new members at over 15%. It also has the lowest employment rate of around 45%. Kolinda Grabar-Kitarović, President of the Republic of Croatia
| Petar Čavlović | H1 Telecom |
| Darko Vukadinović | LA Log |
| Katarina Fresl | Zagreb Šped |
| Zlatko Sirovec
Employment and employment growth are the key paradigms for a successful economy. It seems many are returning to this idea and perceive it as an important goal. Companies should be competent and competitive, and employment as well as experience of older people has the potential to fight for what the market brings.
On one side, we have tax base and too many parafiscal duties, noticeably higher, especially in transport, than in the surrounding countries. On the other side, there is a problem with heavy tax loads when hiring employees in companies. When the regulations become more sensible to the economy, things will change.
We think that the termination period and the relating procedure should be shortened as much as possible to preserve workers’ rights. This way the employer could solve his problems in a short time, and avoid his breakdown. At the same time, a part of the severance pay exempt from tax should be increased so that workers could compensate for this shorter time.
We still have many problems with hiring workers. It is difficult to find a good worker with an appropriate level of knowledge and experience. The European Union anticipates that up to 200,000 people will leave Croatia by 2019 and that our birth rate is continuously falling.
| Tehnika |
No 253 | December 2015 | PVinternational | 5
CROATIAN CHAMBER OF ECONOMY
and workers are often exposed to poor working conditions, for example, avoiding paying social contributions. Those who are unable to legalise their working activity status without excessive administration move into the grey economy and work illegally, or they remain isolated from the working world. Preferring only one form of work relations limits the possibility of exploiting all working resources in society, Mrnjavac claims.
LOWER TAXES AND LONGER WORKING LIFE A high overall tax load in the circumstances of unstable macroeconomic environment and an inefficient legal system results in higher unemployment and fewer investment, Nika
Šimurina from the Faculty of Economy in Zagreb considers. Šikurina says it is vital to lower the tax load, simplify and stabilise the tax system and stimulate productive investment through tax measures, especially investment in innovation and technology. The tax system has been changed 18 times, that is, once a year on average. This is why we need a consensus on prohibiting any changes to the tax system without a clear analysis of its effects. When speaking about prolonging working life, Maja Vehovec, from the Institute of Economy in Zagreb, said Croatia needed positive social campaigns regarding older workers in order to dismiss the stereotypes and prejudices about the elderly. Concerning the promotion of local markets, Josip Tica, from the Faculty of Economy in Zagreb, highlighted that we need to strengthen and direct local administration, promote the ethic of work and entrepreneurial environment and co-operation, strengthen the educational system by co-operating with entrepreneurs and keep highly educated people in the country. The conference proceedings, containing broader descriptions of all 39 guidelines presented at the conference, will be delivered to each new member of Parliament, each member of the new executive as well as representatives of county and local administrations.
END THE VICIOUS CYCLE
National platform on dual education CCE Vice-President for International Affairs and EU, Želimir Kramarić, presented a proposal for dual education of the National Economic platform. The initiator of the project is the CCE, and its goal is to link systems of education and economy based on the Austrian and German models. The current situation is that there is a vicious circle - you cannot be hired if you do not have experience, which is impossible to have if you do not work. At the same time, workers on the labour market do not have the required competencies as they did not acquire them through practice during their education. Furthermore, German and Austrian students mainly attend vocational training where practical work in school practicums and companies is highly represented, Kramarić pointed out. He also added that the Croatian situation is a consequence of an imbalance
6 | PVinternational | December 2015 | No 253
between the market needs and school curricula; companies are not interested in organising practical work, and the youth are motivated to study a long time instead of being motivated to join the market. Present employment of young people between 15 and 24 is at 18% in Croatia; it is around 50% in Austria and Germany. The EU average is 33%. Dual education will include young people on the labour market during their high school and higher education. The proposal of dual education includes concrete activities such as: 1. an effective national model of economic participation in defining present and future educational needs 2. a comprehensive national model of performing practical work for students in vocational high schools 3. a national model and the setting up of
Želimir Kramarić
an educational programme for teachers and mentors in companies 4.organising a comprehensive model of performing international practice and student exchange for teachers, students and mentors The project would be funded by the European operative programme Effective Human Potential 2014-2020, and the total cost during the four years of implementation would be around €33.3 million.
CROATIAN BUSINESS & FINANCE MONTHLY EMPLOY CROATIA RESEARCH
32.3% OF ENTREPRENEURS PLANS NEW HIRING Three main factors affecting the dynamics of business quality are legal regulations, employers’ activities relating to HR, and employee education as well as training, Josip Ježovita
J
osip Ježovita, from the Croatian Catholic University, presented the entrepreneurs’ opinions on the labour market and employment that are the result of a survey conducted on 13,000 entrepreneurs during 2014 and 2015. He presented optimistic data according to which 32.3% of entrepreneurs plan to hire new workers. Those employed are one of the most significant resources of any company. In order to provide better direction and stimulate their and their employees’ development, the survey revealed three main factors affecting the dynamics of business quality. They are - legal regulations, employers’ activities relating to HR and employee education as well as training, Ježovita highlighted. Concerning the legal regulations, as the first external factor, over 10% of entrepreneurs had a positive response when they were asked whether legal reforms simplified their business in the area of human resources, but around 60% were not able to give a clear answer.
EDUCATION AND TRAINING However, almost 80% of employers were very positive about the instruments for exemption from salary contributions when hiring young people for an indeterminate period of time. They were mainly large employers, employers from information and communication business and training activities. Concerning the internal factors which potentially affect business dynamics, it seems that only 30% on average implement one or more activities, and they mainly implement the activity of introducing the employee to his work (around 45% of those surveyed). Considering size and activity, they are mainly large employers, employers from information and communication businesses and training activities. The surveys positive results point to the fact that in the case of almost 50% of employers, a certain number of their employees went
through one form of training or other. As expected, they are mainly employers from educational activities, healthcare and social welfare, and the trend is positive compared with 2013; 15% more employers in all activities and of all sizes. Concerning subsidies, 45% of em-
13,000 ENTREPRENEURS PARTICIPATED IN THE SURVEY ON LABOUR MARKET ployers think it would be easier to organise training if they could receive financial support for accepting people for practical training.
EMPLOYEE’S ACTIVITIES RELATED TO HUMAN RESOURCES NO
YES
work-place analysis
76.5
23.5
planning to hire new workers
67.7
32.3
selection of new employees
79.7
20.3
work induction
55.5
44.5
planning career development of employees
89.8
10.2
planning employee training
75.6
24.4
implementation of employee training
75.9
24.1
work performance monitoring and assessment
70.5
29.5
employee motivation and remuneration
62.2
37.8
none of the above
76.1
23.9
No 253 | December 2015 | PVint PVinternational ternati a ona o l|7 on
NEWS CONTRIBUTION TO PRESERVATION AND PROTECTION OF CLEAN WATER
CROATIA AIRLINES PRESENTED WITH A WHITE FLAG AWARD The White Flag is an international award from the Global Underwater Awareness Association (GUWAA) and CA is the first airline to be awarded
CA became involved in the White Flag project through cleaning of the sea-bed at Žaborić beach near Šibenik
T
he Croatian national airline Croatia Airlines (CA) has recently been presented the White Flag award, an international recognition from the Global Underwater Awareness Association (GUWAA). It is the first time an airline has received the award for preservation and protection of clean water and long-term environmental awareness shown throughout its operation. CA became involved in the White Flag project through cleaning of the sea-bed at Žaborić beach near Šibenik, for which it employed professional GUWAA divers last summer. Simultaneo-
usly, the video system in CA aircraft showed a promotional video entitled White Flag, on the issue of sea-bed cleaning, aiming to raise the awareness of the general public. CA has been investing in the protection and preservation of ecological for 25 years through the promotion of environmentally-friendly activities, as well as by keeping abreast with the latest technological solutions and using them in its operations. White Flag is an environmental symbol of clean water in rivers and lakes and is awarded to companies and organisations for their significant involvement in protection and preservation of nature, and to those who have contributed towards raising awareness of the general public. Eligibility criteria for the White Flag award cover the implementation of the most acceptable environmental methods of sea-bed cleaning, as well as of organisation of recycling and proper management of waste, to name a few. Companies desirous of receiving the White Flag award need to share their experiences with environmental organisations focus on training and raising the awareness of the general public and be continuously involved in the maintenance and cleanliness of water. (S.P.)
A STRONG EIGHT MONTHS
INDUSTRIAL GROWTH
I
ndustrial production has seen an upward trend for eight consecutive months. According to calendar-adjusted data, production in September was 5.4% up compared with the same month in 2014, as stated by the Croatian Bureau of Statistics. This is the fastest growth rate since April 2008. Industrial production has shown only one fall on an annualised level over the last 12 months. Growth shown in September was due to a 12.4% increase in mining and a 7.2% increase in processing, whilst electricity supply fell by 16.4%. By sector, food 8 | PVinternational | November 2015 | No 253
production was up 9.6% and a 12.4% rise (partially due to a low base) in crude oil and natural gas extraction had the largest impact on growth recorded in September. The shipbuilding sector rose by 46.4%. Favourable trends in both domestic and international demand recorded this year had a positive impact on industrial production and, in addition to projections of similar trends in the forthcoming future, a 2.2% growth rate may be expected for 2015, stated Zvonimir Savić, Director of Economic Analysis Sector at the CCE. However, due to the low base, we have not yet seen
full industrial production recovery on a par with pre-crisis levels, added Savić. Upward trends in industrial production have been seen throughout the European Union and hence, according to calendaradjusted data, industrial production in August was 1.9% up compared with the same period last year. Upward trends in industrial production in the EU have continued since the end of 2014. (I.V) )
CROATIAN BUSINESS & FINANCE MONTHLY RESULTS FOR THE THIRD QUARTER
TOURISM ENHANCING GDP GROWTH Construction industry ranks amongst positive indicators of growth for the first time since 2008. Real GDP growth is also vigorous according to seasonally adjusted data, at 2.7% by Igor Vukić vukic@privredni.hr
C
roatian gross domestic product has seen real 2.8% growth during the third quarter of 2015, in relation to the same period last year, according to preliminary results provided by the Croatian Bureau of Statistics. This is primarily due to tourism and household consumption, as well as construction that ranks amongst positive indicators of growth for the first time since 2008, pointed out Marko Krištof, Director of the Croatian Bureau of Statistics, during his presentation of results. Real GDP growth is also vigorous according to seasonally adjusted data, at 2.7%. Consequently, Croatia has recorded considerably higher growth compared with the EU (averaging 1.9%). According to seasonally-adjusted real growth rates, during the third quarter the Czech Republic saw 4.3% at the EU level, followed by Romania and Poland with 3.6% growth. Croatia is seventh, whilst Greece (-0.4%) and Finland (-0.7%) are at the bottom of the rankings. According to the results shown in the third quarter and compared with the second quarter, the Croatian ranking is far better. As a result of its 1.3% growth, the Croatian economy ranked second in the European Union, closely following Romania. A comparison of the results achieved during the second and the third quarters, in addition to Romania and Croatia, Poland showed satisfactory results (0.9%), as well as Slovakia (0.9%). On the other hand, during the summer months poorer economic results were shown by Estonia (-0.5%), Greece (-0.5%) and Finland (-0.6%). Real GDP in
Croatia has seen growth for four consecutive quarters, as stressed by Krištof. Moreover, an average 2.2% Gross Value Added growth was also satisfactory. Positive GVA results in the third quarter were achieved in almost all sectors, with the exception of agriculture (-0.5%), communications (-0.1%, as a result of lower Telekom revenues), and the banking sector (-0.3%, due to Swiss franc conversion). The processing industry, with its 4.3% growth provided the greatest positive contribution to GVA growth. Construction showed slight positive growth of 0.2%. The decline in that sector had also been evident previously, whilst an increase in the number of working hours was recorded in the third quarter. Exports are still high, yet for this quarter they have been exceeded by an import growth rate for the first time. Exports of goods and services were 8% up, whilst import growth stood at 8.1%. It is important to highlight the importance of the share of investment in GDP growth du-
2.2% average Gross Value Added
4.3% the percentage of processing industry growth in that figure
GDP IN CROATIA HAS BEEN GROWING FOR FOUR CONSECUTIVE QUARTERS ring the third quarter. Thus, gross investment in fixed capital reached 2.2% and it should be noted that this indicator showed growth for two consecutive quarters. 9 | PVinternational | November 2015 | No 253
CREATIVE BUSINESS DAYS
ERADICATE FRUSTRATION WITH EXCELLENT BUSINESS IDEAS Knowledge of business success stories can help invigorate the entrepreneurial climate in Croatia, suggests Tajana Kesić Šapić from the Croatian Chamber of Economy (CCE)
In addition to creativity and originality, conference participants showed they share commitment and diligence to their work
E
liminating frustration within a company is the right approach, providing you do not avoid hard work and effort, stressed Izet Ždralović from the company Microblink, stating that it is the best recipe to successfully implement a business idea. Microblink is becoming increasingly popular globally due to its application entitled Photomath. This programme scans mathematical equations via a mobile phone, and instantly provides solutions and shows the mathematical operations used, has thus far been downloaded free of charge by 25 million users globally. “If only we had charged at least one dollar per download”, is a thought that has recently occurred to more than one hundred participants at the Creative Business Days
Blue squirrel awards for extraordinary creativity The 7th Day of Creative Business Days was organised by the CCE and the marketing agency Kreativna vjeverica (Creative Squirrel). Several innovative ideas implemented last year were presented with Blue squirrel awards. Darko Špiljarić, owner of Inkea, received the award for furniture design, and Đurđica Dunatov, the owner of a creative small business Grafolux involved in graphic design and Ivan Mrvoš, the founder of the company Include and the innovator behind smart benches, were also presented with awards.
10 | PVinternational | November 2015 | No 253
event organised by the Croatian Chamber of Economy (CCE). Nevertheless, it is not a matter of generosity from Microblink. The company is aiming to develop a long-term cost-effective business strategy. There are currently several solutions, yet long-term planning is fundamental. A large number of applications have thus far seen global success, albeit short-term. The company founder, Damir Sabol, was aiming to overcome his son’s frustration with mathematical equations that was the principal idea behind the success of the company. Moreover, the company developed a mobile invoicing app. The company is currently focusing on a new project - how to quickly enter an IBAN number of 21 digits using a mobile phone. Nevertheless, the company is still having a hard time - their easy-to-use electronic payment system has not been accepted on the market.
BELIEF IN WHAT YOU DO IS FUNDAMENTAL Ivan Mrvoš from Split solved the problem of a “flat” (without power) mobile phone battery by designing a smart bench. Whilst it is resting on the smart bench, it simultaneously charges your mobile phone through an integrated battery charger. Mia Marić, the founder of Clox brand, highlighted the importance of customer-emotion. She has designed leather stilettos featuring working custom made clocks, the object being to play with the passage of time and emphasising the fact that one often needs a clock to remind one of all the tasks to be accomplished throughout. The idea behind BlaBlaCar from Antonija Bilić Arar, was to provide ride-sharing services and it soon transformed into the largest international transport community. In addition to creativity and originality, conference participants showed they share commitment and diligence to their work “We had not slept for three days, but we succeeded in delivering the benches and meeting the tight deadline”, stated Ivan Mrvoš. They all share enthusiasm and belief in their work. Knowledge of business success stories can help invigorate the entrepreneurial climate in Croatia, suggests Tajana Kesić Šapić from the Croatian Chamber of Economy (CCE). (I.V.)
RECENT GENERAL ASSEMBLY MEETING AT THE CCE
SYSTEMATIC REFORMS LEADING TO NEW SERVICES Voluntary membership is the vision of the new management of the CCE. However, the voluntary membership model should not be embraced with excessive haste, nor without serious preparations during a transition period, so as to avoid any negative impacts on the services and programmes provided for companies currently members of the CCE, opines Luka Burilović, President of the CCE by Igor Vukić vukic@privredni.hr
M
embers of the General Assembly of the Croatian Chamber of Economy have unanimously accepted the draft programme of the CCE for 2016, as well as the financial plan, in which projected revenue is €22.5 million, with total planned expenditure harmonised with planned revenue.
ORGANISATIONAL REFORM “The Chamber is an accurate example of systematic organisational reform. We have reduced salaries and downsized by 30%, whilst simultaneously launching new services. Our example should be followed by public administration and a large number of government organisations”, pointed out CCE President, Luka Burilović, adding that “whilst others are merely discussing reforms, the Chamber has been implementing them”. Burilović also expressed his opinion about ongoing negotiations concerning the new government, pointing out that he welcomes the intentions to create a government that would implement a reform programme aimed at accelerating economic growth. Moreover, he addressed the issue of mandatory membership that is currently being tackled publicly yet again. “It has to be highlighted once more, that voluntary membership is the vision of the leadership of CCE. Nevertheless, the model of voluntary membership should not be embraced with excessive haste, nor without serious preparations during a transitional period, thus avoiding any negative effects on the services and programmes
provided for companies that are currently members of CCE. A voluntary membership model may be adopted once Chamber revenue accounts for between 50% and 70% of total revenue and which may be achieved only gradually. A transitional period lasting for several years is always required when aiming to meet such objectives in business”, explained Burilović at the recently held General Assembly meeting at the oldest Croatian economic institution. He reminded those present of the draft amendment proposal to the Law on CCE, which is currently being addressed yet again; it was publicly discussed last year and over 1,000 entrepreneurs voted against it, not through anonymous surveys, but fully signed. “It is not fair to continuously point to the CCE and the Croatian Chamber of Trades and Crafts, as there are 27 additional chambers in Croatia and they have all adopted a mandatory membership model”, opined Burilović. He stressed that an institution should not be abolished as a result of inadequate conduct at an individual level. “Should the government or a ministry be abolished if their performance is unsatisfactory? Would the public be willing to pay, for example, for some agencies, state apparatus, utility services and taxes if such payments were not obligatory? 90% of the public would not, and no sensible person would propose that”, concluded CCE President.
163 YEARS OF OPERATION OF CCE
It is not fair to constantly point out the issue of the CCE and the Croatian Chamber of Trades and Crafts, since there are 27 additional chambers in Croatia who have all opted for a mandatory membership model.
Luka Burilović, President of the CCE
In addition, he again pointed out that the annual budget of the CCE was slashed from No 253 | December 2015 | PVinternational | 11
RECENT
CCE in charge of company register The Croatian Chamber of Economy could take over the responsibility of the Commercial Courts of being in charge of the company register, pointed out Luka Burilović. Hence, the courts would be unburdened and crucial proceedings would require a reduced amount of time. The President also stated that during his talks with government representatives, he also proposed the transfer of other powers to the Chamber. “The activities performed by five diverse agencies could be instantly
transferred to the CCE, without increasing the number of employees and without incurring additional costs”, noted Burilović. One of the prime indicators of the effective operation of the CCE is also the decision reached by 14 state-owned hospitals to become members, irrespective of the fact that they are not required to do so by law, yet they have recognised the value of services provided by the CCE and have voluntarily become members, highlighted the President.
General Assembly to comprise of a larger number of small and medium-sized entrepreneurs Following a decision reached by the General Assembly of the CCE, rather than being comprised of 77 members as has been the case to date, the number of General Assembly members will range between 77 and 101 in future.
€34.7 million and that revenue and expenditure have now, finally, been harmonised. Over 150 employees have been made redundant, with around 400 remaining employees providing more services at reduced costs. “I keep reiterating that 97% of our members pay a membership fee of €5.60 monthly, whilst the CCE simultaneously provides services that are at least 10 times more valuable”, emphasised Burilović. The mandatory membership model has been adopted in most European countries that are considered as a rôle model for Croatia over a wide cross-section of aspects, such as Germany, Austria, France and Holland. Similarly with Turkey, where revenue generated by the Chamber account for almost 70% of the total, still opts for a mandatory membership model, as an expression of mutual solidarity among entrepreneurs. Moreover, membership fee enables the provision of services at more affordable prices, added Burilović. Throughout the 163 years of its operation, the CCE has persisted under six different countries and systems, from Austria and Austria-Hungary, the Kingdom of Yugoslavia, 12 | PVinternational | December 2015 | No 253
This is because the CCE is aiming to involve an increasing number of SME’s - and hence entrepreneurs - operating within the Association who will also have the opportunity to become members of the General Assembly.
the Independent State of Croatia, and socialist Yugoslavia. “Thus, I am deeply saddened by the fact that three attempts to abolish the Chamber of Economy, as the central institution for the Croatian economy, have all occurred over the last 25 years”, noted the CCE President. Irrespective of a lower budget compared with previous years, the CCE will continue implementing new services. A significant proportion of activities will imply assistance provided to members concerning the use of structural and investment funds from the European Union, in addition to its own involvement in the use of such funds. The remaining funds will be used for the launch of a dual education project following the Austrian example. The specific objective is to reduce the overall unemployment and youth unemployment rates through the inclusion of youth on the labour market during their education.
INDUSTRIAL DEVELOPMENT CENTRE (CIRAZ) AND INDUSTRIAL STRATEGY An innovation for 2016 is the project “Industrial Development Centre for effective implementation of Industrial strategy” with joint
97% OF THE MEMBERS PAY A MEMBERSHIP FEE OF €5.60 MONTHLY
CROATIAN BUSINESS & FINANCE MONTHLY
participation of the CCE, the Croatian Academy of Sciences and Arts and the Ministry of Economy. Some 85% of the resources required for this programme are expected to be provided via EU funds. The revitalisation of the central premises of the CCE in co-operation with the Zagreb-based Ethnographic Museum will result in a unique urban unit, and the premises including an interactive museum of the Croatian economy, as well as an adult and youth education centre on the Croatian economy. Moreover, the year-round exhibition of the initiative Buy Croatian (Kupujmo hrvatsko) will be presented and a mini conference centre developed, co-financed through EU funding. Through the project Digital Chamber the CCE will develop an entirely new communication platform to its members as well as for non-members. The project will enable the transfer of a wide cross-section of public authority from the Government and ministries to the CCE, resulting in a substantially more affordable and more straightforward service provided to the economy at large. The President of the CCE has also announced the opening of the CCE representative
Further downsizing Further rationalisation of expenditure and the optimisation of operations will result in an additional reduction in the number of employees, for whom a severance package of €0.9 million has been allocated. Irrespective of a lower budget provided compared with the previous years the CCE will continue implementing new services.
office in Shanghai in Spring 2016, pointing out that vigorous steps will be taken to encourage entrepreneurs to penetrate fast growing markets such as China, Russia and South Korea. It has to be stressed that among the large number of issues addressed, the General Assembly has approved the Arbitration Ordinance on the Permanent Arbitration Court at the Croatian Chamber of Economy, as well as the Ordinance on the Amendments to the Ordinance on Permanent Arbitration Court at the Croatian Chamber of Economy, and also passed the sentences by the Court of Honour at the CCE.
22.5
€ million
revenue and expenditure of CCE in 2016.
150
over employees
made redundant by the Chamber of Economy
No 253 | December 2015 | PVinternational | 13
CROATIAN EXPORTS
CROATIA ALSO EXPORTS HORNS, BEAKS, HOOVES AND DRIED LEAVES In the first six months of 2015 the Croatian export of bull semen, fish waste, tendons and veins, as well as sponges and “other products of animal origin” were worth €0.2 million. As opposed to some other categories, such as wine, meat, milk, and marble, whose values are normally expressed in smaller, double-digit figures, the export of raw hides and skin reached the significant value of €13.82 million by Igor Vukić vukic@privredni.hr
H 7.177
€value of exportsmillion of fresh and chilled beef, plus €1.29 million of frozen beef
3.97
€ million value of wine exports
61.33
€
million
value of export of fresh and chilled fish in the first 6 months of 2015
orn core, poultry beaks, fish waste and bull semen are some of the products exported by Croatia. For every product, there is a potential customer, according to a well-known proverb. There is substantial demand for these nichemarket goods globally. Such unusual goods cross borders in both directions, according to data provided by the Croatian Bureau of Statistics. Moreover, they are more frequently imported rather than exported by Croatia. In the first half of 2015, Croatian exports of horns, beaks and hooves were worth €14,000. In addition, it exported €11,000 of bones and unprocessed horn core. Exports of other pro-
ducts of animal origin, comprising fish waste, bull semen, tendons and veins and sponges, as examples, were worth around €0.2 million. Simultaneously, imports of similar niche products were €125,000. It is also important to show the value of exports of bovine raw hides and skin and other cloven-hoofed animals accounting for €13.82 million. Croatian imports of such hides and skins were worth €9.1 million. In the first six months of 2015, the value of exports of untreated sheep and lamb skins stood at €0.16 million, whilst exports of untreated pig skins were worth €15,500. The value of Croatian exports of leaves, branches and plant parts, mosses
EXPORTS TRENDING UPWARD
Strong trends to continue According to preliminary results and estimates, Croatian exports over the first eight months showed growth of 11.3% compared with the same period last year. Preliminary results provided by the Croatian Bureau of Statistics showed the value of exports standing at €7.44 billion, up €0.69 billion over the same period in 2014. Simultaneously, relatively dynamic imports growth of 5.9% continued. Analysts have been considering the extent to which this increase in exports is ‘real’. According to CCE sources, and in line with interpretations provided by the Croatian Bureau of Statistics, it can be considered ‘real’, as the figures show the real value of exports by companies registered in Croatia. Nevertheless, a proportion of exports based on increased industrial production or other goods on the domestic market needs to be separated from exports encouraged by Croatian EU accession and the opening of new trade flows, or exports of goods of foreign origin. Nevertheless, currently available statistical data cannot thus far provide grounds for comparison of these segments, as pointed out by the CCE.
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CROATIAN BUSINESS & FINANCE MONTHLY
and lichens reached €55,000. Simultaneously, Croatian imports of these goods were worth €0.53 million. It is also important to highlight six months’ exports of flower bulbs valued at around €0.29 million.
A RANGE OF WHIPS FOR THE WORLD Croatian rubble and gravel, pebbles and crushed stones are used in the construction of motorways and railway embankments in other countries. In the first half of 2015, exports of such materials, also used as one of the raw materials in the production of concrete, for causeways and similar purposes, were
EXPORTS OF LEAVES, BRANCHES AND PLANT PARTS, MOSSES AND LICHENS WERE €55,000 worth €5.38 million. During the same period, the value of Croatian imports of gravel was €3.26 million. Croatian marble exports that are used for the construction of a wide range of buildings, interiors and the production of endproducts stood at €8.17 million. Granite exports were worth €0.15 million. Croatian exports of diverse types of brooms and brushes were worth €0.77
million, and the value of exports of walking sticks, whips and similar products was €10,500. Also during the first six months of 2015, the Croatian exports of umbrellas and sunshades reached €5.86 million.The export of live horses, donkeys and mules was €0.34 million, and some €2.64 million represented the value of exports of live domestic poultry. Fresh or chilled beef exports over the first half of 2015 stood at €7.17 million, together with frozen beef worth €1.29 million. By the end of June 2015 exports of fresh and frozen pork stood at €7.44 million, and mutton at €0.16 million. The export of edible slaughterhouse by-products from pigs, cows, sheep and goats were worth €0.3 million; these are often used as raw materials in the pharmaceutical industry.
STRONG CORN EXPORTS Exports of live fish in the first half of 2015 were worth €1.48 million; in addition, the value of exports of fresh chilled fish was €61.33 million, and of frozen fish €6.22 million. Fish fillet exports value stood at €1.84 million, dried and salted fish were €5.2 million. Crab exports were €1.52 million and molluscs €6.4 million. Exports of milk and cream in the first half of 2015 stood at €4.27 million, with such imports worth €25.76 million. Moreover, the value of exports of yogurt, sour cream and kefir slightly exceeded the value of imports (exports €4.8 million, imports €3.73 million). Nevertheless, with whey, the situation was the oppo-
site: exports came in at €0.93 million and imports €2.38 million. Concerning butter, exports were €1.14 million, and imports €5.28 million. Exports of pork
EXPORTS OF PORK FAT WERE €24,500, WITH IMPORTS OF €61,000 fat were €24,500, and imports €60,700. Sunflower oil exports/imports were also biased – exports €4.94 million, imports €13.72 million, although sugar turned positive - exports €28.76 million, imports €7.24 million. A similar situation was with wheat and corn. According to data provided by the Croatian Bureau of Statistics, wheat exports in the first six months of 2015 were €12.43 million, and imports €3.62 million. Corn exports were €60.97 million, and imports €21.9 million.
BEER: EXPORTS EXCEED IMPORTS Beer showed a positive balance of trade. Croatian exports of beer, primarily to Bosnia and Herzegovina, were worth €16.4 million, and imports €14.68 million. In the first six months of 2015, wine exports were €3.97 million, compared with imports of €14.34 million. Water also showed a positive balance with exports of water at €6.26 million, and imports of €3.5 million. 15 | PVinternational | November 2015 | No 253
STABLE MARKET REAL ESTATE BUSINESS FORUM 2015
BETTER THAN LAST YEAR It is a guarantee the market will not return to its state of 2008 when there were 60,000 real estate transactions. Currently, there are 30,000 transactions. However, a price slump brings optimism, says CCE’s VicePresident Josip Zaher by Boris Odorčić odorcic@privredni.hr
Average prices are not representative. Price of a square metre of properties only 100 metres from each other could vary between €1,000 and €3,000. Dubravko Ranilović, President of the CCE Real Estate Business Association
T
he real estate market will end the year with a 2%-3% price fall. This is considerably less when compared with 2014, which saw a 9% fall. CCE’s Vice-President, Josip Zaher, pointed out at the 24th real estate business forum, organised by the CCE Real Estate Business Association. This indicates we have a stable market that has reached the state of assessing everything in the right way – the realistic way. It is a guarantee that the market will not return to its state of 2008 when there were 60,000 real estate transactions. Currently, there are 30,000 transactions. However, a price slump brings optimism for better market stabilisation, that is, business should improve. He also said that an increase in purchasing power and GDP should lead to greater demand.
ATTRACTIVE HOTELS Zaher thinks this forum is the arena where the CCE traditionally trains its members and experts included in the real estate sector. This actually contributes to the development and a professional position. Significant results have been achieved over many years. We have 16 | PVinternational | December 2015 | No 253
been continuously working on training real estate agents, which as a result has increased the level of staff. Almost 3,000 people have passed the examination to become agents. The CCE also keeps a register of real estate agents, containing 877 legal persons and private individuals, Zaher said. Jasminka Biliškov, owner of Biliškov Real Estate Agency, says the state of the Croatian real estate market is better compared with 2014. Our business increased 15% in all segments. Therefore, the real estate market is slowly starting to pick up pace. Furthermore, more new-starts are visible. A considerable amount of money is invested in tourist facilities; hotels are bought and land for building attractive five-star hotels is sought, Jasminka Biliškov points out. She also adds that small real estates are top sellers and therefore responsible for the survival of the agencies. Fewer villas are sold, but as she notes, there are clients who buy such real estate on the coast and in the area of Zagreb. Embassies and highly-positioned foreign business people often want to rent or buy beautiful villas, but moreso in Zagreb than on the coast. She also
CROATIAN EMPLOYMENT SERVICE
pointed out that real estate in Zagreb is the quickest to be sold, followed by Split, Rijeka, Dubrovnik and other cities. Jasminka Biliškov stressed that the real estate market in Slavonia is more difficult compared with other parts of Croatia. Our colleagues in Slavonia are having a bad time, since the prices are low and the number of sales is very small.
MORE STABLE PERIOD Dubravko Ranilović, President of the Real Estate Business Association of the Croatian Chamber of Economy and Board Member of Kastel-Zagreb, says the price expressed as an average does not say anything. The crisis brought only one positive aspect – the polarisation of prices. Therefore, today’s prices per square metre of properties only 100 metres from one another could vary between €1,000 and €3,000. We are compiling statistics for Croatia that points to a certain increase or fall of the prices. This year we will have a smaller price fall overall. The largest fall was at the end of last year, or at the end of the crisis, and this is when the number of transactions increased, Ranilović says. Overall, Croatia is in a negative trend, says Ranilović. During the season, prices on the coastal area were slightly higher. Zagreb prices are also falling, but all areas have entered a more stable period. Ranilović also added that older unsold apartments are irrelevant, since they have not been on the real estate market for a longer period. When we as real estate agents hear about these so-called unsold apartments, we get chills down our spines. These have not affected the real estate market for the past five years. The market is develop-
OUR BUSINESS INCREASED 15% IN EVERY SEGMENT, NOTED JASMINKA BILIŠKOV ing in spite of them, and the banks, that is, the owners of these properties, will solve the matter consecutively. Moreover, it is good for the market to reduce the number of these apartments gradually, Ranilović says. He continues that the property tax has not been a frequent topic this year. Regardless of the situation, as soon as taxes are mentions, the market destabilises. However, we have entered a relatively stable period, and the situation is now better despite the fall, Dubravko Ranilović concludes.
Subsidies used by 52, 612 people
S
ince the beginning of this year and up to 1st November, a total of 52,612 people in Croatia used employment subsidies, of which 26,881 used the subsidy for expert training for work without employment. According to data provided by the Croatian Employment Service (HZZ), a total of €0.21 billion has been provided for the implementation of the employment active policy measure. Of this amount, some €133.2 million was provided from the state budget, €47,500 from the European Social Fund (ESF) and €21,000 from the Youth Guarantee Fund. By the end of October, €124.5 million was paid for implementing the employment active policy measure, according to HZZ. Also, seven contracts (total worth €0.2 billion) between HZZ and ESF were recently signed for the purpose of subsidising the employment active policy measures for the period between January 1 of this year and 2017. As HZZ highlighted, the implementation of these measures is going smoothly. The applications are processed according to the order in which they are received. (S.P.)
GOOGLE SELECTS TOP INNOVATORS
Four Croatians amongst top 100 innovators
G
oogle has selected four Croatian innovators in the list of top 100 innovators in Central and East Europe. They are Matija Kopić, founder of Farmeron company; Jan Jilek founder of Dotmetrics and initiator of 1000startups.eu, Valent Turković, initiator of mobile Wi-Fi hotspots for refugees, and Miroslav Vrankić, founder of Serwantess. As Google described, these innovators are businessmen who use a completely different technological approach in various business activities. For example, the Osijek based startup company Farmeron links livestock farming and the Internet. The company is oriented towards the American market, but will soon expand to the Far East and South America. Jan Jilek from Dotmetrics says the European Union has to be even more open to innovation and startups as well as to continue to stimulate the development of eco-systems and create opportunities for start-ups to more easily access the market. (S.P.) Matija Kopić
Jan Jilek
Valent Turković
Miroslav Vrankić
No 253 | December 2015 | PVinternational | 17
THE FIRST 50 YEARS OF ENTREPRENEURSHIP OF STJEPAN ŠAFRAN
CONSTANT DEVELOPMENT IMPERATIVE FOR ENTREPRENEURSHIP Stjepan Šafran decided to become involved in the production of electronic equipment and as production expanded, he developed and improved constantly over the years. New facilities were opened in several locations and new staff employed by Darko Buković bukovic@privredni.hr
I % of Metal Product and WAM Product production will be exported this year
300% exports by Metal Product company last year
over staff
140 0
employed by Metal Product and WAM Product
invite you to the ceremony to mark the completion of the construction project of the production facility of Metal Product in Breznički Hum, and the implementation of new technology. Further, we are marking the 50th anniversary of my entrepreneurial activity”, read the invitation from Stjepan Šafran, artisan and entrepreneur, a man with inexhaustible energy. Nevertheless, it is important to highlight the vast amount of knowledge, skill and personal energy required to reach the 50th anniversary of his entrepreneurial activity. Production facilities have always been a top priority for Šafran, as well as new investment and job creation. “The principal idea behind entrepreneurship is constant development. Nothing else is required”, is what he considers as his mantra, and he hence used it to mark the 50th anniversary of his entrepreneurial activity. The ceremony held in Breznički Hum in Varaždin County was significant, also because the arrival of the company Metal Product, to this municipality in 2002 started industrialisation of the area. Furthermore, it was primarily due to the company that a comprehensive business infrastructure was developed in this zone. The companies WAM Product and Metal Product, located in this area, currently employ over 140 staff and they have substantially increased their exports to EU markets. Consequently, this year 60% of their total production will be exported. It is not surprising that the President of Croatia, Kolinda Grabar-Kitarović, attended the ceremony. The President pointed out the fact that “every economy should cherish those who significantly impact on its growth and development and unselfishly contribute to a better future”. “The heritage of Mr Stjepan Šafran comprises exemplary companies, production facilities, new jobs and products that significantly impact economic development.
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All these achievements show the fulfilment of a dream and serve as reminders of universal human values, such as perseverance, diligence and determination”, emphasised the President.
CRAFTSMAN’S WORKSHOP AND AN ENTERPRISE Stjepan Šafran opened his artisan workshop in 1967 starting his entrepreneurial activity. He decided to become involved in the production of electronic equipment and consequently production expanded, developed and improved continuously over the years. In 1969, he made his first deliveries of electrical equipment for Elektroprivreda in Bosnia and Herzegovina. Following market expansion and excellent feedback on his products, as well as through a constant increase in the number of orders, the company primarily focused on the creation of new jobs. At start-up, Šafran had only one employee but by 1971, he had expanded to 12 staff. By the end of 1979, in co-operation with Sara-
Šafran winery Šafran winery, founded by Stjepan Šafran in 2006 originated from several hundred years of family tradition of vine growing on the hills of Breznički Hum, as well as of wine production. The winery comprises a bottling plant and an independent laboratory for analysis of must and wine, wine tasting premises, as well as a presentation facility that can accommodate up to 60 persons.
CROATIAN BUSINESS & FINANCE MONTHLY
Stjepan Šafran
The central role of the family Šafran’s wife has played a central role in the management of the business. When private businesses were allowed to employ up to 12 staff, she completed her training as a lathe operator and opened a workshop, aiming to employ additionalworkers. Their elder daughter owns a fashion salon in Zagreb, the younger daughter is a lecturer at the Zagreb School of Economics and Management. Their son-in-law is a Director of the company Alu Product and owner of Tržec Foundry, whilst their second son-in-law is Director of Metal Product, where he has worked across all business segments since 1997 – from sales and purchasing officer, to sales and purchasing manager and commercial director to Managing Director. jevo-based Energoinvest, he made his first delivery of insulator pins for the African market. Subsequently, a long term-plan on production expansion was developed, which was soon followed by the purchase of a construction site near Zagreb. Three production facilities have thus far been constructed, covering an area of 3,600 m2. In 1986, an aluminium casting programme required for the expansion of the product range was introduced. In 1989, a complete facility of the Šikić Foundry was acquired and it currently still operates as the integrated Metal Product. From 1971 to 1990, the workshop operated in conditions that greatly limited its development, due to the socialist system adopted at the time, which restricted the number of employees for private businesses. By 1989, the workshop employed 40 staff and that was the largest number of staff that Šafran was allowed to employ. Following amendments to regulatory provisions in 1990, limits to the number of employees were abolished and Šafran partially transformed his workshop into a new company – Metal Product. In the same year, the construction of new production facilities began, whilst a proportion of its product range was expanded. In 1994, co-operation with the globally established German company Tyco Electronics Raychem GmbH on the distribution of heat-shrinkable
cable accessories was included in its product range. Thereafter, the company signed a contract with the Finnish ABB Group in 1996, as well as with Siemens Norway. A year later Šafran opened a factory in Sarajevo.
NEW FACTORY – NEW TECHNOLOGIES By the end of 2001, a joint-venture company WAM Product was founded with the Italian WAM Group Corporation in Breznički Hum and began operations a year later. The factory currently employs 75 staff. Simultaneously, a new Metal Product production facility was opened in Breznički Hum. Investment continued throughout 2013, and 75 new jobs have been created over the past two years. Saša Klikovac, Director of Metal Product, who has slowly been taking over responsibilities from Stjepan Šafran, believes and expects to continue with job creation and investment implementation in the forthcoming years, keeping abreast with market requirements. “I expect Metal Product to play a crucial role in Croatian production and the economy in the near future”, pointed out Klikovac, highlighting the fact that Metal Product exports in 2014 rocketed by 300% compared with 2013 and the trend continues, as in 2015, export growth will stand at 30% in relation to 2014, which was the best year on record.
All these achievements show a dream come true and act as reminders of universal human values, such as perseverance, diligence and determination. Kolinda Grabar-Kitarović, President of the Republic of Croatia
I expect Metal Product to play the central role in the Croatian manufacturing sector, as well as in the Croatian economy. Saša Klikovac, Director of Metal Product
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BUSINESS DEMOGRAPHY
LIFE AND DEATH OF CO
Every other company in the processing sector dies within four years. This is a pos sector, 80% of companies established in 2010 closed down within four years by Igor V
T 52% of companies in the processing industry in their fourth active year
he number of active companies in Croatia decreased continuously between 2010 and 2014. This mainly concerned the processing industry, real estate and construction, according to the latest business demography data published by the State Bureau of Statistics. The decreasing number of companies was mirrored in the decrease in the number of employees of these sectors. These data are surprising, considering the long-term market crisis. However, in some sectors the number of new companies is rising. For example in power, gas and steam supply, air-conditioning, water supply, waste water management, waste management and
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environmental management – all have seen positives. Growth has been seen in accommodation and food services, as well as information and communication. However, the rising number of such companies has not been followed by an increase in the number of employees, which points to only partial corporate restructuring. Furthermore, business demography also keeps an account of business ‘deaths and births’ over a given period. The Central Bureau of Statistics established that the number of business ‘births’ varied considerably between 2010 and 2014. In 2011, the number of established companies decreased greatly in most sectors in relation to 2010.
CROATIAN BUSINESS & FINANCE MONTHLY
MPANIES
itive result – in the real estate
Vukić vukic@privredni.hr
Notwithstanding, the number of newly created companies started to rise between 2012 and 2013. However, in 2014 this numbered decreased. The number of business ‘births’ is considerably higher in scientific and technical activities as well as healthcare and welfare, especially since they also include the liberal professions.
SURVIVAL RATE The survival rate shows the percentage of companies active between their first and fourth years, since the year they were established. Upon examining the companies founded in 2010 and their four active years, the statistics point to the highest survival rate of businesses in processing sector, in power supply, as well as financial and insurance activities. For example, 52% of processing companies established in 2010 were still ‘alive’ in 2014. 50% of proce-
sense, when compared with similar transitional countries. While the index of companies joining the market ranges around 16.5 in Latvia or around 13 in Poland, the same index is only 5.5 in Croatia. The index of companies leaving the market is 10.9 in Hungary, 11.6 in Slovakia, but 6.5 in Croatia. There are many factors that contribute to this result, and they are not only economic, but also cultural, psychological and sociological. Unfortunately, Croatia does not have a developed culture of entrepreneurship and success, which is a precondition for creating a competitive, successful and strong economy, Goran Buturac from the Institute of Economy in Zagreb says.
THE LOWEST SURVIVAL RATE IS IN ART, ENTERTAINMENT AND RECREATION
MERCILESS TAXES
ssing companies did not live to see their fourth year of business activity. The lowest survival rate is in the areas of art, entertainment and recreation as well as real estate and tourism (accommodation and food services). Only 24% of real estate companies founded in 2010 managed to survive. New companies are constantly emerging in the tourism sector; however, only 34% have managed to survive their fourth year. Entrepreneurs in art, entertainment and recreation have a 22% chance of surviving their fourth year on the market. Notwithstanding, the higher number of tourism companies, but also higher ‘death’ rate, actually points to more intensive economic activities in this sector. Research has shown that more dynamic businesses have a higher ‘birth and death’ rate. The Croatian economy as a whole is much weaker in this
According to Buturac, this is partly the result of heritage, but also numerous irregularities and non-transparency during the economic transition process, which contributed greatly to creating a negative image of entrepreneurship and a loss of trust in the economy. Concerning the economic dimension of the problem, it is possible to say that all economic policies, from Croatian independence to date, have not managed to create conditions or an investment climate suitable for stronger economic development. Besides underdeveloped entrepreneurship and a negative investment climate, one of the main causes is certainly insufficient work activity, an undeveloped success culture, a rigid educational system not adapted to a market economy, a lack of innovation and fear of failure, Buturac highlighted. In 2013, The Institute of Economy in Zagreb conducted research entitled How to promote growth of the Croatian economy, which also
Each tax relief provides entrepreneurs the possibility to further invest, develop and hire, which pays off in the market and the country Gabrijela Šurina Hanzl and Ines Vranješ Radovanović, Granum G
24 4% of companies in the real estate sector in their fourth active year
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BUSINESS DEMOGRAPHY
Number of enterprises, according to NKD 2007 and by activity status 2010-2014 200.000 NUMBER OF ACTIVE ENTERPRISES
180.000
NUMBER OF ENTERPRISES BIRTHS
NUMBER OF ENTERPRISE DEATHS
160.000 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0
2010
2011
2012.
2013
2014
Source: DZS
Analysis of entrants and exits from the market (2008-2012) Zemlja Bulgaria Czech Rep. Latvia Lithuania Hungary Poland Romania Slovenia Slovakia Croatia
Entering 14,5 9,18 16,57 18,61 9,83 13,07 10,92 10,89 14,86 5,5
Exiting 9,62 8,96 13,27 26,82 10,92 10,42 14,19 7,53 11,56 6,5
Nett Entry 4,92 0,22 3,3 -8,21 -1,09 2,65 -3,27 3,36 3,3 -1,0
Source: World Bank
34 4% of tourism companies in their fourth active year
ncluded field research and a survey of 173 companies. The researchers investigated what prevents Croatian companies from investing more and becoming more competitive. Some of the main reasons were high taxes, inefficient state bureaucracy, legal insecurity and the high cost of capital. The research conducted by Goran Buturac in 2014 showed that the tax load alone is on average 18% above tax capacity. Of EU transitional countries, only Slovenian and Hungarian tax loads exceed their tax capacity, but still much less than Croatia. All other countries have a smaller tax load and as a result, the preconditions for achieving more competitive pricing.
THE RIGHT WAY In addition to increasing efficiency in the public sector and performance of the public administration, the economy has to be shorn of its heavy tax load. One way to do this is to reduce public expenditure. All previous econo-
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mies tried to boost the economy through big institutions in public companies, but neglecting small-sized enterprises and entrepreneurial development. This was clearly not the right way, since it did not yield any results. For example, the unemployment rate for artisans decreased by 28.3% between 2008 and 2014. Maximum relief of fiscal and parafiscal duties for small-sized enterprises, especially start-ups, is one of the preconditions for developing an entrepreneurial culture and promoting the full economic activity of the country. Young people would be motivated to become entrepreneurs; production growth and selfemployment would be stimulated and young people would not leave the country. Also, the state treasury would not be empty, since 25% of all we buy and what we earn goes to the state, Buturac concluded. Every product or service needs a buyer. When there are few or no buyers, there is no need for the product or service. This is the law of the market in times better than we are discussing now, as business consultants Gabrije-
OUR TAX LOAD IS ON AVERAGE 18% ABOVE THE TAX CAPACITY, GORAN BUTURAC SAYS la Šurina Hanzl and Ines Vranješ Radovanović from granum g say. They began their enterprise during the crisis in 2010, when many of their acquaintances were not sure whether to call them brave or crazy. However, the difficult market situation at our start brought something good with it. Since Croatia is a small market, meaning there are even fewer opportunities for companies such as ours, offering services the first in line to be cut during the crisis, we had to go into the regional market to survive. When the market is not sufficient or does not need your product, you either change and expand your market or develop a product the market needs. We managed to do both, the founders of granum g say.
WILLINGNESS TO CHANGE The sector in which the company operates also influences its survival. In challenging market conditions, when companies perish and unemployment grows, people do not invest or buy anything regarded as a luxury. We often say in this case people buy only bread and milk, which is what puts additional strain on entrepreneurs.
CROATIAN BUSINESS & FINANCE MONTHLY
Unfortunately, Croatia does not have a developed culture of entrepreneurship and success that are the preconditions for creating a competitive, successful and strong economy. Goran Buturac, Institute of Economy, Zagreb
Notwithstanding, some do manage to find customers during such difficult times. Flexibility, adjustment to market conditions, customisation of offer and knowledge is important. Other important things are quality, continuous learning, long-term planning as well as a planned business approach, perseverance and a lot of courage. Their order of priority is irrelevant, but the attitude and the willingness to change are not, as these business consultants highlight. It seems the market is waking up, and this could help company life span. Stimulating measures are also valuable, from consultant services to cheaper loans. The support has to be quick and simple with as few administrative demands as possible. Each tax relief provides entrepreneurs the possibility to additionally invest, develop, and hire, which pays off in the market and the country. We hope that things will improve even further in this respect so that entrepreneurs could find the strength to survive, and justify the fact they are an important part of economic development. We also hope companies will manage to survive since unemployment is already a huge problem, Gabrijela Šurina Hanzl and Ines Vranješ Radovanović say.
HOW TO PLAN BUSINESS TRANSFER
New generation can jeopardise a company
I
t is not uncommon for a company to find itself in great difficulty after its founder leaves. This is why it is important to plan for business transition to others, possibly relatives or other owners who will take over the company, Slavica Singer from the Faculty of Economy in Osijek pointed out during the discussion on good practices in business transition, held in the CCE Central Office in Zagreb recently. There are 165,000 companies in Croatia whose owners are over 55. They employ a total of 180,000 workers, many of whom could lose their jobs if the
process of ownership transition does not go well, said Mirela Alpeza from CEPOR. According to research, around 15% of companies end up in liquidation when the owner leaves. This is why the Ministry of Economy published a guide for business transfer with basic legal and economic advice, in co-operation with the European Union. The
advantage of an early start of the transition process is stressed. If this process is postponed, potential successors could give up or the right moment for selling could be lost. The pressure of speedy and unplanned transition process can easily shake the business. Business transition is an emotional and complex process that can lead to various disputes and disagreements between owners of companies, family members, employees and others. These disagreements could be avoided through mediation and the help of a professional mediator, as the guide states. (I.V.)
23 | PVinternational | November 2015 | No 253
RECENT NO ALTERNATIVES TO CIRCULAR ECONOMY
THE LINEAR APPROACH M USE-DISPOSE IS UNSUSTA
Circular economy is a new approach to economic processes and business that im and repeated use of products and raw materials. As a result, financial resources a environment protected by Boris Odorčić odorcic@privredni.hr
T
he Circular Economy is becoming a more frequently addressed concept yet a large number of people are unaware of the implications. It is a different approach to overall economic processes and business, implying processing, recycling and repeated use of both products and raw materials. The specific objective is saving and reducing dependence on imports of energy and raw materials, as well as a cleaner and
60,000 COMPANIES IN THE EUROPEAN UNION, EMPLOYING 1.5 MILLION STAFF, ARE INVOLVED IN PLASTICS PRODUCTION healthier environment and an enhanced quality of life of the people in general. It is important to highlight the fact that the effects of this approach are visible and measurable in the simplest way – through job creation - as stressed at the 10th international Croatian-Slovenian conference Circular Economy 24 | PVinternational | December 2015 | No 253
and the Polymer Industry, recently held at the Croatian Chamber of Economy. Želimir Kramarić, Vice President of the Croatian Chamber of Economy for International affairs and the EU, stated that in the case of Croatia, due to her being a small EU country with relatively protected natural resources, sustainable development is an imperative, as well as effective waste management and the circular economy may provide wide opportunities, in addition to significant resources available through EU funding. “These opportunities are linked with the launch of various types of production in the green economy that is perhaps a broader concept compared with the circular economy. Sustainable revenue growth and the development of green industries certainly have the potential to create a significant number of new jobs in Croatia. Croatia is well-known for the high number of innovators, as well as for its research and development, both in this and other fields”, he noted. Hrvoje Dokoza, Deputy Minister of Environmental and Nature Protection, stressed that we are living in times of rapid replacement of most usable objects. “We are expected and encouraged to do so by producers. Due to this way lifestyle, we are incredibly ineffectively at managing our resources. Consequently, due to
CROATIAN BUSINESS & FINANCE MONTHLY
MAKEAINABLE
mplies processing, recycling are reduced and the the ineffective use of limited resources, we are faced with increasing pollution, the loss of ecosystems, as well as valuable raw materials discarded in landfills”, he pointed out, adding that it is evident that the linear approach of make-usedispose is unsustainable. “It is obvious that there are no alternatives to circular economy at a global level, which primarily applies to the European Union – the continent with the poorest supply of raw materials”, he emphasised.
WASTE SEPARATION The European Union has opted for circular economy; industrial economy aiming to exploit renewable energy sources, reducing and aiming to eliminate the use of chemicals and waste generation. Waste management is a fundamental aspect of circular economy, due to its significant role in the creation of new jobs and green technologies. The European Commission is expected to present a set of measures concerning this topic on the 2nd December. Helmut Maurer, representative of the European Commission (DirectorateGeneral for the Environment, General Administration for the Environment, Head of A2 Unit – Waste Management and Recycling), pointed out the fact that, due to its delayed EU accession, Croatia was in a slightly different position compared with most other EU member states. “Nevertheless, I have noted that Croatia is following the latest trends and has been investing enormous efforts to keep abreast of them in the shortest time period. Taking the right direction is of extreme importance for all member states and it also provides an opportunity for Croatia to direct investment in the right direction. One of the current trends in Europe is the upgrading of waste separation, as well as a focus on the extraction of valuable raw materials from waste, rather than mere
waste collection. It is important to involve all those who aim to take care of the environment and encourage them to separate valuable raw materials from waste, such as plastics, paper and metal, to name a few, starting with household waste, and hence having it collected by the public infrastructure, having it recycled and transformed into something valuable. In this manner, recycled high-purity raw materials are produced. It is an immense opportunity for Croatia”, he stated. Giuseppe Riva, Director of PlasticsEuropea for the Mediterranean Region, pointed out that the Association has been implementing the project Zero plastics to landfill since 2012 and recycling has been continuously increasing. Now, 60,000 companies in the European Union employing 1.5 million staff, are involved in the production of plastics, whilst waste management is becoming an increasingly important aspect of the economy. “The society of today cannot consider discarding anything, since anything can be a valuable resource, which is of particular importance for those states lacking resources. I believe it is an issue that needs to be addressed at the European level and the circular economy follows this path. Croatia, Italy and other member states are investing immense effort to face such challenges. Hence, it is fundamental to exchange experiences on this issue, and throughout Europe there are diverse experiences in this field”, pointed out Riva, adding that plastics produced from recycled raw materials are considered as a market niche with considerable potential. In addition, he stressed that the use of plastics has been on an upward curve. Asia and China are amongst the leading plastics producers, whilst the US has the highest consumption per capita. “A US citizen uses on average 140 kilos of plastics annually, whereas a European citizen normally uses 93 kilos annually”, noted Riva.
MODERN FACTORIES Dr Helge Wendenburg, Managing Director of the Department for Water Management and Resource Protection at the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety, presented the German experiences in waste collection and management. Germany generates almost 350 million tonnes of waste, of which 71% is recycled, in addition to the activity of 167 waste-incineration plants con-
nected to energy plants. By the end of 2018, Croatia needs to implement a comprehensive waste management system. This implies introducing waste separation, landfill rehabilitation and the construction of 13 waste management centres – modern factories operating in compliance with the highest environmental standards. Waste management centres currently manage a minimal quantity of waste, whereas most waste is used for the extraction of valuable raw materials, as well as materials for energy exploitation. Their total value stands at €0.6 billion and 90% of the resources required for co-financing are in place. In other words, 70% of the needed financial resources have been provided through EU funding, whilst the remaining amount up to 90% of the investment has been provided by the Environmental Protection and Energy Efficiency Fund. The first two waste management centres have already been constructed. Marišćina has started its trial operation, and Kaštijun is expected to do so in the near future. Moreover, funding has been secured for the Bikarac Waste Management Centre in Šibenik-Knin County. In addition to Bikarac, waste management centres at Biljane Donje (€51 million) for Zadar County, Babina Gora (€27 million) for Karlovac County and Piškornica (€82 million), that will meet the requirements of four counties are all currently in high implementation phase. In addition to reduced quantities of disposed waste, the ultimate goal is to provide at least 50% of paper, glass, plastics and metal collected through waste separation by 2020. Croatia currently recycles around 15% of all the collected materials. One of the prerequisites for meeting this objective is to enable the public to separate waste, which local government has been obliged to focus on since 24th July 2014 in compliance with the law. According to estimates, over the last 10 years the mixed municipal waste discarded and buried in Croatia has had a market value of €0.6 billion. During the past three years, the Environmental Protection and Energy Efficiency Fund have invested over €6.7 million in the procurement of utility equipment and vehicles for cities and municipalities. The efforts implemented have yielded substantial results. 80% of people can currently access some type of waste separation, compared with only 45% in 2012. No 253 | December 2015 | PVinternational | 25
THE CROATIAN CHAMBER OF ECONOMY
€1.53 BILLION COULD BE THE LEVEL OF CHRISTMAS SEASON SALES A 5% increase in the sale of local products would have a positive impact on the Croatian economy, emphasised Tomislava Ravlić of the CCE by Ilijana Grgić grgic@privredni.hr
ing the festive season rose to €1.46 billion. “Against the backdrop of the crisis, consumer behaviour has changed considerably. Everyone is trying to reduce their spending, even on presents, and consumers are also opting for more useful products”, emphasised the Director of Trade Department at the CCE, Ema Culi, adding that retail is an important economic activity that has a great impact on GDP and is also a link between industry and the end user.
CONSUMPTION RECOVERY “Retail turnover in the first nine months of 2015 was around the average rate of 2.1%, which implies that it has been rising for 14 months. April saw a large increase at 4.1%, while in
2,1% average retail turnover for first nine months of 2015. retail turnover increasing
for
14
consecutive months
1.46
€ billion
Christmas season sales in 2014
P
rojections provided by the Croatian Chamber of Economy show that personal sales in December 2015 would be in the region of €1.53 billion, €60,000 up on December 2014. December is a traditional month for retail and increased sales, when retailers provide special offers, whilst the peak days include the weekend before Christmas.
FIRST GROWTH FOR THE PAST FOUR YEARS “According to estimates by the CCE, the public will spend around €1.53 billion during the festive season 2015, which would imply the first growth in the past four years,” noted Tomislava Ravlić, Deputy Director of Trade Department at the CCE. She pointed out that the projections were based on the increase in retail turnover over the past several months, as well as the increase in nett salaries following the Amendments to Income Tax Act, which has impacted personal consumption. During the last 15 years, consumption in December was lowest in 2001 at €0.66 billion, but recovery was economically positive in 2007 and 2008; in 2014 consumption dur-
26 | PVinternational | December 2015 | No 253
RETAIL HAS SIGNIFICANT IMPACT ON GDP, NOTED EMA CULI OF THE CCE July it was 4.5%, as a result of a positive tourist season. Retail turnover increased by 1.3% in September over August”, noted Ema Culi, highlighting that average retail rate throughout the European Union was 3%. Consumption has been recovering over the last two years and, as pointed out by the CCE sources, consumer confidence is evident. “I invite Croatian consumers to opt for local products in December, as just a 5% increase in consumption of local products would have a significant impact on the Croatian economy”, stressed Tomislava Ravlić. As pointed out by CCE sources, according to independent research, 80% of the general public are prepared to pay slightly more for Croatian products.