INTERVIEW → I want to introduce order in the system, says Tomislav Tolušić, Minister of Agriculture PAGES 6-9
SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
ORGANIC FOOD → From 2003 to 2015 the number of organic food producers was up 24 times PAGES 10-13
INDUSTRY → Croatian shipbuilding has increased, now ranking second by percentage share in EU PAGES 16-21
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
December 2016, Year IX, No 264
ACCELERATED DEVELOPMENT
Fastest economic growth over the last eight years Gross domestic product for the third quarter of this year showed growth of 2.9% over the same period last year - the eighth consecutive quarter of GDP growth by Ilijana Grgić grgic@privredni.hr
T
he Croatian Bureau of Statistics has published its first estimate of GDP growth according to which in the third quarter of 2016 the Croatian economy recorded growth by 2.9% compared with the same period last year. This is the eighth consecutive quarter of GDP growth. It is important to note that 2.9% growth has been the fastest rate since the second quarter of 2008 when GDP growth last stood at the identical rate. According to seasonally adjusted data, real GDP was 2.7% up in relation to the same quarter in 2015 and 1.7% growth rate was recorded compared with the previous period. “Since this period is considered as the ‘tourism quarter’, in which tourism exerts a significant impact, positive growth was achieved as a result of an increase in services export, implying an increase in trade, accommodation and food preparation”, stated Marko Krištof, Director of the Croatian Bureau of Statistics, pointing out the fact that all the components of GDP were positive. Household consumption increased by 3.4% compared with the same period in 2015, as opposed to a 3.1% rise recorded during the previous two quarters. The rise in consumption was certainly significantly
which indicates a decrease in relation to the previous quarter when they were 7.3% up. Gross fixed capital formation showed growth of 2.9%, irrespective of a drop recorded in that aspect, whilst investment was 6.5% up over the second quarter.
FASTEST EU GROWTH RATE
TRADE TURNOVER INCREASED FOR 25 CONSECUTIVE MONTHS affected by trade turnover, now increasing for 25 consecutive months, which has not been recorded since records began. Exports of goods and services were 6.3% up, as opposed to a 4% increase during the previous quarter. On the other hand, imports of goods and services rose by 6%,
It is interesting to consider data from all 28 EU member states, since, according to seasonally adjusted data, Croatia at 2.7% is in the upper half of EU member states whose average GDP growth was 1.8%. During the third quarter, Romania achieved 4.6% GDP growth - the highest amongst 28 EU member states, followed by Bulgaria (3.5%), Slovakia and Spain both with 3.2%, with Croatia after Cyprus (2.8%) GDP growth during the third quarter. “A comparison of seasonally adjusted data of GDP growth in relation to the previous quarter is also interesting. Croatia showed the fastest growth amongst all 28 EU members, at 1.7%, whereas the average GDP growth amongst 28 EU members was 0.4%”, noted Krištof pointing out that, notwithstanding the fact that the Croatian Bureau of Statistics is not normally involved in projections, data concerning GDP indicates the continuation of trends in economic recovery.
FOREIGN INVESTMENT
OVER 23 YEARS, FOREI INVESTMENT HAS EXC
A
ccording to preliminary data provided by the Croatian National Bank, Foreign Direct Investment at the beginning of October 2016 was €606.3 million, of which €283.9 million accounted for owner investment. Over the last 23 years, F.D.I has exceeded €29.7 billion, of which €2.3 billion accounted for by “round tripping”. In 2016, Croatia has seen F.D.I inflow from Austria of €191.5 million, whilst the total investment from this country into Croatia exceeded €5.2 billion. Nevertheless, the country whose F.D.I inflow into Croatia over the last 23 years has been Holland with almost €6 billion;
this year it has been a “modest” €30.8 million. During previous years, F.D.I inflow was considerable from Germany (€2.8 billion), Hungary (over €2 billion), Italy (almost €1.5 billion), as well as Slovenia with almost €1.4 billion. “During the second quarter, Foreign Direct Investment was only €83.2 million, which is one of the lowest recorded levels over this period of the year. Nevertheless, when investment implemented during the first quarter is added, which was considerably higher, F.D.I for the first six months was not unsatisfactory compared with the previous years, yet it is still rather unsatisfactory in relation to pre-crisis years, sugge-
sting that investors have still not changed their attitude towards Croatia as an investment destination”, noted Zvonimir Savić, Director of Financial Institutions, Business Information and Economic Analyses Sector at the Croatian Chamber of Economy.
INVESTMENT WAVES Foreign direct investment into Croatia has occurred in waves, with the period between 2004 and 2009 being considered as the ‘golden years’. It has to be noted that, for instance in 2007, F.D.I exceeded €3.4 billion. According to activity, the most important foreign investment this year
FDI top 10 performing countries, liabilities 1, in millions of Euro Country
2014.
THE NETHERLANDS AUSTRIA GERMANY LUXEMBOURG HUNGARY ITALY
2015.
1st and 2nd quarter 20162)
TOTAL (1993-2ndquarter 2016)
2.405,5
68,3
30,8
5.999,6
-82,5
-852,6
191,5
5.254,0
-811,2
193,3
139,8
2.841,5
59,3
287,1
141,2
2.192,1
-89,9
-109,0
18,5
2.079,0
8,3
20,4
72,2
1.488,9
FRANCE
34,7
19,4
7,0
1.397,5
SLOVENIA
25,4
87,8
21,0
1.314,8
22,3
613,1
86,4
1.181,4
-12,4
-0,5
-0,1
840,1
GREAT BRITAIN DUTCH ANTILLES 1)
Beginning from the first quarter of 2009, the methodology of calculation of retained earnings has been amended, and implies entering the retained earnings on a quarterly basis during the period in which the profit had been generated. Retained earnings had previously been entered during the month in which the decision on allocation of profit for the previous business year was reached; 2) preliminary data
FDI, liabilities 1, in millions of Euro Year
OWNER INVESTMENT In the direct investor company
In the direct investor (reverse investment)
Between horizontally integrated companies
2014
2.185,2
0,0
0,0
2015
1.920,7
0,0
3,9
283,9
0,0
0,0
21.027,2
-0,3
9,8
st
nd
3)
1 & 2 quarter 2016
TOTAL (1993-2nd quarter 2016) 1)
Data source: Croatian National Bank
Data also includes round tripping that results in an increase in FDI in both flows (inward into Croatia and outward - abroad) in the same amount. This type of di Beginning from the first quarter of 2009 the methodology of calculation of retained earnings has been amended and implies entering the retained earnings o business year was reached; 3) Preliminary data 2)
2 | PVinternational | December 2016 | No 264
GN DIRECT EEDED €29.7 BILLION came from the financial sector (€331.3 million). Total F.D.I from that sector exceeded €7 billion. Property ranked second according to value, exceeding €162.6 million, whilst investment implemented into that sector since 1993 has been €0.31 billion. Boris Vujčić, Governor of the Croatian National Bank, commented on F.D.I flows during his presentation of the White Book of Foreign Investors Association, pointing out that Croatia had seen a substantial drop in investment immediately following the crisis in 2009, yet, according to Governor Vujčić, it appears that the last five quarters have seen an upward trend yet
again. “Nett foreign investment, that is, foreign investment into Croatia less the investment implemented by Croatia into other countries, have actually approached zero, down from pre-crisis levels that used to reach as much as 4.5% of GDP. The fundamental problem in Croatia has been a lack of greenfield investment, primarily in industry, even at the time”, noted Governor Vujčić.
OBSTACLES TO INVESTMENT According to sources at the Foreign Investors Association, the most important obstacles to F.D.I inflow into Croatia are legal uncertainty, an excessive tax burden, parafiscal taxes, ineffective public
administration and the functioning of the judiciary. According to foreign investors, the crucial area that needs to be addressed in order to improve the business climate and attract foreign investment is also the “rigidity” of labour laws and they also believe that the Croatian economy is encumbered with a large number of parafiscal charges that need to be settled, although they are not clearly linked with business operations. Moreover, they are perplexed by the duration of legal proceedings and occasionally an absolutely different treatment of specific procedures at local level compared with the treatment of such cases at the national level.
FDI top 10 according to activity, liabilities 1, in millions of Euro Activity
TOTAL (1993-22nd quarter 2016)
-615,8
331,3
7.030,9
-59,6
-38,2
2.675,4
2015.
197,4 1.203,2
FINANCIAL INTERMEDIATION OTHER THAN INSURANCE AND PENSION FUNDING OTHER BUSINESS ACTIVITIES
1st and 2nd quarter 20162)
2014.
RETAIL AND COMMERCIAL MEDIATION
-44,3
87,9
27,9
2.659,0
REAL ESTATE BUSINESS
116,2
-57,7
162,6
2.441,8
POSTS AND TELECOMMUNICATIONS
117,0
-3,6
35,4
1.883,6
RETAIL; HOUSEHOLD ITEM REPAIRS
144,5
112,5
47,2
1.843,0
PRODUCTION OF COKE, OIL DERIVATIVES AND NUCLEAR FUEL
-121,4
-74,2
1,4
1.306,2
155,8
168,6
66,0
1.257,0
PRODUCTION OF CHEMICALS AND CHEMICAL PRODUCTS
132,8
-216,5
-169,3
1.226,3
HOTELS AND RESTAURANTS
207,4
24,2
-37,9
925,0
OWNER INVESTMENT IN PROPERTY
1)
Beginning from the first quarter of 2009 the methodology of calculation of retained earnings has been amended, and implies entering the retained earnings on a quarterly basis during the period in which the profit had been generated. Retained earnings had previously been entered during the month in which the decision on allocation of profit for the previous business year was reached; 2) preliminary data
RETAINED PROFIT2)
DEBT INSTRUMENTS
Retained profit
In the direct investor company
-187,7
259,8
-803,2
17,6
In the direct investor (reverse investment)
TOTAL Between horizontally integrated companies
Liabilities
96,1
40,0
2.393,5
-22,5
-946,9
169,6
463,2
-60,3
54,0
-134,5
606,3
4.251,6
3.208,4
196,8
1.020,6
29.714,1
rect investment was entered in December 2008 (€825.7 million), August 2009 (€666.5 million), December 2010 (€–618.6 million) and June 2014 (€1,485.8 million). on a quarterly basis during the period in which the profit had been generated. Retained earnings had previously been entered during the month in which the decision on allocation of profit for the previous
December 2016 | No 264 | PVinternational | 3
EBAN WINTER UNIVERSITY 2016
AN OPPORTUNITY TO TES CONTACTS WITH INVESTO A recently held two-day Zagreb-based conference brought together 1,700 entrepreneurs, business ‘angels’ and experts from Croatia and throughout the world. 20 finalists of the Zagreb Connect start-up competition competed for the prize fund and awards were given to entrepreneurial ventures from Croatia, Slovenia and Great Britain by Krešimir Sočković
I
nternational business ‘angels’ are interested in investing in Croatia, yet a large majority of entrepreneurs find it easier to opt for some other markets and develop their projects there. These were the principal topics addressed during the two-day conference entitled EBAN Winter University 2016 recently held in Zagreb. The conference fully tackled the issue of how to improve opportunities for local entrepreneurs. It brought together over 1,700 participants – amongst whom were over 100 representatives of start-ups, 400 business ‘angels’ and around 500 students from Croatia and throughout the world. The Conference was organised by CRANE, the Croatian Business Angels Network and the city of Zagreb, as well as EBAN, the European Business Angels Network. Business angels both in Europe and Croatia are innovative, successful entrepreneurs who provide financing for startup projects by their ownership of shares and providing assistance and support in the development and commercialisation of projects that contribute to economic development of the country, emphasised the President CRANE Davorin Štetner. “We have organised the EBAN Conference in Zagreb in order to raise awareness of the requirement for changes to business conditions, as well as to attract attention to the innovativeness of young entrepreneurs in Croatia. We believe their ideas could arouse substantial interest from investors and are convinced that the Conference will result in a large number of new contracts and capital allocated for project development”, stressed Štetner. 4 | PVinternational | December 2016 | No 264
Croatia is highly focused on strengthening the economy and is both willing and prepared to participate in the European entrepreneurial system to create new value-added projects, pointed out Croatian President Kolinda Grabar Kitarović at the opening. “Entrepreneurial climate is currently fundamental, as well as the activities of business angels and Croatia wants to position herself as a favourable investment destination. Nevertheless, entrepreneurs need to consider adverse factors, such as instantaneous changes occurring throughout the world that often resemble chaos. This can be an opportunity for many young people who are currently still studying, especially if systems are created which are intended for the recognition of new business models based on digital technologies. Cro-
atia has many advantages such as high quality higher education, yet needs to focus on meeting the requirements of entrepreneurship, as well as on the improvement of business conditions and to ensure young people decide to remain in Croatia”, highlighted Kolinda Grabar Kitarović.
ANGELS OF INSPIRATION One of the leading lady business angels and the President of EBAN Candance Johnson pointed out that EBAN believes in Croatia as a special place in the creation of a European future. “Governments define policies and deal with the regulations, but entrepreneurs need to do all they can in order to co-operate and assume a strong attitude focused on a better Europe. It is both a privilege and an honour
ST IDEAS AND ESTABLISH ORS Kolinda Grabar Kitarović, Croatian President
Davorin Štetner, President of CRANE
to follow Croatia on her path into Europe and the world through the creation of new horizons, which Croatia has been showing through each globally accepted start-up project”, she opined. Entrepreneurs are ambitious and dextrous and require that dexterity in order to avoid a large number of people to whom they owe money, emphasised one of the motivational speakers at the Conference, Bruce Dickinson, a business angel, as well as lead singer of the heavy metal band ‘Iron Maiden’ and a successful entrepreneur. In time, after addressing a
large number of insecurities, entrepreneurs eventually reach stable, solid ground since their ideas are essentially valid from inception. In order to achieve that, entrepreneurs must never lose hope and must always be persistent. Never give up. If you fail, never mind, you will not face a closed door, but an open door leading towards new ventures, concluded Dickinson. It is not difficult to launch a business in Croatia, yet managing it is highly challenging, stated one of the business angels and co-owner of several start-
up companies, Hrvoje Prpić. “Taxes are not a crucial problem. The fundamental issue is excessive bureaucracy, the requirement for seals, visits to a notary public and submission of reports. These issues are far more serious than all the others. I believe the idea of Swift-cut – simplification and elimination of dispensable regulations - that was implemented several years ago, is excellent. It has resulted in some positive developments, yet there is still ample room for improvement in business conditions in Croatia. If we managed to implement the changes, we would also manage to prevent brain drain and retain business operations in Croatia, yet perhaps it is already too late. The number of people leaving Croatia and going to, for example Great Britain or Ireland, is huge. Once 50,000 people have left the country, new departures are easier, since one is not ‘out there’ alone and there are people who can provide initial assistance. This is an issue that requires serious consideration”, concluded Prpić.
45HC the best start-up The end of the two-day Conference was marked by an announcement of the winner of Zagreb Connect. Amongst 20 finalists, contestants from Croatia, Great Britain and Slovenia particularly impressed the expert panel. Nanodiy, a start-up that enables printing on any type of textile fabric, ranked third and won a prize of €7,000. Moreover, this start-up and its idea attracted the attention of the media company NovaTV that awarded it with a special prize, a one-year promotional-package aiming to help it in its future work. One of the prizes was awarded by the audience that was given the opportunity to vote using the official Conference app. This prize worth €5,000 was also awarded to Nanodiy. Second prize and €10,000 was awarded to Gowaft from Great Britain whose idea represents an innovative met-
hod of carrying heavy objects across a city. The most interesting idea, according to the expert panel, was provided by the startup 45HC from Slovenia which came first and won a prize of €20,000. This digital company for ocean freight transport with an effective logistics network also won a trip to Silicon Valley. The City of Zagreb, as co-organiser of the Conference, awarded a special prize of €5,000 to the start-up Vollo. In addition to the prize, this company was also awarded a one-year programme of pre-incubation/incubation
at the Technology Park Zagreb. Furthermore, the winner of Zagreb Connect, in partnership with the Embassy of the State of Israel in Croatia, is travelling to Tel Aviv where they will be introduced to a startup community in Israel.
December 2016 | No 264 | PVinternational | 5
INTERVIEW TOMISLAV TOLUŠIĆ, MINISTER OF AGRICULTURE
There is funding worth €2.6 billion available to us for rural development, yet we have absorbed under 7% thus far, stated the Minister of Agriculture
6 | PVinternational | December 2016 | No 264
ORDER, WORK AND DISCIPLINE NECESSARY I want to introduce order in the system of both agriculture and forestry and I believe I will succeed in doing so. Subsidies will be paid with more transparency and on a more regular basis, whilst the distribution of land will be made in a fair and just manner. Last, but not least, I wish to improve, accelerate and increase the absorption of funds from the Rural Development Programme, as well as from the Operational Programme for the European Maritime and Fisheries available by Krešimir Sočković sockovic@privredni.hr
I
rrespective of the fact that agriculture has been considered a strategic economic branch for many years, there is actually a small number of companies and family farms operating successfully. Forest management also faces a similar situation, notwithstanding that forests are a natural resource fundamental to the domestic wood processing industry. Problems with administration, an ageing population, fragmented and small properties outdated technology, production of products which customers have not been insured for in advance significantly impact business operations, notwithstanding the assistance provided both at national and European levels. Although many ministers have already started tackling the situation, a large number of issues still need to be addressed. Tomislav Tolušić, Minister of Agriculture, talked with Privredni vjesnik about his plans for the next four years.
To what extent can agriculture and the wood industry be considered as strategic branches of the Croatian economy? Both agriculture and the wood industry should be strategic branches, yet I am afraid we have been trying to find the right path both in agriculture and in the wood industry. Without a strategy and a clear goal and a path to follow, we will not get far. We definitely have to change that. We have over 100 strategies in diverse fields, yet we lack one for agriculture. Moreover, we do not implement the strategies that we currently have and thus operate without any medium-term or long-term plans. I am hoping to change this with my team, as well as to identify and solve the problems and provide a strategy in accordance with which we will identify the objectives we wish to meet by 2020 or 2025. According to best practices implemented by companies such as AgroFructus or Osatina and the interest aroused amongst young business during the recently held Agro Startup Conference, it appears that in theory it is possible to live from agriculture. Why is that not so easily achievable in practice? December 2016 | No 264 | PVinternational | 7
INTERVIEW
The state does not have to provide financial assistance. It only has to establish a system and normal prices on the market of quality goods that a farmer is required to provide. Farmers need to know whether they will be provided state-owned land for use, at what price and for how long, as well as whether they will be given the opportunity to purchase it. Unfortunately, we are currently only acting under emergency circumstances.
The current situation is partly due to the attitude assumed by the state. We have not established a transparent, logical and clear system ranging from the market segment to the disposal of state-owned agricultural land and we also lack assistance for young farmers provided in the form of guidance and provision of opportunities for development. It has to be admitted that some progress has been made here, yet interested young people require assistance since they can exert a considerable and positive impact on Croatian agriculture. They are the people who either already are or will soon be highly educated, who use modern technology and use anything that can contribute to the strengthening of competitiveness in agriculture and ensure high quality crop yields. They can achieve superior results and provide higher quality products. Nevertheless, until the state has introduced some order, one cannot expect either young or experienced farmers to express their satisfaction. The state does not have to provide financial assistance. It only has to establish a system with competitive prices on the market of quality goods that a farmer is required to provide. Farmers need to know whether they will be provided state-owned land for use, at what price and over what period, as well as whether they will be provided the opportunity to purchase it. Unfortunately, we are currently only acting under emergency circumstances. Stock farmers are currently dealing with such issues and soon it will be the turn of fruit growers and subsequently tobacco producers. Once we have stopped operating on short-term plans, the number of people interested in agriculture and those planning to build their future in it will increase substantially.
How to start operating in this sector? Is the Ministry planning to provide any assistance to such initiatives? Pursuant to the Agricultural Land Act, which I believe is generally unsatisfactory, young farmers are favoured for the allocation of land use. They are awarded points that are still not that significant to be decisive in the allocation of land. We are striving to amend this in the new act through which we will also restore authority over the management of local government. The Agency will assume only the role of controlling and verifying appeals. Rural development measures provided by our ministry include a large number of measures intended for young and beginners. Some are directly linked - such as substantial subsidies worth around €50,000. Through other measures, young farmers are allocated additional points with which they can easily implement their projects for which they applied through
8 | PVinternational | December 2016 | No 264
other Rural Development Programmes. We have provided €2.6 billion for rural development and we have thus far spent under 7%. We have not so far actually ‘tasted the cake’ that has been offered to us. These funds need to be used in agriculture by 2023, yet I would like to use them even sooner - by 2019. We will consequently boost competitiveness both of agriculture and food processing industry.
A large percentage of the EU budget is intended exclusively for agriculture. You were the minister for EU funds and you are well acquainted with the resources intended for the agriculture sector. How can you improve the use of these resources? We have complicated the absorption of these funds through a broad range of procedures. The European Union has not imposed them, it has only provided a preliminary framework and we have complicated it all with procedures, not only in the Rural Development Programme, but also in Operational Programme Competitiveness and Cohesion, Effective Human Resources Programme and Maritime and Fisheries Development Programme which is currently also under the scope of my responsibility. This can be justified by the fact that we are currently an EU member state, yet only recently, as only three years have elapsed since Croatian EU accession. The procedures are new to us and more complex, primarily in agricultural policy which is the only common policy at the level of all member states. We require a specific period of time for this transition. Nevertheless, we are lagging behind as well. However, the fact that all member states have increased their absorption of EU funds only upon EU accession can provide some comfort. Five years following EU accession all member states have reached a level of 90% to 100% concerning the absorption of funds. We need to make these initial steps and we will hence be able to operate more effectively. Croatian Forests are a substantial and important resource for the Croatian economy. Irrespective of the fact that Croatian Forests has been managed in such a way that we have not lost them yet, sustainable exploitation can be significantly increased. What are your plans concerning this issue? Forest management will be assessed following the completion of the analyses currently being conducted. I believe the generation of profit cannot be the principal objective of any stateowned company and this primarily applies to a company such as Croatian Forests. It should focus on the development of the industry lin-
ked with this activity, instead. In my opinion, it would be better if Croatian Forests did not generate profit, as the objective should be to create 5,000 new jobs in the wood industry. Any profit generated through increasing the prices of raw materials only adversely affects the wood industry. We need to decide on the objectives of institutions that are intended to provide services to the private sector and develop a domestic industry which is fundamental both for the budget and job preservation. Concerning the preservation of forestry assets, I believe it is currently successful. Croatia has a large number of high quality foresters committed to their work and there are no problems in general. I am convinced all this potential needs to be used for economic development in addition to biomass preservation at required levels.
Foreign investors have recently been looking to find room for investment especially in the wood sector, primarily due to quotas on raw materials. Will there be any changes in forest management after amendments in company ownership structures?
WE HAVE COMPLICATED IT ALL FOR OURSELVES THROUGH A LARGE NUMBER OF PROCEDURES FOR THE ABSORPTION OF EU FUNDS The current Management Board of Croatian Forests has completed its mandate and I would like to express gratitude for their work. Nevertheless, the members of the new Management Board are still unknown. Export of planks and logs must not be the principal objective of the wood industry but this is currently the case. Although I still have not been fully acquainted with this system, for which I kindly ask you to provide me with some additional time, I still find it utterly illogical for a company hiring 11 employees to have 40,000m3 of wood at its disposal, whilst some other company involved in final production, hiring 700 employees has been allocated between 5,000 and 7,000m3 of wood. We are selling something that we
are going to import with value-added from Italy, Poland or any other country yet again. We need to strengthen our final product industry, focusing also on the existence of sawmill companies who are absolutely necessary and need to have their own position in the market. Nevertheless, they need to be focused on work for the final industry, rather than on exports. Wood can be allocated more effectively to benefit both the Croatian general public and the domestic wood industry. Some companies that have signed all the required contracts and have been allocated specific quotas are currently not being provided with wood pulp, whilst some others are provided wood pulp “under the table”. We cannot and shall not allow that.
What are the plans of your ministry concerning forest industry, wood industry, agriculture and fisheries during the next four years? We will do our best to preserve our forests, to make the wood industry a cornerstone of the Croatian economy and one of the leading industries, whilst simultaneously regulating the wood pulp market. Concerning other sectors, they too can expect I will practically apply the slogan “order, work, discipline”. I am striving to introduce order in the system of both agriculture and forestry and I believe I will succeed in doing so. Subsidies will be paid with more transparency and on a more regular basis, whilst the distribution of land will be performed in a fair and just manner. Last, but not least, I am aiming to improve, accelerate and increase the absorption of funds from Rural Development Programme, as well as from the Operational Programme for the European Maritime and Fisheries available to us. Furthermore, I am aiming to create fair market competition through negotiations and dialogue with those involved in the processing industry, as well as with those interested in purchase and trade. The Act on Unfair Commercial Practices needs to be implemented and we are planning to achieve that and are also going to pass a new Agriculture Act, as well as a large number of additional regulations linked with this sector, albeit taking into consideration the compromises required to enable the survival of all parties involved. Both small and large companies are required, as well as producers and those involved in processing and trade as there is room for all. We need to organise the functioning of our system in a slightly different manner, since unless this has been done, the first link in the chain – producers - will soon disappear. The current situation is unacceptable if we are aiming to make Croatia more prosperous.
Both small and large companies are required, as well as producers and those involved in processing and trade as there is room for all of them. We need to organise the functioning of our system in a slightly different manner, since unless this has been done, the first link in the chain – producers - will soon disappear. The current situation is unacceptable if we are aiming to make Croatia more prosperous.
December 2016 | No 264 | PVinternational | 9
ORGANIC FOOD PRODUCTION
10 | PVinternational | December 2016 | No 264
MORE AND MORE PRODUCERS BECOMING INVOLVED IN ORGANIC FOOD PRODUCTION At the end of 2015 Croatia saw slightly less than 5% of all agricultural land under organic food production - 75,882 hectares of 1.53 million hectares. This area has more than tripled over the last five years by Krešimir Sočković
O
rganic farming bans the use of most mineral fertilisers and almost all pesticides. Under organic farming, artificial fertilisers are replaced by organic, whilst weeds are controlled mechanically and infected plants and fruit need to be regularly removed. Nevertheless, such food production results in organic food with a taste that is unique and natural.
Additionally, this method of production strengthens the natural resistance of plants and also prevents pests and diseases. There is a further advantage to organic farming – biological protection through conservation of a larger number of plant and vegetable species living together which reduces infestation of plants by pests.
GMO BANNED There is a wide range of products that can be used in organic food production without raising pollution fears. These are eco-friendly products based on aromatic herbs, propolis, various oils and soaps amongst others that are used for disease prevention or in order to cure infected plants. Crop rotation also contributes to a reduction of weeds, and genetically modified organisms and products with GMO raw materials are strictly banned. As has been pointed out by or-
ganic food producers, apple skin contains some twenty harmful substances even after being thoroughly washed, whilst non-organic animal farming includes preventive and daily administration of antibiotics, hormones and anti-parasitic
substances to animals. Our consumption of such products inevitably includes our consumption of a proportion of these harmful substances. On the other hand, fresh organically produced items contain 50% more vitamins, minerals, enzymes and other micronutrients. According to data provided by the Research Institute of Organic Agriculture and IFOAM (International Federation of Organic Agriculture Movements), 43.7 billion hectares or 0.99% of agricultural land globally is under organic agriculture. The value of the organic market has been estimated at $80 billion, with the US market worth $36 billion being the leader in organic product consumption. According to the same source, the value of the European market is around €20 billion, and its leading markets are Germany (€7.5 billion) and France (€4.4 billion). The Croatian organic market has been estimated at €100 million. By the end of 2015, Croatia saw slightly less than 5% of all agricultural areas under organic food production - 75,882 hectares of 1.53 million hectares. This area has more than tripled over the last five years. Arable land accounts for 36,841 hectares of agricultural land under organic farming, followed by pasture covering an area of 27, 652 hectares, and organic orchards at 5,638 hectares.
20 0 billion
€
value of organic market in Europe
100 0million
€
Value of Croatian organic market
MANDATORY CONTROLS All striving to become involved in organic farming in Croatia, as well as in the distribution of these products t need to be entered into the December 2016 | No 264 | PVinternational | 11
ORGANIC FOOD PRODUCTION Number of organic food producers
Hectares under organic farming 80,000
3500
70,000
3000
60,000
2500
50,000
2000
40,000 1500
30,000
1000
20,000
500
10,000 0
0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Ministry of Agriculture
Directory of Entities Involved in Organic Food Production, with the organic production being under professional control. The professional control needs to be implemented at least annually, and is performed by control entities authorised by the Ministry of Agriculture. Following the implementation of the first control performed by the control entity and after its positive opinion has been given in the Protocol, a request is submitted to the Paying Agency for Agriculture, Fisheries and Rural Development. Subsequently, the Agency, based on the documentation submitted, issues a decision on the entry into the Directory of Entities Involved in Organic Production. By the end
2010
2011
2012
2013
2014
2015
Source: Ministry of Agriculture
of last year 3,061 farms, companies and micro-businesses were issued with such documentation. Since 2003 when the Directory included 130 organic producers, their number had increased eight-fold by 2010, and has increased 24 times compared with the current situation. Concerning the legal framework for organic farming, organic food production in Croatia has been regulated by the Act on Agriculture and the Ordinance on Organic Production. Moreover, some EU regulations concerning organic food production are also in force, such as the Council Regulation on Organic Production and Labelling of Organic Products, Commission Regulation on Comprehensive Guidelines for the
Implementation of the Council Regulation on Organic Food Production and Labelling
FROM 2003 TO 2015 THE NUMBER OF ORGANIC FOOD PRODUCERS WAS UP 24 TIMES of Organic Products that encompasses also professional control and the Regulation on Comprehensive Guidelines for the
MARKO SEVER, EKO SEVER
EUROPEAN UNION
High risk of contamination
Over 11 million hectares designated with an ecological area certificate
Tri su ključna problema u proizvodnji ekološke hrane, kaže Marko Sever iz Eko Severa. “Jedan je da se još uvijek na istoj farmi mogu proizvoditi ekološki i konvencionalni poljoprivredni proizvodi, te postoji velik rizik od There are three fundamental issues in organic food production, as pointed out by Marko Sever from Eko Sever. “Firstly, one is currently still allowed to produce both organic and conventional food on the same farm and thus there is high risk of contamination and mistakes. The second issue is concerning CAP (subsidies), where subsidies are granted per hectare, rather than per product and consequently a large number of producers in organic farming are primarily interested in applying for the subsidies and subsequently there are no products on the market. Thirdly, Croatia is faced with 25% VAT on food, whilst VAT in all the other neighbouring countries and in most EU countries is under 10%”, concluded Sever.
12 | PVinternational | December 2016 | No 264
In 2015 over 11 million hectares were designated with an ecological area certificate (or under conversion) in the EU. Organic food production accounted for 6.2% of overall food production. During the period of five years, areas under organic farming increased by slightly less than 2 million hectares. Furthermore, during the same period the number of farmers registered for organic production increased. By the end of 2015 there were 271,500 registered organic farmers in the EU, an increase of 5.4% over a period of one year. The most agile in conversion to organic production are Austrian farmers with one fifth of the total agricultural land or over 552,000 hectares under organic farming. 17% of agricultural land is under organic farming in Sweden, as opposed to 16% in Estonia. Organic farming in the Czech Republic covers an area of 478,000 hectares or 14% of agricultural land. Italy and Latvia have over 10% of agricultural land under organic farming.
The percentage of organic farming in total agricultural land
The percentage of organic farming in total agricultural land
6%
arable land
5%
orchards
48.1%
4%
vineyards
3%
olive groves
7.4%
2% 1%
4.6%
36.4%
0% 2010
2011
2012
2013
Source: Ministry of Agriculture
Implementation of the Council Regulation on the regimes concerning the import of organic products from third countries.
Organic products must be affixed with an EU organic product label. In case the uses of “bio”, “eco” or “organic” have been stated on the products and they do not bear an EU organic product label, consumers are obligated to notify the Ministry of Agriculture – Sector for Inspection in Agriculture – about such products, since these are clearly instances of consumer fraud.
ADDITIONAL SUBSIDIES Organic producers are entitled to additional subsidies. The fundamental condition for exercising the right to additional
2014
1.2% 1.8%
aromatic and medicinal herbs
0.5%
vegetables pasture
2015 Source: Ministry of Agriculture
subsidies for organic farming is the entry into the Directory of Entities Involved in Organic Food Production managed by the Paying Agency, whereas the agricultural land under organic food production needs to be registered in ARKOD system and included in the control system. In cases
of organic production where there is no prescribed minimum of agricultural land owned in order for entitlement to subsidies, yet the conditions of a minimum area of land within the same group of crops needs to be met (0.05 hectares), providing the agricultural land owned covers an area of at least 0.5 hectares, entered both in the Directory and the ARKOD system. Those submitting an application for organic
farming on permanent grassland need to own a minimum of 0.5 heads of cattle per hectare farmed in compliance with the regulations on organic food production. Subsidies for organic farming are granted through two sub-measures of the Rural Development Programme - 11.1 Payment to convert to organic farming practices and methods and 11.2 Payment to maintain organic farming practices and methods. Payment under the measure 11.1 can range from €310 per hectare for permanent grassland to €868 per hectare for permanent crops. On the other hand, payment under the measure 11.2 ranges between €258 per hectare for permanent grasslands and €723 for perennial crops.
JASMINKA DUKIĆ, SENIOR EXPERT ASSOCIATE AT THE AGRICULTURE, FOOD PROCESSING INDUSTRY AND FORESTRY SECTOR AT THE CCE
One of the principal challenges – a risk of losing customer confidence Jasminka Dukić, Senior Expert Associate at the Agriculture, Food Processing Industry and Forestry Sector at the Croatian Chamber of Economy emphasised that the greatest advantage to organic production in Croatia is in the natural resources (soil, water, air), favourable climatic conditions, healthy eating trends, development of ecologically acceptable rural tourism, opening of the new markets, funding opportunities through EU funds for rural development through measures of agro-environmental subsidies, organised and planned marketing of organic food producers, which means considerable growth potential and further enhancement of organic food production in Croatia. “It has to be highlighted that organic food production is a highly specialised agricultural system that requires specific professional education, know-how and technology. On the other hand, a lack of information on organic products amongst the majority of consumers can be stressed as the fundamental downside, whilst the risk of losing customer confidence is one of the principal challenges in the sector of organic food production”, concluded Jasminka Dukić.
December 2016 | No 264 | PVinternational | 13
LOLA ORGANICS
FROM FIELD TO TAB
A young entrepreneur, Ivna Miloš Rušov, has launched a business project to bring and customers in big cities who want high quality hand-picked healthy food. Sh products from an unknown source whilst high quality products are being provide by Krešimir Sočković sockovic@privredni.hr
L
Although some producers with whom we cooperate with are not holders of eco certificates, they are the people that I am personally acquainted with and whose crops I visit regularly and so I am well aware of the origin of these products, as well as the farming methods used; I would give these products to my own children. Ivna Miloš Rušov
ola Organics is a project developed from a love of food and a desire to provide friends who are keen on high quality food with the best local products. “We have managed to identify hardworking people who produce fruit, vegetables and a wide cross-section of other valuable products on their own property. We pack these products in co-operation with the producers in our baskets in the most appealing way and deliver them to our customers’”, said Ivna Miloš Rušov. She decided to launch this project following careful consideration of an idea she had had during her university studies in Barcelona where this type of service has long been available and is currently widely popular and well-established. She has been interested in healthy food since her school days and her colleagues recognised her by plastic containers in which she used to carry her better-tasting and healthier food and shared it with others. “Spanish farmers are involved in door-to-door deliveries in wooden containers with the products they provide over a specific season. Customers never really know what they will get, but do not mind that, knowing that they are always provided with high quality products by wellknown producers. I was delighted with this idea, yet I was not sure at the time whether that was the most appropriate business for me”, she noted.
WELL-ORGANISED DELIVERIES On returning to Croatia following graduation she thought about her future. “In Croatia, there are many property owners, so many food producers and so much delicious food. My neighbours, for example have a garden the island of Ugljan and grow wonderful chard, oranges, lemons and pomegranates. This is exactly the reason why I found it illogical to purchase produce imported from Italy, Turkey and elsewhere and of unknown origin easily available in the stores, whilst top quality products grown locally may probably be wasted. Simultaneously, local people whose grandparents live in villages or on the islands normally wait to receive parcels of local produce frequently sent to them. I thought that people living in cities like Zagreb, needed the opportunity to delight in such products and that is primarily why I decided to
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THE PRODUCERS WITH WHOM THEY COOPERATE ARE MAINLY FROM THE ISLANDS OF UGLJAN, PAŠMAN AND THE OUTSKIRTS OF SPLIT launch this business”, explained Ivna Miloš Rušov. Delivery in Croatia is very well-organised and a parcel sent from Zadar can reach Zagreb in only several hours. Hence, it would be a disgrace not to exploit this. “Fruit or vegetables picked in someone’s garden in the morning can be delivered to your table after several hours without problems. This is fundamental for our business. We do not own a warehouse, as we operate exclusively through orders received over the Internet and organise packaging that we send our custo-
BLE IN A DAY
g together small-scale producers he pointed out that it is illogical to buy ed locally and might well be wasted use them personally and I believe it is an excellent choice”, stressed Ivna Miloš Rušov.
ON FACEBOOK AND INSTAGRAM
mers throughout Croatia”, she pointed out. The company is currently based in Biograd na Moru, and producers are mainly from the island of Ugljan and Pašman. Oranges, pomegranates and lemons originate from the islands, whilst the other fruit and vegetables are provided by familyowned farms throughout Dalmatia. The largest number of customers are currently in the three largest cities - Zagreb, Split and Rijeka. They are mainly women, mothers with very young children who normally want to know if their children can eat these products. “Although some producers with whom we cooperate are not holders of eco certificates, they are the people that I am personally acquainted with and whose crops I visit regularly and so I am well-aware of the origin of these products, as well as the farming methods used; I would give these products to my own children. Many of the people with whom we co-operate are small-scale producers for whom obtaining certification would mean excessive outlay and thus jeopardise their production. We sell products I can guarantee; I
We are planning to expand delivery from other parts of Croatia in the near future. “I want to provide three locations in Croatia from where the delivery of our parcels would be organised. In so doing, we will facilitate delivery and provide a greater number of products. We are currently constrained by delivery deadlines that we have voluntarily imposed and that is a period of 24 hours from field to table. There are currently some issues concerning the delivery of some shorter-expiry food to consumers within that time frame. I would like to sell free-range eggs or dairy products, yet this is currently not possible. Nevertheless, since we have had an excellent start to date – with hardly any promotional activities – I believe we will find a way to achieve at least some of our plans”, she emphasised. The fact that this sales and distribution method has attracted huge interest is rather surprising since we have not invested at all in marketing and promotion. We operate exclusively through social networks. “We advertise through Facebook and Instagram, and have aroused substantial interest and so we are not planning any significant investment concerning promotion. Nevertheless, following the opening of new venues intended for the collection of products and co-operation with an increasing number of producers we will certainly have to consider focusing on this aspect”, concluded Ivna Miloš Rušov Products can currently be ordered on company pages; deliveries are on work days and the product range includes seasonal products - Cripps Pink apples, cauliflower, chard, red cabbage and sweet potatoes. Standard product range includes aubergines, red beet, leeks, spinach, butternut pumpkin, endive chicory, kale, sauerkraut, fresh cabbage, onion (yellow), carrots, potatoes, celery and parsley. Mushrooms, special corn for making pop-corn, peeled walnuts, and recently added, delicacies from the Sanja Protić family farm on the island of Korčula are also available. December 2016 | No 264 | PVinternational | 15
CROATIAN SHIPBUILDING IN 2016
CONTRACTS WORTH $1.9 BILLION Slightly over three years ago, shipyards went through a process of restructuring and privatisation. At that time, private shipyard owners assumed the huge responsibility of taking forward the sustainability of shipbuilding systems that had not been functioning in a satisfactory manner. The destiny of Croatian shipbuilding will depend on the success of this process, noted Siniša Ostojić, Director of Hrvatska brodogradnjaJadranbrod by Jozo Vrdoljak vrdoljak@privredni.hr
D
uring the last 10 years, the percentage of shipbuilding in Croatian GDP has ranged between 0.8% and 1.8%, accounting for 10% to 15% of Croatian exports, and its share in employment stands between 2% and 5% (together with its subcontractors its share reaches 10%). These indicators show that shipbuilding is an extremely important sector for Croatia. By the end of September 2016, Croatian shipyards had contracted to construct 46 vessels with a value of around $1.9 billion. Additionally, in 2016 Croatian shipyards have signed contracts for the construction of six vessels valued at around $280 million, which is a solid result against a backdrop of a significant decrease in orders globally. From the beginning of this year to the end of September, the construction of just 321 vessels was contracted globally, a slump of 74% compared with the same period last year. On the other hand, in 2013 a total of 3,056 vessels were contracted for construction, in 2014 the number dropped to 2,217, whilst 2015 saw only 1,617 vessels contracted for construction. Since there are currently no sign of a significant market recovery, a further decrease both in freight rates and prices of new-build vessels can be expected. 16 | PVinternational | December 2016 | No 264
ANTICIPATED REVIVAL The production programme of Croatian shipyards covers many types of vessels of different size, as well as their overhaul, reconstruction and the involvement in offshore construction. “The Croatian shipbuilding sector is about to face immense challenges, bearing in mind currently unfavourable market circumstances and a specific situation of the restructuring process under the supervision of the Croatian government and the European Commission”, stated Siniša Ostojić, Director of Hrvatska brodograd-
KNOWLEDGE IS CRUCIAL IN SHIPBUILDING, NOTED MARINKO BRGIĆ nja-Jadranbrod. “Due to the size and complexity of ship construction, a significant proportion of Croatian industry, particularly small and medium-sized companies, have signed contracts directly linked with shipbuilding. This sector employs a large number of people in specific
December 2016 | No 264 | PVinternational | 17
CROATIAN SHIPBUILDING IN 2016
Our vision is to increase the loyalty of the current, as well as future partners through creativity, knowledge and responsibility of our employees and set new standards of corporate social responsibility. Hrvoje Markulinčić, Director of Business Information Systems in Uljanik Group
regions, primarily in Istria, Primorje-Gorski Kotar and Split-Dalmatia. The processes of privatisation and restructuring of the shipyards are intended to enable more effective performance especially in the international shipbuilding market and in accordance with market standards, as well as in compliance with existing E.U rules and regulations. The hopedfor revival of Croatian shipbuilding is intended to greatly improve both regional and social stability, as well as impact on the strengthening of the national economy”, noted Ostojić. During the recently held Sorta symposium, an event that brings together shipbuilding experts, Ostojić pointed out that Croatian shipyards are in a continuous process of change and have been constantly adapting to change. He added that, notwithstanding all the difficulties, shipbuilding shows positive trends and has made a significant breakthrough over the last two years – according to its share globally, it has advanced from 15th to 9th position, increasing its share by a factor of four. Moreover, it also saw an increase in its share within Europe and currently ranks second, thereby achieving the best results compared with all other local industrial branches. The ranking of Croatian shipbuilding is related to ship deadweight tonnage, rather than revenue generated. According to ship deadweight tonnage, Italian shipbuilders rank lower than those in Croatia, yet according to generated revenue, Italian shipbuilding ranks significantly higher.
ULJANIK GROUP OPERATING AT FULL CAPACITY During the symposium, Marinko Brgić, member of the Management Board of Uljanik Group, stressed that irrespective of the long-term crisis faced by the shipbuilding sector, the Uljanik Group has been operating at full capacity. “In all our preparatory activities in both our shipyards, in the Pula-based Uljanik and 3 Maj Shipyard, our capacities will be fully engaged over the next two years. We are currently focused on an intensive increase in our capacities in order to meet all contractual obligations. We have entered into 21 new contracts, 11 of which are completely different projects, which shows our full engagement. This clearly shows our commitment to positioning ourselves in a niche market of construction of highly sophisticated vessels with high value-added. These are complex projects, as the vessels are not produced in series, but individually and they exhibit substantial differences. In order to be able to produce such vessels one has to have highly resilient design and construction facilities that can meet client requirements, as well as trained staff able to develop and implement
18 | PVinternational | December 2016 | No 264
such projects. We are consequently focused on the development of highly resilient shipbuilding aiming to meet such requirements. Co-operation with educational institutions is imperative for us in order to achieve all these goals, as knowledge is crucial for the shipbuilding industry”, pointed out Marinko Brgić.
THE SPECIFIC OBJECTIVE OF ULJANIK GROUP IS TO CONTINUE ESTABLISHING STABLE RELATIONSHIPS WITH CLIENTS, EMPLOYEES AND THE ENTIRE ENVIRONMENT, POINTED OUT MARKULINČIĆ Hence, the order book for the Uljanik Group currently includes 21 construction orders worth around €1 billion. All vessels have been contracted through the umbrella company Uljanik and thus resources can usually be combined both in Uljanik and 3 May Shipyard. Amongst the vessels contracted for construction, sources at Uljanik have highlighted a newly-built vessel – Cutter Suction Dredger 500 that Uljanik Shipyard has been constructing for Jan De Nul Group. The Cutter Suction Dredger will have a digging power of 8,500 kW and will be the most powerful cutter suction dredger globally, with the best performance capable of digging through solid sand, hardened clay and rock up to depths of 45 meters. The Cutter Suction Dredger will be 151.3 meters long, 36 meters wide and the height to the main deck will be 10 meters. The maximum digging depth, with extensions, will be 45 meters. They stressed the fact that at the end of 2015 a contract was signed with the Australian company Scenic on the construction of a luxury passenger ship intended for cruising across the world, but primarily in both polar and tropical regions. It is a project that ranks amongst several more expensive vessels constructed and the first of its kind in Croatia.
SOPHISTICATED VESSEL CONSTRUCTION “By the end of last year, we fully met all the conditions concerning human resources, finance, as well as technological and market conditions
GLOBAL MARKET CIRCUMSTANCES
China contracted the largest number of ships – 156 this year According to data released by Hrvatska brodogradnja Jadranbrod the current circumstances on the global shipbuilding market are extremely difficult. The market is facing an extreme downward trend in demand for all vessel sizes and types, with the exception of cruise liners and passenger vessels, which has seen substantial growth. Due to a significant drop in the number of contracts throughout all the shipbuilding market, with the exception of the passenger segment, many shipbuilding countries are currently facing serious problems. The South Korean shipbuilding industry has seen losses exceeding $5 billion, the Japanese shipyard Kawasaki Heavy Industries is considering closure and the Chinese shipyards are going bankrupt daily. Of the 321 contracts for the construction of vessels, China has signed 156 and ranks first according to the quantity of cGT with 3.2 million cGT, whilst Italy ranks first according to the value of contracts for the construction of vessels, at $5.3 billion. The largest slump in the number of construction contracts was for LPG tankers, down 91% in relation to the same period
last year, followed by a significant drop of 86% in the number of contracts for bulk carriers, crude oil tankers were down 84%, general cargo vessels decreased by 81% and refrigerated cargo vessels were down 78%. Furthermore, contracts for the construction of other types of vessels saw a decrease ranging from 55% to 76%, with the exception of passenger and cruise liners, which rose by 70%. 2016 saw 51 for the latter type of vessels. During the first nine months of 2016, the percentage of contracted passenger ships (in cGT) in the total quantity of those contracted was 26%, with bulk carriers accounting for 18%, crude oil tankers 17%, container ve-
from the Restructuring Programme, although it formally lasts until 2017. The specific objective of all our important organisational changes initiated in both shipyards is to establish an organisational system to enable the contracting, planning and designing of a vessel through a synergy of all project resources, which will subsequently provide the opportunity for ship construction in both shipyards without any significant technological differences. Another specific objective is long-term sustainability, as well as to enhance competitiveness and increase the effectiveness of overall business processes. Following the use of the most appropriate solutions in both locations, the shipyards located at Pula and Rijeka currently operate almost in an identical manner”, explained Hrvoje Markulinčić, Director of Business Information Systems in Uljanik Group. Uljanik Group is currently hiring 4,380 employees, 2,678 of whom are employed in
ssels 14%, and offshore vessels accounted for only 5%. According to data on the World Shipbuilding Order Book measured in deadweight tonnage, China is still the leading country at over 44% of the Order Book, followed by South Korea and Japan accounting for around 24%. The overall European shipbuilding industry currently still accounts for around 1.9% of the World Shipbuilding Order Book, with Croatia ranking 9th with a share of about 0.3%. At the European level, Croatia still ranks 2nd with around 16.8% of orders. Croatian shipyards rank second following Romania according to the value of orders placed.
BRODOSPLIT EMPLOYS OVER 2,000 WORKERS AND HAS ENSURED FULL EMPLOYMENT UNTIL 2019, STRESSED DEBELJAK Pula and 1,702 in Rijeka. During the first nine months, total revenue at Group level was €0.2 billion, almost 33% up compared with the same period last year. Total expenditure increased by 26.6% to €0.21 billion. During the first nine months of this year, Pula-based Uljanik showed a gross profit of €8.5 million, as opposed to only €0.29 million in 2015. On the other hand, at Group level, losses fell from
6vessels contracted by Croatian shipyards in 2016
around
$280 0million total value
only
321vessels contracted from January to September 2016 globally
December 2016 | No 264 | PVinternational | 19
CROATIAN SHIPBUILDING IN 2016
€16.4 million to €11.5 million, which shows both quality and a positive trend. Following two decades of the construction of modern vessels for the transport of passenger vehicles and trucks (RO-RO vessels), as well as multipurpose vessels for the transport of containers and passenger vehicles, the construction of dredgers, complex and sophisticated vessels for underwater work and vessels for livestock transport, continues within the Group. “We are about to start on the construction of our first luxury cruise liner for use in polar areas. The specific objective of Uljanik Group is to continue establishing stable relationships with clients, our employees and the entire environment through high professionalism and motivation that we certainly can provide, in addition to the top quality of delivered units”, concluded Markulinčić.
BRODOSPLIT CONSTRUCTS STEEL GATES TO PRESERVE VENICE During the period in which Brodosplit was privatised the contribution of the company to the restructuring – including recapitalisation, commercial sources and own financial reserves - was €0.23 billion. Tomislav Debeljak, President of the Management Board of Brodosplit
Concerning the shipbuilding aspect of Brodosplit, there are currently 18 on-going construction projects for new vessels. One is for equipping a cruise liner 105m long with accommodation for 150 passengers and 69 crew. In addition, the construction of the first of a series of five identical 64-metre long sailing vessels is currently underway, each of which can accommodate 36 passengers and 9 crew. Furthermore, the largest sailing vessel in the world is being constructed, as well as the first in a series of five identical patrol vessels for the Ministry of Defence of Croatia - 43.50 meters long and an 8-meter beam, four vessels for container transport and two for nautical tourism for local clients from Split. “In addition to shipbuilding we also develop and provide a wide range of products with over 30,000 tonnes of contracted steel constructions such as the 63 steel gates to protect Venice from flooding. The project is financially highly positive, yet also challenging and employs almost half the workforce over a period of 21/2
20 | PVinternational | December 2016 | No 264
years”, emphasised Tomislav Debeljak, President of the Management Board of Brodosplit. Over 31/2 years have elapsed since the start of the restructuring process of Brodosplit and according to Debeljak everything is being performed according to plan. “During the period in which Brodosplit was privatised, the contribution of the company to the restructuring – including recapitalisation, commercial sources and own financial reserves - was €0.23 billion”, stressed Debeljak. According to information provided by Brodosplit, Brodograđevna industrija Split has implemented the operational plan and ended the third quarter showing a consolidated profit. “These results do not include restructuring subsidies that other shipyards include in their figures, as well as in the profit and loss account and hence operational sustainability is currently already achieved even without subsidies. Business operations have been showing continuous growth trends both concerning total volumes and exports. We can express our utmost satisfaction with the results achieved thus far. Brodosplit employs over 2,000 people, it has ensured full employment until 2019 and continuously focuses on new commer-
OUR CAPACITIES ARE CURRENTLY FULL AND YET WE NEED TO FOCUS ON NEW CONTRACTS IN ORDER TO MAINTAIN THIS PACE, EMPHASISED TRAMONTANA cial projects primarily concerning contracted work whose bid adjustments are positive”, explained Debeljak.
MARKET POSITIONING TO CONSTRUCT MORE COMPLEX VESSELS The competitive advantage and specific feature of Brodosplit, according to Debeljak, is that it is involved in the construction of extremely technically and technologically demanding vessels with higher value-added and with luxury interior designs. As a good example of this, he pointed out the construction of the largest square-rigged vessel globally, where Brodosplit has been identified as one of the few shipyards in the world with the potential
to construct such a unique vessel, and offers for the construction of luxury motor yachts unprecedented in Croatia thus far. “Our specific objectives are the positioning of Brodosplit on the market for the construction of more complex vessels and large constructions such as cruise liners, passenger ships, the gates for the protection of Venice, military vessels and yachts, amongst others. Moreover, we will be insisting on the implementation of alterations throughout the business processes in order to boost productivity and performance effectiveness. Profitable contracts are imperative in order to ensure a positive future. We are expecting the implementation of contracts entered into through competitive bidding for the construction of vessels and large steel constructions”, stated Debeljak. Brodosplit has recently entered into a contract for the construction of a 108-meter long vessel, a Polar Expedition Cruise Vessel. The contract was signed in Holland with a leading company for cruising in polar regions. “Through the signing of this contract, Brodosplit is making steady progress in the implementation of its business plans and establishing its position as an inevitable European shipbuilding system involved in the construction of highly complex vessels through which it achieves a high level of competitiveness”, concluded Debeljak.
BRODOTROGIR: ROPAX VESSEL PROJECT It is important to note several facts regarding the existing order book in Brodotrogir, such as the ongoing completion of a chemical tanker that was launched in July and whose delivery is planned for the end of November. “It is the second of two chemical tankers that Trogir Maritime contracted with Hrvatska brodogradnja Trogir shipyard, which is also part of the Brodotrogir Group. We have signed contracts on the use of vessels after construction, with the Norwegian Blystad Group. The chemical tanker is built to achieve the maximum degree of flexibility of cargo operations in this area, designed for an optimum correlation of deadweight, cargo capacity and speed”, explained Mateo Tramontana, member of the Management Board of Brodotrogir. Tramontana added that Brodotrogir is currently involved in the construction of a vessel for the North of Russia for a Russian ship owner. “The part that had already been constructed was towed to our shipyard and we plan to complete the work in around three months. A similar sister vessel that is in a smaller-scale phase of construction is also expected to be towed to our shipyard in the 46th week. The
contracted delivery date is nine months. By the end of the month – on 25th November - we plan to start cutting of the first steel plates for an Arctic tanker. We have contracted for the construction of the bow structure for the Finnish shipyard Arctech Helsinki Shipyard. It is a tanker able to break through 2-meter thick ice and does not require icebreaker assistance in
order to navigate polar conditions. It is capable of operating in temperatures of – 40 degrees Celsius without any problems. The part that we are constructing is 170 meters long and its delivery is planned for the end of October 2017. It will subsequently be merged with the engine room and superstructure in the drydock at Helsinki Shipyard. Moreover, we have initiated a project for offshore vessels for pipeline transport. We are currently negotiating on the construction of a series of smaller tankers. There are huge opportunities”, noted Tramontana, who as an experienced shipbuilder pointed out that Brodotrogir has been involved in RoPax vessel projects for the first time. “We have been involved in the design of yachts and special purpose offshore vessel projects. Our capacities are currently full and yet we need to focus on new contracts in order to maintain this pace”, added Tramontana. Renovation of the docks is satisfactory. Last year Brodotrogir saw 50% more vessels for overhaul compared with the previous year. The restructuring process of Brodotrogir is to be completed in March 2018. Its asset value has increased 2.7 times since the start of the restructuring process. Brodotrogir saw the end of 2015 showing consolidated revenue of around €54.6 million, around 30% up compared with the previous year. The shipyard currently employs 1,150 staff. “Once 50% of our revenue has been generated through activities other than shipbuilding, we will be able to state that we have almost reached long-term sustainability”, believes Tramontana.
Once 50% of our revenue has been generated through activities other than shipbuilding, we will be able to state that we have almost reached long-term sustainability. Mateo Tramontana, member of the Management Board of Brodotrogir
December 2016 | No 264 | PVinternational | 21
ANOTHER SUCCESS FOR CroNoMar
FROM ŠIBENIK GLOBALLY A totally new type of catamaran design constructed in the Šibenik-based shipyard NCP, worth over €1 million is currently heading towards Norway. It is a prototype and four additional catamarans of the same dimensions, albeit of various models, will be delivered by the end of December by Jozo Vrdoljak
W The negotiations concerning the delivery of eight additional units during the first half of 2017 have now
been completed, seven of which are being constructed at the Šibenikbased NCP shipyard, whilst the construction of one ship is currently underway in the Pula-based Tehnomont shipyard. Ana Zajc, Senior Project Consultant at CroNoMar
ith favourable weather conditions a totally new type of catamaran design 13.75 m in length and worth over €1 million, constructed for a Norwegian client at the Šibenik-based shipyard NCP will soon be on its way towards Norway by the time this article has been published. To date, vessels have been departing from Split. This vessel is a prototype, and according to plans, four additional craft of the same dimensions, albeit of various models, will be delivered to international clients by the end of November or the end of December. The total export value of vessels delivered through the intermediation of CroNoMar in 2016 will exceed €16 million. Over five years, the company has signed contracts for 59 catamarans and 3 service vessels for the Norwegian and other international maritime markets. The vessels, constructed in Šibenik, are used for normal business operations on fish farms globally, whilst service vessels constructed by Pula-based Tehnomont are currently used only in Norway for the supply, maintenance and servicing of fish farms. According to Ana Zajc, Senior Project Consultant at CroNoMar, the company has been involved in significant negotiations with both its Croatian and Norwegian partners during 2016, resulting in the signing of new contracts for vessels to be delivered in 2016 and 2017. “The conditions that need to be met during construction have been negotiated separately in order to fully meet client requirements and wishes. Each ship is different and has its own specific technical features. The negotiations concerning the delivery of eight additional units during the first half of 2017 have now been completed, seven of which are being constructed in the Šibenik shipyard, whilst the construction of one unit is currently underway in the Tehnomont shipyard. It is important to highlight that new contracts imply new de-
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sign, new models and significant technical improvements and thus provide well-known Croatian products to the international maritime market. This means that both revenue and earnings growth and the creation of new jobs for a variety of worker profiles in the Croatian shipbuilding and engineering sector”, noted Ana Zajc.
SIX YEARS OF CO-OPERATION The whole project of the construction of warships in Croatia for the international maritime market was initiated in 2010 through the intermediation of CroNoMar, which was also an intermediator during the previously menti-
EXPORT VALUE OF VESSELS DELIVERED THROUGH THE INTERMEDIATION OF CRONOMAR IN 2016 TO EXCEED €16 MILLION oned work, as well as a senior partner in project implementation and finalisation for both the Croatian and the Norwegian partner. As a result of both high quality and competitiveness of products compared with other producers, the warship construction project for international clients will continue through entering into contracts on new models and types of vessels. The specific objective of CroNoMar is to connect Croatian and Norwegian companies, as well as to identify market requirements and provide access to new markets aiming to strengthen competitiveness and the export potential of Croatian entrepreneurs, primarily
small and medium-sized companies operating in the maritime sector. CroNoMar was founded in 2009 and has been providing assistance to entrepreneurs regionally and throughout Croatia on their way towards international markets, successfully identifying and creating new business opportunities for further breakthroughs of high quality Croatian products globally. “Examples of successful co-operation show that there is ample room internationally for those who can provide a competitive product or service with high value-added and a quality guarantee. This type of partnership is a prerequisite for economic growth that ensures increased production, new investment and new, well-paid jobs”, stated Ana Zajc.
EQUIPPING VESSELS Marin Globe is a company created as a result of co-operation between CroNoMar and international clients, involved in the promotion and sale of maritime equipment produced in Croatia for international markets, initially Norway and subsequently to other international markets. From inception to date through its intermediation, 60 shipboard cranes with various features have been exported, depending on end-user requirements. Most
have been installed on vessels constructed in Šibenik, whilst some have been delivered directly to clients in Norway. December 2014 saw the successful conclusion of long negotiations lasting several years and hence the first export of vessels with fitted hoists produced in Croatia, which paved the way for new contracts and further sales of Croatian products to new markets. Since the end of 2014, hoists produced by the Croatian deck machinery specialist Adria Winch have become included in technical equipment of almost all the vessels produced by NCP and consequently over 60 hoists have been installed to date on vessels constructed in Šibenik and exported to f Norway, Saudi Arabia, the United Kingdom and Iceland, amongst others. A significant breakthrough in entering new markets was made at the beginning of 2015, when the activities of Marin Globe expanded to Far Eastern countries. Following successfully completed negotiations, the order for hoists was confirmed and they were delivered to the Chinese market in December 2015. The high quality of the first delivery resulted in new orders for the purchase of hoists and other maritime equipment produced in Croatia to be delivered in December 2016. December 2016 | No 264 | PVinternational | 23
PRIVREDNI VJESNIK
TWO DESIGNERS ENTERING THE GERMAN MARKET
ELFS - a store in the heart of Frankfurt Fashion by ELFS is intended for young people but who do not strictly follow trends. They aim to promote their clothing on city streets, in clubs and wedding parties
Two designers Aleksandar Šekuljica and Ivan Tandarić, known as ELFS, opened their first exclusive store on 18th November in Frankfurt in one of the best-known city streets. “Joy, pride and happiness are the words that best describe our feelings today”, said Aleksandar Šekuljica during the opening of the store, designer
founders were delighted with the premises on Berger Street. “The street is beautiful, colourful and joyful, the ideal venue for our store. It is one of the longest in Frankfurt, well-known for its coffee shops and shopping and is also ideal for long walks. Perfect for ELFS Girls and Boys”, stated Šekuljica.
A good designer manages to live well from their designs
and co-founder together with Ivan Tandarić, of ELFS, one of the best-known Croatian fashion brands. The two co-
Fashion by ELFS is for young people who pay attention to their appearance, but do not strictly follow trends. They
24 | PVinternational | December 2016 | No 264
aim to promote their clothing on city streets, in clubs and wedding parties. Hence, the opening of the store attracted a large number of visitors, who were delighted with the store interior that was decorated in a recognisable ELFS style. Industrial design and white are predominant in the interior that covers an area of around 100m2, and displayed items have been arranged according to themes: ELFS fashion accessories, formal dresses, casual outfit and ELFS sneakers. “Our profession is not only marked by creativity both from the visual and technical aspects, but also by brand responsibility, a commercial approach to business and cost-effectiveness. A good designer manages to live well from their design. A brand product range must meet market requirements, pointed out Tandarić and Šekuljica.