Interview→Darko Horvat: We need competitive entrepreneurs, says Minister of Entrepreneurship PAGES 2-4
SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
The Croatian Chamber of Economy→ New representative offices intended to help entrepreneurs PAGES 12-13
Interview→Milan Vrdoljak: we first have to find the drivers and then buy the lorries, says the BP of Ricardo PAGES 16-17
PVinternational C R O A T I A N
B U S I N E S S
&
F I N A N C E
M O N T H L Y
July 2016, Year IX, No 260
STABILISATION AFTER POLITICAL TURBULENCE
NEW ELECTIONS AT THE BEGINNING OF SEPTEMBER It is important to send a message to the public that all state bodies will operate; we will fulfil all our international obligations and everything relating to salaries, obligations and pensions, the ousted Prime Minister Tihomir Orešković said by Ilijana Grgić grgic@privredni.hr
T
he technical government of PM Tihomir Orešković held its first session last Thursday after Parliament lost a no-confidence motion. “We will operate as a technical government for about four months, maybe longer. It is important to highlight that Parliament will operate a little less than a month. It is vital to send a message to the public that all state bodies will operate; we will fulfil all our international obligations and everything relating to salaries, obligations and pensions”, the ousted Prime Minister Tihomir Orešković said at the beginning of the session. Even though the government is technical, a few proposals were sent to Parliament. During his elaboration of the proposal to the Act on the payment of invoices to consumers which sets the rules of transparency and comparability of compensations charged to the consumer, Finance Minister, Zdravko Marić, said that they will proceed with this amendment to the Act, more precisely an EU directive which should be implemented by 18th September. Regarding amendments to the Act on Accounting, Marić explained that the proposed amendments are the result of comments from interested parties in
a public discussion, and will affect over 100,000 Croatian entrepreneurs. Crucial changes will include cancelling the obligation of introducing a unique framework account plan helpful for statistical and tax issues, but at additional financial and administrative cost for entrepreneurs, Marić said.
The proposed amendments would increase the budget by €120 million this year and €14.7 million next year and €17.3 million in 2018, Minister of Labour and Pension Systems, Nada Šikić said. To recap, the Croatian government was dissolved after a no-confidence motion was lost, after which the Prime Minister
THE GOVERNMENT UNDER THE LEADERSHIP OF OREŠKOVIĆ CONTINUES ITS WORK IN A TECHNICAL MANDATE Parliament also received amendments which allow transferring capitalised savings from the pension fund of the first pillar for those individuals who receive their pensions from the first pillar, that is, the disabled and those with reduced service years.
invited his two vice-presidents Tomislav Karamarko (Croatian Democratic Party – HDZ) and Božo Petrov (Most) to resign. The Government continues its work under the leadership of Orešković in a technical mandate until new elections scheduled for the beginning of September.
INTERVIEW DARKO HORVAT, Minister of Entrepreneurship and Crafts within
WE NEED COMPETITIVE ENTREPRENEURS We have simplified common national regulations to allow entrepreneurs access to non-repayable EU funds. We have made all technical preparations and secured the appropriate financial instruments inside specific credit packages with an interest rate varying between 0.5% and 3%. by Sanja Plješa
T I am aware the Ministry of Entrepreneurship and Crafts drew €7.6 million from EU funds last year. My wish is, and we will work hard on achieving it, that this year my Ministry signs contracts worth roughly ten times more. This would make me feel satisfied.
he Ministry of Entrepreneurship and Craft within this government mandate expressed willingness to cooperate and solve the problems of micro, small and medium-sized entrepreneurs and crafts. The Minister of the technical government now, Darko Horvat, immediately made some moves, simplifying the business of entrepreneurs to increase their competitiveness, for example, through applications for EU structural funds. What does the Ministry of Entrepreneurship and Crafts plan to do to simplify the business of crafts as well as small and medium-sized enterprises? If we wish to become a true service for the real sector and identify the biggest problems, only the entrepreneurs themselves can provides us with what is necessary. We visited the majority of counties and spoke with entrepreneurs, after each meeting with the leading people in local administrations. We also visited several companies in each county, so that people could tell us their major concerns. Without any hesitation, entrepreneurs spoke about their problems, for example, new vacancies, designing export strategies or increasing production and services. One of the most important problems concerned starting a new investment cycle. After almost three months we managed to reconstruct some issues to the benefit of our entrepreneurs, and funding via EU funds was a big contribution. The rules prescribing the draw-down of funds were very complicated and problematic. Additional problems occur after they use 35% or 45% of non-repayable
2 | PVinternational | July 2016 | No 260
subsidies in rounding up financial constructions and investment for which they had prepared. On the one side, we simplified common national regulations to allow entrepreneurs drawing non-repayable EU funds. We made all technical preparations and secured the appro-
WE WILL TRY TO INVITE TENDERS FROM STRUCTURAL FUNDS BY THE END OF THE YEAR WHICH WILL EXCEED €0.2 BILLION priate financial instruments in specific credit packages with an interest rate varying between 0.5% and 3%. The highest rate will be paid when the loan is intended for craft funds. On the other hand, the interest rate on loans for boosting the investment cycle will be 0.5%. You have recently mentioned introducing new financial instruments for entrepreneurs. Could you elaborate on this? From the first day I became minister, I have been saying that my wish is to create business conditions for Croatian entrepreneurs which would be on the same level of those of our neighbours. The banks in Italy, Germany, Austria and Switzerland have far lower interest rates than Croatia. We want to turn our
Patrik Macek/PIXSELL
the technical government
entrepreneurs into competitive entrepreneurs and offer them funding at the rates competitors are paying. On the other hand, a series of tenders invited for benefit crafts, micro and small sized entrepreneurs as well as trade companies. They are now in the final phase of creating regulations based on which this year’s E-impuls tender will be invited, worth almost €40 million. We will no longer use the budget for subsidies, but will base our subsidy systems entirely on EU structural funds. We are also sure that when new boards are appointed to HPB and CBRD a synergy will
occur which will help these two banks reduce their interest rates to under 3% and that on the basis of their existing and new products on the market. Due to competition on the financial market, these elements will influence commercial banks operating in Croatia to bring their products and interest rates closer to our philosophy. Some of the anticipated effects can already be seen on the Croatian financial market. The majority of commercial banks offer loan packages to the Croatian financial market at an interest rate under 4%. We must not forget the situation six months July 2016 | No 260 | PVinternational | 3
INTERVIEW
Minister Horvat and our journalist Sanja Plješa
back when a 6% interest rate was considered normal and favourable. What will E-impuls include? This years’ framework of E-impuls will be based on the Development Strategy of Entrepreneurship 2013-2020. The first strategic goal will be to improve the economic efficiency and competition of Croatian entrepreneurs. Through E-impuls we will secure subsidies for companies wishing to modernise their plants and equipment, introduce new technologies, procedures and norms as well as various other measures for promoting production, development of clusters and co-operatives or for offering support to companies regarding the application of technical and normative acts and quality systems. Female entrepreneurship, co-operatives, the concentration of economic potential through support clusters will be promoted. Also, E-impuls will secure the promotion of entrepreneurship, including participation at shows whether they are organised in Croatia or abroad. The development and establishment of new companies will be stimulated as well as a subsidies’ system which will allow these companies employment, or which will enable self-employment. I am certain that many strategic documents will be implemented through E-impuls; certain acts will be transformed, and the specific strategy we want to implement and highlight through E-impuls is the strategy for fighting poverty and social exclusion. 4 | PVinternational | July 2016 | No 260
How much funding will be given to entrepreneurs through E-impuls? The harmonisation of common national regulations secured the decrease of lower and an increase in the upper threshold of funding subsidies from the EU structural funds. In this segment the lowest subsidy, when the structural fund is the source, will be €40,000 and the highest will be €4 million. The lowest subsidy in E-impuls will be €4,000 and the highest will be €40,000. It is not the intention of E-impuls to stimulate companies which are able to find sources of financing directly through structural funds. The intention is to subsidise the most sensitive segment of Croatian entrepreneurship – crafts, micro and small-sized companies. How much funding do you plan to draw from EU structural funds and where will they be invested? I am aware the Ministry of Entrepreneurship and Crafts drew €7.6 million from EU funds last year. My wish is, and we will work hard on achieving it, that this year my Ministry signs contracts worth roughly ten times that amount. This would make me feel satisfied. Regarding plans for this year, the Minister of Regional Development and EU Funds, Tomislav Tolušić, has a transparent strategy, and his intention is to increase this amount considerably, primarily concerning financing infrastructural projects. We have to find funding in EU funds which
would finance various projects up to the level of 50-60% of their value. Not a single project in Croatia should be financed exclusively via the state budget. We are now at a level of €10.9 million in subsidies. E-impuls is worth €40 million, the same as the opening tender for tourism. Almost €26.6 million is planned for introducing IT equipment, software and telecommunication equipment. Therefore, there will be a total of six or seven more tenders by the end of the year intended for subsidising entrepreneurial infrastructure whether in entrepreneurial zones or development centres and incubators. We will try to invite tenders from structural funds by the end of the year which will exceed €0.2 billion. Over €2.4 million will be intended for student scholarships. Our view, according to which we will not pay anything from the state budget, helped us to bring back the level of scholarships for shortage occupations to €1.5 million in 2015. It is important to highlight that not a single scholarship was paid from the state budget. They were all financed by structural funds. What is your view on the dual education system for craft skills, and what should be changed in this system? We have already sent a memorandum to Germany, which, I am certain, will be signed by the end of the year by the two competent ministries of Bavaria and Croatia. Their co-signees will be the Chamber systems from Bavaria and Croatia. A workgroup has been formed and it should design the concept of introducing the dual education system. Through two pilot projects, we will start with this autumn we want to help children, parents and employers as well as founders of high school systems for vocational training, to realise that it is not the county which dictates how the children will be enrolled and what will the enrolment quotas could be. It is the identifying of newly opened vacancies and the need of the real sector which will define enrolment quotas with the possibility that a larger share of these children will do their practical training in companies or crafts. Our Ministry will help either with scholarships or fees for practical training or it will cover the cost of mentorships, that is, the employer in order to create a positive environment.
CORPORATE BUSINESS ACTIVITY IN CROATIAN COUNTIES IN 2015
ZAGREB TAKES FIRST PLACE Counties have 59.5% of all Croatian entrepreneurs. Companies registered there account for 72.1% of the total income of the Croatian economy, and employ 65.2% of workers and account for 69.5% of nett profits by Ilijana Grgić grgic@privredni.hr
T
he 106,569 Croatian entrepreneurs operating in 2015, concentrated their head offices in the centres of Croatian counties, according to the analysis by the Financial Agency on business activities in Croatian counties during 2015. Furthermore, it is evident that over 10,000 entrepreneurs
COUNTY CENTRES ANALYSED ACCORDING TO THE NUMBER OF ENTREPRENEURS, NUMBER OF EMPLOYED AND INCOME AS WELL AS NETT PROFIT OR LOSS, ZAGREB RANKS FIRST IN ALL FOUR SEGMENTS operate in just two counties: Split and Dalmatia (11,957) and Zagreb (35,089). Therefore, these centres account for 59.5% of all Croatian en-
trepreneurs; the companies registered in those cities account for 72.1% of total income of the Croatian economy; employ 65.2% of workers and account for 69.5% of nett profits. In order to obtain the complete picture, one needs to look at FINA data on business activities of all entrepreneurs in 2015. The 106,569 entrepreneurs had 838,584 employees, up 29,204 over 2014. They achieved a total income of €85.3 billion, expenditure of €82.3 billion and nett profit of €2 billion. Profits of €4.79 billion was accounted for by 68,611 (64.4%) of entrepreneurs Losses of €2.5 billion was realised by 37,958 (35.6%) of entrepreneurs. Of the €85.3 billion of total profits, €15.5 billion was earned through exports, 10.2% up year-on-year. 15,385 entrepreneurs (14.4%) were involved in exports; €27.3 billion represented imports. At a county level, entrepreneurs in Istria achieved the highest profit growth in 2015 (+267.4%) compared with 2014. Istria is followed by Primorje and Gorski Kotar (+218.8%); Šibenik and Knin (+115.9%), Krapina and Zagorje (+115.7%) Zagreb with profit growth of 104.7%.
VISIBLE DIFFERENCES BETWEEN COUNTIES The number of entrepreneurs, the number of employed and total income per city/county centres, is, naturally the highest in Zagreb. It is followed by, which is second in terms of the
€85.2 billion total income of 106,569 entrepreneurs in 2015
€82.3 billion expenditure last year
page 8
July 2016 | No 260 | PVinternational | 5
CORPORATE BUSINESS ACTIVITY IN CROATIAN COUNTIES IN 2015
COMPARISONS: CROATIAN COUNTIES AND THE WORLD Source: HGK
9.436
34.763
60.070 1.960
THE COUNTY OF PRIMORJE AND GORSKI KOTAR GDP of the County of Primorje and Gorski kotar is similar to that of Montenegro, based on the economic strength of 155th country in the world, and it achieves this share with half the population
1.931
8.361
15.371
800
THE COUNTY OF KARLOVAC GDP share of the County of Karlovac is similar to that of the Solomon Islands, based on economic strength, 174th country in the world (of a total of 190 countries according to IMF data), the number of people is five times lower.
6.529
43.975
47.988
1.840
1.829
10.128
18.378
566
THE COUNTY OF KRAPINA 3.202 22.643 AND HRVATSKO 38.182 915 ZAGORJE
The County of Krapina and Hrvatsko Zagorje has a GDP share roughly THE COUNTY the same as Spain. OF ZAGREB This county’s share of The County of Zagreb population is 3.1%, and has a slightly lower GDP it is slightly higher than compared with the Japan the 0.6% of the Spanish (5.7% to 6.5%); the percentage of global share of the population population. is slightly higher (7.4% in relation to 1.8% in Japan).
THE COUNT VARAŽDIN
GDP of the County that of of San Mari people in this coun
THE CITY OF ZAGREB Zagreb’s GDP and population is twice the size of Malta, according to economic strength of the weakest EU member
35.089 328.040 330.102 17.673
THE COUNTY OF ISTRIA GDP of the County of Istria is similar to the share of Maldivia, 161st country based on economic strength, and Maldivia has 1.7 times greater population.
9.552
30.746
THE COUNTY OF LIKA AND SENJ
1.819
GDP share in Croatia of the County of Lika and Senj is similar to Hungary’s share in the EU; the share of the population is somewhat smaller (1.2% in Croatia compared to 1.0% of Hungary in the EU).
16.147
46.092 3.556 703 4.017
106.569 639.648 838.584 35.926
REPUBLIC OF CROATIA
1.856 106
THE COUNTY OF ZADAR GDP share of the County of Zadar is similar to Brazil’s GDP share in the world, and the share of the population is slightly bigger (4% in Croatia compared with 2.8% of Brazil’s share in the world).
GDP share of the County of Šibenik and Knin in Croatia is similar to Mexico’s share in the world, and the share of the population is 2.6% higher in Croatia compared with 1.8% of Mexico’s share in the world.
3.597 12.548
legend: No. of entrepreneurs
THE COUNTY OF ŠIBENIK AND KNIN
No. of employees
6 | PVinternational | July 2016 | No 260
total revenue, mil. HRK
profit, mil. HRK
21.095
2.052
5.381
11.570
300
825
2.626
12.074
25.316
641
THE COUNTY OF MEĐIMURJE GDP of the County of Međimurje is similar to that of Australia in world GDP, and the share of the population in Croatia is 2.7; it is considerably higher compared to the 0.3% of Australia’s share in the world.
65.567 504.368
THE COUNTY OF KOPRIVNICA AND KRIŽEVCI
605.703 25.652
1.467
9.572
15.211
597
GDP share of the County of Koprivnica and Križevci in Croatia is similar to Austria within the EU; the population share in Croatia is slightly higher and accounts for 2.7% in relation to 1.7% of Austria in the EU.
TY OF
1.629
7.225
881
3.470
of Varaždin is similar to ino, and the number of nty is five times higher.
14.073
241
7.197
146
THE COUNTY OF BJELOVAR AND BILOGORJE
4.561 24.299 37.475
GDP and population share of County of Virovitica and Podravina are similar to that of Greece in the EU.
THE COUNTY OF SISAK AND MOSLAVINA
THE COUNTY OF POŽEGA AND SLAVONIJA
GDP share of the County of Sisak and Moslavina is similar to that of Sweden in the EU, and the share of the population is double (4% in Croatia compared with 1.9% of Sweden’s share in the EU).
GDP share in Croatia of the County of Požega and Slavonija is similar to Romania’s share in the EU; the share of the population in Croatia is 1.8%, smaller in relation to Romania’s 3% share in the EU.
3.472
GDP share in Croatia of the County of Slavonski Brod and Posavina is almost the same as Canada’s GDP share in the world; the share of the population is Croatia is 3.7%, and it is considerably higher compared with Canada’s 0.5% share in the world.
7.957
135
270 11.957 40.559 70.498 2.665
THE COUNTY OF SPLIT AND DALMATIA GDP share of the County of Split and Dalmatia is roughly the same as Fiji’s share, 158th country in the world based on economic strength (of a total of 190 countries based on IMF data), and it achieves it with half the population.
The County of Osijek and Baranja has a GDP share in Croatia which is slightly higher than the German share in the world (5.6% in relation to 4.9%). The share of the population is considerably higher – 7.1% in relation to Germany’s 1.1%.
THE COUNTY OF SLAVONSKI BROD AND POSAVINA
9.298 727
862
THE COUNTY OF OSIJEK AND BARANJA
THE COUNTY OF VIROVITICA AND PODRAVINA
GDP share of the County of Bjelovar and Bilogorje in Croatia is similar to Denmark’s share in the EU, while the population in Croatia is 2.8% it is considerably higher in relation to Denmarks 1.1% share in the world.
CONTINENTAL REGION
1.660
7.941
15.089
327
1.617
13.870
17.217
639
THE COUNTY OF VUKOVAR AND SRIJEM
3.705
9.428
19.539
860
GDP share of the County of Vukovar and Srijem in Croatia is similar to India’s share in the world (2.5%). The share of the population is far lower (2.4% in relation to 17.9% of India).
41.002 135.281
THE COUNTY OF DUBROVNIK AND NERETVA GDP share in Croatia of the County of Dubrovnik and Neretva is roughly the same as Belgium’s share in the EU, and the share of the population is 2.9% and it is only slightly larger compared to Belgium’s 2.2%.
232.881 10.272
ADRIATIC REGION
July 2016 | No 260 | PVinternational | 7
CORPORATE BUSINESS ACTIVITY IN CROATIAN COUNTIES IN 2015
€2.2 2 billion nett profits
838,584 employed in these companies in 2015
number of entrepreneurs and employed as well as of total income, but ranks 12 in terms of nett profits. Rijeka is the third centre in terms of the number of entrepreneurs and employed and per total income and nett profits. There are 63,381 entrepreneurs registered in county centres. Considering the fact that 35,089 entrepreneurs are registered in Zagreb alone and thus Zagreb has more entrepreneurs than all other county centres in total. If Zagreb is omitted, which is also analysed as county and central county city, the result shows there is no single central county city with over 6,500 entrepreneurs. Only Split reached this figure, followed by Rijeka (4,279 entrepreneurs), Osijek (2,485) and Zadar with 2,116. In all other county centres, the number of entrepreneurs is under 2,000, the lowest being in Gospić (206), Krapina (271) and Pazin (292). Concerning county centres analysed according to the number of entrepreneurs, number of employed and income as well as nett profit or loss, Zagreb ranks first. It is followed by Rijeka and Split, Velika Gorica, Varaždin, Karlovac and Zadar. In terms of losses, FINA data show that entrepreneurs in Šibenik showed the largest losses (€41 million), followed by Virovitica (€6 million), Gospić (€2.1 million) and Slavonski Brod (€0.4 million). These negative results were mainly influenced by TLM Aluminium u stečaju from Šibenik (€16.6 million in losses), followed by Contorte (-€5.6 million) and Hrvatski duhani (-€4.6 million), Italikacink from Gospić (-€0.25 million), Calcit Lika (-€0.2
8 | PVinternational | July 2016 | No 260
million) and Bilfinger Đuro Đaković Montaža from Slavonski Brod with €5.7 million in losses. The analysis by the Croatian Chamber of Economy Counties – great economic differences points to significant differences in total GDP. Zagreb accounts for 33.1%, Primorje and Gorski kotar 8.8%, and Split and Dalmatia for 8.2% GDP. It should be highlighted that the GDP per capita of Zagreb and Primorje and Gorski kotar is considerably higher than the average of Croatia “The main macroeconomic indices, GDP, employment, unemployment, salaries and financial reports of the activities of entrepreneurs, to show economic differences between
ENTREPRENEURS OF THE COUNTY OF ISTRIA ACHIEVED THE HIGHEST PROFIT GROWTH (267.4%) LAST YEAR COMPARED WITH 2014 counties. The majority of counties are visible in some indexes (GDP and employment). In other words, only three counties account for
CCE ECONOMIC STRENGTH INDEX PER COUNTY
Only the City of Zagreb and the County of Istria as well as the County of Primorje and Gorski kotar are above average The Croatian Chamber of Economy implemented the assessment and classification procedure of all counties in Croatia based on the economic strength index. The CCE index of economic strength is a composite index, the sum of weighted basic economic indices of three years and the demographic prognosis, for the purpose of measuring the degree of economic strength and economic potential of counties in deviations from the Croatian average. It shows that only the City of Zagreb and the County of Istria as well as the County of Primorje and Gorski kotar are above the Croatian average, and the remainder are below average. Such a position of the majority of counties is influenced by the City of Zagreb. The lowest rankings relate to the County of Bjelovar and Bilogorje, Virovitica and Podravina as well as Požega and Slavonija whose index is on the level of two thirds of the Croatian average. In
50% of Croatian GDP and almost 50% of those employed”, pointed out the CCE Manager of the Sector for financial institutions, business information and economic analyses, Zvonimir Savić. After EU accession Croatia was divided in two NUTS-2 regions: continental Croatia (around 2.96 million people) and Adriatic Croatia (around 1.47 million people). Continental Croatia has twice the number of counties than the Adriatic, similarly to GDP ratio. However, compared with GDP per capita per EU average, the difference between the two regions is very small: Continental Croatia - 60% of EU average and Adriatic Croatia 57%. In its analysis the CCE highlights that even less developed counties could increase their competitiveness with adequate use of funds available from the EU, especially considering that Croatia lags behind other EU members when it comes to using these funds.
THE CRISIS REFLECTS ON THE NUMBER OF THE EMPLOYED Movements in the rate of employment over the last several years reflect the economic crisis. Last year the employment rate was lower compared with 2008 in all counties. The rate was reduced most in Zagreb, followed by Osijek and Baranja and Split and Dalmatia. However, in relative terms the largest fall was seen in Virovitica and Podravina (24.5%) and Koprivnica and Križevci (23%). The situation is somewhat different concerning unemployment. The largest relative
Motovun
Rijeka
these counties with lower economic strength index is where one should look for the potential for economic development, that is, the need to invest in their development is visible, with the goal of reducing development differences between counties and stimulating total economic growth of the Republic of Croatia.
increase in unemployment was seen in Krapina and Zagorje, a high of 73.7%. Zagreb saw a 67% increase in the numbers unemployed. A fall in the number of unemployed was seen only in Zadar and of Karlovac.
ENTREPRENEURS FROM ŠIBENIK ACHIEVED THE BIGGEST NETT LOSSES DURING 2015 (€41 MILLION) The trend of an increasing unemployment rate was recorded between 2009 to 2014, and in almost all counties. The ratios remain the same: Virovitica and Podravina, Slavonski Brod and Posavina as well as Vukovar and Srijem, continuously register the highest rate of unemployment. Even though the trend changed last year, and the rate fell in all counties, it remains the highest compared with 2008 in all counties except Zadar, where the rate is at the level of 2008. Data on the distribution of nett salaries per county show that the highest average nett salaries in 2014 were recorded in Zagreb, Primorje and Gorski kotar and Dubrovnik and Neretva. Zagreb accounts for the highest salary with the lowest in Varaždin ay approximately 45%.
High concentration of counties is visible in some indices (GDP and employment). In other words, only three counties account for 50% of Croatian GDP and almost
50% of those employed Zvonimir Savić, HGK
July 2016 | No 260 | PVinternational | 9
FINANCIAL AGENCY
THE MAJORITY OF ENTRE CAPITAL FROM AN INTERN
O
f a total of 106,569 entrepreneurs, the number of entrepreneurs having capital from an internal source is the highest (98,388 or 89.5%), with entrepreneurs having capital from an external source representing 9,908 or 9.3%. The remaining 1,273 entrepreneurs (1.2%) have capital from mixed sources both internal and external in different ratios, according to data provided by the Financial Agency. Entrepreneurs with 100% capital from an internal source employ 81.9% of the total number of workers and accounted for 68.5% of total revenue and 67.6% of total expenditure. Irrespective of a lower share of both total revenue and expenditure, they account for 95.2% of the positive consolidated financial result and 82.3% of income tax. On the other hand, entrepreneurs having 100% capital from an external source hire 10.6% of the total number of employees, generate 20% of total revenue and account for 20.5% of total expenditure. In addition to their share
in total revenues and expenditures (20% and 20.5% respectively), they generated 14.2% of profits for the period and 26% of losses for the period and their share in overall consolidated results was 1.2% and accounted for 14.6% of income tax.
NEGATIVE RESULTS Entrepreneurs whose ratio of capital from an internal source exceeds 50% but under 100% operated with negative financial results. Irrespective of the fact that they account for only 0.3% of the to-
TOP 5 ranked entrepreneurs having 100% capital from internal sources according to total revenue in 2015 (revenue and profit expressed in HRK’000, nett salaries expressed in kuna) COMPANY NAME
Total revenue
Profit or loss for the period
2014
2015
2014
1. KONZUM d.d.
13,454,641
14,940,741
2. HRVATSKA ELEKTROPRIVREDA d.d.
11,431,361
9,529,315
3. HEP-Distribution System Operator d.o.o.
7,062,829
7,018,390
620,061
4. PLODINE d.d.
3,416,053
3,879,338
5. PRVO PLINARSKO DRUŠTVO d.o.o.
2,884,136
3,752,368
Number of employees
2015
2014
2015
108,802
234,604
11,886
1,209,052
1,739,787
447
725,199
41,422 128,616
Nett salaries 2014
2015
12,602
3,934
4,030
431
9,030
9,727
7,514
7,485
6,922
7,212
35,388
3,025
3,230
3,825
3,998
206,505
51
15
6,725
6,940
Source: Fina, Register of annual financial reports
TOP 5 ranked entrepreneurs having 100% capital from external sources according to total revenue in 2015 (revenue and profit expressed in HRK’000, nett salaries expressed in kuna) COMPANY NAME
Total revenue
Profit or loss for the period
Number of employees
Nett salaries
2014
2015
2014
2015
2014
2015
2014
2015
5,151,066
4,872,836
37,649
69,353
716
763
4,309
4,330
2. PLIVA HRVATSKA d.o.o.
3,798,517
3,971,429
586,051
169,901
1,878
1,976
9,673
10,286
3. LIDL HRVATSKA d.o.o. K.D.
3,274,918
3,712,555
108,635
185,418
1,486
1,610
6,869
7,394
4. VIPnet d.o.o.
3,019,138
2,920,319
60,753
36.487
1,064
1,168
12,682
9,422
5. BOXMARK LEATHER d.o.o.
2,518,308
2,695,531
-22,145
-280,188
3,426
3,808
4,326
4,246
1. PETROL d.o.o.
Source: Fina, Register of annual financial reports
10 | PVinternational |July 2016 | No 260
EPRENEURS HAVE NAL CROATIAN SOURCE Financial results of Croatian entrepreneurs in 2015 accoring to capital sources (amounts expressed in HRK millions, salaries expressed in kuna) Description
Number of entrepreneurs Number of employed persons Total revenue Total expenditure Income tax Profit for the period Loss for the period Consolidated financial result– profit or loss for the period Investment in new fixed assets Export Import Average monthly nett salaries– in relation to the average monthly nett salary in the Republic of Croatia %
100% capital from internal sources
100% capital from external sources
Capital from internal sources exceeding 50% and under 100%
Capital from external sources exceeding 50% and under 100%
95,388 686,983 437,988,188 417,109,294 4,569,127 27,321,848 11,012,082 16,309,766 25,213,021 57,099,517 48,538,413 4,603
9,908 89,112 127,725,306 126,701,404 810,762 5,100,973 4,887,833 213,139 6,646,110 37,621,074 34,713,495 6,875
301 35,605 43,479,676 44,523,064 -240,574 1,179,946 1,982,759 -802,813 4,000,159 13,906,278 15,617,430 6,994
648 21,974 25,142,159 23,451,824 399,031 2,170,970 879,666 1,291,304 2,423,219 6,151,064 5,062,469 7,238
50% capital from internal sources and 50% capital from external sources 324 4,910 5,312,617 5,168,904 15,606 152,147 24,040 128,107 162,346 536,367 533,380 5,266
Source: Fina, Register of annual financial reports
Shares of Croatian entrepreneurs in 2015 according to capital sources (shares in %, HR=100.0%) Description
Number of entrepreneurs Number of employed persons Total revenue Total expenditure Income tax Profit for the period Loss for the period Consolidated financial result– profit or loss for the period Investment in new fixed assets Export Import Average monthly nett salaries – in relation to the average monthly nett salary in the Republic of Croatia %
100% capital from internal sources
100% capital from external sources
Capital from internal sources exceeding 50% and under 100%
Capital from external sources exceeding 50% and under 100%
89.5% 81.9% 68.5% 67.6% 82.3% 76.1% 58.6% 95.2% 65.6% 49.5% 46.5% 91.7%
9.3% 10.6% 20.0% 20.5% 14.6% 14.2% 26.0% 1.2% 17.3% 32.6% 33.2% 137.0%
0.3% 4.2% 6.8% 7.2% -4.3% 3.3% 10.6% -4.7% 10.4% 12.1% 14.9% 139.3%
0.6% 2.6% 3.9% 3.8% 7.2% 6.0% 4.7% 7.5% 6.3% 5.3% 4.8% 144.2%
50% capital from internal sources and 50% capital from external sources 0.3% 0.6% 0.8% 0.8% 0.3% 0.4% 0.1% 0.7% 0.4% 0.5% 0.5% 104.9%
Source: Fina, Register of annual financial reports
tal number of entrepreneurs, they generated 10.6% of losses for the period and accounted for a negative consolidated result of 4.7%. The percentage of entrepreneurs having 50% and above of capital from an external source stood at 0.6% of the total number. They employ 2.6% of the total number of workers, and achieved 7.5% of the positive consolidated result (nett profit). The share of entrepreneurs having an equal share of capital from internal and external sources (50%/50%) is
the smallest in the structure according to capital ownership and they showed significantly comparable results throughout the financial categories. Entrepreneurs having capital from 100% internal or 100% external sources have shown the most substantial investment in fixed assets, whilst a higher share of exports and imports is correlated with 100% foreignowned entrepreneurs – 32.6% concerning exports and accounting for 33.2% of imports. The highest monthly nett salaries in relation to the Croatian average
have been paid by entrepreneurs with a level of 50% and above of capital from external sources – their average nett salaries (€965) exceeded the average nett salary in the Republic of Croatia by 44.2% (€670). If business results are measured by normal indicators, profit for the period per employee amongst entrepreneurs having capital from internal sources was €3,165, whereas profit for the period per employee amongst entrepreneurs having capital from external sources was considerably lower at €318. (V.A.) July 2016 | No 260 | PVinternational | 11
GENERAL ASSEMBLY OF THE CROATIAN CHAMBER OF ECONOMY
NEW REPRESENTATIVE OFFICES INTENDED TO HELP ENTREPRENEURS The Croatian Chamber of Economy is aiming to provide support to entrepreneurs in new market penetration and has begun the process of opening representative offices abroad. In addition to Shanghai, Belgrade and Sarajevo, representative offices will be opened in Vienna, Milan, Munich and Istanbul by Krešimir Sočković
T Croatia provides high quality innovative products and is aiming to sell these products and Croatian know how to the Chinese market. Luka Burilović, President of CCE
he Croatian Chamber of Economy is fully aware of the importance of Far East market and primarily the Chinese market. Hence, we have the opportunity to open a Croatian Chamber of Economy representative office in Shanghai, as has been emphasised during the recently held General Assembly. “China, as the second-largest global economy, is an important partner for Croatian companies. Consequently, the opening of our representative office will significantly contribute to strengthening economic co-operation, and we also believe it will reduce the considerable disproportion between exports and imports,” stated the President of the CCE Luka Burilović. “Croatia provides high quality innovative products and she is aiming to sell these products and the Croatian know how to the Chinese market,” stressed Burilović. The decision to open a representative office in Belgrade and Sarajevo by the end of this year has also been passed. This was certainly due to a significant increase in trade in goods and services, as well as to the substantial importance of these markets for Croatian companies. In 2015 the value of Croatian exports to Serbia was €562.3 million, a substantial increase of 10.41% compared with the previous year, whilst the increase in Croatian imports was doubled reaching 21.83% and in value terms
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stood at €433.1 million. Simultaneously, Croatian exports to Bosnia and Herzegovina were up by only 0.09% to €1.13 billion, with imports rising by 7.38% to €495 million. “As a result of our continuously keeping abreast of the interests and the requirements of its members, the CCE has identified the requirement for significant presence and support for entrepreneurs in Serbia and Bosnia and Herzegovina which are amongst the most important for Croatia, both concerning exports and imports by Croatian companies,” added the President of the CCE. “Croatia, Bosnia and Herzegovina and Serbia are neighbours, which until 1991 were all one country. The populations are linked with a large number of business, friendly and family ties and there are no language barriers. Consequently, there is are significant competitive advantages that can be exploited in order to further promote economic co-operation between Croatia, Bosnia and Herzegovina and Serbia, whilst simultaneously taking into consideration national and the economic interests”, noted Burilović.
TURKEY LOOKING FORWARD TO COOPERATION WITH CROATIA The opening of representative offices of the CCE in Austria - in Vienna and Italy (Milan) has been announced, and a representative office in Germany will be located in Munich. As
PRESIDENT OF THE CCE
Now is the time to act Concerning current political circumstances, Luka Burilović, President of the Croatian Chamber of Economy urged all political actors to be responsible. “Instability brings into question the reforms required to provide a new impetus to the economy. Following a long-term recession, we have finally seen positive results both in exports and GDP growth, as well as an increase in industrial production. Politicians need to be responsible, since the Croatian economy requires urgent action. Now is time to act. The message is clear and I believe it will be understandable to political decision makers”, concluded Burilović.
a result of excellent co-operation with Turkey, we have already started the opening of a representative office in Istanbul. “Following the extraordinary success of the Croatia – Turkey Business Forum, the Turkish President, Recep Tayyip Erdoğan, stated he was looking forward to the forthcoming opening of a representative office of the CCE in Turkey”, highlighted Burilović, adding that the representative offices locations have not been randomly selected but are primarily located on markets which have shown the greatest interest in establishing cooperation with Croatia. As announced at the Croatian Chamber of Economy, representative offices in the above countries will be focusing on the promotion
and representation of interests of the Croatian economy and will primarily be oriented towards the establishment of business relations amongst companies, as well as towards attracting investment, technology and knowledge transfer, establishing relations with other countries’ representative offices, keeping abreast of political decisions concerning economic developments at a global level and projects by international organisations. Premises at an affordable rent have already been ensured for several representative offices, and each representative office will submit a report to the General Assembly of the CCE annually concerning its work during the previous year. July 2016 | No 260 | PVinternational | 13
EIF AND CBRD SIGN FIRST AGREEMENT WITHIN THE EFSU FRAMEWORK
€20 MILLION FOR SME’S The agreement will enable the CBRD to offer companies in Croatia guarantees on bank loans during the forthcoming year due to the guarantee issued by EIF and supported by the Obzor 2020 programme (Horizon 2020) by Boris Odorčić
T The users of the loan, which will be insured with InnovFin’s guarantee,
will have lower interest rate since the guarantee will reduce the starting interest rate by 0.422% or 0.572%, depending on the size of the entrepreneur. Dušan Tomašević, Board President of CBRD
he European Investment Fund (EIF) and the Croatian Bank for Reconstruction and Development (CBRD) signed their first agreement for small and medium-sized companies within the framework of the InnovFin programme and secured support of the European Fund for Strategic Investments (EFSI), central element of the Investment Plan for Europe, the so called Juncker Plan. The agreement will enable the CBRD to offer companies in Croatia guarantees on bank loans during the forthcoming year as a result of the guarantee issued by EIF and supported by the Obzor 2020 programme (Horizon 2020), framework EU programme for research and innovation. It is anticipated that the EU support to innovative Croatian companies will generate a portfolio of loans worth €20 million. Dušan Tomašević, Board President of CBRD, highlighted that co-operation with EIF started in 2007. Therefore, even before Croatia’s full EU membership, the CBRD had the chance to develop and promote its business in co-operation and based on the model of this European financial institution. “Two years ago we started to work with EIF on using guarantees within the CIP programme. This joint project contributed to the development of the micro-loan market in Croatia and enabled micro entrepreneurs, with up to 10 employees, to access loans up to €25,000 with only bills and promissory notes. With the signed agreement on co-operating on the InnovFin guarantee programme, with which EIF offers first class guarantees on 50% of every approved loan, we will allow the SME’s, as well as small and medium sized capitalised companies with up to 500 employees, easier access to financing through lower interest rates. The users of the loan, which will be insured with InnovFin’s guarantee, will have a lower interest rate, since the guarantee will
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reduce the starting interest rate by 0.422% or 0,572%, depending on the size of the entrepreneur”, he highlighted.
PAYMENT DEADLINES The guarantee of the InnovFin programme will be allowed to be used, based on the existing programmes of the CBRD, which will turn already favourable loan conditions into even more favourable ones. Therefore, regular interest rates per CBRD’s loan programmes, totalling 2, 3 or 5% will depend on the type and area of investment as well as the size of the entrepreneur, will be additionally reduced by these percentages. The regular long-term loan repayment deadlines, ranging up to 17 years based on some CBRD loan programmes, will be preserved. This instrument will be available to the Croatian entrepreneurs since autumn and we anticipate great interest in this type of funds, Tomašević said. He also added that the signed agreement is the first project approved
THIS INSTRUMENT WILL BE AVAILABLE TO CROATIAN ENTREPRENEURS IN THE AUTUMN, DUŠAN TOMAŠEVIĆ SAYS within the framework of the Juncker Plan in Croatia. Deputy Chief Executive at EIF, Roger Havenith, pointed out that 99.7% of the total number of registered companies in Croatia are SME’s. They employ 68% of the total number of the employed. CBRD is the largest institution for promoting investment in Croatia and it
is in the perfect position for finding innovative companies which this EU support will benefit the most. This is the first transaction in the framework of the European fund for strategic investment in Croatia. During the following
THIS IS THE FIRST TRANSACTION IN THE FRAMEWORK OF THE EUROPEAN FUND FOR STRATEGIC INVESTMENT IN CROATIA, ROGER HAVENITH HIGHLIGHTS couple of months, we anticipate another two agreements to be signed. The CBRD is EIF’s long term partner, and we are certain that together with the guarantee for the SME’s within the InnovFin programme it will successfully direct funds to Croatian SME’s and smaller companies of medium market capitalisation, Havenith highlighted.
REDUCTION IN INTEREST RATES Darko Horvat, technical Minister of Entrepreneurship and Crafts, pointed out that the first class guarantee of 50% and consequential lowering of interest rates are some of the moves which the end-users, that is, Croatian entrepreneurs, will feel. The lucky appearance of this financial mechanism is what enabled the banks to lower their interest rates. Today, commercial banks offer loan packages below 4%. Year into year, month by month, by creating competition in the financial world, I am sure that we can achieve loan packages of 1-2%, as our neighbours have, Horvat. Tomislav Tolušić, technical Minister of Regional Development and EU Funds, evaluated that up to this point Croatia did not have such a first class guarantee which did not enter the de minimis support, and which is extremely acceptable to Croatian entrepreneurs. He also added that this guarantee opens a new market niche for Croatian entrepreneurs due to the fact that it includes small companies of medium market capitalization with up to 500 employees, together with SME’s with up to 250 employees. Therefore, this instrument is now eligible for more interested entrepreneurs then before, Tolušić pointed out,
NEW JOB CREATION Neven Mimica, Europe commissioner for international co-operation and development mentioned that €20 million of new and extremely favourable loans will be available to SME’s in view of repayment conditions, interest rates and first-class guarantees. These loans are crucial for expanding the business of SME’s and creating new jobs in Croatia. The Juncker Plan is the main initiative of the European Commission with the goal of promoting investment and opening new vacancies across the European Union, Mimica highlighted. Over €300 billion has been already invested in the EU during the past couple of years, and this is lower than the historical average. The Juncker Plan aims at compensating this shortage and creating a positive environment for investing. Therefore, the Investment Plan for Europe is focused on removing investment obstacles, offering transparency and technical support on investment projects as well as more intelligent use of new and existing financial means. It is important to highlight that the Investment Plan for Europe has already started to yield results. The European Investment Bank (EIB) estimates that EFSI promoted investments worth over €100 billion by May.
CBRD is the largest institution for promoting investment in Croatia and it is in the perfect
position for finding innovative companies which this EU support will benefit the most. Roger Havenith, Deputy Chief Executive at EIF
July 2016 | No 260 PVinternational | 15
INTERVIEW MILAN VRDOLJAK, BOARD PRESIDENT, RICARDO
WE LACK PROFESSIONAL DRIVERS FOR FURTHER DEVELOPMENT Until a year ago we would first buy lorries and then hire new drivers. Now we are in a situation in which we first have to find the drivers and then buy the lorries, says the President of the largest Croatian road haulage company by Svetozar Sarkanjac
M A SAD MALO O NAMA...
4 mil € nova investicija u transportnu flotu 280 transport units employing 315 staff
ilan Vrdoljak and Darko Rimac, co-owners of Ricardo, the largest road haulage company in Croatia, bought 30 new Mercedes-Benz trucks with semi-trailers. The investment was €4 million and it increased their transport fleet to 280 units. Ricardo currently employs 315 workers, and is in the process of hiring a further 50 due to the increased scope of work.
You are certainly the largest Croatian road haulier. Are you pleased with this position? It is true. Ricardo is the leader on the Croatian market. We have been an EU member for almost three years now. We have to be aware
of the fact this is our common state. We know Croatia is our homeland, but the EU is our common state and we are only one small part of it.
However, your transport fleet has become a respectable size even at EU level. Again, this is true when we look at this on the level of Croatia. With these new lorries we now have almost 300 units. At the same time, no one is regarded as a ‘serious’ hauler with a fleet under 500 units. Therefore, we need to grow twice as fast to actually mean something in the European Union. These are undisputable facts which every Croatian hauler should understand if they want to go beyond the Croatian market.
INVITATION TO WORK
50 drivers wanted Ricardo is now looking to hire 50 professional drivers of cargo vehicles. Concretely, we are looking for 20 drivers who would cover the area of Zagreb and its vicinity, and 30 drivers who would work in local and international transport. Those interested must meet the following criteria: qualified driver C+E category, digital tachograph ID and COD95. It is an advantage to have experience in local and international transport. Certificate of no criminal record is required, and drivers who
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want to work in international transport should be familiar with the related legal regulations. The invitation also includes a comment that the work refers to a fixed term with the possibility of transferring to a permanent contract. Ricardo’s director, Milan Vrdoljak, says that potential future drivers can obtain a safe position with a regular and stimulating income. Since Ricardo is the largest road hauler in Croatia, it is understandable we have the largest amount of work. All this guarantees safe
positions. The income of our drivers ranges between €933 and €2,000. This refers to nett income with daily allowance including additional bonus, depending on the worker, Vrdoljak explains.
New lorries require new drivers. How do you solve this issue? There is a problem concerning young people who complete their formal education for drivers of motor vehicles at the age of 18 or 19. They are, of course, without experience. How can we give these young people such a lorry and take responsibility for them? This is why we introduced the Ricardo Plus Project to train future drivers so they can perform this work and requalify from category C to category E which allows them to operate a vehicle of up to 40 tonnes. Notwithstanding, this type of training cannot happen overnight. We are able to train professionally 50 drivers in one year, but the development rate of our company is much faster. This is why we have turned to the socalled import of professional workforce. In our case – experienced professional drivers. The issue of an employment quota for foreign workers is becoming more controversial concerning the employers’ real needs and the increasing number of unemployed in Croatia. How do you overcome this problem? Regarding the quota for importing workers, we know this is something that other EU countries have been through already. Poland, the Czech Republic and Slovakia experienced the problem of drivers who went to west Europe-
WE ARE ABLE TO TRAIN PROFESSIONALLY 50 DRIVERS ANNUALLY, BUT OUR DEMAND IS HIGHER an countries. Therefore, we are left with the market of ex-Yugoslavia, primarily Serbia as well as Bosnia and Herzegovina, from which we can bring people to Croatia. I honestly believe the present quotas are not high enough since I guarantee that not a single professional driver who actually wants to work as a driver is unemployed. On the other hand, if such a driver exists, then the issue is how much does this person want to work as a professional driver. If he does not want to work for Ricardo, there are other transport companies in Croatia. If he does not want to work in Croatia, he has good chances of finding work in one of the EU countries.
How many professional drivers is Ricardo able to hire at the moment? Until a year ago we would first buy lorries and then hire new drivers. Now we are in a situation in which we first have to find the drivers and then buy the lorries. This tells you everything about our need for professional drivers and the quota we are able to hire.
We have been an EU member for almost three years now, in a market with over 500 million people. We have to be aware of the fact this is our common state.
July 2016 | No 260 PVinternational | 17
INTERVIEW PETAR ĆURLIN, OWNER, VILLA DVOR HOTEL, OMIŠ
We operate profitably annually, yet it is not crucial, since high cash flow is considerably more important for the running of an hotel compared with accounted profit, noted Petar Ćurlin
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BOUTIQUE AND FAMILY HOTELS ARE A WAY OF LIFE Croatian hotel owners are inundated with parafiscal taxes that are currently higher compared with anywhere else in the world, making the hotel industry an expensive business which requires huge investment, whilst the return on investment is, naturally, slow. Nevertheless, I would recommend investment in family hotels to any family involved in tourism. Once you are positioned on the market, business becomes far easier. Nevertheless, there are a large number of challenges, but they can be tackled by a family by Jozo Vrdoljak
T
he Omiš-based Villa Dvor Hotel is unique in many ways. It is located on a high cliff which makes it special, being unique for its seclusion and provides the opportunity to enjoy a marvellous view. Moreover, its owner Petar Ćurlin who has reconstructed it, focuses on energy efficiency. Perhaps its most unique feature is that the owner constructed a lift in it in 2012 which was locally considered sensational. It may initially sound unusual, yet the tunnelling works lasted over a year, as the 36-meter long tunnel had to be carved out of the rock. The lift marked a turning point in the hotel operations, since prior to this construction guests had to climb over 200 steps to reach the hotel reception desk. Privredni vjesnik recently talked with Petar Ćurlin, about hotel operations, the tourist season and promotional methods for specific markets. In addition, he provided his opinion on tourism in C ro -
atia, revealing some secrets to the successful running and operations of boutique and family hotels. Villa Dvor Hotel was constructed in 1937. Petar Ćurlin became its owner in 1995. The implementation of a challenging hotel reconstruction project began in 2000 and the hotel re-opened in January 2006. The hotel is also unique in that the owner owns some land on the Cetina River bank, where he grows vegetables to meet hotel requirements. His brother is involved in cattle farming in the Omiš hinterland. Petar Ćurlin gets up at 5 a.m. to do the agriculture work and at 8 a.m. he is at the hotel where he deals with small-scale repairs and also works as a chef. Outside the peak season he is involved in hotel promotion at fairs and he runs it throughout the year. The hotel comprises of 23 rooms and a restaurant.
What was last year’s tourist season like? It was excellent. We recorded 4,500 overnight stays, generated a revenue of €0.36 million and continued profitably. We operate in this manner year-on-year, yet it is not crucial, since high cash flow is considerably more important for the running of an hotel compared with accounted profit. We have managed to survive the most difficult years and we are
currently entering a more positive phase. Our hotel ranks amongst the 25 best hotels in Croatia on TripAdvisor with an
A HOTEL CAN HAVE A STAR MORE THAN A DESTINATION, BUT NOT TWO STARS MORE average grade of 9.2, whilst our Kanjon restaurant ranks amongst the 100 best restaurants.
What are your expectations for this year? I believe this year will be our best. We have made excellent work in sales and promotion and we have already recorded vigorous growth. The results shown this May are 55% up in relation to the same period last year. June is expected to show the results soaring by 40%. Overall, I expect we will exceed 5,500 overnight stays. We have already started taking bookings for next year. July 2016 | No 260 | PVinternational | 19
INTERVIEW
PERHAPS NOT DOUBLE-DIGIT GROWTH, BUT UPWARD TRENDS CERTAINLY
Tourism in Croatia will see long-term growth What are the current developments in tourism in the Split-Dalmatia region and in Croatia? Tourism is developing rapidly and we are faced with significant upward trends, primarily due to the fact that Split has been undergoing large-scale tourism development. I can state my utmost satisfaction that tourism development in this region has gained considerable importance and it is being increasingly focused on, planned and considered. I believe our region will see long-term growth in tourism sector, perhaps not double-digit growth, but development trends will certainly not
grind to a halt. Concerning Croatia, the unstable situation in competitive countries can be positive, yet it can also be a double-edged sword. Croatia as a country has huge potential in connecting agriculture and tourism, yet we have not exploited it sufficiently to date. I regret this, since top quality agricultural products are value added for tourism. The potential of ecological power production is even greater and it can result in attracting tourists with greater purchasing power. Investment into infrastructure is imperative and there is additional potential in the presentation of cultural and natural heritage.
What do you primarily focus on concerning gastronomy and other services? In our hotel, the menu does not have a central role, since we primarily use our own ingredients in meal production. We normally provide seasonal food. We have a family farm since the supply of high quality meat and dairy products in Croatia is currently uncertain. We arrange trips for our visitors in co-operation with the best tour operators in the region without commission. Our core business is the hotel industry and we are primarily focused on customer satisfaction.
4,500 overnight stays recorded last year
0.36
€ million
generated revenue
What promotional methods do you normally opt for? We have participated at 10 fairs throughout the world. One needs to allocate 10% of one’s revenue for promotion. I am an economist and we adapt the methods and the market for our promotion to inter-currency relations. During the last three years we have focused on promotion outside the Eurocurrency markets: in Switzerland, Scandinavia, Great Britain, Canada, the US and the Republic of South Africa, to name a few. Due to inter-currency relationships, our prices are some 20% more favourable on these markets. We have achieved excellent results on these markets and in May we had many visitors from Switzerland. Our prices are fixed throughout the year, since price decreases normally adversely affect the labour force. One simply cannot afford to operate in the red and operating losses cannot be tackled by infringing workers’ rights. We extend the season annually by operating from
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OUR PRICES ARE FIXED THROUGHOUT THE YEAR, SINCE PRICE DECREASES NORMALLY ADVERSELY AFFECT THE LABOUR FORCE April to October. Season extension is imperative to growth. Our visitors arrive from markets that are considered non-typical for Omiš. Omiš visitors primarily cover Poles, as well as Czech, Hungarian, German and Italian tourists, whereas our visitors are primarily Australian, American, British, Scandinavian, Austrian, Swiss and Canadian tourists.
Are you satisfied with the results achieved thus far? We are a family business. We have invested substantial effort and committed work and I can say we have survived an extremely difficult period. We are currently operating successfully and have been achieving excellent results. It is important to highlight the fact that our employees need to feel the impact of success and Croatian entrepreneurs frequently pay insufficient attention to this issue. Similarly, annual investment s fundamental in order to maintain the level of quality. Family plays a vital role in our business – our family comprises of my wife and I and our four children, and our
employees are permanently employed. We do employ seasonal workers, but they are normally always the same ones. Once we have hired an employee, they normally stay with us until retirement. We have reduced employee turnover to the minimum.
You have invested substantially in the energy sector. Initially we invested into a heat pump. We exploit water from the Cetina River for electricity generation, by generating the heat from the river and the excessive thermal energy is used or transferred for hot water production. Hence, we provide both hot water and cooling completely free of charge. Moreover, we have constructed a solar power plant and through upgrading our energy efficiency we additionally boost business results achieved by our hotel. Consequently, our energy costs have decreased many times - between three and five times, to be more specific - compared with our competitors who opt for a combination of gas and electricity or primarily electricity. Energy efficiency is fundamental and it has a huge impact on savings. What is the value of investment into the hotel to date? It is not easy to talk about the total value of investment, since we invest continuously and there is substantial additional work. The initial investment was almost
€3 million. This was partly provided through the government programme entitled Incentives for Success and partly our own resources. The value of investment last winter was around €66,000.
Why has there been a decrease in the construction of small family-run hotels compared with 10 or 15 years ago? The fundamental issue is the fact that entrepreneurs cannot be “produced”. You are either a born entrepreneur or not, and you cannot be transformed into one. I believe most families who had the inclination to become involved in the hotel industry, have already done so. Financial and state-owned institutions would certainly provide credit lines such as Incentives for Success if they were requested. Furthermore, hotels are extremely complex products, whose running requires specific knowledge, skills and compliance with standards. Some entrepreneurs opt for the construction of apartments, since they find it easier and there is insufficient qualified labour force on the market. Waiters literally have to speak three or four languages, they are paid seasonally and their salaries are low. Hotel operators in Croatia are burdened with parafiscal taxes that are higher compared with anywhere else in the world and thus the hotel business is expensive, with high investment and an extremely slow rate
of return on investment. Nevertheless, I would recommend investment into hotels to all families involved in tourism, as the hotel business is a way of life. It is a resilient product and is transferrable to descendants. Families can work on the identity of their hotels and they can survive crises and challenging business periods. It all implies long-term investment. Once you are well-positioned on the market, business activities become considerably easier. Nevertheless, there are a large number of challenges, although they can be tackled by a family. Investment into quality is imperative, since any investment that has not been implemented one year will reflect through a decrease in prices across the following years. In that case you will need to operate at very low prices which will result in operating losses and you will be facing serious problems. One needs to invest at least €1,300 annually into each hotel room in order to fully maintain it.
In your opinion what is the biggest mistake made by the institutions? Aggressive promotion is typical in Croatia – a five-star hotel imperative is being constantly pointed out, whilst our destinations are normally at a level of three to four stars, with the exception of several specific locations. A hotel can have a star more in relation to a destination, but not two stars more. Otherwise, it does not fit in and it cannot claim a market. July 2016 | No 260 | PVinternational | 21
COUNCIL OF THE ASSOCIATION OF CROATIAN TRAVEL AGENCIES
Strengthening the positio on the tourist map of Euro Boris Žgomba, President of the Association of Croatian Travel Agencies, has yet again been appointed as Vice President of the European Travel Agents’ and Tour Operators’ Associations (ECTAA). He will continue participating in the creation of the principal tourism guidelines at a European level, as well as in the development of travel agencies in Europe by Sanja Plješa
T
he implementation of special taxation procedures to which travel agencies are subject is a contentious issue and the tackling of this may significantly impact on any increase in their profitability, as was stated at the recently held session of the Council of the Association of Croatian Travel Agencies at the Croatian Chamber of Economy. According to the explanation provided by the Tax Administration, the procedure is implemented in the event of travel agencies operating with clients independently, whilst simultaneously using the supply of goods and services from other tax payers for the provision of travel services. Tax payers are not entitled to make a choice between the special taxation procedure and the regular taxation procedure. As pointed out by the Tax Administration, the special procedure is implemented irrespective of whether the travel agency uses the supply of goods and services from tax payers residing in the EU, those in third countries or from domestic tax payers. Hence, in the event of a travel agency providing services independently yet on someone else’s behalf, through the use of services supplied by other tax payers, it actually acquires the services (such as hotel accommodation, transportation services and tickets for museums or concerts) from other tax payers. Consequently, the travel agency integrates the stated services into a unique solution and provides additional services such as bookings, preparation of vouchers and other documentation, arranges passenger transport to specific tourist destinations and organises tour guide services and services of a tour escort as additional services.
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A FALL IN PROFITABILITY It was highlighted during the session of the Council of the Association of Croatian Travel Agencies that the profitability of travel agencies has been dropping over the last several years as a consequence of the previously stated problems, as well as of other problems they have encountered recently. As stressed by Tomislav
SPECIAL TAXATION PROCEDURE - A CONTENTIOUS ISSUE FOR TRAVEL AGENCIES Fain, member of the Council of the Association of Croatian Travel Agencies, the profitability of travel agencies is hampered by unfavourable legislation and primarily by unfair commercial competition of some agencies often using unqualified labour. The issue of insufficiently qualified labour was primarily pointed out which requires instant action in order to yield significant results by 2020. Members of the Council of the Association of Croatian Travel Agencies pointed out that, unless the current situation changes in the near future, most travel agencies will need to resort to other methods of operation, such as relocation to other countries in the region. In that case, Croatia would lose the fiscal contribution of their operation and this would consequently lead to additional increase in unemployment.
Concerning this year’s tourist season, Members of the Council of the Association of Croatian Travel Agencies concluded that the tourism results recorded during the first five months of 2016 were on a par with or, in some parts of Croatia slightly inferior, compared with the results shown during the same period last year. Nevertheless, they have shown a moderate level of optimism in expressing their expectations for 2016 concerning the results on a par with those in 2015. During the session of the Council of the Association of Croatian Travel Agencies, Boris Žgomba, President of the Association of Croatian Travel Agencies, stated that he had been yet again appointed to be Vice President of the European Travel Agents’ and Tour Operators’ Associations (ECTAA) which is an acknowledgement of his high quality work during his previous mandate. Moreover, he highlighted the fact that the Association of Croatian Travel Agencies had its representative at a high function in the umbrella organisation of European travel agencies was of extreme importance. Žgomba added that, as a Vice President of ECTAA, he will continue participating in the creation of the principal tourism guidelines at a European level, as well as in the development of business activities of travel agencies in Europe.
CROATIAN MEMBERS OF THE ECTAA COMMITTEE “One of the priorities will be to advocate for the development and promotion of the operation of Croatian Travel Agencies and the entire tourism industry, as well as to focus on strengthening of the position of Croatia on the tourist map of
TERME TUHELJ AND TERME OLIMIA
on of Croatia ope New attractions: Art and Wellness Festival During the first five months of 2016, Terme Tuhelj recorded 39,352 overnight stays, 20.7% up compared with the same period last year. Moreover, generated revenue was €2.4 million over the same period, an increase of 17.6% in relation to 2015, as pointed out during the recently held joint press conference of Terme Tuhelj and Terme Olimia management. Terme Tuhelj is proceeding with the implementation of the Art&Spa project and this year will also see their Art&Wine Festival – a festival of music and wine to be held on Sa-
turdays at the SpaArena. All the summer events will be included in the 1st Urban Festival of Art and Wellness where visitors will be given the opportunity to enjoy the experience of a different type of art each week. It should be noted that Terme Tuhelj visitors can also visit Terme Olimia which is marking the 50th thermal tourism anniversary this year. The value of investment into the reconstruction of the four star Sotelia Wellness Hotel in Terme Olimia and two electric vehicle charging stations is €1.5 million. (S.P.)
THE FIRST ZIPWIRE INTO THE SEA IN EUROPE
An unforgettable experience Europe”, noted Žgomba. Sanela Vrkljan, Assistant Director of Tourism Sector at the CCE, has also been appointed as a member of the ECTAA Committee and has also been appointed as Business Secretary of the Association of Croatian Travel Agencies. In addition, Domagoj Hunski, Key Account Manager from Uniline Travel Agency, Ivan Pukšar, Director of Kompas Zagreb Travel Agency, Željko Trezner, Consultant of the Management Board at the Association of Croatian Travel Agencies and Ivana Maltar, Director of the Office of the Association of Croatian Travel Agencies have all been appointed members of the ECTAA Committee.
Tourists keen on an ‘adrenaline fix’ have been provided with a zipwire, a new programme on the Crikvenica Riviera. Crikvenica Adrenaline Park has launched a new ‘extreme’ facility for tourists - Kačjak Zip Line, sli-
ding down stainless steel cables into the sea. Whilst riding the zipwire, tourists have the chance to see the Kačjak peninsula from an entirely new perspective. This new tourism highlight is the first zipwire into the sea in Europe. The starting point is 35 meters above high and the ride is 500 meters long. It comprises two routes – one ends on the mainland and the other into the sea. Crikvenica Adrenaline Park is an unforgettable experience. (S.P.)
July 2016 | No 260 | PVinternational | 23
LANTERNA RESTAURANT GAINS PRESTIGIOUS CERTIFICATION
FLAVOURS AND ATMOSPHERE WON OVER THE TOURISTS Top quality of food, wine and service at the Lanterna Restaurant was awarded this year with the prestigious Certificate of Excellence, given to this restaurant by world portal TripAdvisor by Sanja Plješa pljesa@privredni.hr
L
anterna is located in one of the oldest streets of the Zagreb Old City, in a cellar over 300 years old. Its owners, have followed the same goal since opening of the restaurant in September 2010, to offer traditional Zagreb dishes at affordable prices and in a pleasant family atmosphere. They wanted to merge traditional and contemporary through the restaurants interior design and the food. Some ideas for dishes are based on recipes from an old cookbook from 1845, which the owners found in the Museum of the City of Zagreb. They added an ingredient of their own to adjust these dishes to modern tastes. Lanterna has been one of the
ssitors evaluate a location on based on ttheir personal experience nce and their gra grad des are shown on TripAdvisor. Lanterna iis included in the top five restaurants w with the highest number of comments. “We are extremely satisfied with the c certificate we have been awarded; it meaans a lot to us”, said Tomislav Švagelj. It is useful to highlight that all dishes aare prepared from local ingredients bou ught fresh every morning on the picturresque market of Dolac. top 10 Zagreb restaurants for the past couple of years. The news about it even spread even through London. Top quality food, wine and service at the Lanterna Restaurant was awarded this year with the prestigious Certificate of Excellence, g given to this restaurant by world portal T TripAdvisor. This is one of the most pop pular portals globally, and specialises in ttravel offers, assessments of restaurants, h hotels, locations and cities. Millions of vi-
ZAGREB’S LANTERNA IS IN THE TOP FIVE RESTAURANTS WITH THE HIGHEST NUMBER OF COMMENTS ON TRIPADVISOR. 24 | PVinternational | July 2016 | No 260