Thinking outside the box International Business Plus Conference of the Regional Business Club PAGES 2-7
SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
Interview: Tonči Pejović Two kilometres of runway takes you anywhere, says CEO, Brač Airport PAGES 8-11
Topic of the week There are not enough workers despite 300,000 unemployed PAGES 16-19
PVinternational C R O A T I A N
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April 2016, Year IX, No 257
CROATIAN ECONOMIC OUTLOOK QUARTERLY
GROWTH CONTINUES After six years, local demand has finally increased. Real personal spending is responsible for about a half of GDP growth in 2015 and the Institute of Economics Zagreb anticipates this growth will continue
M
otivated by a real GDP growth rate of 1.6% for 2015 and positive monthly indices of the EIZ business cycle (CEI index) and data on industrial production for January 2016, analysts at the Institute of Economics Zagreb (EIZ) announced a further increase of positive growth rates (1.5% in 2016 and 1.8% in 2017) in the latest issue of Croatian Economic Outlook Quarterly. The main contributor to this forecast is local demand, which increased 1.2% in 2015, after six years. Real personal spending is responsible for about half of GDP growth in 2015, and EIZ analysts anticipate this growth to continue. With further moderate positive movements, real personal spending could increase 1.4% this year
INVESTMENT ACTIVITIES SHOULD CONTINUE TO INCREASE AT 1.9% and 1.5% in 2017. On the other hand, state spending could increase by only 0.2% in 2016. Stronger fiscal consolidation in 2017 could lead to decreased state spending according to EIZ forecast (-0.8%). After 1.6% growth in 2015, analysts anticipate further growth of investment du-
ring the first half of this year, caused by the slow formation process of the new government and uncertainty on adopting a new budget. With an improved business climate during the second half of the year, and especially during the next, investment could grow at a rate of 3% in 2017. EIZ predict that foreign trade will maintain its positive contribution to GDP growth over the next two years, but with slightly lower import and export growth rates. Furthermore, it is estimated that last year’s budget deficit was around 4% of GDP. Its further decrease towards 3.5% and 3% of GDP during this and next year is based on the budget proposals for 2016
which includes budget cuts totalling €3.3 billion. This would mean that in 2018, Croatia could meet the deficit level prescribed by the Excessive Deficit Procedure. During the forthcoming period, the labour market will keep up with economic trends, with a further decrease in the number of unemployed and moderate growth of those employed mainly in the private sector. It is anticipated that the unemployment rate will decrease to 16.9% in 2016 and to 16.5% in 2017. Another positive tourist season and the recovery of foreign investment could point to a stable HRK/EUR exchange rate. (V.A.)
International Business Plus Conference of the Regional Business Club
THINKING OUTSID The issue of survival, as well as of excellence and competitiveness are the fundamental issues for all brand owners, according to Ante Todorić, Vice President of Agrokor. We are surrounded by brands, yet we frequently do not consider them as such, pointed out Mirjana Čagalj, Vice President of the Croatian Chamber of Economy. Jasmina Milanović, Investment and Development Financial Manager at Elixir Group, concluded that some have attempted to revive brands through the manipulation of quality
Z Be audacious and courageous on brand creation!
Omer Senguler, Global Magic Brands
agreb Brand Forum (ZBF) – 7th International Business Conference of the Regional Business Club – was recently held in the Kraš Auditorium in Zagreb. Around 400 participants, company owners, presidents and board members, company directors and experts aimed to provide solutions to a wide number of issues concerning brands, in panel discussions and workshops during a one-day conference. Be audacious and courageous on brand creation, and think outside the box, stressed Omer Senguler, a marketing expert and owner of the Turkish Global Magic Brands. “The major issue in brand creation is to work conservatively in a conservative company. Marketing, communication strategy, insight into the use of available information and a comprehensive insight into one’s own product are imperative for successful brand creation”, he pointed out.
THE FUTURE OF OUR BRANDS The issue of survival, as well as the issues of excellence and competitiveness, are the fundamental issues for all brand owners, according to Ante Todorić, Vice President of Agrokor. “It is the issue we wake up with and the one we consider at the end of the day. The success of Croatian brands such as Bajadera (pralines), Domaćica (chocolate tea biscuits) or Violeta (toilet paper and tissues) are excellent examples of successful regional brands. Competitiveness is imperative at the global level and new ideas are always fundamental. One needs to consider the issue of the future of our brands. Hence, we are launching our new platform entitled Abrakadabra – a new online market that will provide room for everyone and will be aimed at the creation of the largest regional marketplace””, added Todorić. 2 | PVinternational | April 2016 | No 257
According to Petar Ćorluka, owner of Violeta, large market players are frequently rather sluggish. “” We have been exploiting our advantages; we are well-known throughout the region, our market share is satisfactory and it is continuously increasing. Consequently, we have introduced Japanese technology and have become one of the few diaper manufacturers at the international level””, stressed Ćorluka.
PRODUCT ORIGIN CURRENTLY STILL SIGNIFICANTLY IMPACTS ON BRAND PERCEPTION, STRESSED MUJO SELIMOVIĆ “The automotive industry, which until recently used to rank second at a global level, is currently faced with a turning point. The issue of whether people are currently still opting to own cars has become a burning one. Moreover, there is the issue of whether companies should remain involved in hardware production or they should focus on provision of services. According to current trends, we are about to see significant changes during the next 5 to 10 years”, noted Almir Jazvin, President of the Management Board of ASA Prevent from Bosnia and Herzegovina. Jasmina Milanović, Investment and Development Financial Manager at Elixir Group,
DE THE BOX
Petar Ćorluka, Jasmina Milanović, Tanja Skaza, Almir Jazvin, Ante Todorić, Peter Frankl
believes that what we do with the brands we currently own is extremely important. “Some have attempted to revive brands through manipulation of quality. We have invested into new higher quality brands and hence, through placing the name Eliksir before brand names, we have guaranteed quality. Our best products now keep abreast with the best products in chemistry and pharmaceuticals”, she concluded. According to Tanja Skaza, co-owner and director of the Slovenian company Plastika Skaza, working with passion is vital and an imperative for growth. She added that her company used to be considered only as a producer for many years and it was only at one point after so many years that they decided to reach for a higher level. We are surrounded by brands, yet we frequently do not consider them as such, pointed out Mirjana Čagalj, Vice President of the Croatian Chamber of Economy. “Everything is
branded, starting with countries, cities to products, companies and even individuals. The Croatian Chamber of Economy is currently focused on providing assistance in branding of national products. Through marks of quality and origin awarded to products we are striving to point out their principal quality which results in enhanced customer loyalty”, highlighted Mirjana Čagalj. Kraš provides a large number of branded products and it is also the owner of brands and hence Kraš Auditorium is an ideal venue for this conference, noted Damir Bulić, President of the Management Board of Kraš. “Though effective management brands can yield excellent results both to their owners and customers, poor brand management can result in substantial losses. Consequently, such a conference can help us all and provide some ideas on how to improve what we currently have in order to continue the tradition which for some of us is longer than one century”, stated Bulić.
Kraš provides a large number of branded products and it is also the owner of brands.
Damir Bulić, Kraš
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International Business Plus Conference of the Regional Business Club
Damir Novinić, Gordan Milinić, Mihajlo Vesović, Milorad Batinić, Mirka Jozić, Božo Skoko
CONCEPT OF COUNTRY OF ORIGIN
The potential of brand licensing is immense, as effective brand licensing yields exceptional results.
Goran Krnjak, Brand Extension and Licencing Worldwide
During the roundtable discussion entitled Investors, welcome to.....(Country and City Branding), Božo Skoko addressed the country of origin issue, explaining that the parallel development of the image of the country and the image of specific brands was primarily due to the concept of the country of origin. “A country provides support to its brands upon their placement on foreign markets. The awareness of the origin of products grew simultaneously with the growth of globalisation”, he added. He assessed that, upon analysing the leading regional brands, one reaches the conclusion that most of them were created well before globalisation. Damir Novinić, Managing Director of AIKInvest, believes that investors opt for the microconditions they consider as most appropriate for them. “Irrespective of the fact that there is substantial competition with the countries in the region, there are still opportunities for joint appearance on third markets. Hence, each country needs to point out its competitive advantages and subsequently all these competitive advantages need to be highlighted under a joint brand on third markets”, he pointed out. Gordan Milinić, Director of Foreign Investment Promotion Agency in Bosnia and Herzegovina, concluded that the war in Bosnia and Herzegovina still adversely affects investment, irrespective of its finish some twenty-odd years ago. “A Japanese Ambassador once spoke to me about humanitarian aid provided by Japan to Bosnia and Herzegovina. I interrupted
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him stating that investment and job creation are fundamental for Bosnia and Herzegovina and are considerably more important than humanitarian aid. The Ambassador grasped my point and is preparing a visit of some fifty Japanese potential investors to Bosnia and Herzegovina in co-operation with the Japanese Chamber of Commerce and we are consequently expecting the first Japanese investment in Bosnia and Herzegovina in the forthcoming future”, noted Milinić. Mihajlo Vesović, Head of the Department for Innovation and Economic Diplomacy at the Chamber of Commerce and Industry of Serbia, mentioned a city in India that has become one of the best investment destinations in Serbia. “It is a city with excellent infrastructure. India has attracted investment as a result of the consensus of all the political actors and full transparency of work”, he explained. The City of Ivanec has recently ranked first in the Financial Times, one of the most influential newspapers globally, on the top 10 list of European cities with best strategies to attract foreign investment. Milorad Batinić, Mayor of Ivanec explained their strategy stating that “they simply act in accordance with the slogan: efficient, safe and professional implementation of your entrepreneurial initiatives”. Mirka Jozić, Head of the City Office for Economy, Labour and Entrepreneurship, Zagreb, emphasised the fact that Zagreb, in addition to being a successful city break destination, is striving to develop also concerning high value added activities - IT technologies, know-how, human asset potential, adding that industry is certainly relocating to the outskirts.
EMOTIONS CANNOT BE COPIED Upon closure of an extremely successful roundtable discussion entitled Global vs. Local Brands – Old vs New, the moderator Darko Buković, Director and Editor-in-Chief of Privredni vjesnik, pointed out to Tihomir Vranešević, a professor from the Marketing Department at the Faculty of Economics of the University of Zagreb, the issue of connection between sport and branding, against the backdrop of a broad range of examples of sports club names containing brand names. Passion is imperative both in sports and branding!” Young people aged between 15 and 25 opt for brands since they are aiming to conform and build their identity and they hence identify with brands. Brands and people are interdependent: people create brands and brands create an image of people using them. This occurs also in sport. There are no successful brands without truth. Moreover, there are a large number of concrete examples showing
that brands are assets that require management. However, brands are intangible assets and thus this is at times hard to imagine. It is considerably easier to deal with production facilities or buildings, yet those who become aware of these issues on time soon realise that this type of intangible asset is substantially more valuable compared with tangible assets, noted Vranešević. This roundtable discussion began with a presentation of research of connection amongst regional brands. The analysis was conducted in Slovenia, Croatia, Bosnia and Herzegovina, Serbia and Macedonia and the results were presented by Ante Šalinović of Ipsos Adria and Janja Božič Marolt with Mediana. The strength of local and global brands throughout the region was analysed from consumers’ stance and it included around 70 product categories. 2,500 respondents participated in the survey and the results showed a dominance of the so called ex-Yu brands throughout the territory of former Yugoslavia. “The research results imply the fact that the former Yugoslav market was not managed effectively primarily concerning marketing. Hence, the most valuable brands managed to survive even after 25 years and despite all the events that ensued and that certainly adversely affected brand development and this was also due to their keeping abreast with all the contemporary methods and modern technology. Irrespective of the fact that at the time the competition was not as severe as it currently
Darko Radišić, Tihomir Vranešević, Denis Matijević, Minčo Jordanov, Muhamed Pilav, Mujo Selimović, Darko Buković
ting from potential interregional co-operation in a large number of activities, ranging from brands in the construction sector to those in food processing, focusing on joint appearance on regional markets, as well as on third markets. Consequently, supporting this stance, Denis Matijević, owner of AgroFructus Group, emphasised that the local market is small and added that “Co-operation is imperative and crucial for our success in competing with large companies”, stated Matijević.
BRANDING IS NOT ADVERTISING
CROATIAN COMPANIES ARE CURRENTLY INSUFFICIENTLY AWARE OF ADVANTAGES OF BRAND LICENSING, ACCORDING TO GORAN KRNJAK is, contemporary producers should definitely learn from them concerning brand creation”, pointed out Šalinović. Minčo Jordanov, owner of several reputable Macedonian companies, stressed the importance of connection between corporate brands and personal brands of the leading officials. He pointed out the economic benefits resul-
Muhamed Pilav, owner of MS&WOOD, a Fojnica-based furniture factory, that is exclusively export-oriented, stated that “Branding is definitely not advertising. Quality comes first, and is followed by innovation and public relations - occurring by themselves”. Darko Radišić, member of the Management Board of Kraš, stated that Kraš owns 15 brands that successfully exist and develop on regional markets, as well as on a large number of further markets. He stressed that the strength of brands owned by Kraš is the result of its rich history and tradition, yet the company sources have expressed their full awareness of the fact that the value of a brand is retained exclusively upon continuous and systematic maintenance. Mujo Selimović, owner of the Sarajevo-based MIMS Group, pointed out that brand perception is normally substantially affected by product origin and this primarily applies to the market in Bosnia and Herzegovina. Concerning the maintenance of an old brand, Selimović mentioned the example of Sarajevsko pivo – Sarajevo beer, as one of the products provided by the Group. “We have first-hand experi-
One needs to be aware of the fact that failure is an integral part of success, yet unfortunately entrepreneurship is currently stigmatised in Croatia.
Davorin Štetner, Croatian Business Angels Network CRANE
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International Business Plus Conference of the Regional Business Club
Branding specialist Feđa Vukić at Brand Forum workshop
Brands and people are interdependent: people create brands and brands create an image of people using them
Tihomir Vranešević, professor at the Faculty of Economics of the University of Zagreb
ence on the proportions of loss resulting from a neglected brand, irrespective of its tradition and popularity. We have been neglecting the brand of Sarajevo beer for years and consequently it led to market dominance of international beer brands in Bosnia and Herzegovina. Following 2014 when we finally addressed the issue of brand strengthening, 2015 saw a 30% improvement of results and the positive trend continued also during the first quarter of 2016. Facts speak for themselves”, concluded Selimović. Irrespective of the long-term efforts aimed at increasing the importance attributed to franchise business in the Croatian economy, the current circumstances in Croatia still cannot be compared with the situation in the countries such as the US, Great Britain or Italy. The franchise model in those countries was recognised long time ago by those aiming to become successful entrepreneurs, albeit adopting a safe method and investing into know-how that has already been established on the market. The principal obstacles for a more vigorous impetus of franchises on the Croatian market are certainly fear and ignorance of this business model, as was pointed out during the roundtable discussion entitled Franchising, Licensing, Sharing = New Development LifeCycle of Brands. Zdeslav Radovčić, owner of Energy Clinic, believes that the people who decided to opt for this franchise are emotionally and spiritually involved in the wellness industry. Andrija Čolak, co-owner of Surf&Fries, stressed the fact that in their case they opted for a franchise model spontaneously. “We had had a successful business model and our clients’ inquiries resulted in our opening a franchise”, he stated, adding that opening of a franchise requires a certain amount of finan-
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cial resources, as well as available facilities. “We provide logistics support and know-how to those interested in order to overcome the initial difficulties”, stressed Čolak. In addition to fear and ignorance, Čolak highlighted the importance of another specific problem – the protection of intellectual property rights. “Throughout our experience we have encountered poor copies of our products that have a negative impact on the brand, yet there is no one to address concerning the issue of protection”, he emphasised. Nikola Oršanić, President of the Franchise Association at the Croatian Chamber of Economy, concluded that most franchises are involved in food and beverage industry in which the importance of branding is huge. Nevertheless, there are high quality franchises in other areas where brands are unfortunately frequently not recognised. “Most franchises have been imported into Croatia, yet it is important to highlight that franchise business can be a quality method for expansion of entrepreneurship beyond Croatian borders”, he explained, pointing out that the Croatian citizens prefer spending some €30,000 for a car purchase and subsequently losing most of that amount in only a few years rather than investing into knowledge and job creation. Goran Krnjak, President of Brand Extension and Licencing Worldwide, stated that the level
FRANCHISE CAN BE A HIGH QUALITY METHOD OF EXPANSION OF OUR ENTREPRENEURSHIP ACTIVITY BEYOND THE CROATIAN BORDERS, POINTED OUT NIKOLA ORŠANIĆ of awareness concerning the advantages of brand licensing amongst Croatian companies is rather poor. “The potential of brand licensing is immense, as effective brand licensing yields exceptional results”, he stressed. Mladen Mirko Tepuš, Managing Director of Erste Card, noted that their franchise platform adapts to any market. “Regulations are interpreted in different ways by various countries and consumer payment habits differ substan-
Zdeslav Radovčić, Andrija Čolak, Nikola Oršanić, Goran Krnjak, Mladen Mirko Tepuš, Ilijana Grgić
tially. Furthermore, establishing the purchasing power on a specific market is vital upon market penetration, as well as identifying the right moment for the launch of a specific product or a service”, stated Tepuš. Furthermore, franchise business in Croatia can be significantly boosted by tourism. Tourists visiting Croatia are provided the best opportunities for experiencing and being informed on local franchises and hence the advantages of word-of-mouth advertising can be exploited. This is precisely what happened in the case of Surf&Fries. Almost all the owners of start-ups in Croatia and throughout the region have commenced operating almost from zero. Nevertheless, the owners of the companies that participated in the roundtable discussion entitled Start-up Revolution – a new investment paradigm, believe the popular opinion on start-ups operating positively only after they have attracted investment is entirely incorrect.
INVESTMENT IRRELEVANT FOR START-UPS Roundtable discussion participants agreed on the fact that in 10 years both Croatia and the region will provide more favourable conditions for development of start-ups, as well as of other companies. Knowledge will be imported, yet it will simultaneously be exported to third markets. Nevertheless, creation of legislative, political and economic framework is a fundamental prerequisite for job creation in Croatia, since workers are currently still demoti-
Davorin Štetner, Elizabeta Planinić, Tadej Jevševar, Ivan Jelušić, Goran Ćulibrk, Krešimir Sočković
vated. Davorin Štetner, President of CRANE, Croatian Business Angels Network and owner of Kreator Group, believes investment is irrelevant for start-ups. “Investment will be attracted eventually and the belief that a start-up will operate successfully only after it has received a financial injection through investment is utterly incorrect. One needs to be aware of the fact that failure is an integral part of success, yet unfortunately entrepreneurship is currently stigmatised in Croatia”, Štetner stated categorically. “I have to point out that I admire all private entrepreneurs in Croatia and I believe they are all actually heroes. Company owners need to focus primarily on cost-effectiveness. The EU can provide sufficient funding for project financing. One only needs to develop an interesting project and absorb EU funding”, he pointed out, explaining that business angels differ from classic investors by the fact that, in addition to providing financing, they also share their experiences in business. Elizabeta Planinić, owner of the company Čuvar sjećanja (Custodian of Memories), started her private business in 2011 following both private and business hardships and launched a start-up – grave maintenance services. After five years of successful operation she decided to promote her business and terminate the start-up phase of her company. Tadej Jevševar, co-owner of the Slovenian company Chipolo, concluded that almost all big brands in Slovenia are currently foreign-owned. Nevertheless, he noted that it is not so important provided the companies operate successfully, providing benefits for everyone – for the
state, the employers and the public. He emphasised the fact that start-up scene in Slovenia is excellent, whilst start-ups are most frequently purchased by large companies. Goran Ćulibrk, manager with the Serbian Activecollab, stated that their start-up company had faced failure upon development of a product that proved to have been a wrong choice. Nevertheless, following that negative experience they will focus on development of another product which they believe will be successful, he stressed. Ćulibrk pointed out the fact that both failure and success are integral components of business. Ivan Jelušić, co-owner of a start-up named U:plug stated that he owns several companies involved in hardware product development together with his business partner Mitko Cabevski. In addition, they invented a mobile phone charging holder. “We believe that all this can be considered as branding. Not only a mobile phone charging holder, but also the entire method of creation and placement of the product”, he stressed. Incubators are vital for start-up development, since they provide diverse training programmes for startup owners through which they can acquire specific knowledge and skills required in their day-to-day operations. “I believe that networking between young people launching a start-up and economic actors is imperative”, concluded Jelušić. [reported by Ilijana Grgić, Krešimir Sočković, Svetozar Sarkanjac, Sanja Plješa, Boris Odorčić i Jozo Vrdoljak]
April 2016 | No 257 | PVinternational | 7
INTREVIEW TONČI PEJOVIĆ, CEO, BRAČ AIRPORT
TWO KILOMETRES OF RUNWAY TAKES YOU ANYWHERE YOU WANT TO GO We will extend the runway by another 320 metres, which is the required length for landing and securing larger planes, that is, regional jets with 150 seats. This would create a whole new opportunity for talks with airline companies. We would cover the entire Europe and Russia, even the Middle East by Jozo Vrdoljak
T 0.6
around € million
invested in the extension of the runway
35,000 passengers desired number of Brač airport passengers
1,440 metres length of the existing runway (1,380 metres in practice)
onči Pejović became CEO of Brač Airport last summer with the goal of turning it into a more sustainable business. Pejović gained his vast experience by managing Dubrovnik Airport and Zagreb Airport. He was also the president of various local and international airport associations. Privredni vjesnik asked him how can Brač airport become a more sustainable business and about the development perspective of small airports as well as general air traffic related problems.
number of seats and flights by 17%. However, this did not increase our business. Actually, the number of passengers declined, even for Gruber Reisen, where it had been stable for years. We can say this project was not successful. However, we made progress with other projects. We acted as a base for the emergency helicopter service, a pilot-project, and we worked on increasing the number of local flights.
The majority owner of Brač Airport is Zlatni rat hotel with a 51% share. The state holds 30% and the remainder is held by small shareholders.
Why were there not more local flights from Brač to Zagreb? I can say the state was not fair to Brač, since it sponsored only one flight a week during the summer season. For the sake of comparison, Osijek Airport was sponsored with 12 flights a week. One flight a week is not enough for Brač which 1.5 million overnight stays. This high number can certainly justify introducing more flights. However, after participating at the tender invited by the Ministry of Sea, Traffic and Infrastructure, we managed to impose ourselves, and this year a further flight to Brač will be introduced. This is still not enough, but it is better compared with the past four years.
What was last year for Brač Airport like? We defined new directions by taking over and setting new business methods. We introduced a new transporter last summer - Express Airways – that flies routes to Düsseldorf and Leipzig and manages flights for the Gruber Reisen tourist agency. We increased the
Brač Airport is preparing an investment project. What is it? To reach the number of 35,000 passengers a year we need to invest in extending our runway. The present runway is 1,440 metres long and it can accept planes coming from Germany, Austria and Slovenia. In practice, this runway is actually even shorter since it
THE MAJORITY OWNER OF BRAČ AIRPORT IS ZLATNI RAT HOTEL WITH A 51% SHARE
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The state announced it would sell its share, and a decision should be made at the forthcoming assembly. I expect this will be attractive to investors.
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INTERVJU
Large airports are profitable, but this is not the case with small airports. Their expenditures are constantly growing and the majority of them are not profitable.
was shortened to 1,380 metres for safety reasons. In order to adapt to the trends of most airline companies, that is, the type of planes they have, we decided to invest. We considered options and then decided to extend the runway to the southeast. Ownership relations are solved there and we dealt with the problem of physical planning quite fast. The investment proved to be justified since there are several important investment projects being developed on Brač which will attract more business people and tourists after they are completed. The extension of the runway will cost around €0.6 million. The land we will expand on is owned by Zlatni rat, and it will be transferred to the ownership of the Brač airport after additional capitalisation. Through the investment in the extension of the runway, Zlatni rat will certainly increase its share with additional capitalisation. How long will the runway be extended? The runway will be 320 metres longer, which is the required length for landing and
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securing bigger airplanes, that is, regional jets with 150 seats. This would create a whole new opportunity for talks with airline companies. We would cover the entirety of Europe and Russia, even the Middle East. This has been impossible until now since we had to rely on planes with a capacity of flying two hours at the most. Split airport is overbooked during the summer so tourists travelling to Brač or Hvar could land at our airport. What is the destiny of small airports? I often hear that airports are money factories. I was the president of the Regional forum of airports for two mandates, a forum with 138 members operating through 358 airports and traffic of up to five million passengers. It is true that large-sized airports are profitable, but this is not the case with small airports. Their expenditures are constantly growing and the majority of them are not profitable. The European Commission was not keen on subsidising the development of airports, but we see this also changed. Public discussion
PREPARATIONS IN FULL SWING
Many new concepts this season What is new for this season? We opened a store with local products, we introduced catering and we are in talks with a British pilot school regarding the possibility of holding practical courses at Brač airport. By the end of March, we will have two flights to Zagreb, on Tuesday and Saturday. We will have one destination more in Austria, so we will fly to four Austrian destinations in total. And talks concerning the introduction of a route for Belgrade are in progress. A new Croatian transporter is coming into this scene – Avex company from Rijeka, which would fly twice a week to Belgrade.
has been recently opened so that member countries and local units could subsidise, promote and sponsor the work of small airports. We know that two kilometres of road cannot lead us anywhere, but two kilometres of runway can take you anywhere. There aren’t many airports in Croatia. For example, Norway has 46 airports, Great Britain 70, Greece over 30. In these countries several
THE EUROPEAN COMMISSION NOT KEEN ON SUBSIDISING THE DEVELOPMENT OF AIRPORTS, BUT WE SEE THIS ALSO CHANGED big airports are profitable, but others are covered by the budget. The state announced it would sell its shares in some companies. Will this be the case of Brač Airport? The state announced it would sell its share, and a decision should be made at the forthcoming assembly. I expect this share will be attractive to investors. Certain talks have already taken place.
Is the state share interesting to airline companies? It is not the happiest relationship when an airline company is also the owner of the airport since the airport then depends on one company. It is not excluded that a foreign or local operator of another airport expresses interest for the state share. The example of the privatisation of some Greek airports showed that big German airports entered their ownership structure. To my knowledge, other Croatian airports owned by the state are not so far from searching for a concessionaire. What do you think about connecting the islands with hydroplanes? This is a great project, and the planes in question are excellent. The only thing is that their servicing is expensive, which could pose problems for sustainability of the business. However, our islands were once connected this way, which is why I think this is a great project. Brač Airport and its partner European Coastal Airlines had the intention of connecting the islands of central Dalmatia with two flights a day to Zagreb, but we did not find anyone to talk to in the government. It is encouraging that the European Commission expressed the need for revitalisation of the European islands.
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ITALIAN COMPANY CANICULA INVESTS INTO MUĆ
A NEW FISH PROCESSING FACILITY Our daily processing capacity is 50 tonnes. The facility will employ 130 staff. We are planning to reach a turnover of around €4.7 million, notes Cristian Serio by Jozo Vrdoljak vrdoljak@privredni.hr
C
anicula, the company owned by Cristian Serio, an Italian entrepreneur, has recently opened a new fish processing facility in Muć municipality. The company has been operating in Croatia for five years, operating in rented facilities and, according to Cristian Serio, in unsatisfactory conditions in Tribunje and in Milna on the island of Brač, where the company was faced with a lack of employees and high costs of ferry transport. The annual turnover ranged between €2 million and €2.6 million, but ceased production on the island of Brač in 2015. Investment into the new facility is €4.3 million, of which €1.3 million was provided by EU funds through the IPARD Measure 103, and €3 million through a loan granted by the Croatian Bank for Reconstruction and Development. The facility covers an area of almost 2,000 m2 and it is located on land covering an area of almost 7,000 m2. The new facility will primarily be producing salted anchovies for the Italian market. Canicula salted anchovies will be transported in large containers to Pesce Azzurro, an Italian family-owned facility, where they will be re-packaged and sold in Italian retail chain stores. Success is guaranteed, since the family owned company produces a product brand that is sold in the largest Italian retail chain stores. “The daily processing capacity that we are expecting to reach in one year is 50 tonnes of fish and by that time the facility will employ 130 staff. We are planning to reach a turnover of around €4.7 million”, pointed out Cristian Serio.
CENTENARY OF BUSINESS ACTIVITY The company currently owns three re12 | PVinternational | April 2016 | No 257
THE NEW CANICULA FACILITY WILL PRODUCE SALTED ANCHOVIES TO BE SOLD IN ITALY frigerated vehicles adapted for the transportation of fresh fish and a purse seine whose value is €200,000. According to Cristian Serio, during the closed season for anchovies he is planning to purchase raw materials from Spain. “We have developed a delivery model that enables delivery of fresh anchovies from Spain in only 16 hours. We are planning to generate around 20% of our revenue from high value added products, such as marinated products and it is important to highlight carpaccio from anchovies and sardines. Irrespective of the level of complexity of the production process of similar products, they can be sold at high prices and we have ensured rapid payment. We will sell through retail chains and catering facilities”, stressed Serio. After production has been fully established, the company plans to construct a further facility for the production of frozen bluefish. This will primarily comprise of packaged frozen sardines. “We have already constructed a refrigeration tunnel and purchased a deep freezing
Cristian Serio
machine worth €650,000”, points out Serio. The Serio family has been involved in salting and processing of fish and seafood for over 100 years. Since 1979, when the company Pesce Azzurro was established, it has had a modern facility and headquarters in Cefalù, a small Sicillian town. The company also owns facilities in Albania and Tunisia. Pesce Azzurro is a leader in the Italian market for the processing and warehousing operations of canned fish.
SHORTENED PROCEDURE FOR PROJECT APPLICATION FOR EU TENDERS
REVOLUTIONARY CHANGES IN FUNDS ABSORPTION According to Tolušić, EU funds absorption by the end of the year could range between €900 million and €1 billion, with property-legal relations being seen as the most serious problem that could potentially slow the entire process by Ilijana Grgić grgic@privredni.hr
T
he Croatian Ministry of Regional Development and EU Funds is planning to absorb almost €1 billion of EU funding and to make revolutionary changes in the procedure of project application for EU tenders. After 42 working days, they have succeeded in simplifying the procedure and reduced the number of administrative steps from 7 to 5, aiming to eventually reduce them to 3. Moreover, a further objective is to simplify applications for EU fund absorption for entrepreneurs, since last year only €7.6 million was absorbed out of the €0.2 billion of available EU funds. A new tender for entrepreneurs will be invited at the beginning of May, to be closed in December 2016. The value of signed contracts by the end of 2016 is expected to reach almost €66.7 million. “We have simplified the procedure for entrepreneurs, since a mandatory letter of intent from the bank will not be required and the mandatory deposit will also be abolished. We are currently altering the limits and the lower limit will be reduced from €66,700 to €40,000, whilst the upper limit will be increased from €2 million to €4 million. In addition, we have been opening up significantly and abolishing all the comprehensive studies and reports that used to be required and that greatly complicated the lives of entrepreneurs in that segment. Moreover, I expect the number of days required to process all documentation to decrease from 180 to 90”, stressed Tomislav Tolušić, Minister of Regional Development and EU Funds, during a working meeting with journalists, emphasising the fact that Croatia saw more ‘red tape’ than the EU required. “Common national regulations for the implementation of
EU projects can be amended, albeit upon prior agreement with the European Commission that has a deeper insight into some of our major problems than we do”, noted Tolušić.
NEW JOBS CREATED According to Tolušić, EU funds absorption by the end of the year could range between €900 million and €1 billion, with property-legal relations being seen as the severest problem that could potentially slow the entire process. Project basis of the Ministry of Regional Development and EU Funds currently comprises of 1,736 projects with building permits, worth between €2.5 billion and €3 billion. Nevertheless, a potential problem could be the fact that building permits are valid for three years and, in order to avoid their expiry, the Ministry of Construction and Spatial Planning will propose regulatory amendments aiming to extend the life of building permits for EU projects to six years. In addition, the minister has announced the invitation for 200 diverse tenders for EU funds absorption, which implies three or four new tenders on a weekly basis. Furthermore, Ministry sources have expressed their awareness of the possibility of bottlenecks with such large-scale work and are planning to invite tenders for employment in the immediate future and hire a many more employees in line with requirements, aiming to increase the EU fund absorption rate. The European Commission has also pointed out an insufficient number of employees involved in the tasks concerning the EU funds absorption as one of the principal causes of weak absorption of the EU funds.
THE MINISTER HAS ANNOUNCED AROUND 200 TENDERS FOR EU FUNDS ABSORPTION TO BE INVITED THIS YEAR
April 2016 | No 257 | PVinternational | 13
CROATIAN CHAMBER OF ECONOMY PUBLIC PROCUREMENT AS A GENER
ANNUAL PUBLIC PROCUR 30% OF STATE BUDGET In compliance with EU directives, local producers must not be favoured, yet several countries protect their local producers effectively and with great subtlety, using concealed protection features avoiding any violation of the rules, as pointed out by Ivančica Franjković, Deputy Head of the State Office for Central Public Procurement
What we all require is a strategic approach to public procurement aimed at enabling the SME’s to provide goods and services to the public sector. Corruption is not the only problem, since the principal issues in public procurement originate also from legal motivation, as well as from a lack of information both amongst the contracting authorities and the bidders. Luka Burilović, President of the Croatian Chamber of Economy
A
new Public Procurement Act will simplify decision-making and reduce threshold limits in public procurement. Simultaneously the Ministry of Economy will cease being a passive protagonist and will be pointing out divergences from practices and instances of corruption in public procurement, as announced by the Minister of Economy Tomislav Panenić during the conference Public Procurement as a Generator of Economic Growth. The conference was organised by the Croatian Chamber of Economy and the Ministry of Economy aiming to define the guidelines for the improvement of the public procurement system and open the discussion on the new Public Procurement Act. The total value of annual public procurement is almost one third of the state budget or €5.6 billion, whilst the share of public procurement in GDP currently stands at almost 13%, emphasised Luka Burilović, President of the Croatian Chamber of Economy. “98% of bidders or contractors are Croatian, yet unfortunately most products have not been produced in Croatia. This is not due to the fact that Croatian products are uncompetitive, but primarily the result of a wide range of other reasons, one of them certainly being the level of corruption. The law and its enforcement is needed to enable Croatian entrepreneurs to access public procurement tenders”, concluded Burilović, highlighting the fact that, according to estimates, 15% of Croatian GDP is normally lost as a result of corruption.
CROATIAN PRODUCT CATALOGUE The Chamber has been pointing out issues in public procurement for years, highlighting the fact that irregularities need to be corrected. Croatian producers are frequently unable to participate in a large number of public procurement tenders due to a wide range of restrictions and the selection process in which specific products are favoured. “What we all require 14 | PVinternational | April 2016 | No 257
is a strategic approach to public procurement aimed at enabling SME’s to provide goods and services to the public sector. Corruption is not the only problem, since the principal issues in public procurement also originate from legal motivation, as well as from a lack of information both amongst the contracting authorities and the bidders”, warned Burilović.
THE TOTAL VALUE OF ANNUAL PUBLIC PROCUREMENT IS €5.6 BILLION Consequently, the Croatian Chamber of Economy has created a new service – an online catalogue of Croatian products. As pointed out by sources at the Chamber, the catalogue provides the opportunity to bring together and present Croatian products, whilst also providing easy access to specifications and costs for contracting authorities. “This will increase the share of small and medium-sized businesses in public procurement procedures and also raise awareness of the importance of product placement through public tenders and their impact on GDP growth. This is one of the objectives of the European policy in compliance with the Small Business Act”, explained Tajana Kesić Šapić, Director of Sector for Industry and IT. The catalogue initially includes 254 products of which 49 are Croatian quality mark holders and 13 are Croatian origin mark holders, and companies can currently start providing more products for the catalogue. Zvonimir Viduka, Director of the company Altpro pointed out that public tenders favour a specific company, and his own company cannot participate in the tendering process. “Altpro is a company that has won public
RATOR OF ECONOMIC GROWTH
EMENT WORTH ALMOST
procurement tenders on several international markets. We provided equipment for 45 railway stations in Indonesia, yet none in Croatia”, noted Viduka. According to Ivica Vuković, Director of the company Krah, the lowest bid price criterion is not the principal issue, yet it is one of the main problems. “Our biggest problem is the fact that tenders have been conceived in a manner that prevents local producers from participation. Imported goods are favoured and conditions that need to be met exclude domestic producers”, stated Vuković.
CONCEALED PROTECTION In compliance with EU directives, local producers must not be favoured, yet several countries protect their local producers effectively and with utmost subtlety, using concealed protection features and avoiding the violation of the rules, as pointed out by Ivančica Franjković, Deputy Head of the State Office for Central Public Procurement The previous laws were not entirely rigid and inflexible, yet new solutions will enable a higher level of participation in the public tendering process of Croatian products and innovative local companies that have thus far
MOST PRODUCTS PURCHASED THROUGH PUBLIC PROCUREMENT HAVE NOT BEEN PRODUCED IN CROATIA
faced huge problems in providing references in the Croatian market, stressed Tomislav Radoš, Vice President for Industry and IT, Energy and Environmental Protection at the Croatian Chamber of Economy. “Those inviting tenders need to be provided with further training. Moreover, they need to be informed of the fact that Croatia abounds with those who provide quality products, and this role will be assumed by the Croatian Chamber of Economy through the online catalogue of Croatian products”, emphasised Radoš. Davor Huška, Assistant Minister of Regional Development and EU Funds, highlighted the importance of public procurement to the Croatian economy, as the value of tenders invited over the next five years and financed through EU funds is €13.3 billion, whilst Gordana Brcković, Assistant to the Minister of Economy particularly pointed out the importance of synergy in the public tendering process, as well as of contracting authorities and bidders for products and services. “We are about to provide the draft law on public procurement and are expecting to have the final version by May 2016. Consequently, we are inviting everyone to provide their proposals and opinions”, noted Gordana Brcković. Over 900 proposals and opinions by businessmen and a large number of Associations have been put forward during the public discussion thus far. The draft law will include the criterion of cost-effectiveness, the European Single Procurement Document aimed at reducing the administrative burden for all those involved in the public procurement process and primarily concerning small and medium-sized businesses. (K.S.)
Our biggest problem is the fact that the tenders have been conceived in the way that prevents local producers from participation. Imported goods are favoured and conditions that need to be met exclude local producers. Ivica Vuković, Director of the company ompany Krah
April 2016 | No 257 | PVinternational | 15
TOPIC OF THE WEEK HOW TO FIND THE NECESSARY WORKFORCE
THERE ARE NOT ENOUGH WORKERS DESPITE 300,000 UNEMPLOYED Despite high unemployment rate, many Croatian companies cannot meet their demand for staff through the Employment Service. In a future Croatia there will be a demand for foreign workers due to the low birth rate and an ageing population. The examples of Poland and Germany show that economic growth can be secured only by opening borders to workers of scarce professions by Krešimir Sočković sockovic@privredni.hr
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very year some 5,000 employers in Croatia look for possibilities of importing workers despite the fact that 300,000 people are registered at the Employment Service. The Croatian labour market is suffering from many problems – we are seeing the lowest rate of activity and numbers employed in the European Union, the unemployment rate is almost the highest, the average age of a worker is high, and more young and educated people are leaving the country to earn better abroad – this is partly a consequence of the fact that the unemployment rate for young people is very high. This was the topic of last week’s Round Table How to
FOR THIS YEAR, CCE MEMBER COMPANIES REQUESTED THE POSSIBILITY OF IMPORTING 4,708 WORKERS FROM FOREIGN COUNTRIES secure the required workforce for the Croatian economy organised by the Croatian Chamber of Economy. 16 | PVinternational | April 2016 | No 257
In the next 20 years the EU will face shortage of around 30 million workers. Therefore, Croatia’s larger problem in the future will be how to attract foreign workers when faced with competition from West Europe. What makes things worse is the fact that if the country could to employ every worker looking for a job through the Employment Agency, it would still lack around 300,000 workers to secure Croatian economic growth and budget for pensions, healthcare and other social contributions.
POLISH EXAMPLE Croatia’s transition competitors face the same problem. For example, due to the outflow of their workers to the West Europe (over 800,000 according to estimations), Poland has applied for special licences for importing staff from the Ukraine, Belarus, Uzbekistan and Tajikistan. Polish officials at the Ministry of Labour visited China in January to find workers for their electro-technical industry and construction since they lack 72,000 staff. At the same time, in the considerably smaller Czech Republic, entrepreneurs seek help from the government since they are in need of 140,000 workers. Although refugees from the Middle East and North Africa are causing problems, in or-
der to maintain economic development, Germany alone lacks half a million immigrants over the forthcoming 35 years. In 15 years, half the workers in Germany will retire, so the number of workers could decrease from 45 to 29 million by 2050. Germany lacks workers and professionals with high education degree in almost all parts of the country. Companies need IT specialists, technicians, natural science scientists and there are many vacancies for health workers. When work permits are cancelled for Croatian workers, at least 10,000 Croatians will leave to keep company with the other 93,000 already working outside the country. Croatia will soon be faced with economic, demographic, education, safety and social problems.
OVER A THIRD OF COMPANIES NEED WORKERS Based on employers’ analysis of the demands for workforce in 2014, presented by Josip Ježovita of the Croatian Catholic University, almost 36.2% of the survey participants required workers, mainly in the processing industry, automobile production and sales, construction and tourism. The newly employed were in most cases searched for through the Employment Service (66.9%), personal acquaintances (45.4%) and through personal CV database (33.7%). Almost 32.8% of employers searching for workers experienced problems in finding them. The highest demand is for waiters, cooks, operators of cargo vehicles, salespeople, medical nurses, hairdressers and welders. The biggest problems that the employers face concerning workers are the lack of work experience (54.9%), lack of education for the particular job (43.3%), and interestingly enough, disinterested and unmotivated candidates (34.7%). For this year, CCE member companies requested the possibility of importing 4,708 workers from foreign countries so they could meet their demand for workers. The majority of the foreign workers were requested in Split, Zagreb, Rijeka, Čakovec and Pula, mainly electrical welders, ship fitters, ship pipers, ACP workers, welders, grinders, masons, steel reinforcement grid assembler, concreters and carpenters. The shipping industry is searching for the largest number of foreign workers (3,006), whereas construction companies requested 1,336 permits for foreign workers.
REQUALIFICATION INTERNALLY Even entrepreneurs are highlighting the high demand for foreign workforce. We are conApril 2016 | No 257 | PVinternational | 17
TOPIC OF THE WEEK
1000 quality drivers left Croatia for Germany
stantly searching for workers with certain experience (tile installers, pasteboard installers and others). We cannot find them here, so we have to look for them in foreign countries, says CEO Deputy of Tehnika Zlatko Sirovec. The HR Manager of Uljanik Hrvoje Markulinčić adds that it is important to highlight that foreign workers do not replace or exclude local ones. Moreover, they secure work for our mechanics, electricians and other professions, Markulinčić highlighted. The lack of workforce numbers was the reason we founded our college for the mem-
bers of our Group, Board Member of DIV Darko Pappo highlights. We are forced to ‘requalify’ our workers, and the best way to do this is internally. I have to stress our priority is not to bring workers from abroad. The Croatian worker is the cheapest for us. However, there are not enough of those who are ready and willing to work, Pappo highlights. The problem is the education system and politics in general, says Board President of Radnik, Mirko Habijanec, who is currently in need of around 100 suitable workers. Our goal is not to import foreign workers. We want to employ local people with whom it is easier to work, but we already have problems in finding suitable workforce, said Board Vice-President of Valamar Riviera Poreč Ivana Budin Arhanić who highlighted that tourism now employs around 80,000 people, and will soon need a further 20,000. President of the Road Cargo Traffic Association with the CCE and CEO of La Loga Darko Vukadinović, explained that his branch is faced with the problem of the outflow of skilled workers. According to his estimates, around 1,000 qualified drivers went to Germany alone.
A SOLUTION NEEDS TO BE FOUND The problem of importing workers has to be solved to the benefit of companies and the protection of interests of the local workforce, highlights Davorko Vidović, consultant for labour policy and employment with the CCE. Not only do worker import quotas have to increase, but a completely new model for hiring foreign workers should be developed. The number of the requested work permits ex-
Top 7 most critical professions (Female and male) Waiter
Cook
Driver of cargo vehicles
Salespeople
Medical nurse
Hairdresser
Welder
+
5,99 kn
7,4%
6,6%
Source: CEA, CCE
18 | PVinternational | April 2016 | No 257
3,2%
2,9%
2,1%
1,9%
1,8%
ŽELIMIR KRAMARIĆ, CCE VICE-PRESIDENT
We have stop producing staff for export or supply For now, Croatia does not have a consistent information system on educational and qualification needs on the labour market. Therefore, it is very difficult or entirely impossible to determine future education requirements, highlighted Predrag Bejaković from the Public Finances Institute. Considering globalisation and negative demographic factors, Croatia is, or should be, in the process of restructuring the economy and promoting its competitiveness. The education system should be more flexible and faster when adapting, Bejaković thinks. One of the solutions is offered by the Croatian Chamber of Commerce through
its project of dual education. The goal of dual education is to connect the system of education and the economy based on the German and Austrian model. This is pre-
ceeds the number of the determined quota 20 times. These are mostly in construction, traffic, tourism and ship building professions, Vidović highlights. A national problem has to be solved only by taking national action. The first condition is to recognise the problem, and the second is the political will to solve it. Also, the first national goal has to be to increase employment and the first step is to develop a comprehensive national development strategy and use of human potential. We can immediately start with short-term measures such as increasing
cisely what entrepreneurs are looking for, says CCE Vice-President for International Affairs, Želimir Kramarić. This type of education will include young people on the labour market even during their high school or any other higher education. We have to stop producing people/staff for export or supplies, Kramarić highlights. Deputy Minister of Science, Education and Sport Hrvoje Šlezak supports this project. These types of projects, like the project of dual education implemented by the Chamber, is only a step forwards towards solving this complex problem. However, we all know this is the way to go, Šlezak concluded.
import quotas, develop a new model for hiring foreigners, amend the Act on Foreigners, introduce dual education and stricter monitoring of illegal work, Vidović concludes. Nada Šikić, Minister of Labour and the Pension System stressed that the Ministry is open to talks with companies about new models of hiring foreign workers. I understand and support, on one side, the needs for importing workers. However, on the other side, we have to consider the protection of our own labour market. Therefore, the quota will be increased this year, but not as much as was requested.
5000 employers in Croatia are searching for possibilities of importing workers
Annual quotas for work permits for 2016 proposed by the CCE 3006
4708 work permits
1336
proposed by CCE members
500
another
400 300
20,000 ,
253
people
200 100
59
35
will soon be demanded in tourism, in addition to the present 80,000
19
0 Shipbuilding Source: CEA, CCE
Construction
Traffic
Tourism and Processing industryAgriculture and hospitality (Metal processing Forestry industry)
April 2016 | No 257 | PVinternational | 19
THE REASON BEHIND The story of CroNoMar, Šibenik
Croatian-Norwegian co-o
CroNoMar has been searching for new projects linked with the marine and mar opportunities for the development of Croatian companies and boosting ov
In addition to the Šibenikbased NCP, vessels for international clients are constructed in Pula-based Tehnomont. Moreover, CroNoMar is aiming to extend activities linked with shipbuilding to other Croatian shipyards. Malvin Villabo, Director of CroNoMar
T
he Šibenik-based company CroNoMar, in Norwegian ownership, was founded in 2009, with the idea of bring together Croatian and Norwegian entrepreneurs in the marine and maritime sector and to provide assistance to entrepreneurs through the provision of diverse services. The total value of projects implemented through CroNoMar in 2015 was €13 million. The activities of CroNoMar are mainly the provision of professional assistance to entrepreneurs, the organisation of educational programmes, information, consultancy and networking, as well as facilitating access to information sources and services linked to the development of new products and services, the implementation of new business models and the internationalisation of business. The efforts of CroNoMar to focus on the strengthening of co-operation between the two countries have contributed greatly to the successful implementation of a CroatianNorwegian project - iNavis Maritime Innovation Centre located in Šibenik, that opened in 2012. Due to the importance of this project, 2011 saw a visit by the Norwegian royal family to Šibenik, which encouraged further economic co-operation between Croatia and the Kingdom of Norway.
A SIGNIFICANT BREAKTHROUGH CroNoMar has been looking for projects aimed at providing opportunities for development of Croatian companies and boosting overall economic growth.
Malvin Villabo, Director of the company CroNoMar, has extensive experience in business development both in shipbuilding and research and development. He was at one of the most important R&D institutions in Norway - the Institute of Marine Research in Norway, and he subsequently continued his career in Leiv Eiriksson Nyskaping, a Norwegian incubator where he worked as a director for 18 years. A significant breakthrough was made in 2015 through CroNoMar concerning the development of new products intended for foreign markets in the shipbuilding sector. Two prototype ships with exceptional technical 20 | PVinternational | April 2016 | No 257
and technological features were subcontracted, constructed and delivered: a 15-metre catamaran and a 25-metre monohull which were successfully presented in August 2015 at the largest global marine aquaculture trade fair held in Norway. In addition to the participation of Croatian SME’s at the Aqua Nor fair, the project included an organised visit to Norwegian companies in the region, aiming to contribute to the internationalisation of business of Croatian companies, and presentation and branding of Croatian quality and products on the international market. It was co-financed with funds provided by the Ministry of Entrepreneurship and Crafts from the Entrepreneurial Impulse programme for 2014, and implemented by CroNoMar. The projects implemented since 2015 are linked with engineering in shipbuilding and comprise of the preparation of comprehensive technical documentation for ships and the completion of existing design plans, and they aim to present and provide an overview on the quality and innovativeness of Croatian engineers to foreign markets. Several local companies have been involved in the projects thus far: the Šibenik-based company Navarch, as well as the Split-based companies Anemos and Armanija. “2016 will see us sign new contracts, and opportunities will be provided for the implementation of new projects and the further development of our business. CroNoMar always strives to agree on installation of the maximum quantity of the maritime equipment produced in Croatia in all projects implemented by the company, aiming to show and present the quality and the professionality of Croatian producers at an international level. Concerning shipbuilding, in addition to the Šibenik-based NCP, vessels for international clients are also constructed at the Pula-based Tehnomont. Moreover, CroNoMar is aiming to extend the activities linked with shipbuilding to other Croatian shipyards. Equipment from Croatian producers installed on ships, is currently provided by reputable companies such as Adria Winch and Palfinger Croatia, and in the future we expect to strengthen
operation
ritime sectors aimed at providing verall economic growth by Jozo Vrdoljak co-operation with other Croatian companies”, explained Villabo.
KNOWLEDGE AND TECHNOLOGY TRANSFER The activities of CroNoMar are primarily focused on the marine and maritime sector both in Croatia and in Norway, whilst the services it provides comply with international standards and are fully adapted to the end user. CroNoMar fully meets market requirements concerning the provision of assistance through intermediation between business partners, in order to establish new co-operation, provision of assistance upon contract signing, provision of services or performance of work such as quality control and construction supervision. Furthermore, CroNoMar fully meets market requirements enabling networking between the companies using its services and their foreign partners, the internationalisation of business and access to new markets. Day-today operations at CroNoMar, as well as iNavis Centre Innovation Incubator, are based on knowledge and technology transfer and business development, aiming to position the Centre as a recognised brand both in Croatia and at international level. Through defining the potential projects and business opportunities CroNoMar aims to address identified problems concerning the market, unsatisfactory technological levels or
financing, aiming to foster the competitiveness of Croatian products and services in this sector to enable them to meet the requirements of international customers. Projects implemented through intermediation of CroNoMar both ensure stable full-time jobs and create new jobs in the local environment. “CroNoMar has been aiming to be involved in long-term projects since its foundation. Consequently, in 2009 the company signed its first commercial contract on the construction of a catamaran for the Norwegian market in Croatia, following which it signed several contracts on construction of new working vessels. Hence, the Šibenik-based NCP Overhaul shipyard has to date constructed a total of 47 catamarans, most of which were ordered by Norwegian clients, whilst several were for Saudi Arabian clients and two were ordered by British clients. Each contract is specific and the technical specifications of products are contracted primarily to meet the requirements of the end user”, pointed out Malvin Villabo.
13 3 million
€
the value of projects implemented through CroNoMar in 2015
47 catamarans constructed in Šibenik mainly for Norwegian clients
iNavis Centre
16 companies in the Innovation Incubator iNavis Centre, established as a result of cooperation between the City of Šibenik and the Norwegian Ministry of Foreign Affairs, includes an Innovation Incubator run by the company CroNoMar. As an institution providing support to entrepreneurship, CroNoMar is focused on encouraging the development of entrepreneurship and the entrepreneurial environment through its business activities. In addition to the incubator, iNavis Centre also includes
the Regional Development Agency of the Šibenik-Knin County and a dislocated university undergraduate study of Energy Efficiency and Renewable Energy Sources of the University of Zagreb. 16 companies linked with the marine and maritime sector are currently operating in the Innovation Incubator. They are primarily involved in engineering and electrical engineering in shipbuilding, hydro engineering, the provision of services in shipping, consultancy
services and there are also companies providing services linked with accounting and information technology.
April 2016 | No 257 | PVinternational | 21
FOOD PRODUCTION FISH AND SHELLFISH FARMING
MARICULTURE IS THE BUSINESS OF THE FUTUR During the past five years, mariculture has developed rapidly in Croatia. Apart from the quantity of the fish, quality also increased. The turning point was the involvement of Adris Group by Jozo Vrdoljak vrdoljak@privredni.hr
ANNUAL PRODUCTION OF MARICULTURE CLUSTER MEMBERS
over 4,000 tonnes of tuna 8,000 tonnes of white fish 3000 tonnes of shellfish 20 million juvenile fish
M
embers of the Mariculture Cluster produce over 4,000 tonnes of tuna a year; 8,000 tonnes of white fish and 3,000 tonnes of shellfish plus 20 million juvenile fish. The total quantity of farm-raised tuna is exported to the demanding Japanese market; the largest proportion of white fish goes to Italy and a smaller amount is sold in Croatia, whereas shellfish is sold exclusively on the local market. “We founded the Mariculture Cluster in late 2008, motivated by the Croatian Chamber of Economy (CCE), when this cluster received the initial funding. Our activities have been intensifying ever since”, highlights Danica Poparić Majić from the Croatian Chamber of Economy – Split County Chamber. In early March the Mariculture Cluster organised another training workshop in Split, gathering the most important representatives of this activity. This time the focus was on disease prevention in white fish, and the workshop was coorganised by the Croatian Veterinary Institute, CCE Split and the Group of White Fish Farmers of the Maritime Cluster. The workshop was sponsored by Pharmaq, the Norwegian producer of vaccines and drugs. Foreign and local experts and practitioners shared their experiences and discoveries in applying preventive measures and health management in mariculture to around seventy participants. “These types of workshops are very informative, and this one was one of many other workshops that help the Croatian fish farmers perform their business. We are trying to organise as much as similar activities as possible”, notes Danica Poparić Majić.
HUGE PERSPECTIVE In the past five years mariculture has been developing rapidly in Croatia. In addition to the quantity of fish, quality also increased. The turn22 | PVinternational | April 2016 | No 257
ing point was definitely the involvement of the Adris Group since this company raised the standards of farming to an extremely high level. Their company Cromaris is already amongst top ten white fish farmers in the world. Dragan Pezelj, manager of white fish farmers in the Mariculture Cluster says the Cluster includes 24 white fish farmers who produced 8,000 tonnes of white fish last year, which is
PARAMETERS OF TUNA FARMING EXCEED THE PRODUCTION OF WHEAT IN CROATIA a significant increase compared with 6,000 tonnes produced a few years ago. “We are pleased we are contacted by more and more farmers who produce over 1,000 tonnes of white fish. There are four of them currently. New investors are also contacting us. We export to Italy, Slovenia, Poland, Serbia and Bosnia and Herzegovina. We are also trying to penetrate the Russian market. We are delighted the quality of our fish has been recognised and we are able to compete side by side with the European market. The Mariculture Cluster helps us solve both economic and health problems in farming white fish”, Dragan Pezelj highlights. Pezelj says this business has huge a perspective since farm-raised fish is the only fresh fish available at any given moment. Furthermore, its price is more affordable. On the
E
other hand, wild fish is available less and less. He also said that the parameters of tuna farming exceed the production of wheat in Croatia, and the value of the farming white fish currently totals around €30.6 to €46.6 million. The limiting factors are huge obstacles, from administrative to financial. Investment projects are quite expensive. The duration of the production cycle is another problem since it lasts at least two years. Other problems are related to farming live organisms. The problem of obtaining concessions and the complex procedure of obtaining permits are main investment obstacles, Pezelj explains. He hopes that local producers will use the money from the EU funds intended for investing in mariculture since €40 million are now available as he reveals.
HEALTH AND FARMING Sardina from Postira farms around 600 tonnes of white fish, 900 tonnes of tuna and owns a shellfish farm. Kristijan Zanki, fishery manager at Sardina says the company is preparing for an EU tender related to investment projects in aquaculture. Since all the farmers are joined in the Mariculture Cluster, we anticipate the EU funds will have enough money for the innovations we intend to implement to improve our production conditions in our farms and, of course, cut our expenses, Zanki points out. Zanki highlights that the process of obtaining concessions for farms is the biggest concern for fish farmers. It is difficult to obtain permits, especially for farms located 300 metres from the shore since the concession has to be obtained at state level, not county level.
This is a time-consuming and extremely complex procedure - possibly the biggest obstacle for local and foreign investors, Kristijan Zanki explains. Zanki also commented on the comparison between the qualities of farm-raised fish and wild-caught fish. He says the advantage of farm-raised fish include affordable prices and supervised farming. This fish does not come into contact with pollutants and disease carriers. Experts supervise all the parameters, Zanki claims. Concerning the inspection of diseases in farming sea bass and gilt-head bream in Croatia as well as the methods for their prevention and treatment, Slavica Čolak from Cromaris in Zadar says that due to systematic monitoring of fish farms, this fish is equally healthy, if not healthier than the wild-caught fish. Snježana Zrnčić from the Croatian Veterinarian Institute says that farm-raised fish can be safely recommended since this kind of fish does not contain traces of antibiotics or any other drugs. Drug treatment in the second year of fish farming is not cost-effective. It is important the fish is submitted to health analysis before its placement on the market to see whether it contains heavy metals or even antibiotics. I can say with all certainty that farmraised fish has never contained toxic elements before its releasement on the market. Farmraised fish has a shorter life span than the wild fish so it does not come into contact with other species in nature. Its feeding is supervised. On the other hand, wild fish live longer and feed on basically anything. At the same time, farmraised fish has almost the same parameters of saturated fatty acids as the wild fish Snježana Zrnčić explains.
The process of obtaining concessions for farms is the biggest concern for fish farmers, Zanki says
Kristijan Zanki
Dragan Pezelj
April 2016 | No 257 | PVinternational | 23
NAFTALAN AGREEMENT WITH THE NORWEGIAN HEALTH INSURANCE FUN
CROATIAN SPA TREATM OPPORTUNITIES INTER
For many years now patients from Russia, Denmark and Slovenia have been com The agreement with the Norwegian insurers could result in a greater influx of pat
L
ast year ended successfully for the management and workers of Naftalan – a special hospital for medical rehabilitation in IvanićGrad, with €78,000 profit; more patients and a new market due to stronger marketing activities, which finally resulted in the arrival of the first group of patients from Norway. Notwithstanding, the true result of promoting naftalan in Norway as a mineral oil with extremely positive therapeutic effects on treating skin and inflammatory rheumatic diseases, this year should see an improvement as the hospital has signed an agreement with the Norwegian health insurance fund to cover treatment costs for psoriasis and other skin diseases for 100,000 patients in Norway estimated to suffer from this disease. For many years patients from Russia, Denmark and Slovenia have been coming to Ivanić-Grad to receive naftalan treatment. The agreement with the Norwegian market could result in greater interest by patients from Finland, Iceland and Sweden. The increased interest in the Croatian spa is not surprising – medicinal oil, naftalan – produced from distilled and refined crude oil, and salty thermal mineral water are unique in Europe. In other parts of the world they exist only in Baku, capital of Azer-
baijan. The largest number of visitors are from Slovenia, and the long-time partner is the Psoriasis Association; its members are offered affordable prices. The hospital also participates regularly in health fairs, says Assistant Director for healthcare protection quality, Milica Birk. For this reason, almost 40% of income was earned on the free market and 60% from the Croatian Institute for Health Insuran-
QUADRUPLE GROWTH IN THREE YEARS
Year with €0.16 million income During the past three and a half years, Naftalan and its subsidiary Ivalan have developed their products, naftalan-based products, aiming to bring them closer to the public. In addition to their stores, their product is sold in all Croatian pharmacies, and
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exported to Bosnia and Herzegovina, Serbia and Sweden. The business is performing very well and it shows continuous progress. “We finished last year with €0.16 million income, and our growth quadrupled in three and a half years”, says Dr. Maričić.
ce (HZZO). The hospital accommodates 1,800 patients every year, which is 8085% of its total capacity. Furthermore, every day the hospital treats 100 elderly and weak patients, and another 300 go through a daily cycle of physical therapy.
HIGH QUALITY STAFF HZZO covers all costs for patients approved by their medical committee. Tho-
D FINALISED
MENT SEES GREAT RNATIONALLY
ming to Ivanić-Grad to receive naftalan treatment. tients from Finland, Iceland and Sweden by Goran Gazdek
NAFTALAN OFFERS 137 STATE-OF-THEART ROOMS AND SUITES
ey urological rehabilitation - treatment they perform to a lesser extent. “We have an excellent and well-trained medical staff, consisting of five doctors specialising in physical therapy and rehabilitation, four doctors specialising in dermatovenerology, 25 physical therapists and 16 medical nurses – a total of 94 employees, including the reception, kitchen, technical and cleaning staff. In addition to human resources, we aim at maintaining a high-level of equipment and accommodation with constant investment”, highlights Director Dr Goran Maričić.
Ministry of Health for the building’s technical and investment maintenance as well as capital construction. T The total budget is €2.9 m million, and nett incom me is roughly €2.1millio on, says Director Marič ri ič ričić, who praises their e ex excellent co-operation wi with the County. Further in nve investment will needed to expand capacity and additional services for better positioning and much better development of health tourism which has huge potential and high annual growth rates. Naftalan has a development project for the construction of an additional 120 beds, a complex of outdoor and indoor pools – 1,200 m2 of water areas, a new kitchen and restaurant, gym and multipurpose meeting hall with 190 seats for which they have managed to obtained a building permit.
SOMETHING NEW EVERY YEAR
INVESTMENT WITHOUT LOANS
reign market, depending on the level of service and accommodation (€80-€120 a day). Naftalan is celebrating its 27th anniversary this year. It opened in 1989, after much research conducted by numerous scientist of the Ruđer Bošković Institute, Ina laboratory and various hospital institutes. In 25 years, the hospital managed to establish itself in medical tourism as a serious institution with high-standards for treating skin diseases, rehabilitation, illnesses of musculoskeletal system, posttraumatic and postoperative rehabilitation of the locomotor system and ne-
Ten years ago they added a sixth floor with 24 beds and four-star accommodation. Currently, Naftalan has 137 beds in modern single-bed and two-bed rooms as well as suites, renovated every year with new furniture and mattresses. A new area for physical therapy opened two years ago, and another is being organised and will be used for naftalan therapy, electro-therapy and heat-therapy as well as wellness, massage and medical exercises. During the past ten years, the hospital has invested a total of €5.3 million in maintenance and development. Naftalan’s owner is the County of Zagreb which invests €4 to €5 million a year, these funds are provided by the
Total investment is €10.6 million, and it is planned to obtain 50% of this from EU structural funds. However, the former government failed to negotiate this in the operational programme 2014-2020. Now they are working on solving this problem in order to finance this project with their own funds, good planning and well predicted future income. “The founder is not keen on acquiring a loan, since it considers the amount too high compared with what it could guarantee. Thus why for now we decided to cut investment to €5 million, and drop the idea of building additional accommodation, says Dr Maričić. He also added there was a possibility for Naftalan to receive 30 new beds.
se who come with a referral letter for physical therapy pay for accommodation, and there are patients who cover all treatment costs themselves. For a day, which includes three meals (buffet), accommodation, doctor and nurse care as well as full physical therapy services, HZZO pays €45. Prices vary for the fo-
April 2016 | No 257 | PVinternational | 25
CROATIAN CANDIDATE EY ENTREPRENEUR OF THE YEAR
ĐURO HORVAT WINS Đuro Horvat is the winner of the Croatian version of the competition, which makes him one of 60 entrepreneurs who will compete for the title of the EY World Entrepreneur of the Year in June in Monte Carlo
T
his is the second time that the most prestigious award for entrepreneurs was organised in Croatia, and the new EY Entrepreneur of the Year in Croatia is Đuro Horvat from Tehnix.
As the winner of the Croatian version of the competition, he is one of 60 entrepreneurs who will compete for the title of the EY World Entrepreneur of the Year in June in Monte Carlo. Horvat is the CEO of an ecological company for the planning, production, and servicing of equipment, machines, plant and technology servicing as well as promoting environmental protection. The company employs over 325 workers and owns 50 patents as well as over 350 personal products sold on the local and foreign markets. EY Entrepreneur of the Year is a global programme which promotes the achievements of top global entrepreneurs and it is carried out at regional, state and global level in over 145 cities and 60 states.
The winner in the category of Technological innovations is Kristijan Milaković, head of company Nicro which provide users with help in optimising production processes for the purpose of meeting strict demands of the pharmaceutical, food and chemical industry. Habiba Legac, owner of company Feroimpex for producing automobile parts won in the category of International Achievement. Her company specialises in producing bearings, automobile and railway industry parts well as tools and bearing parts for wind power plants. A total of 30 companies applied for this year’s competition. They employ a total of 6,500 people and have a total income of €0.87 billion. (I.G.)
SAILING PORTS IN CROATIA
INCOME GROWTH EVEN DURING THE CRISIS
T
he Croatian Bureau of Statistics presented the results of their survey on the income of sailing ports. The survey was conducted last year across 121 ports specialising in sailing tourism.
Last year there were a total of 112 ports. Maritime tourism ports earned €100 million in income (VAT excluded), 5.1% more compared with 2014. The positive growth trend of these ports has la26 | PVinternational | April 2016 | No 257
sted without interruption since 2002, which is partly due to the increased in their numbers. The Croatian Chamber of Economy commented that this growth is a structural result of the so called “other income”, which was responsible for 7.6% of last year’s total income. The largest share of ports total income (68% in 2015) is related to income from renting berths, which actually decreased 1.6% compared with 2014.
EY Entrepreneur of the Year - Đuro Horvat from Tehnix