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Tourist season → This year’s tourist season has probably been the best since records began PAGES 2-7

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PV analysis→ The construction sector: a lack of optimism notwithstanding new projects PAGES 8-11

Financial results→ Relatively good results against a backdrop of accelerated changes PAGES 12-17

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

Septemper 2016, Year IX, No 261

GDP FOR THE SECOND QUARTER SHOWING GROWTH OF 2.8%

Exporters help Croatia survive Irrespective of a wide range of obstacles faced, as well as regulatory amendments and a tax regime ranking amongst the most onerous in Europe, domestic businesses are becoming increasingly more competitive on the global market, pointed out Burilović

he Croatian Bureau of Statistics has published preliminary estimates of the GDP rate for the second quarter of 2016 with real growth rates according to categories of expenditure and ﬁelds of activity. Marko Krištof, Director of the Croatian Bureau of Statistics pointed out that GDP for the second quarter of 2016 showed growth of 2.8% compared with the same

period last year, whilst seasonally adjusted GDP was 2% up over the second quarter of 2015. “The largest positive effect in the increase in GDP over the second quarter of 2016 was through the growth of exports of goods and services. The effect of local demand to GDP growth was also positive, whilst the strongest positive impact resulted from an increase in household ﬁnal consumption expenditure (3%)”, noted Krištof, adding that the effect of nett foreign demand was also negative. “The Croatian economy started recovering from the crisis primarily due to exporters. This seventh consecutive quarterly GDP growth is the result of efforts by our companies which also during the second quarter recorded exports growth of 4.1% compared with the same period last year”, noted Luka Burilović, President of the Croatian Chamber of Economy, commenting on 2.8% GDP growth estimates over the second quarter.

EXPORTS 11.6% UP Moreover, he reminded that exports rose by 11.6% during the ﬁrst nine months of 2015, which was a clear indicator of exporters being the cornerstones of the

overall economy. “Irrespective of a wide number of obstacles, as well as regulatory amendments and tax burden ranking amongst the most onerous in Europe, domestic businesses are becoming increasingly more competitive on the global market”, pointed out Burilović, adding that a rebound in consumer confidence is an extremely significant feature. “Longterm recession and negative trends on the labour market have adversely affected consumption over the last several years. I am highly delighted that consumption has recently been making upward trends”, emphasised the President of the Croatian Chamber of Economy. Furthermore, he pointed out that there is still ample room for additional growth and the absorption of EU funds needs to be considered as a priority. “It would be unforgivable not to exploit this opportunity concerning the fact that there is almost €11 billion at our disposal. The economic development of Croatia needs to be largely financed from these sources”, stated Burilović, adding that the value of co-financing for entrepreneurs provided by the Croatian Chamber of Economy is €107,000 to date aiming to increase EU funds absorption.

TOURIST SEASON

2 | PVinternational | September 2016 | No 261

AN IMPORTANT YEAR According to the outgoing Tourism Minister, Anton Kliman, this year’s tourist season has probably been the best since records began. For each day until 20th August Croatia saw over 1 million visitors, and by the end of July over 45 million overnight stays were recorded by Jozo Vrdoljak

ccording to all indicators, this tourist season will be record-breaking both in terms of the physical indicators and revenue generated. All aspects of the tourism industry have shown upwards trends (with the exception of campsites with an unsatisfactory start to the season) against a drop in prices of privately-owned accommodation. Nevertheless, this year two previously identiﬁed problems became increasingly evident – labour shortage and infrastructure issues, whilst, according to several indicators, the situation will deteriorate further in the immediate future. By the end of July over 45 million overnight stays were recorded, of which 26 million were recorded in July. “Over 1 million visitors were recorded up to 20th August on a daily basis. These are certainly good indicators and I believe they will be accompanied by greater revenue earnings, perhaps exceeding €8 billion. If local consumption, which will deﬁnitely exceed €1.5 billion, is included, one is certainly entitled to speak about a successful season.

UPWARD TRENDS THROUGHOUT THE COUNTRY Sources from Istria, in which the largest number of overnight stays is normally recorded, stated they were delighted with the results. “When analysing this season, it is important to keep in mind the fact that 2015 was the most successful tourist season in the history of Istria. 23,670,000 overnight stays were recorded in 2015, up 6% compared with 2014,

exceeding the overnight stays recorded in the previous year by 1,400,000, which may certainly be considered a substantial increase. It is evident that a large increase in the number of overnight stays year-on-year is a huge challenge considering the fact that the physical level of accommodation has not increased. This year also appears to be a significant year for and there are many indicators suggesting it will be yet another record-breaking year. 7 million overnight stays were recorded in Istria in July for the first time since records began, whilst 2015 saw 6.5 million overnight stays over the same period. Furthermore, 8 million overnight stays were recorded in August for the first time, as opposed to 2015 which saw 7.7 million. There seems to be some symbolism to these figures, more specifically, by 21st August 2016 there had been 5,860,000 overnight stays, whilst in 2015 the number of overnight stays was 5,560,000, which indicates an increase of 300,000 and an increase of 5.6% in relation to 2015”, stressed Denis Ivošević, Director of the Istria County Tourist Board. From the beginning of 2016 to 20th August, Dubrovnik saw 680,767 tourist arrivals, 10% up and 2,372,317 overnight stays, an increase of 12% compared with the same period last year. The highest number of visitors came from the United Kingdom, followed by France, the US, Germany, Croatia, Spain, Sweden, Norway, Finland and Australia, to name a few. According to Jelka Tepšić, Head of Department for Communication Tactics at the Dubrovnik-based Tourist Board, the 2 millionth September 2016 | No 261 | PVinternational | 3

TOURIST SEASON

over € billion

expected tourism revenue

overnight stay was recorded in Dubrovnik on 6th August, four days earlier compared with 2015. “According to the results seen thus far, 2016 will also see its 3 millionth overnight stay earlier than in 2015”, anticipated Jelka Tepšić. Dubrovnik ranks first in Croatia concerning the number of dockings and cruise passengers, and also ranks third in the Mediterranean concerning its popularity amongst tourists. “In July 2016 we saw 122,584 cruise passengers, as opposed to 136,942 recorded over the same period last year. Since the beginning of 2016, we have seen 385,983 cruise passengers, whereas during the first seven months of 2015 the number came in at 390,452. Hence, this year is similar to 2015 concerning results achieved”, stated Jelka Tepšić. The results achieved in Split in July also confirmed the most successful tourist season thus far. According to data provided by eVisitor, an information system for electronic checkin and check-out of visitors, in July Split saw 124,219 tourist arrivals and 424,184 overnight stays, an increase of 29% and overnight stays rose by 31% compared with 2015. “The largest number of our tourists originated from the United Kingdom, Australia and the US, whilst the highest number of overnight stays was recorded by tourists from the United Kingdom, Poland and Germany. Concerning cumulative data, Split saw 298,060 tourist arrivals and 886,565 overnight stays from January to July, a 24% increase with overnight stays 28% up in relation to the same period in 2015. The 1 millionth overnight stay was recorded almost one

month earlier compared with 2015. This season will be remembered by the largest number of tourists in the city, the greatest interest expressed by journalists and bloggers, the highest number of events across all tourism areas,

CAMPSITES SAW A SLIGHTLY LESS SATISFACTORY START, YET WILL END UP POSITIVE as well as the most successful year since records began”, noted Alijana Vukšić, Director of Split Tourist Board. Kvarner was faced with some problems last year concerning tourist arrivals, yet the situation has improved considerably in 2016. The number of visitors to Kvarner in July was 14% up and the number of overnight stays rose by 10% in relation to July 2015. During the ﬁrst seven months of 2016 it was visited by almost 1.4 million and over 7 million overnight stays were recorded, a 5% increase in the number of visitors, whereas the number of overnight stays rose by 6%, indicating the average length of stay has increased. The trend concerning the increase in tourist turnover that was identiﬁed over the previous

NAUTICAL TOURISM

Charter tourism shows excellent results Ivica Buble, owner and director of the Trogir-based Dalmatia Charter, one of the oldest charter companies, believes the nautical season in Croatia has been successful and that we will see growth also in this tourism segment. “This is partly due to the unstable situation in the South-East Mediterranean. Nevertheless, nautical tourism shows the greatest growth potential. We certainly have not exploited all the potential”, pointed out Buble. Sean Lisak, member of the Management Board at Tehnomont in charge of the Pula-based Marina Veruda and also President of the Croatian Marina Association at the CCE, stated that based on data concerning the results achieved thus far, it appears the nautical sector has seen yet another successful year, irrespective of the fact that comprehensive data on specific marinas is not available as yet. “Colleagues across our marinas are delighted with the results achieved thus far and, due to favourable off-season forecasts, the season is likely to be extended”, noted Lisak. Moreover, Lisak pointed out that, following benchmark analysis

4 | PVinternational | September 2016 | No 261

of Croatian marinas started at the end of last year, significant differences have been noticed in specific categories in the North and South. “That could be explained through higher interest shown by those involved in nautical tourism in the Southern part of the Adriatic, which is actually more appealing from the nautical point of view. The revenue structure of the marina business shows that most revenue is currently generated through berth rental and that requires particular focus. Both marinas and concessionaires need to be provided with the opportunity to create the prerequisites for new programmes and services, aiming to achieve additional growth in total revenue. One of the prerequisites is the passing of nautical tourism development strategies and umbrella acts such as that on maritime property and concessions. Simultaneously, nautical tourism needs to be monetised as a specific tourism product, rather than a source of government revenue through concession fees collected via a competent ministry”, explained the President of the Croatian Marina Association at the CCE.

months in Kvarner was also conﬁrmed by the results seen in August. Hence, during the ﬁrst week of August this part of the Adriatic Coast saw 173,917 tourist arrivals, with 1,125,247 overnight stays were recorded. “In July the number of visitors to Kvarner was 674,000 up, more than double the number of the local population. I believe it shows it is not difficult to imagine what it looks like during the peak season. It is impressive, but hardly surprising. This has all been due to our marketing in the most important home countries, as 80% of visitors originated from Germany, Slovenia, Austria, Italy, Hungary and the Czech Republic, followed by Poland and Slovakia. I have to point out that, in addition to the Kvarner Tourist Board, immense effort was shown by tour operators, as well as local tourist boards”, pointed out Irena Peršić Živadinov, Director of Kvarner Tourist Board, who expects Kvarner will see impressive results. “We can certainly conclude that we have seen another excellent tourist season and, according to latest pronouncements, we are about to see an excellent off-season”, she emphasised.

CAMPSITES SAW A SLIGHTLY POORER START Irrespective of the fact that campsites will also see positive results, they saw a slightly less satisfactory start. According to the data provided by Adriano Palman, Director of the Croatian Camping Association, overnight stays in campsites dropped by around 9% during the ﬁrst six months of 2016. “Nevertheless, the

season is in full swing and the results achieved in July and August are highly satisfactory. Overnight stays in July were up around 4% in relation to 2015, which was sufficient to make up for the previous negative results and to be on a par with the last year. Accurate data for August are currently unknown, yet they are expected to be positive and campsites expect to see around 6 million overnight stays during August. When previous results are added, from the opening to the end of August, the number of overnight stays in is expected to range around 15 million. Slightly over 2 million overnight stays are expected to be recorded during the forthcoming period”, noted Palman. According to him, visitor structure is still standard. “Most visitors come from Germany (30%), followed by those from Slovenia, Austria, Holland and Italy. Moreover, 2016 has seen an increase in the number of campsite visitors from Eastern Europe, yet accurate data concerning this will be available only at the end of the season”, added Palman.

over billion

1,5

€

expected local consumption

7 MILLION OVERNIGHT STAYS RECORDED IN ISTRIA FOR THE FIRST TIME, AS OPPOSED TO 6.5 MILLION IN 2015, STATED DENIS IVOŠEVIĆ He stressed that campsites have seen continuous growth for several years and pointed out that current results show an increase of 15% compared with those achieved ﬁve years ago or 22% up over those 10 years ago. “During the last decade campsites invested in quality and this primarily explains the fact that tourism has recorded good results over the last decade and consequently saw the end of each year showing positive results by at least several percentage points”, explained Palman. Privately-owned accommodation continues to grow this year, albeit at slightly lower prices. “A drop in prices in privately-owned apartments is a direct result of an increasing number of private accommodation owners’ opting to provide rental services. Owners who had invested in their property and subsequently achieved a high level of quality do not have problems with prices. Neither do they face problems with bookings. Consequently, my advice to these owners is to opt for investment into quality. Tenders are currently invited for the allocation of non-repayable funding for investment into service quality enhancement”, emphasised Anamarija Cicarelli, owner of the Split-based company Interligo,

over million

overnight stays recorded in July

September 2016 | No 261 | PVinternational | 5

TOURIST SEASON

INTERVIEW: LEILA KREŠIĆ JURIĆ, Directo

ADMINISTRA TOURISM NE a consultancy for private accommodation owners. She pointed out the recent trend amongst visitors of staying in privately-owned accommodation for a day or two. “These are young people who are also excellent consumers and aim to visit several locations during their stay”, she explained.

HOTEL OPERATORS DELIGHTED The hotel company Sunčani Hvar has seen the best pre-season since records began, Gordana Tomičić, President of the Management Board. “Concerning the results achieved in July and August and bookings for September and October, we are expecting the longest and most successful season thus far. The growth in overnight stays up to July 2016 came in at 22% above average, as a consequence of welltargeted key markets and development of our own direct sales channels to markets with higher purchasing power, where Hvar is considered as a must-see travel destination. The newly reconstructed Pharos Hotel exceeds the expectations and the ﬁnancial objectives are in line with the plan, whilst total revenue generated is 15% up”, stressed President of Sunčani Hvar Management Board. Sources at the Biograd-based Ilirija, a company that integrates three tourism sectors – the hotel industry, nautical tourism and camping, are also delighted with this year’s season. Nevertheless, Goran Ražnjević, President of the Management Board believes that tourism has still not exploited all its development potential. “Tourism has not managed to become fully recognised as a cornerstone of development and growth with a signiﬁcant knock-on effect on the overall economy, showing effects throughout the year, rather than only 120 to 150. We will not manage to fully exploit the potential if we continue observing it exclusively in terms of statistical data. It needs to be considered as an economic activity, which it actually is. Tourism has to be highlighted in the same way it is being done by other countries, and they are both considerably more organised and successful compared with us”, believes the top-ranking official at Ilirija. 6 | PVinternational | September 2016 | No 261

ccording to current statistical data, it is evident that 2016 will be yet another year of excellent tourism results for Croatia. The same opinion has been expressed by most employees in the tourism industry, and the outgoing Tourism Minister, Anton Kliman. Good results were due to excellent weather conditions, new products, as well as a deﬁned identity for Croatia internationally. Privredni vjesnik spoke with Leila Krešić Jurić, Director of Tourism Sector at the Croatian Chamber of Economy.

 The fact that this year Croatia will see yet another best tourism season on record has been continuously emphasised in public. What is your opinion concerning this issue? This year’s season is excellent. The forecast had been provided by the Tourism Business Council at the CCE which, as an umbrella entity, brings together all aspects of the tourism industry in the Chamber as well as external associations. Statistics are indisputable and tourism ambiance is still dominant in most local holiday destinations, both at the sea and inland. Upward statistical trends concerning foreign nationals have been recorded by the Ministry of Interior in relation to previous years. Specific tourism areas, as well as specific destinations, show a significant improvement in results especially in the luxury and high quality four and five-star accommodation in hotels and rentals that have substantially increased in number compared with previous years. Split-Dalmatia County needs to be highlighted due to a 30% increase in tourist arrivals and overnight stays.  What are your expectations and estimates by the end of this year? Expectations for 2016 indicate overnight stays will increase by 7% compared with last year, as well as tourism revenue, breaking all records and exceeding €8 billion. Nevertheless, it has to be noted that according to the Croatian Tourism Development Strategy to 2020, this sector is expected to generate €14 billion, in addition to high growth in investment into new hotels, capacities and tourism infrastructure. What we as a country need and can focus on, in compliance with EU Directives, is the simplification of administrative and bureaucratic procedures and business conditions that adversely affect entrepreneurship and thus tourism. A particular focus needs to be placed on the agreed methods of running a business, reporting to the state, taxation and more flexible labour legislation. Thereafter, tourism revenue will flow more effectively throughout the overall economy.  Travel agencies have been faced with many problems. Are solutions to these in sight? Travel agencies have seen a substantial increase in numbers,

or of Tourism Sector, CCE

ATIVE BARRIERS IN EED TO BE REDUCED Specific areas of tourism, as well as specific destinations, have seen a significant improvement in results especially luxury and high quality four and five-star accommodation in hotels and holiday rentals that have grown in numbers compared with previous years by Sanja Plješa pljesa@privredni.hr

which clearly shows the level of interest amongst entrepreneurs. There are currently some 2,500 registered travel agencies and tour operators and it is important to point out that over 500 of them operate in three Croatian regions, Split-Dalmatia County, Dubrovnik-Neretva County and Zagreb. One of the burning issues faced by travel agencies is the issue of a special taxation procedure. Moreover, there is the issue of too few ﬂights from Zagreb Airport, as well as from other airports, both

STATISTICS ARE INDISPUTABLE AND TOURISM AMBIANCE IS STILL DOMINANT IN MOST LOCAL HOLIDAY DESTINATIONS, BOTH BY THE SEA AND INLAND during the peak- and off-season, insufficient off-season selfcatering accommodation as well as the lack of qualiﬁed labour, which is expected to be even more pronounced in the future. We therefore support curricular reform, the harmonisation of education and practical requirements and the introduction of a dual education system. Concerning the issue of special taxation procedures that have been adopted, it directly and adversely affects the increase in proﬁtability of travel agencies. Hence, the management of the Association of Travel Agencies at the Croatian Chamber of Economy has started lobbying on this issue at the Ministry of Finance, with support provided by the Ministry of Tourism and we are expecting new guidelines to be adopted following the appointment of the new government and the Parliament.

This years’ tourism season is excellent, stated Leila Krešić Jurić

September 2016 | No 261 | PVinternational | 7

PV ANALYSIS CONSTRUCTION PROJECTS FOR EU FUNDING

THE CONSTRUCTION SECTOR: Through involvement in 11 projects via the Connecting Europe Facility (CEF), Croatia may become an important intermodal hub that would result in a wide range of positive effects – from job creation to developing the conditions for further investment interest. Nevertheless, optimism is in short supply. The frail construction sector is lacking much but primarily labour by Boris Odorčić

The myth that presents construction as an indestructible economic function, based on success in the 1970’s and several successful following years, is still plainly obvious. Reality in construction is still a myth and a very painful one Mirjana Čagalj, Vice-President for Construction, Transport and Connections at CCE

he European Union recently approved 11 projects via Connecting Europe Facility (CEF) in transport to be co-ﬁnanced by the EU with €306.9 million of a total of €456 million allocated to Croatia in this envelope. The total value of the Croatian share in these projects, many of which will be implemented at the level of several countries, is €492.7 million. The projects comprise a wide cross-section of investment initiatives into railway infrastructure, the improvement of management in air transport, implementation of intelligent transportation systems in rail and road transport, infrastructure upgrade for Rijeka, the construction of a bridge across the River Sava, as well as the implementation of information services to achieve the aim of effective navigation on inland waterways. Through involvement in 11 projects via Connecting Europe Facility (CEF) Croatia may become an important intermodal hub to connect Europe with the rest of the world; this could result in wider positive effects – from job creation to the further attraction of investment to achieve economic growth. In addition, four construction projects have been approved for which the overall value of the Croatian share is €457.2 million with the EU co-ﬁnancing them with €278.3 million. Concer-

8 | PVinternational | September 2016 | No 261

ning the value of the co-ﬁnancing provided by the EU, this includes the largest project for the construction of double-track railway to the Hungarian border (€241.3 million), whilst the second largest project is the Zagreb waterfront project in Rijeka, which has been allocated non-repayable EU funds of €26.8 million. There is also the project concerning the construction of a 600-metre bridge between Croatia and Bosnia and Herzegovina on the Rhine-Danube Corridor, (€25.26 million). Furthermo-

NEW POTENTIAL FOR SMART AND SUSTAINABLE GROWTH IN CONSTRUCTION INDUSTRY re, the reconstruction of the Raša terminal in Istria will also be granted ﬁnancing, with the Croatian level standing at €7 million and coﬁnancing by the European Union to the value of €3.1 million.

NUMBER OF ORDER INCREASING Mirjana Čagalj, Vice-President for Construction, Transport and Connections at the Croatian Chamber of Economy pointed out that those involved in construction should be delighted with all these projects. Nevertheless, against a backdrop of the current situation, there is little room for optimism. “Concerning the current

A LACK OF OPTIMISM NOTWITHSTANDING NEW PROJECTS Indices of the number of employees in companies

Overall economy Construction

XII 2011.

XII 2012.

XII 2013.

XII 2014.

XII 2015.

Index

Total

XII 2015./ XI 2015.

XII 2015./ XII 2014.

I–XII 2015./ I–XII 2014.

1.128.166

1.109.719

1.104.807

1.095.460

1.103.000

99,1

99,8

99,3

82.189

74.911

70.540

67.307

66.938

98,5

94,4

95,8

Source: CCE

Overview of the number of employees in construction Ø 2010.

Ø 2011.

Ø 2012.

Ø 2013.

Ø 2014.

XI - 2015.

XII - 2015.

Total

1.168.179

1.159.657

1.153.497

1.132.246

1.120.507

1 .112.850

1.103.000

Construction

91.052

84.194

78.579

73.832

72.028

67.928

66.938

Buildings construction

37.333

33.661

30.806

27.755

26.751

25.181

24.938

Other building/construction

28.463

26.760

24.857

24.214

23.053

21.282

20.721

Spec. construction activities

25.256

23.773

22.916

21.863

22.224

21.465

Total Overall economy

Source: CCE, Croatian Bureau of Statistics

situation and actual trends, from the aspect of production and revenue, Croatian construction has been almost halved over the past several years and unemployment ranks amongst the highest in Croatia. In addition, it has been faced with the issue of a brain drain, and has seen the lowest level of activity and unemployment rates in the EU”, she pointed out. Whilst the construction industry has only recently recovered from the crisis, the government needs to approve additional import quotas for foreign workers. Unless this happens, the government needs to be aware that the construction companies will not be alloca-

A LACK OF QUALIFIED LABOUR, AS THOUSANDS OF WORKERS HAVE MIGRATED MAINLY GERMANY ted these jobs and neither will other accompanying industries, which will eventually have a severe impact on the wider economy. She provided data according to which the value of orders in 2015 was €0.52 billion. An increase of €0.5 billion, (the value of these construction projects), would see growth of September 2016 | No 261 | PVinternational | 9

PV ANALYSIS some €2.3 billion based on current growth trends, a 23% upswing. Total revenue generated by construction, including these projects, would range between €5.8 billion and €6 billion, up between 9% and 10%. As a percentage of GDP, it would increase by around 5.3%, a considerable improvement of 15% to 16% compared with the current situation of 4.4%. In addition, the number of employees in construction would be likely to rise and reach between 80,000 and 81,000, an increase of 13,000 to 14,000; current numbers employed in construction is about 67,000. Stating that construction was the economic

Cumulative graphic overview of statistical indicators in the construction industry in Croatia, 2003-2015; employment, total revenue, active companies, productivity2009. and share of GDP

Source: CCE/ Croatian Bureau of Statistics

2003. 2014.

120.000

2004.

100.000

BRAIN DRAIN

80.000

2013.

2005.

60.000 40.000 20.000

2012.

2006.

2007.

2011.

2010.

number of employees total revenue (HRK million)

2008.

number of active companies productivity (€)

GDP (%/mil)

Number of employees in construction over the last decade 120.000 100.000 80.000 60.000 40.000 20.000 0 2003. 2004. 2005. 2006. 2007. 2008. 2009. 2010. 2011. 2012. 2013. 2014. Source: CCE/ Croatian Bureau of Statistics

10 | PVinternational | September 2016 | No 261

area to have incurred the most severe burden during the recession as a result of a lack of investment, Mirjana Čagalj stressed that it is now facing a turning point with new potential for smart and sustainable growth. “The construction myth that presents construction as an indestructible economic function, based on the success from the 1970’s and several successful following years from 2005 to 2008, is still with us. The current reality is a very different story; it is sobering and painful, primarily for those working in the industry, as well as for the general public,” she noted. The industry was hit by the crisis slightly later than other areas, in mid-2009, when projects contracted for during the previous period had only then reached completion. From that point until 2014, construction saw a drop in revenue, as well as a decrease in its share of GDP, activity and productivity were similarly down, as well as the value of work and the number of employees. Concerning the current status and actual trends both from the point of view of production and of revenue, it was almost halved during the above period.

A drastic economic, quantitative and qualitative drop in this industry that lasted for over 70 consecutive months has only recently halted. Consequently, it is not surprising that the level of activity is currently almost at the level of 2014, since no signiﬁcant development or investment initiatives have occurred during the past two years. The degree of the dramatic drop faced over the last seven years may best be illustrated by the rate of unemployment data. Whilst the total number of employees in companies during the period from pre-crisis 2008 dropped by 9.79%, the construction sector saw a calamitous drop of 33.8%. December of 2008 saw 101,120 workers employed but by the end of December 2015 the number of workers stood at 66,938. It is important to stress that the current situation implies both the lowest activity and the lowest employment rate in the EU, amongst the highest unemployment rates in general, as well as the highest youth unemployment rate, accelerated rates of youth migration and brain drain and the fact that, according to population statistics, Croatians rank amongst the oldest in the EU. “The construction industry is therefore faced with the issue of brain drain and, according to estimates, following the abolition of the employment of foreign workers, several thousand construction workers migrated to Germany”, emphasised Mirjana Čagalj, adding that the Croatian paradox of a lack of labour and high unemployment rates has been highlighted over a long period. Consequently,

RECENTLY ADOPTED IMPORT QUOTAS FOR CONSTRUCTION WORKERS WERE ALLOCATED WITHIN TWO DAYS last year; the import quota for foreign workers in construction in 2015 was zero (0). The recently approved quotas in construction were all taken up within two days. “Many construction companies stated that the allocation of import quotas to companies was unfair, since

Annual quota of work permits for foreign workers for construction companies Activity

Construction

the number of requests for permits for foreign workers – primarily in construction, as well as in transport, tourism and shipbuilding – greatly exceeds the number of workers deﬁned by import quotas approved by the state. This year, the government has increased the annual import quota, although not in the large numbers requested by companies. Nevertheless, this is understandable, as it is a considerable improvement compared with

Occupation

Quotas required 2016

Quotas granted* 2016

Carpenter

368

150

Construction worker

294

Steel worker

159

100

Concrete worker

Roofer

Dry building fitter

Tiler

Plasterer

Wall painter

Electrician Total Source: CCE/ Croatian Bureau of Statistics

1039

500

*following the decision of the Government of Croatia reached on 20th April 2016

the requirements and size of specific companies had not been adequately considered. The only criterion was who applied first. Those who had been informed applied first and some larger companies were at a disadvantage, having been allocated no foreign workers or an insufficient number relevant to their size and requirements,” she pointed out. September 2016 | No 261 | PVinternational | 11

HALF-YEARLY FINANCIAL RESULTS

RELATIVELY GOOD R BACKDROP OF ACCE

Over the first six months of 2016, the Adris Group generated revenue (excluding the same period last year. Companies within the Agrokor, Jamnica, Ledo and Zv relation to the same period last year, although Vupik, PIK Vinkovci and Tisak sh SAPONIA GROUP: PROFITS UP BY 42%

TELE2 HRVATSKA: PROFIT OF €2.13 MILLION

revenue was €26.8, million a slump of 50%.

PRIVREDNA BANKA ZAGREB: NETT PROFIT UP ALMOST 50% For the first six months of 2016, Privredna banka Zagreb showed a nett profit of €90 million, up by 47% compared with the same period in 2015. Interest incoDuring the first six months of 2016, the Saponia Group showed nett profits of €0.92 million, an increase of 42% compared with the same period last year. Total revenue was €71.6 million, growth of 2.3% over the same period last year.

KONČAR D&ST: NETT PROFIT OF €1.77 MILLION

Earnings generated by Tele2 Hrvatska before interest, taxes, depreciation and amortisation (EBITDA) were €2.13 million after the ﬁrst six months of 2016, €1.6 million down over 2015. Sources in the company stated that quarterly earnings were signiﬁcantly affected by the increase of radiofrequency spectrum fees. Sales were stable compared with the same period last year at €22.67 million.

VIRO SUGAR FACTORY: LOSS OF €0.3 MILLION During the ﬁrst six months of 2016, the Viro sugar factory showed a loss of €0.3 million compared with the same period in 2015 (nett proﬁt of €3.16 million). Total

For the ﬁrst half year, Končar Distribution and Special Transformers saw €1.77 million nett proﬁt, 7.7% down compared with the same period of 2015. Total revenue came in at €50.25 million, a decrease of 18% over the same period last year. 12 | PVinternational | September 2016 | No 261

me generated was €0.19 billion, with interest expenses of €40.2 million. Bank assets at the end of this period were €9.16 billion. During the ﬁrst six months of 2016, PBZ Group showed nett proﬁts of €110.6 million, 38.2% up over the same period in 2015.

CROATIA AIRLINES: LOSSES REDUCED BY 13% Following the ﬁrst six months of operations in 2016, Croatia Airlines reduced its losses by 13% compared with the same period last year, currently at €11.28 million after showing an increase in the number of passengers and sales. Operating revenue over the ﬁrst six months was on a par with 2015, although ope-

RESULTS AGAINST A ELERATED CHANGES

g its tobacco business), on a par with those covering vijezda structure showed an increase in profits in howed increasing losses by Ilijana Grgić

SUNČANI HVAR: LOSS OF €1.56 MILLION

rating costs were 2% down, the overall loss was successfully reduced by 13%.

Total revenue for Sunčani Hvar during the ﬁrst six months of 2016 was €5.95 million, 9% up in relation over last year. The company incurred a loss of €1.56 million, an increase of €1.09 million compared with last year. Revenue per available room increased to €3.25 million, whilst the most signiﬁcant growth was achieved by the

Food and Beverages Department of €2.1 million. September 2016 | No 261 | PVinternational | 13

HALF-YEARLY FINANCIAL RESULTS DUKAT: NETT PROFIT AT HRK38.8 MILLION

Jamnica saw the end of the ﬁrst half of 2016 with an after-tax proﬁt of €17.04 million, an 18.8% rise over the same period last year. Total revenue was 4% up to €0.17 billion, and total expenditure rose by 3% to €0.15 billion.

LEDO: REVENUE 2% UP For the first six months of 2016, the Ledo Group saw after-tax profits of €25 million, up 11.4% over the same period Nett profit of €5.17 million were seen by Dukat during the first half of 2016, an increase of €4.95 million compared with the same period last year. Operating revenue came in at €99.67 million a drop of 2.9%. Sales also decreased, showing a drop of 2.7%, to €99.22 million.

ARENATURIST: REVENUE UP, BUT LOSSES INCREASING

with total expenditure also reducing – by 5.9% - to €98.33 million.

PIK VINKOVCI I VUPIK: STILL SPILLING RED INK For the ﬁrst six months of 2016, PIK Vinkovci showed a loss of €1.16 million. The company increased sales by 13.6% to €28.37 million. Company sources quote

last year. Total revenue was €0.16 billion, 2% up, with sales revenue increasing by 2.4%, to €0.15 billion.

During the ﬁrst six months of 2016,

ZVIJEZDA: PROFIT OF HRK10.9 MILLION Over the ﬁrst half of 2016, Zvijezda showed a proﬁt of €1.45 million, 47.8% up. Total revenue was €54.87 million, a fall of 1.9%. Total expenditure also fell - by 3.2% - to €52.73 million. Through

revenue from Arenaturist came in at €13.13 million, 4% up over the same period last year, whilst losses reached €8.5 million an increase of €2.69 million over the ﬁrst half of 2015. Capital expenditure over the ﬁrst six months of 2016 was €18.89 million an increase of 9over the same period in 2015.

JAMNICA: REVENUE UP BY 4%

TISAK: LOSSES WIDENING TO €0.96 MILLION

the second quarter it is important to stress their investment of €0.19 million, an investment in food processing equipment.

BELJE: DEEPER LOSSES Following the ﬁrst six months of 2016, Belje showed a loss of €0.37 million, down almost 86% (negative) compared with the same period last year. Total revenue fell by 3.8% to €97.96 million 14 | PVinternational | September 2016 | No 261

that exports were €0.96 million, indicating some growth. Vupik also showed greater losses during the same period, seeing a loss of €0.46 million over the same period in 2015, to show a loss of €0.96 million in 2016. Sales dropped by 8.4% to €19 million.

During the ﬁrst six months of 2016, Tisak showed a before tax loss of €0.96 million, compared with €0.84 million during the same period last year. Total revenue was €0.17 billion an increase of 1.7%, with total expenditure also increasing by 1.8%, to €0.18 billion.

RESULTS

HRVATSKA LUTRIJA: REVENUE UP 6%

irrespective of the fact that the operating plan showed expectations of a nett proﬁt in the region of €1.43 million. Total revenue was €41.64 million, a drop of 16%.

JANAF: NETT PROFIT LEAPS 56%

Over the first half of 2016, Hrvatska Lutrija recorded a gross profit of €3.57 million, up 51.6% compared with the same period last year, whilst revenue from lottery ticket sales increased by 6%. Total revenue for Hrvatska Lutrija over the first six months of 2016 was €31.57 million.

TEHNIKA: LOSS RATHER THAN PLANNED PROFITS During the ﬁrst six months of 2016, Tehnika showed losses of €1.75 million,

ded a loss of €1.45 million (lower in relation to the same period in 2015 when it was almost €4.5 million). Proﬁt before amortisation, ﬁnancial revenue, expenditure and taxes was €1.05 million.

Janaf has been extremely successful over the ﬁrst half of 2016, having generated a nett proﬁt of almost €18 million, up almost 56% over the same period last year. Total revenue showed growth of 18% compared with the same period in 2015 to reach €49.33 million, whilst total expenditure dropped 1.8% to €13.6 million.

ĐURO ĐAKOVIĆ GROUP: REVENUE UP 53% During the ﬁrst half of 2016, the Đuro Đaković Group generated revenue of €36.28 million, 53% up compared with the same period in 2015, but also recor-

DALEKOVOD: NETT PROFIT COMES IN AT OVER €5.33 MILLION

Over the first half of 2016 nett profits generated by Dalekovod stood at €5.53 million, a substantial increase compared with the same period last year €0.9 million). On the other hand, nett profit from the Dalekovod Group surged by September 2016 | No 261 | PVinternational | 15

HALF-YEARLY FINANCIAL RESULTS 321% to €3.75 million, with total revenue at €67.24 million. Total revenue generated increased by almost 10% to €51.39 million.

with the same period in 2015. Total expenditure came in at €0.141 billion, a 20% decrease.

ADRIS GROUP: NETT PROFIT OF €20.13 MILLION before rose by almost 18% to €9.61 million, against €8.15 million for the same period last year.

ZAGREBAČKA BANKA: NETT PROFIT ALMOST DOUBLES During the first six months of 2016, the Adris Group generated a nett profit of €20.13 million, which (irrespective of the sale of its tobacco operation), is unchanged from the same period last year. Total revenue generated was €0.32 billion. During the first half of 2016, the number of overnight stays in Maistra fell 3% in relation to the same period last year; this should be set against the backdrop of an 8% increase in the average nightly rate, resulting in a 5% increase in operating revenue. Cromaris generated a nett profit of €0.96 million with revenue rising 18% due to an increase in prices. Over the first half of 2016, the Croatia Insurance Group saw a nett profit of €8.27 million.

Nett profit generated by Zagrebačka banka over the first six months of this year was €104 million, 94% up over the same period in 2015, with operating revenue of €0.28 billion, up 17%. Nett interest income reached €0.18 billion, up 1.8% as a result of stable average loan volume and lower financing costs.

KRAŠ: NETT PROFIT UP 12.3%

During the ﬁrst half of 2016, the total consolidated revenue from the Kraš Group was €61.15 million, 1.3% up over the same period last year. Nett proﬁt increased by 12.3% to €0.71 million. Sales reached €60.04 million.

16 | PVinternational | September 2016 | No 261

Over the ﬁrst six months of 2016, Optima Telekom saw total operating revenue reach €30.4 million, up 2.1over the same period last year, with pre-tax proﬁt coming in at €0.84 million. It should be noted that the company showed a loss of €35,500 for the same period last year.

HRVATSKI TELEKOM: REVENUE AND NETT PROFIT RISING

PETROKEMIJA GROUP: FIRST PROFIT SINCE 2011

Over the first half of 2016, the Petrokemija Group showed a profit of €123,000, the first occasion the company has generated a profit during the first half of the year, since 2011. Total revenue was €0.14 billion, a drop of 19.1% compared

OPTIMA TELEKOM: HRK6.3 MILLION PROFIT

KONČAR GROUP: REVENUE DOWN, PROFIT UP Total operating revenue from Končar Group during the ﬁrst half of 2016 was €0.17 billion, a 16% drop over the same period last year. However, pre-tax proﬁt

During the first half of this year Hrvatski Telekom recorded a nett profit of €55.6 million, up 2.7% compared with the same period in 2015; total revenue was up 3% to €0.45 billion. “We are highly delighted with our financial results over the first six months. We are continuing the investment cycle into network infrastructure and innovative services, as

well as into retaining and strengthening of our position as the technological leader on the Croatian market and in the improvement of user experiences”, pointed out President of the Management Board of HT, Davor Tomašković.

INA: PROFITS PLUNGE BY 90%

During the ﬁrst half of 2016, Ina generated nett sales revenue of €0.84 billion, 32% down compared with last year. Nett proﬁt was €3.07 million a slump of over 90%, due to a drop in oil and gas prices. Earnings per share dropped to €0.31 (€4.37 last year).

ATLANTIC GROUP: PROFITS AND REVENUE BOTH DOWN

was €68.29 million, a drop by 2.42% over the same period last year, with nett proﬁt increasing by 4.2% to €3.75 million. Revenue is in line with the business plan that intimated a further decrease in revenue from the Russian market, albeit at a substantially slower pace.

Over the first six months of this year, Atlantic Group saw a nett profit (after minority interests) of €17.8 million, 7.3% down compared with the same period last year. Total revenue from Atlantic Group during the first half of the year

VALAMAR: INCOME SOARS 36% During the ﬁrst half of 2016, the hotel company Valamar Riviera saw overall income rise 36% to €67.6 million, whilst the number of overnight stays also increased by 13%. Total sales over the ﬁrst six months of 2016 rose 22% to almost €56 million.

CROATIAN POSTAL BANK: €12.2 MILLION NETT PROFIT

ERICSSON NT: REVENUE INCREASE OF OVER 7%

was 2.6% down to €0.33 billion. Sales also fell by 3.3% to €0.33 billion.

AD PLASTIK GROUP: PROFIT UP 4.2% During the ﬁrst half of this year operating revenue from AD Plastik Group

Ericsson Nikola Tesla generated a nett profit of €6.8 million during the first six months of 2016, on a par with results achieved from the same period last year; sales increased by 7.5% to €97.3 million, compared with €90.59 million for the same period in 2015. “Business results during the first half show a continuation of stability in business operations”, stated the President of Ericsson Nikola Tesla, Gordana Kovačević.

According to the unaudited financial statement, during the first six months of 2016 the Croatian Postal Bank generated a nett profit of €12.2 million, together with vigorous growth in market share across all operating areas. Some 17,600 new current accounts were opened in the retail banking division during the first half and over 800 new corporate banking accounts were also opened. September 2016 | No 261 | PVinternational | 17

INTERVIEW CRISTIAN SERIO, PRESIDENT, MANAGEMENT BOARD AND OW

ANOTHER FACILITY TO BE CONSTRUCTED I am planning to build my own Croatian brand Canicula and the work has already started. By the end of this year or the beginning of 2017, we plan to start another factory. We are satisfied as we have been operating with enhanced dynamics by Jozo Vrdoljak

he family behind the company Canicula, a young Italian entrepreneur named Cristiano Serio, has been involved in fish processing for over 100 years, and for over five years in Croatia. At the end of March 2016, the company opened a fish processing facility in the business zone of Prisike, and prior to that for one year in Tribunj and Milna on the island of Brač. There, Serio was faced with a serious labour shortage problem and incurred substantial costs for ferry transport. The annual turnover of the company at that time, ranged between €1.97 million and

DO WE EXPERIENCE PROBLEMS WITH PAYMENT? THE ISSUE IS NOT AS DIRE AS IS FREQUENTLY POINTED OUT €2.6 million but ceased operating there at the end of 2015. Privredni vjesnik talked with Cristian Serio about the future plans of the company, as well as new investment and market sales. Serio also commented on business conditions in Croatia generally, as well as on the current status and quality of ﬁsh stocks in the Adriatic Sea. 18 | PVinternational | September 2016 | No 261

NER OF CANICULA

We have submitted a request for the allocation of an export number for Russia - a market we find particularly interesting. Canned fish is not subject to the embargo, which is god news for us. We are also planning to penetrate both the Chinese and the Japanese markets, stated Cristian Serio

September 2016 | No 261 | PVinternational | 19

INTERVIEW

4.3 3 million

€

investment into the first fish processing plant (of which €2.9 million has been granted by HBOR)

between € million and € million

3.3 3 4

planned investment into the second facility y

 What is the value of the investment into the facility? Investment is €4.3 million; around €1.3 million was provided via the European Union IPARD Measures 103, and a €2.9 million loan was granted by the Croatian Bank for Reconstruction and Development (HBOR). The facility covers an area of almost 2,000 m2 within a plot of around 7,000 m2.  What is your production range? Canicula primarily produces salted anchovies. Most are sold to the Italian market. Many are packed in large containers and sent to the Italian facility of our family-owned, where they are re-packaged and sent to large Italian retail chains. The market is secure, since my family business is involved in the production of a brand for the largest Italian retail chains. A percentage of our product range is packaged under our own brand in specially designed glass jars and sold on the Croatian and other markets. In addition to salted anchovies, we provide canned salted sardines and marinated shrimps.  Are you satisfied with the production

over

60%

of products exported

levels? Do you have sufficient labour at your disposal? We are extremely satisfied overall, as we are operating with increased dynamism. Our workers are from near Sinj and thus we have provided transport for them. 70 staff are currently employed at the fish processing plant, 10 additional employees in Sales and Administration s and we have truck drivers and staff on purse seine boats or fishermen. Overall, the

20 | PVinternational | September 2016 | No 261

company employs almost 100 workers. Canicula already owns three refrigerated trucks for fresh ﬁsh transportation.

WE ARE PLANNING TO REACH A TURNOVER OF AROUND €4.7 MILLION  You own your own purse seine boats? Originally, we had one purse seine boat and have recently purchased an additional one. The cost of a purse seine boat is around €200,000. We catch and process sardines and anchovies and in our new facility we have started shrimp canning. Additionally, we have established cooperation with two fishing boats that catch shrimps near Palagruža. Shrimps are processed and packaged in our plant. We have also successfully launched sales to caterers.  What is your planned turnover? We are planning to reach a turnover of around €4.7 million. Our daily capacity is now 50 tons of processed fish; we plan to become the leading producer of salted anchovies in Croatia.  Are there any plans for a wider product range? At the end of this year or the beginning of 2017 we plan to construct another fish processing plant next to our current factory. It will have freezing chambers and technology for rapid

freezing. The other section of the processing plant will be intended for curing fish, primarily salmon and tuna. There are no large facilities for fish curing in this area and thus we would gain access to a high proportion of the cured fish and seafood market. I am convinced this is a significant project. The investment will be between €3.3 million and €4 million. We anticipate some EU funding for this. We are about to apply and submit documentation for this project. The Croatian Bank for Reconstruction and Development (HBOR) and other institutions have so far been convinced by our serious intentions, and we can expect to operate with greater ease and the granting of investment funding.

 Where do you sell your products? Primarily to Italy, but also to Spain. In addition, we have started exporting to Serbia and Montenegro. Over 60% of our products are exported. We aim to reduce our exports of products in large packages and to increase the level of exports of products in glass jars to the local market. Furthermore, on the local market some of our products are sold to catering facilities and we have also recently started selling in retail chain stores, such as Konzum, Tommy, Billa and Interspar. It has to be noted that our partners have been extremely satisﬁed with the quality of our products. As opposed to our competitors, we use olive oil rather than vegetable oil in our canned products.

 To which other markets are you planning to export? We have submitted a request for the allocation of an export number for Russia - a market we find particularly interesting. Canned fish is not subject to the embargo, which is good news for us. We are also planning to penetrate both the Chinese and Japanese markets. Our plans concerning exports are wide.  Have you faced any problems with payment? The position is not as dire as is frequently suggested. There are delays, but eventually all payments are made. It has to be pointed out that in April and May we started selling our products in retail chain stores and it is well-known that they normally sign new contracts at the end of the year. We have invested substantially into marketing and so our expectations are high.  Are you interested in producing your own brands for retail chains? We have opted for the development of our own brand. We are certainly flexible and would not reject any opportunity for co-operation. Nevertheless, we have currently been developing our own brand. The value of investment into marketing, visual identity and brand recognition has been substantial. It is a fact that the percentage of own brands on retail chain store shelves in the West and in Italy is considerably larger, and Croatia will soon need to keep abreast of this trend.

CLOSED FISHING SEASON YIELDS RESULTS

Is there a sufficient quantity of fish in the Adriatic Sea? Certainly and it is top quality fish. Nevertheless, fish stocks have considerably decreased and so the European Commission decided on a closed season which has proved positive. Since the closed season has been introduced, there are higher quantities and larger fish caught during the open season. Hence, the introduction of the closed season has certainly had a positive impact. During the closed season, we provide compensation in order to ensure we have sufficient for the paying salaries. Moreover, during the anchovy closed season, if required, we can access raw materials from Spain. We have developed an effective delivery model aiming to deliver anchovies from Spain in 16 hours. The model, with two truck drivers who take turns driving, is highly effective. Still, fish caught in the Adriatic Sea is high quality and another advantage is that it is available immediately. The fish is delivered to the fish processing plant within two hours after being taken out of the sea. Nevertheless, even the fish originating from Spain is highly satisfactory during closed season.

We are talking about serious contracts between producers and retail chains concerning signiﬁcant quantities of products. However, I am planning to build and I have been building my own Canicula brand.

OUR WORKERS ORIGINATE FROM THE AREA NEAR SINJ  Have you had any problems with competitors? Absolutely not, as we are colleagues and we co-operate. Another aspect that positively impacts on our good relationships is that demand for our products is huge and there is considerable interest in them. The demand on the European market still currently exceeds supply.  What is it like to do business in Croatia? What are your particular dislikes? I have not encountered any significant problems thus far and have managed to adapt and become accepted over a relatively short period. I am also satisfied with the business conditions and life here. Nevertheless, I believe bureaucratic obstacles need to be reduced. Everything else is similar as in Italy. Italy is certainly a large market and consumption and demand for processed fish products exceeds that of Croatia. Still, I can say I am generally satisfied.  How successful is your family business in Italy? The Serio family has been involved in salting and processing fish and seafood for 100 years. Since 1979 when our company Pesce Azzurro was registered, we have owned a modern fish processing plant. The company owns facilities in Albania, Morocco and Tunisia. Pesce Azzurro is the leader on the Italian market in processing, warehousing and storage of canned fish. We are currently exporting to Australia, Japan, Great Britain, Slovakia, Switzerland, Russia, Cyprus, Israel, Germany, Holland and Malta. Our product range in Italy covers around 200 items. The company employs around 400 workers in Italy, Tunisia and Albania.

September 2016 | No 261 | PVinternational | 21

FOOD PRODUCTION

22 | PVinternational | September 2016 | No 261

GLOBAL GROWTH OF FISH FARMING Since the 1960’s fish production globally has increased almost 9%, double that of the meat industry. Fish consumption on a similar level has reached a level of 20 kg per person by Ilijana Grgić

ish farming is one of the fastest growing food processing sectors – almost half of global fish consumption is aquaculture-raised fish and the level is still increasing. According to data released by the European Commission, over 80,000 people are currently directly employed in European aquaculture and this figure is expected to grow, since the quantity of fishery products sold in the EU is expected to increase.

PEOPLE EATING MORE AQUACULTURE-RAISED THAN WILD FISH FOR THE FIRST TIME SINCE UN RECORDS BEGAN According to statistics from the Food and Agriculture Organisation of the United Nations (FAO), per capita EU fish consumption currently stands at 23 kg. In Croatia, the average per capita fish consumption is estimated at 12 kg, whilst in Portugal it is 56.8 kg per capita, in Lithuania 43.4 kg, whilst in Spain it stands at 42.4 kg. Fish consumption in Finland is 35.6 kg, and in France 34.6 kg on an annualised basis. Global per capita fish consumption has reached a record level of 20 kg, as has has been pointed out by the FAO in its statistics, that farm-raised fish consumption has exceeded wild fish consumption for the first time since records began. “The principal driver of global fish consumption is the growth of aquaculture”, noted the Director of the FAO Fisheries, Manuel Barange, who also pointed out that the revenue from the global fish trade exceed the nett trade in meat, tobacco, rice and sugar combined. He explained that the total fish trade in 1976 was $8 billion,

reaching $148 billion in 2014. According to official statistics from the Ministry of Agriculture, 11,244 tons of saltwater fish was produced in Croatia in 2015, as well as 798 tons of shell-fish and a total of 4832 tons of freshwater fish.

ADRIATIC SEA IS IDEAL Mariculture, the farming fish and shell-fish in the sea, is an important aspect of aquaculture. In Croatia, the most important are sea bass, gilt-head and Atlantic blue fin tuna, with mussels and oysters being the prime shell-fish. According to the list provided by the Ministry of Agriculture, 2015 saw a total of 159 fish farmers, 127 of whom were involved in shell-fish farming, and 28 employed in white fish farming and 4 in tuna farming. According to data released by the Croatian Bureau of Statistics in 2015, the total production of farm-raised tuna in Croatia was 2,603 tons, that of of farm-raised seabass 4,488 tons, gilthead production was 4,075 tons, with other fish species 78 tons. “Croatia has an immense potential for further development of mariculture, primarily due to the cleanliness and high quality of sea water”, opined the Director of Cromaris, Goran Markulin. Since its start in 2009, the company Cromaris has increased production six-fold and this year it will exceed 7,000 tons, making Cromaris the eighth largest producer of sea bass and gilt-head globally. Around 90% of sales are to EU markets. “We are aiming to achieve the economies of scale in the immediate future and meet a target of 10,000 tons of fish and significantly increase our profitability. Our competitive advantage is that of Cromaris brand recognition, as well as outstanding freshness and the premium quality of our products”, stated Markulin, emphasising that there are significant advantages to fish farming in the clean waters of the Adriatic Sea. “Institutions both at local and state level are striving to provide support to the development of this sector. Croatia has started recognising

There are over 40 laws concerning certain aspects of production in mariculture. Such complexity and prescribed procedures

signiﬁcantly slows the acquisition of all the necessary licences and approvals for expansion of this industry. Goran Markulin, Director of Cromaris

September 2016 | No 261 | PVinternational | 23

FOOD PRODUCTION (79.6%) compared with the previous year. Carp production accounted for 70.4% of freshwater ﬁsh, whilst trout production was up 14.1%. Croatia meets all the requirements for being a leader in ﬁsh farming in Central and Eastern Europe,

CARP AND CATFISH ARE AMONGST THE ALMOST 600 FISH SPECIES CURRENTLY BEING FARMED GLOBALLY

the potential of the development of aquaculture and ﬁsheries at the European market level. The largest development challenge is complex legislation covering mariculture development; there are over 40 laws concerning production. Such complexity and prescribed procedures signiﬁcantly slows the acquisition of all

ANNUAL PER CAPITA FISH CONSUMPTION IN CROATIA IS 12 KG, WHILST IN PORTUGAL IT IS ALMOST 57 KG required licences and approvals for expansion. Nevertheless, this problem has been identiﬁed and efforts are currently being made to simplify several procedures”, noted Markulin.

FRESHWATER FARMING Of the 4,832 tons of freshwater fish sold in 2015, carp farming accounted for 3,401 tons, catfish 47 tons, and grass carp 132 tons. Big-headed carp white and silver carp) produced 469 tons, and trout 679 tons. The farming of other fish was 104 tons. Total freshwater fish production in 2015 increased by 1,024 tons, (26.9%). Fish prepared and ready to eat rose by 723 tons, a surge of almost 21.1%, with trout up by 301 tons, 24 | PVinternational | September 2016 | No 261

due to constant demand on European markets. This can be confirmed by Ribnjačarstvo Dubrava, a private company which has entered the fish farming register published at the Ministry of Agriculture covering 45 freshwater fish farmers. Due to the surface area of the ponds owned by the family, covering an area between 17 and 120 hectares, Ribnjačarstvo Dubrava has the potential to produce some 400 tons of fish; currently they produce almost 250 tons of carp ready to eat. Nevertheless, the current situation is less favourable compared with the previous decade primarily in terms of pricing, stated the Director, Tibor Petrovčić. “There is potential to increase production. We are expecting to produce around 30 tons of fish this year. In 2012 we incurred substantial losses as a result of a drought, and minimum a period of three years is required to revive the production cycle of carp (from larva to fish ready to eat). The situation concerning sales to the domestic market is not satisfactory, due to very low demand as well as getting paid. On the other hand, exports are an entirely different story, where we have never encountered such problems”, stated Petrovčić, adding that his are exported to Bosnia and Hercegovina, Serbia, Hungary, as well as Austria. Fish farming is certainly challenging; it implies dealing with organisms that are highly sensitive to changes in the environment and thus one needs to meet a multitude of variables in order to be successful and profitable. However, considering data provided by the FAO, it may be concluded that we can look forward to a bright future. Since the 1960’s fish production globally has seen an increase of almost 9%, double that of the meat industry. Local fish farmers can be encouraged by the information that carp and catfish are still amongst the almost 600 fish species currently being farming globally. Salmon ranks third, yet due to specific reasons, we cannot expect it to be in the future plans of fish farmers in Croatia.

ECONOMIC POLICY CHALLENGES IN THE EUROPEAN (MONETARY) UNION FROM A CENTRAL BANK PERSPECTIVE

Overly high expectations from monetary policy Structural reforms are imperative whilst aiming to increase the potential of GDP growth rate. This situation results from political economics. Unless this is solved, significantly higher GDP growth rates cannot be within future expectations, noted the Governor of the Croatian National Bank by Boris Odorčić

laas Knot, President of the Central Bank of Holland, recently delivered a lecture on the Economic Policy Challenges in European (Monetary) Union from a Central Bank Perspective to the Croatian National Bank. The lecture focused on the European Central Bank that has implemented both conventional and unconventional monetary policy measures with the aim of tackling the crisis and the low to zero inﬂationary environment. The Eurozone economy has been recovering from the crisis by being supported by an accommodative monetary policy. Nevertheless, monetary policy cannot replace structural adjustment, whilst long-term accommodative monetary policy can result in ﬁnancial stability risks, as was emphasised during the lecture. Irrespective of the fact that economic vulnerability has reduced in several countries, and the monetary union has strengthened key areas – the strengthening of the monetary union has not yet been completed. Further European integration, whilst achieving an adequate balance between risk sharing and economic co-ordination, was pointed out during the lecture as a desirable objective.

BOTH POSITIVE AND NEGATIVE Boris Vujčić, Governor of the Croatian National Bank, stressed that the Quantitative Easing programme implemented by the ECB created both positive and negative effects, primarily visible on the bond market. He added that there are multiple of similarities between the current situation in the Eurozone and Croatia. “Potential GDP growth rate of 1% has been seen both in the Eurozone

Boris Vujčić and Klaas Knot

and Croatia, which is somewhat too low”, he noted. Vujčić continued, pointing out that monetary policy is overloaded, and expectations from it are not proportional. “Structural reforms are imperative whilst aiming to increase the potential GDP growth rate. This situation results from political economics. Unless it is addressed, signiﬁcantly higher GDP growth rates cannot be expected for the future”, he pointed out. Monetary policy has succeeded in lowering interest rates, whilst it not succeeding in the knock-on effect of higher inﬂation rates, an increase in consumption or GDP growth. “Why is this the case? Because monetary policy is not a limiting factor. If one is striving to address an issue that is not a limiting factor, one will forget about solving the actual limiting factor for economic growth and here I am thinking about structural reforms that need to be implemented”, he emphasised.

EXPORTS EXCEEDING IMPORTS According to the Governor, the expectations of the Croatian National Bank from each new government are identical. “We

are looking for the implementation of the necessary structural reforms that ensure an increase in productivity and therefore also potential GDP growth rates”, he stated. Concerning the issue of whether the kuna exchange rate should be slightly lower than its current level, an aspect that several analysts believe, Vujčić highlighted that the seasonal exchange rate has seen a slight firming due to the extremely high foreign currency inflow. “This occurs every season and mainly during the current season which has been highly successful”, he pointed out, adding that the structure of the Croatian economy in 2016 differs substantially compared with the economy of 2008, when it showed a current account deficit. “We have currently recorded a surplus. In other words, Croatian current exports exceed imports, which also increases the pressure on the exchange rate trend. Why has the exchange rate not firmed further? Due to the extremely expansionist monetary policy that has led to the creation of an excessive kuna liquidity surplus, and thus affects the exchange rate appreciation”, concluded Vujčić.

September 2016 | No 261 | PVinternational | 25

INTERVIEW FRANJO MATIJAŠEVIĆ, OWNER, SLAVONIJA BUS

TRANSPORT COMPANIES FACING AN UPHILL BATTLE Croatian legislation has not been adequately regulated and trying to operate alongside the big market players is often a highly challenging task. Nevertheless, we are delighted that Slavonija Bus is successful, irrespective of all the difficulties. The FlixBus story suited us perfectly by Boris Odorčić

lavonija Bus, a company involved in both local and international passenger transport, was founded in 1994. The Slavonian economy incurred considerable losses during the War, the requirement for passenger transport was deep and hence Matijašević, who now owns 100% of the company, decided to launch his own business. From initially a company owning one vehicle,

PARTNERSHIP WITH FLIXBUS HAS HAD AN IMPACT ON DECISIONS MADE BY BANKS CONCERNING NEW INVESTMENT he transformed it into a company with a bus ﬂeet currently standing at 57 modern buses of various sizes and employing around 60 staff. Several buses owned by Slavonija Bus have recently integrated into the system of FlixBus, the European transport operator whose business model is based on co-operation with regional partners. In addition to Slavonija Bus, Matijašević owns a travel agency.

 What are the principal problems Croatian companies involved in both local and international bus transport currently facing? Croatian transport companies, primarily those of small and medium-size, have been facing an uphill battle. Slavonija Bus was established using its own funds, and has received no financial support. Croatian legislation has not been adequately regulated and hence trying to operate with big market players is often a highly challenging task. Nevertheless, we are delighted that Slavonija Bus is successful and operates in full compliance with the law and tax obligations. The FlixBus story was ideal for us, since it fully adapts to current regulations in each country it enters. Moreover, the development of FlixBus was not based on subsidies and that, considering the global success achieved by FlixBus, further encourages us.  Have there been any changes in your operations following Croatian EU accession? We have not seen any particular or significant changes to our operations, as since our startup we have co-operated successfully with foreign companies, and in particular the German company Neoplan. The changes we have noticed have been essentially those concerning simplified import procedures.  What are the current trends and are Croatian bus transport companies keeping up-to-date? Trends in transport are primarily linked with the upgrade in the level of information and communication with service users. Over the past several years we have made considera-

26 | PVinternational | September 2016 | No 261

ble progress in that area. We have provided the opportunity for online ticket sales, communication through social networks and business system data, which has upgraded the level of our services and is now an imperative. FlixBus has been developing its own highly innovative technology platform that is helping us in to be a part of wider and more sophisticated technology solutions. This necessitates investment and quality upgrades and we have been working on this consistently. We are mainly focused on co-operation with FlixBus and are putting all our efforts into this initiative.

 Generally speaking, what are your views on the Croatian bus fleet, and how does it rate in relation to neighbouring countries and the EU? We believe that, generally speaking, the vehicle ﬂeet of most Croatian transport companies is equal to, or very near the level of the European Union. On the other hand, compared with neighbouring countries, we believe Croatia is far above their their average, although good role models may be found also there.  Has the state provided support for bus transport? Regrettably, no. Most incentives or subsidies planned and implemented by the state, such as co-ﬁnancing for the transport of elementary and secondary school pupils, were normally intended for service users. The legislative framework is only partly harmonised with EU legislation, yet there is no consistency in frequent amendments, nor is there clear

communication concerning their application. Consequently, we ﬁnd ourselves pushing through the market independently, whilst fully exploiting our potential.

 To what extent do bank understand the financing of bus transport companies? Croatian commercial banks show little if any understanding for small and medium-sized entrepreneurs. Their co-operation implies inappropriately high costs, and insurance is most frequently initiated by us. Nevertheless, the climate has been slowly changing, but we are still a long way away from financing models of bus transport in EU member states where our commercial banks are normally headquartered. However, I have to admit that our partnership with FlixBus has given us a slight edge on decisions made by banks regarding the financing of new investment. Access to EU funding is virtually non-existent.  You have frequently mentioned FlixBus. What made you opt for this partnership? The support provided by them through their business model gives us the opportunity to optimise bus capacity and also provides economic benefits and a sustainable platform covering 25 million satisfied passengers throughout Europe. This is where FlixBus and Slavonija Bus co-operate and provide mutual support. We are delighted that we take care of our passengers from Slavonija, due to the confidence given to us by FlixBus. We are currently negotiating about an extension to our co-operation across new markets and new contracts.

ABOUT US...

22 years length of time Slavonija Bus has been operating 57 modern buses in its fleet around 60 employees

September 2016 | No 261 | PVinternational | 27

A SUCCESS STORY A FAST-GROWING START-UP

A MORE ACCESSIBLE CHARTER HOLIDAY In addition to online booking services, on its blog Zizoo provides a vast array of content linked with sailing, as well as comprehensive information on destinations, beaches and restaurants. It is a start-up that has already been identified by both the European and the American investors: during a year and a half since its launch it has attracted $2.5 million by Boris Odorčić

over

8,000 , boats

at 200 locations in 30 countries can be booked through Zizoo

2.5 million

€

worth investment attracted by the company since its inception in 2014

izoo, the Internet booking platform for yacht charter and boat rental services for holiday and sailing, was established in 2014 by Anna Baničević with her Croatian partners Sinan Mašović and Ivan Miletić and Benito Gonzalez del Valle. Zizoo is the nickname of a well-known oceanographer - Jacques-Yves Cousteau. The name has not been randomly opted for, since there are three things that the oceanographer and the company have in common and deem important – the sea, adventure and individuality. The idea behind the launch was to make charter boat holidays more accessible. It was subsequently implemented and transformed into a highly successful project. Hence, it currently provides

the opportunity to book over 8,000 boats of different categories (catamarans, sailing boats and yachts) at 200 locations in 30 countries. Zizoo is planning to extend its programme to 100,000 boats by 2019. It is important to note that the company founders have managed to attract both European and American investors due to their innovative idea and their speciﬁc business model, and consequently the value of investment into further company growth this year is €1.7 million. The substantial success of the platform has been largely due also to the opening of its offices in Zagreb and Berlin and its team currently comprising of 30 staff. Since its inception, the company has attracted investment worth €2.5 million and is currently focusing on further improvement of products and acceleration of its growth rate. It is important to point out that in 2015 Zizoo saw its average monthly bookings increase by 35%. The company is planning to generate annual revenue of €450 million by 2020.

CROATIA AS THE MOST IMPORTANT MARKET “We are highly delighted with the fact that reputable European institutional investors in tourism and the digital industry have entrusted us with their conﬁdence and we are particularly delighted with the support provided by American investors. It is an important step and a fundamental support for the implementation of our plans concerning the expansion of our business in Founders of the company

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A CROATIAN INNOVATION

BodyRecog: your health on your mobile The app developed by the Zagreb-based company Live Good was awarded 16 prizes and ranks amongst the 50 most innovative companies globally in the field of sport

T the US”, stated Anna Baničević. “Due to the services provided by our company, charter holidays are becoming accessible for everyone and they are currently extremely simple to book, as simple as accommodation bookings through platforms such as Booking. com or Airbnb”, explained Sinan Masović. According to Zizoo, in addition to Croatia, the most popular holiday destinations in Europe are Spain, Italy and Greece, whilst the largest number of tourists interested in similar services originate from Germany, Austria, Great Britain and the US. “In our destination programme Croatia is currently the top ranking market for tourists from Western Europe and the US. Moreover, Croatia is the most important market in this sector and provides a global example of the direction which nautical tourism needs to move. Positive trends and growth in this industry are primarily due to a young generation (millennials) that is discovering sailing as a more appealing holiday alternative compared with static hotel accommodation. We believe that Croatia has a unique opportunity to exploit its currently starting position and become a global giant of nautical tourism”, added Ivan Miletić. Aiming to guarantee the quality of the services provided, the company co-operates exclusively with qualiﬁed partners, charter companies and skippers. In addition to online booking services, on its blog it provides a vast cross-section of content linked with sailing, as well as comprehensive information on destinations, beaches and restaurants. Exclusive instructions concerning the routes and comments provided by the passengers who have already visited them are currently the most popular contents. .

he app named BodyRecog developed by the Zagreb-based company Live Good was on show during the Summer Olympic Games. It is a system for improving training on the body and to evaluate personal health. It is the result of several years of committed work in science twinned with entrepreneurship by Anita Bušić, who has a Master Degree in molecular biology. The app provides the user with an evaluation of health risks for cardiovascular diseases, diabetes and cancer, based on body type and shape. It comprises a digital human body measurement using a mobile phone camera for amateur users or a scanner for professional users. “Our vision is to monitor personal health or that of a specific nation or even globally in real time using BodyRecog. This can be achieved through data collection, primarily the health status of an individual, as well as of a large number of people within a country and eventually globally. This type of data is required for experts in biomedicine and institutions such as Institutes of Public Health in specific regions, states and finally the World Health Organisation”, she explained.

A NEED FOR PERSONALISATION The original idea for this innovation was to develop software for a personalised programme of nutrition, physical activity and stress relief. “This would include the latest findings on the interaction of genetics, nutrition, metabolism and hormones of an individual with their environment. BodyRecog is only the first phase of this project”, she noted. It has been awarded 16 prizes and ranks amongst the top 50 most innovative companies globally in the field of sport Two versions of the app are being prepared for the international market. BodyRecog HOME is for digital human body measurement, presenting measurement data through photographs, data analyses, assessment of the health risk of an individual to provide professional recommendations. It is intended for all involved in sport and who care about their physical appearance. Moreover, BodyRecog PRO is the version for experts in biomedicine, as well as for fitness experts, utilising a far larger number of parameters. BodyRecog has immense market potential and this is sustained by the fact that over a billion downloads of diverse wellness apps are expected this year. (B.O.)

September 2016 | No 261 | PVinternational | 29

INVESTMENT FINANCING CROATIAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

€109.8 million support for investment into tourism During the first half of the year the bank granted 1,588 loans valued at €0.55 billion, of which 73% was for investment financing

58.64

€

million revenue generated by the Croatian Bank for Reconstruction and Development during the first half of 2016

14.1

€ million

generated profit over the same period

he Croatian Bank for Reconstruction and Development (HBOR) has recently published its half-yearly financial report for 2016. During this period total revenue generated was €58.6 million, with expenditure reaching €44.5 million and profit of €14.1 million. During the first six months of 2016 it provided support to 1,689 projects through loans, export credit guarantee and issuance of performance guarantees with a total value of €0.75 billion.During this reporting period the bank granted 1,588 loans worth €0.55 billion, 73% of which was for investment financing. The most active users of loans provided were small and medium-sized entrepreneurs whose projects were funded to the extent of €0.42 billion, 2.5 times more compared with that provided for the same purpose over the same period last year. The substantial increase in the number of projects given support was the result of implementing new measures intended to foster co-operation with leasing companies and commercial banks, aiming to ensure access to affordable credit for entrepreneurs.

EXPORT CREDIT INSURANCE RISING Over the ﬁrst half of 2016 investment into tourism was granted support worth €109.8

30 | PVinternational | September 2016 | No 261

million, almost 50% up compared with the same period last year. The Croatian Bank for Reconstruction and Development provided funding for exporters to the value of €0.42 billion during the ﬁrst half of the year through loans, insurance and the issuance of performance guarantees

SME’S WERE PROVIDED €0.42 BILLION IN PROJECT FINANCING FUNDING (with the value of the latter exceeding €0.13 billion). Export credit insurance services over the first six months of this year provided support to export business of €83.36 million, an increase of 12.4% over the same period in 2015. The greatest interest in export credit insurance was seen for activities in Holland, Serbia, Armenia, Bosnia and Herzegovina, Algeria and the Russian Federation. (V.A.)