Administrative guillotine → The goverment plans to generate new savings to the business sector PAGES 4-7
SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
Interview→ We need to consider entire tourist year, not just the season, says Tourism Minister PAGES 8-12
Interview→ Food safety fully in focus, says Milivoj Dragošević, owner of Purex Company PAGES 18-19
PVinternational C R O A T I A N
B U S I N E S S
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F I N A N C E
M O N T H L Y
February 2017, Year X, No 266
BUSINESS CLIMATE BAROMETER FOR 2017
OPTIMISM GROWING According to the traditional annual survey conducted by Privredni vjesnik, entrepreneurs in Croatia are finally expressing optimism. For the first time after several years, economic circumstances have been rated as good by Darko Buković and Nikola Nikšić
R
atings on a scale from 1 to 5, where 1 is the lowest and 5 the highest rating (just as in Croatian schools) were used by Croatian entrepreneurs participating in the annual survey conducted by Privredni vjesnik entitled “Business Expectations”. The local economy was rated at 2.64. If that is rounded up (just as it is done in schools), we are looking at a solidly “good” rating. This is the first time during the
NONE OF THOSE SURVEYED RATED THE PREVIOUS BUSINESS YEAR AS EXCELLENT last five years that general economic circumstances have been given such “high” rating by entrepreneurs: a solid or, even worse, a weak rating once dominated the survey results since Privredni vjesnik started conducting this research. The current rating certainly suggests optimism accompanying the current economic circumstances.
Rather expectedly, as in the previously conducted surveys, none of the current survey participants have rated the previous business year as “excellent”. Nevertheless, the replies given by respondents concerning economic growth estimates for 2017 compared with 2016, show considerable optimism. 66.1% of those surveyed expect slightly higher growth, as opposed to 2.6% who expect considerably higher growth,
whilst slightly over a quarter of respondents (25.5% of those surveyed) expect the level of economic activity to remain unchanged. In the industrially intense and export-oriented Croatian North (of a total revenue of €8.21 billion in 2015, €2.5 billion or 29.7% was generated through exports, with the value of exports in Međimurje County accounting for 33.1% or €53 million of the €1.6 billion revenue) the percentage of
BUSINESS CLIMATE BAROMETER FOR 2017 those who have shown both high expectations and slightly higher growth reached 80%. Irrespective of a lower rating given to the economy for 2016, the Croatian South showed substantial optimism in the opinions given for 2017. Hence, 73% of participants stated they expect higher growth or at least some growth. On the other hand, entrepreneurs in Istria, Primorje and Lika expressed considerable caution, since only 51.4% expect slightly higher growth, although nobody expects substantially higher growth. The results concerning the replies to this question amongst those surveyed in the South and in Istria, Lika and Primorje, were in line with expectations commonly expressed by entrepreneurs operating in those areas.
INVESTMENT CONDITIONS TO IMPROVE According to the general opinion (expectations expressed by 47.4% to 62.7% those surveyed), irrespective of company size, the region in which it operates, the line of business or activity performed, they may see a slight improvement in both investment and business conditions in 2017. Overall, amongst entrepreneurs, data showed that 53.6% believe they will see a slight improvement, with 36.9% of those surveyed claiming that conditions will remain unchanged, as opposed to 4.4% who believe that there will be slightly inferior conditions. On the other hand, 3.3% are highly optimistic and believe that they will see a substantial improvement. Large businesses expressing the opinion that we will see a slight improvement
accounted for the lowest percentage of all answers analysed (47.4%), although 42.1% believe that circumstances will remain unchanged. None of those surveyed from small and medium-sized businesses believe they will see a severe worsening, as opposed to large businesses of whom 2.6% believe this is also a possibility. 57.2% of small businesses believe both business and investment conditions will improve. Entrepreneurs headquartered in Zagreb have expressed the highest level of optimism, as 62.7% expect a slight improvement in both business and investment conditions, whilst slightly over a quarter of those involved in economic activity in Zagreb believe the conditions will remain unchanged. Those involved in trade
How would you rate the general economic conditions for 2016?
traditionally indicate higher levels of optimism compared with those involved in processing. 58.7% of entrepreneurs involved in trade expect a slight improvement in business and investment conditions, as opposed to 48.5% of those involved in processing. Nevertheless, none of those surveyed involved in trade expects a full improvement or a full worsening, whilst 2.9% who are involved in processing believe 2017 may see a substantial improvement in business conditions.
TAXES, LIQUIDITY AND EXPORTS Tax reforms are expected to have a considerable impact by reducing the tax burden (50.7% of those surveyed expect a slight reduction in both taxes and manda-
Average rating of the general economic conditions over the indicated years
55.8%
2.64 2.09
2.43
2.24
2.16
2013
2014
Average ranking
35.8%
2.64 5.1%
1.1% 1
0% 2
3
4
Note: 2.2% of those surveyed did not respond
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5
2012
2015
2016
A SAMPLE
403 of the most important companies participated in the survey 403 crucial companies which directly or indirectly (through groups or affiliated companies) manage the operations of over 450 business entities in Croatia expressed their opinions in the traditional survey recently conducted by Privredni vjesnik. According to principal parameters (activity, size, location, origin and ownership structure) and crucial information (number of employees, total revenue generated, nett results) provided in financial statements from 2015, it is clear we were dealing with a sample which uniformly encompassed structural diversity of stakeholders in the economy. Hence, 85.4% of those surveyed were involved in the real sector but only 14.6% were from the financial sector. Nevertheless, as opposed to the structure of economic entities in Croatia, where micro
tory contributions in 2017). Responses given by 10.5% of large companies needs to be highlighted, as they believe both taxes and contributions will see a slight increase. 7.5% small businesses believe entrepreneurs will be faced with a substantial increase in this burden. Entrepreneurs do not expect significant changes concerning liquidity (66.4% do not expect to see any changes, whereas 20.8% expect only a slight impro-
and small businesses account for 98.5% and the share of medium-sized and large businesses is 1.5%, the share of large and medium-sized companies amongst the participants in the survey was considerably higher (42.1%). Hence, the share of the number of employees and total revenue of those surveyed increased concerning the values of such data at the level of Croatia and consequently based on the value of this data (43,000 employees, €5.1 billion total revenue) participants in the survey accounted for 4% of the overall economy. According to ownership, 10.6% of companies were state-owned or under majority state-ownership, whilst the remaining companies were privately owned or in majority private ownership. Concerning the origin of capital, 15.6% of business entities surveyed were either
vement in conditions) nor in the position of their registered activity (66.8% do not expect any changes, whilst almost 25% of economic entities believe they will see only a slight improvement). Almost three quarters (72.7%) of medium-sized entrepreneurs believe their liquidity will remain unchanged, as opposed to 18.2% who believe they will see a slight improvement. According to 26.1% of entrepreneurs involved in trade, liquidity will see
Overall economic growth in 2017 in relation to 2016 will be 66.1%
25.5%
2.6% substantially higher
slightly higher approximately unchanged
Note: 2.2% of those surveyed did not respond
2.6%
1.1%
slightly lower
substantially lower
foreign-owned or in majority foreign ownership, whilst the largest percentage of business entities was in domestic or majority domestic ownership. Concerning the structure of those surveyed according to economic sectors, in accordance with the National Classification of Economic Activities, the largest number of companies – 37.6% were involved in processing, compared with 16.8% of those involved in trade and 11.7% in construction. Within the processing industry, 9.1% of those surveyed were involved in the production of metal and non-metal products, 5.1% from the wood industry and 3.6% in the food industry. Of 21 counties, the percentage relating to the City of Zagreb was the highest, at 30.3% amongst the total numbers surveyed.
a slight improvement, similar to 23.7% of large businesses who believe they will also see a slight improvement. Approximately 33% of those surveyed expressed no opinion concerning exports, which suggests that exports and operations in international markets is currently still the privilege of a smaller number of entrepreneurs. Concerning small businesses, it has to be noted that their appearance in international markets largely depends on the skills and the willingness shown by state institutions to act in both an organised and effective way in terms of economic diplomacy intended to meet their requirements and assist them in exploiting opportunities. According to expectations shown during the survey, 2017 will see a continuation of growth in exports, as opposed to imports, which will stagnate and thus the value of nett exports will increase. The effect of an increase in the sales of both goods and services and business optimisation (restructuring, without increasing the number of employees) is expected to ensure an increase in nett profits. 53.6% of those surveyed expect to see some improvement in nett results, whereas 33.2% expect to see identical levels to those reached in 2016. Only 7.3% of participants expect to see inferior nett results compared with 2016. February 2017 | No 266 | PVinternational | 3
GOVERNMENT ACTION PLAN
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ADMINISTRATIVE GUILLOTINE TO SIMPLIFY BUSINESS The increasing burden of administration appears to be one of the principal reasons for reduced competitiveness in the Croatian economy. 34 measures aimed at reducing this state of affairs were implemented last year. This year, the government plans to generate savings to the business sector of up to €0.2 billion after implementing 104 measures included in the Action Plan by Ilijana Grgić
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y the end of the year, the administrative burden on the economy is expected to be reduced by almost 30%, accounting for 0.4% of Croatian GDP. The administrative guillotine is intended to introduce some order into the plethora of regulations and obligations and eventually create a more encouraging investment climate and easier business conditions. A burdensome administrative appears to be one of the principal reasons for the low level of competitiveness in the Croatian economy. 34 measures aimed at reducing this situation were implemented last year in the areas of pu-
SAFETY AT WORK WILL HAVE THE GREATEST IMPACT ON THE REDUCTION OF ADMINISTRATIVE BURDEN blic procurement, safety at work, launching a craft business, as well as a trading company, or a property intermediation business, or a business providing tax advisory and accountancy services; these amendments allowed savings in excess of €15.5 million. This year the government is planning to act more vigorously and generate savings for business of up
to €0.2 billion following the implementation of 104 measures included in the Action Plan. In order to decide where to implement cuts, the government opted to apply Standard Cost Model (SCM) methodology, a tool used within the assessment of economic impact of regulations for the measurement of administrative costs incurred by the business sector concerning regulations and bureaucracy.
STARTING A LIMITED LIABILITY COMPANY ELECTRONICALLY Each reduction of the burden through savings provides room for increasing both the time and resources available to the business sector for investment into market solutions. “In addition to the removal of administrative barriers in the existing legislative framework, it is both imperative and fundamental to introduce a system which will ensure that in future laws are not passed without a comprehensive analysis of their impact on the economy and an assessment of their practicality “, concluded Davor Majetić, CEO of the Croatian Employers’ Association, stressing that business digitalisation will also be implemented in Tax Administration to which in the future tax return forms filled in by the entrepreneurs are to be submitted exclusively electronically. The opportunity to electronically implement the overall process of starting a company will be provided, without the obligation of authentication of required documentation by a Notary Public and the making of a company seal. Consequently, according to plans, the savings generated will be €4.9 million. Moreover, tax returns will be electronically
0.2 2 billion
€
savings generated by simplifying t safety at work obligations
4.9 9 million
€
savings generated by electronic company setup
3
€ million expected to be generated for the trading and intermediation in property trading sector
February 2017 | No 266 | PVinternational | 5
GOVERNMENT ACTION PLAN
HITRO.HR SERVICE
6,559 businesses of varying sizes established last year A large number of Croatian entrepreneurs have thus far exploited the opportunities provided by the Hitro.hr service, primarily concerning the chance to be provided with all required information in Fina offices and the performance of most activities required for the creation of a business or a small-business and entering amendments in the Registrar of Companies for existing companies. Consequently, 2016 saw the creation of 6,559 businesses and small-businesses through the Hitro.hr service, an increase of 781
Companies that were established after 1st January 2017
are exempt from payment of the CCE membership fee for a oneyear period following their formation, whilst the membership fee paid by other CCE members will remain the same as last year. Luka Burilović, President of the CCE
business entities, or 13.52% over 2015. Hence, 197 small businesses were founded and 2,266 limited liability companies (in Croatian - d.o.o.), as well as 4,096 simple limited liability companies (in Croatian - j.d.o.o.). The opportunity to create a simple limited liability company, which in Croatia is normally referred to as “a company for €2” has been provided through amendments to the Companies Act that were implemented at the end of 2012.
submitted to the Tax Administration and the opening of a business account at a bank will also be performed electronically. Furthermore, the use of the service e-Craft is encouraged, and the generated savings planned will reach almost €0.4 million, in addition to abolishing the obligation to make a corporate seal. This is intended to finally improve the ranking of Croatia on the Ease of Doing Business index in terms of starting a business. The measures implemented are in the domain of the Ministry of Justice, the Ministry of Finance and the Ministry of Economy, Entrepreneurship and Crafts and are expected to be implemented from the second quarter – ranging from the measures such as the abolition of the corporate seal to measures whose implementation requires far more time, such as the electronic opening of a corporate account at a bank, which is expected to be implemented in the fourth quarter of 2017. “It is important to highlight that companies established after 1st January 2017 are exempt from payment of the CCE membership fee for a one-year period following their inception, whilst the membership fee paid by other CCE members will remain the same as last year”, emphasised Luka Burilović, President of the Croatian Chamber of Economy, adding that the reforms he promised at the start of his mandate have all been implemented and hence mandatory contributions have been abolished, the number of employees has been reduced by 30%, and membership fees have decreased fourfold, reducing the burden to the economy by €14.7 million. “Continuation along this path is imperative. Long-term strategies need to be planned, since planning is a fundamental feature in any advanced economy. Consequently, we have prepared
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a Development Strategy for the CCE during the period 2017 to 2022, in which we focused on the digitalisation and internationalisation of business, the introduction of a dual education system, taking over the keeping of the court register and the continuous promotion of the Let’s Buy Croatian campaign, with county chambers as institutions that provide crucial local support”, explained Burilović. “Our objective is to increase the level of self-financing by 2022, through reducing the percentage of revenue generated by membership fees by 50%, whilst generating 25% of the total revenue through the provision of commercial services, and financing the remaining 25% through EU funding”, noted Burilović, adding that CCE is currently participating in 156 projects financed through EU Structural Funds worth €120 million.
CUTS IN OPERATING EXPENDITURE AND REDUCED LIABILITIES A broad range of measures is being implemented aiming to improve sanitary and health conditions, in compliance with all required standards, which is expected to result in generating savings in excess of €13million. Furthermore, the frequency of health check-ups will reduce from twice to once per year, which will result in a reduction in the administrative burden of €11million. The obligation of sanitary and health examination will be reduced for 15,000 staff working in personal hygiene products, in original packaging, as well as the frequency of lectures and the numbers of those eligible for mandatory training. Concerning the issue of requests for the issuance of certification on the fulfilment of conditions on worker qualifications, compliance with technical equipment standards at the premises and other conditions required for the performance of business ac-
tivity regarding mandatory disinfection, disinsection and deratisation, the fees for the issuance of such certificates have decreased from €33 to €9. Moreover, the request for the issuance of the certificate for the use of hazardous chemicals will be submitted electronically. In addition, there are plans concerning the abolition of the obligation of the purchase stamp duties issued by the state and their electronic payment will be introduced. The entity authorised for the implementation of these mea-
ENTIRELY ELECTRONIC COMPANY FORMATION sures is the Ministry of Health and the deadline is the first quarter of 2017. Safety at work will have the greatest impact on the reduction of the administrative burden, since its annual administrative costs incurred by Croatian entrepreneurs exceeds €0.57 billion. A large number of measures are currently planned, aiming to simplify the obligation of safety at work, whilst savings are expected to exceed €0.16 billion. Moreover, almost €60 million will be savings generated following the preparation of an open guide intended for making risk assessments, aiming to provide entrepreneurs with the opportunity to make independent risk assessments in order to ensure transparency, and avoid payment of costly outsourced service fees. The ministries authorised for the implementation of these measures are the Ministry of Labour and Pension System and the Ministry of Health and the
deadline for their implementation is the second quarter of 2017. Regarding trade and the intermediation in property trading, both will see reductions in operating expenditure and savings generated will exceed €3.2 million, in addition to the introduction of e-permits for administrative access. The examination fee for agents for intermediation in property trading will fall by 25%, from €200 to €147. The energy certification training programme fee in construction will fall by 58%, and administrative savings are expected to be about €1.2 million. The Ministry of Construction and Spatial Planning is responsible for the implementation of measures regarding energy efficiency and the deadline is the first quarter of this year.
ABOLITION ON THE RESTRICTION TO THE NUMBER OF DRIVING SCHOOLS Concerning access to professional services, we will see the abolition of the restriction on lawyer advertising and regulation of the fixed tariff for legal consultancy services provided by attorneys in out-of-court settlements, as well as concerning the provision of attorney opinions. Furthermore, the restriction on the number of new driving schools per individual county will be abolished and so driving schools will be established without restriction in accordance with market conditions, providing they meet quality requirements. In addition, the regulation on the fixed minimum fee for driving school lessons has also been abolished. Furthermore, we will see the abolition of the restriction of audit authorisation for a period of three years, as well as the abolition of the ruling regarding a certified independent auditor is entitled to establish only one auditor office in which they need to be employed. Examination fees and mandatory membership fees in professional chambers for tax advisors and auditors and mandatory membership fees for lawyers will also be reduced by 30%. Records of working hours will also be simplified and members of the Management Board and Executive Directors of companies will be exempt from the obligation to freeze their personal bank account with the Financial Agency upon non-payment of salaries over the due period. Moreover, notary public fees will decrease. Electronic business operations will be exempt from the obligation of fiscalisation. In addition, the legal option will be used yet again concerning the issue of the unnecessary claiming of information from entrepreneurs concerning that information which is already available to public authorities, such as information included in the excerpt from the court register and similar excerpts and the once-only principle is expected to finally be implemented.
In addition to the removal of administrative barriers in the existing legislative framework, it is both imperative and fundamental to introduce a system which will ensure that in future laws are not passed
without a comprehensive analysis of their impact on the economy and an assessment of their practical feasibility. Davor Majetić, CEO at the Croatian Employers’ Association
February 2017 | No 266 | PVinternational | 7
INTERVIEW GARI CAPPELLI, TOURISM MINISTER
WE NEED TO CONSIDER THE ENTIRE TOURIST YEAR, NOT JUST THE SEASON It is obvious that sun and sea are our main products, as is the case with all Mediterranean countries, but with the development of medical, cultural and gastro tourism as well as mega events, we should be thinking about the entire year, increasing our income, says the Minister interviewer Jozo Vrdoljak photography Robert Anić
P
rivredni vjesnik spoke with Tourism Minister Gari Cappelli about the last and forthcoming tourist season, development and investment projects for Croatian tourism. Cappelli spoke about plans related to new projects and legal regulations of the tourist sector. In your opinion, is it possible to repeat the results of last year’s tourist season? 2016 was incredible judging by the results of tourism turnover and a record 90 million overnight stays as well as tourism income, with foreign and local income exceeding €9.5 billion. I am certain this year’s results will be even better, with tourism turnover and income growing at a level of 3% - 4%. After the excellent last year’s results, undoubtedly a consequence of successful and good co-operation between the private and public sector as well as on-going investment in the sector, this year’s investments in tourism will be even greater. I have reason to be optimistic and belie-
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ve Croatia will once again prove why it is becoming an increasingly popular destination for tourists globally, and its turnover and income will grow even higher. What aspect defined last year’s season in terms of investment, new products and projects? Last year we opened around 40 new and renovated hotels as well as other accommodation and catering facilities, proving tourism policy is taking bold steps in the direction of achieving the goals set out in the Development Strategy 2020. Actually, one of our tasks is, if we wish to strengthen our tourism, will be to invest in our offer and services since constant investment in quality is the only thing which can secure us a position on the tourist world scene and turn us into a leading destination in the Mediterranean and globally. We have initiated the
The plan is to start with full implementation of the CRO card project in 2018. I feel it will be of great help to continental tourism, since it will be possible to apply it throughout year.
February 2017 | No 266| PVinternational | 9
INTERVIEW
9.5
over € billion
last year’s tourism income
90 0 million of overnight stays in 2016
around € million
800
anticipated investment in the tourist sector in 2017
digitalisation of tourism, mainly through a new system for tracking tourist activities. It is called eVisitor and it introduced better, more transparent and exact tracking of tourist movements across our country. Of course, it is important to highlight that five tourism projects were listed on the List of strategic projects of Croatia during 2016. At the moment, there are seven projects of the Tourism Ministry on this list, proving the importance and influence of tourism to the entire economy. What can we expect from the forthcoming season? Are some special characteristics or new challenges visible already? I have recently sat with the head managers of the representation offices of the Croatian Tourist Board abroad and they advised me about the booking status, which is quite good at the moment. We noticed that we will have to pay attention to May and look into the possibilities of attracting visitors during this month. Detailed data provided by eVisitor enables simple and precise campaign planning. I will also meet with the counties’ tourist board directors and our discussion will focus on strengthening
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and improving our destination management. Actually, it is not enough to have high category hotels. When a tourist arrives, he wants the destination offer to be on the same level. I would like to hear their opinions and about specific problems as well as which direction can we should take to systematise our tourist boards’ tasks in a legal sense. This is actually the idea of total quality management, our project which we will present to the public. Are you anticipating an early season start? The process of prolonging the season has already started to show results. However, this is a long-term process. It is a fact Croatia had 30% more foreign visitors during the last three months of 2016, proving that the season has indeed lengthened. This year’s holidays are well arranged and this will certainly have a positive influence on the season, and this is where our promotion strategy will be based. Notwithstanding, I want us to talk about the entire tourist year and not just the season which depends totally on good weather and schedule of the holidays. We are actively working on prolonging
the season, developing special tourism types, improving the quality of both the product and services, all with the goal of being able to work throughout the year. It is obvious that sun and sea will be our main product, as is the case with all Mediterranean countries, but with the development of medical, cultural and gastro tourism as well as mega events, we should be thinking across the whole year, increasing our income. We have already achieved 90 million overnight stays, and we will soon achieve the
THE PROCESS OF PROLONGING THE SEASON HAS ALREADY STARTED TO SHOW RESULTS. HOWEVER, THIS IS A LONG-TERM PROCESS goal we set for 2020. However, we are still far from the income we envisaged for 2020 and this is the segment we will have to work on. What do you think should be regulated to increase the efficiency of the tourist sector? The tourist sector functions well as a whole, but there is always room for improvement. As a competent institution, it is our duty to continue with making improvements in legal regulations to ensure all participants, including investors, simpler and more transparent business activities. In terms of the hotel industry, we are working on harmonising regulations with global trends. Considering that loans to private renters are in preparation, and their goal is to raise the quality of accommodation and level of the offered products and services with the number of stars, we will change the related regulations. We will secure a product we can back up at the national level. All entrepreneurs complain about laws regarding tourist land, maritime good, concessions and other aspects. Although the Ministry of Tourism is not the only one in charge of their preparation, it does participate in the process. In which phase is the development of these laws? The Act on tourist land is in its final preparatory phase. A team of lawyers, hotel owners and Ministry experts has been formed to
increase our efficiency. All proposals will be agreed first with the working group and then the competent Ministry of the State Property authorised for this Act. This Act is my highest priority, and I believe it will be adopted during the first year of my mandate. If we could solve this issue, we would activate investment in camps and increase their quality as well as their business activities. Concerning the maritime good and concessions, we are intensively working with the Minister of Sea, Transport and Infrastructure, Oleg Butković, on improving investment security. What kind of compensation could be provided for entrepreneurs and the recent VAT rate increase on hospitality services? What levies do you plan to reduce? It is important to highlight that with the start of the year, the Government accepted the action plan of the Ministry of Economy, Entrepreneurship and Crafts for administrative discharge of the economy. The plan consists of 104 measures which eliminate many administrative obstacles, allowing entrepreneurs to save up to €0.2 billion this year. The adopted measures relate to, amongst other things, protection at work, health and sanitary protection, energy efficiency, trade and establishing companies, for example, it will become simpler to establish a company or a craft; entrepreneurs will be able to fill out an online form for risk assessment evaluation for protection at work, saving €60 million. The expense of training people in charge of providing first aid will be reduced and the process of recording working hours will be simplified. The implementation of the plan will go relatively fast, and some of the most significant measures will be activated during the first half of this year. With this step the Government showed it gives great importance to the real economy, creating a more favourable business climate. Concerning VAT, we are working with hotel owners on finding solutions to this problem. The representatives of restaurant and hotel owners have already proposed their solutions, and one of them is to eliminate parafiscal charges.
This year we have started with plans for promoting health tourism directly. In cooperation with the Croatian Chamber of Economy and the Croatian Tourist Board a portal will be set up and it will promote top participants of the health tourism sector under the slogan Croatia – Full of health.
How can we monitor, for some people, the exaggerated increase so-called family accommodation facilities? The Ministry of Tourism, as an institution and I as its Minister, cannot influence the decisions of individuals since business policy is a matter for an individual. It is a fact we do not have enough high category hotels, whilst the amount of private accommodation facilities is increasing rapidly. Notwithstanding, restrictions do not always bring anything good. We February 2017 | No 266| PVinternational | 11
INTERVIEW INVESTMENT IN 2017
Around €800 million in the tourist sector What investment projects are planned for tourism in 2017 or the forthcoming period? Could you name the largest ones? We anticipate total investment of €800 million in tourism this year. This is €130 million more compared with the year before. The largest amount will be invested by the private sector, as was the case in 2016, to further improve facilities’ quality, offers, new facilities and renovation of existing ones. For now, there is mention of around 40 new hotels to be opened and a new convention centre in
It is a fact we do not have enough high category hotels, while the amount of private accommodation is increasing rapidly. Notwithstanding, restrictions do not always bring anything good. We have to be wise and turn our weakness into strength since we cannot stop this process.
Solaris in Šibenik, several family resorts and new camps, interpretation centres and visitor centres. It is anticipated that investment will grow due to new credit lines approved by the CBRD for micro and other types of tourism entrepreneurs. Other contributors include the privatisation process, adoption of Acts on tourist land and maritime good, anticipated early this year and funding from the EU. The biggest single investor this year is Valamar from Rabac. However, investment projects are planned throughout Croatia, including the continental region.
have to be wise and turn our weakness into strength since we cannot stop this process. We do encourage the owners of family accommodation to increase the level of their professionalism. This will allow them to increase their prices and the state will then be able to turn them into a brand. This can also be achieved by concentrating private facilities into, for example, diffuse hotels or by re-categorising them into small family hotels for which the Ministry created special conditions through adopting new Acts and amendments to the old ones. Actually, every year tourists want more. They also want a more diversified and better offer, which is quite demanding for the owners of private accommodation. However, by joining forces, capital and ideas, this goal can be achieved more easily and faster. Are there any plans for changing the regulations related to health tourism? The development of medical tourism will be top priority during my mandate since I saw at first hand the benefit for prolonging the season and the development of tourism annually. The regulations prepared by the Ministry of Tourism benefit further development of this type of tourism and we are also working with the Ministry of Health on amending their regulations. For example, the amendments to the Act on health protection and health insurance should enable private health institutions to sign contracts with the Croatian Health Insurance Fund (HZZO). Furthermore, the existing private and public health institutions could register other activities with the goal of providing full service in medical tourism. Also, specialist hospitals should be allowed to invest through applying for structural EU funds. This is not possible
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now, although the potential is €300 billion of possible investment and a minimum of 1,500 additional vacancies. We will make this possi-
THE DEVELOPMENT OF HEALTH TOURISM WILL BE A TOP PRIORITY DURING MY MANDATE ble through the amendments to the operating programme. What are the Ministry’s other activities and plans? Concerning the Ministry of Tourism, we are taking various measures for improving and strengthening this aspect. We started this year with plans for promoting medical tourism directly. In co-operation with the Croatian Chamber of Economy and the Croatian Tourist Board a portal will be set up to promote top participants in medical tourism sector under the slogan Croatia – Full of health. The project also includes participation at specialised fairs and conferences, a step forward for the development and promotion of medical tourism. Its start is scheduled for February. There is a big conference scheduled for March in Rovinj called Health Tourism Industry, which took place in Vienna the year before. Workshop Hosted Buyers will take place at the conference and will invite all buyers of medical tourism and hotel accommodation services from tourist home countries.
CROBOHUB PROJECT
1800 ROBOTS NEEDED IN THE ECONOMY According to estimates, the Croatian economy, due to its size, needs 2,000 robots, but currently there are just 175, stated Emil Perić of CCE
T
he Croatian Chamber of Economy, in co-operation with the Innovation Centre Nikola Tesla (ICENT) and the Faculty of Electrical Engineering and Computing, is participating in the CROBOHUB project. This aims to establish a regional competence centre for robotics within ICENT. Current activities are focused on the analysis and estimation of the regional ecosystem, the identification of key stakeholders and the preparation of a feasibility to define the development project. “According to estimates, the Croatian economy, due to its size, needs 2,000 robots, but currently there are just 175, which is a clear indication of both unexploited potential and the requirement for additional investment and development”, stressed Emil Perić, Director of the Department for Technological Development and IT at CCE. Through
“As opposed to the general belief that robots will replace manufacturing jobs,
CROBOHUB PROJECT FOCUSING ON THE USE OF ICT TECHNOLOGY IN PRODUCTION PROCESSES the EU I4SM initiative, the project is focused on the use of ICT technologies in production processes. The transition towards Industry 4.0, (the fourth industrial revolution), is characterised by general digitalisation within which production, sales and supply chains are based on ICT and cybernetic machinery.
the world of Industry 4.0 creates a need for additional staff qualified to manage robots, as well as to repair them and produce new ones”, pointed out Perić, adding that many stakeholders in the economy who are involved in production do not consider robots as a threat. (B.O.)
itSoft
Setcor incorporated within GÉANT itSoft under the Setcor brand is one of the providers of cloud services that has recently qualified for the GÉANT Cloud Catalogue IaaS portfolio, and has thus become one of the providers operating under this European academic high speed computer network. This is a huge success for the Croatian company which, due to its high quality programmes presented at European tenders, competed with reputable companies such as Amazon, Microsoft and Telecom Italia. Only 12 service providers were selected from 100 bids submitted. The specific objective of the tender was to provide the users of GÉANT services,
comprising of European research and development centres and institutions, with access to a simple, safe and predictable cloud system, whose services have been
harmonised both with the European and national legislation, as well as being provided at affordable fees and the possibility of being used in a transparent manner. Consequently, all Croatian scientists and scientific institutions are provided with access to the itSoft cloud resources so that they can use it in their daily work and research. «We are highly delighted that we have succeeded in achieving our objective and win this European tender. We are especially pleased to have become a crucial link in the development of Croatian science. The idea behind GÉANT services is excellent and we believe its positive impact will be felt soon», noted Krešo Troha, Director of itSoft. (B.O.) February 2017 | No 266| PVinternational | 13
RAILWAYS IMPORTANT FOR THE INDUSTRY IN THE REGION
RAILWAYS: IDENTICAL THE REGION Due to the neglected infrastructure of former Yugoslavia, rail transport is slower compared with that during the Austro-Hungarian Empire. The solution may be provided through EU Funds and an opportunity will also be given to the neighbouring countries, since EU funding is available to regional companies as sub-contractors, via Croatia as the project holder by Miro Soldić
D
uring the conference on the importance of railways for the regional production industry, organised by the Railway Cluster for Southeast Europe (RCSEE) and Business Support Network (BSN) in cooperation with the Croatian Chamber of Economy (CCE) and the Croatian Railway Alliance, it was pointed out that, irrespective of the fact that whilst it is currently severely neglected, it has ample potential for further growth, which would have a substantial positive impact on the whole of national economies across the region. The railway sector has resources, potential and tradition, and thus there could be a bright future ahead, whilst participation and involvement of all stakeholders is fundamental for any implementation, since results can be achieved primarily through co-operation. Considering the fact that Croatian Railways (HŽ) alone employs around 6,000 staff and that this state-owned company co-operates with a large number of private companies hiring several thousand employees, it is clear that the importance of the rail sector for the domestic economy is immense. There is a similar situation throughout the region and problems encountered are basically identical – neglected infrastructure as a result of a long-term lack of investment and so regional railway transport is slower compared with that during the Austro-Hungarian Empire. Nevertheless, there is a unique opportunity, through EU funding, to rebuild the outdated infrastructure and finally become competitive. An opportunity will be given also to neighbouring countries, since EU fun14 | PVinternational | February 2017 | No 266
ding is also available to regional companies as sub-contractors, through Croatia as a project holder.
A POSITIVE INITIATIVE At the opening of the Conference, Tomislav Radoš, Vice-President of the CCE, pointed out that it is a praiseworthy regional initiative. “Two things need to be highlighted. Firstly, innovative products and their development are now an imperative. Innovation is challenging, yet small countries such as ours, which cannot compete on economies of scale, need to primarily rely on innovative products. The current Conference will contribute towards the achievement of this goal, since such products can originate from co-operation with surrounding similar companies. Secondly, the Croatian railway industry hires a large number of staff and it is generally believed its potential is considerably higher. Hence, the CCE supports its operation through various aspects, as well as through an online product catalogue, aiming to encourage clients to opt for domestic products in the public procurement process. Moreover, we have developed an entire range of new services which will certainly contribute greatly to further progress”, stressed Radoš, adding that B2B discussions amongst entrepreneurs within the Conference will result in new solutions and partnerships. Milan Vučković, Director of Railway Cluster of Southeast Europe (RCSEE), also emphasised the fact that the specific objective is to intensify co-operation and provide support in the interests of its members. He stated that the Cluster
is a rather recently formed association, yet due to its committed work, has over 50 members in 10 countries, primarily regionally. He expressed his gratitude to the government for the practical support provided thus far and noted that over
800 regional companies have participated in national tenders to date. “They hire an exceptional number
of employees and certainly have immense potential”, stated Vučković and, whilst pointing out
PROBLEMS ACROSS that they are striving to be on a par with competitors on the EU market, he invited everyone to co-operate and encouraged further networking. Following the introductory presentations, there was a panel discussion under the working title “The Importance of Railways for the Production Industry in the Region” which saw the participation of Janja Groš from HŽ Infrastructure, Snježana Josipović from the Ministry of the Sea, Transport and Infrastructure, Mladen Perkov from Altpro, Dražen Rajić from RCSEE, Branislav Đurica, a representative of the Railways of the Republic of Srpska, Mladen Antonić, State Secretary at the Ministry of the Economy and Makso Đukić, President of the Employers Forum of Serbia. Đukić expressed his gratitude to the authorities in both Croatia and Serbia for providing support to them as entrepreneurs, and also explained the principal problems encountered. «We in Serbia have thus far been faced with the privatisation of all state-owned railway industry and it is currently virtually non-existent. The situation in Croatia is different, as Croatian Railways (HŽ) is still state-owned, which does not prevent it from participating in tenders invited by the World Bank. The fact that only Končar and Gredelj are currently operating in the former Yugoslav region and the remaining companies are all foreign-owned is utterly absurd. All tenders that are currently invited in the region have been focused on bids by multinational companies and hence in Serbia there are six foreign-owned companies operating at one railway crossing. This is a problem, as
CROATIAN RAILWAYS CURRENTLY HAS AROUND 6,000 EMPLOYEES, IN ADDITION TO SEVERAL THOUSAND STAFF HIRED BY AFFILIATED COMPANIES when investment is implemented into something, it requires maintenance for a period of around 20 years and if there are different sections built by different companies using different parts, it all becomes highly complex and considerably more expensive», explained Đukić, adding that is it hence desirable that domestic industry becomes involved in the projects in order to avoid similar problems in the future and ensure high quality maintenance.
RESPONSIBILITY OF EVERY GOVERNMENT Rajić stated that governments need to exert efforts to rebuild the railways in order to enhance industry and create jobs for suppliers. “Communication between
regional companies needs to be improved, we need to be acquainted with one another’s products and need to plan joint appearances on markets”, he noted. Antonić pointed out that a new Public Procurement Act is certainly one of the moves that could positively affect rail companies and encourage them to make an additional breakthrough both at regional and European levels. According to new regulations, the lowest bid is not crucial anymore, since the most economically advantageous tender is currently a priority. He invited all stakeholders to gain an insight into new procedures and adjust their bids. “Long-term investment costs need to be considered and if one approaches public procurement from this stance, one could greatly contribute to the development of the entire industry”, he concluded.
February 2017 | No 266 | PVinternational | 15
LED ELEKTRONIKA, IVANIĆ-GRAD
LIGHT EFFICIENCY BAS TURN-KEY PRINCIPLE
LED Elektronika is one of the rare Croatian companies producing complete LED ill end-user and deliver the final illumination system. In the research and developme developing new custom-made products by Boris Odorčić
T
he merger of two companies, TEB Elektronika and ZG Lampa in 2011 resulted in one company LED Elektronika. Led by the idea of creating an intelligent Croatian product, which would be able to compete on the rapidly growing global market for LED illumination systems, that same year LED Elektronika started developing new products – a street LED illumination system PrecisionLux. From that period to date, they have
THE CROATIAN MARKET OF LED ILLUMINATION IS STILL IN ITS EARLY PHASE installed over 5,000 lights in Croatia, says Hrvoje Kaluđer, Technical Manager of LED Elektronika. The Head Office and production facility are in Ivanić-Grad. The majority of young engineers are from the Faculty of Electrical Engineering and Computing, Faculty of Mechanical Engineering and Naval Architecture and Faculty of Transport and Traffic 16 | PVinternational | February 2017 | No 266
Sciences, that is, around 20 workers employed in LED Elektronika work in the Research & Development Centre in Zagreb. In addition to developing LED illumination systems, the Research & Development team also worked on the PrecisionLeap system for remote internet control and surveillance of LED lamps and lighting infrastructure, such as public illumination cabinets and substations, from a remote location. The system is primarily intended for local administrations (towns and villages), but other consumers also, such as sport or industrial facilities with a large number of lights and high maintenance expenses, since the system allows in-depth inspection, display of measured data, light control in real time and maintenance of the illumination system, Kaluđer explains. Also, this company produces and develops mobile meteorological stations, counters, light changing signs and screens, queue control systems and custom-made hardware and software products.
EVOLUTIONARY LEAP As well as the desire to develop an intelligent local product, the idea for this type of activity is the result of the past disregard of the quantity of energy spent on public illumination. The lighting was often too large
and extremely inefficient, and the related projects did not take into account aspects like energy and light efficiency, equally distributed lighting or light pollution. The development of LED illumination proved it represents an evolutionary leap in lighting technologies, offering greater efficiency, quality control of light flow, longer life-
span and increased resistance to external conditions. “We knew very well that great progress could be achieved by developing a new product – intelligent LED lamps – both technological and ecological, and all with long-term positive economic indices”, Kaluđer highlights. Implemented correctly, Kaluđer continues, public illumination reconstruction projects, that is, the replacement of existing illumination by quality LED illumination
SED ON THE E
lumination systems. This is why it can fully adjust just its products to the ent sector, their plans also include selling knowledge owledge as a service when systems, regardless of price, are highly cost efficient. This is obvious from many technological and economic studies, and proven by the finalised project. Concerning the replacement of conventional illumination, the Croatian market for LED illumination is still in its early phase. EU accession brought the possibility of drawing substantial funding from the EU which could be used for projects
ple. This is where we see our competitive advantage on the market. Our competition consists mainly of sellers, and to a much lesser extent other local producers who buy ready-made components from China where this industry is very popular”, Kaluđer notes.
BANK TRUST The company’s biggest problem in Croatia is financing. Since the majority of these types
Implemented correctly, the projects for replacing the existing lighting by quality LED illumination systems, regardless of price, are highly cost efficient. This is obvious from many technological and economic studies and finalised projects Hrvoje Kaluđer, Technical Manager with LED Elektronika
for increasing energy efficiency. Unfortunately, only a small percentage of these funds are currently used for implementing this idea for reconstructing public illumination, Kaluđer points out. It is important to note that LED Elektronika is one of the rare Croatian producers producing complete LED illumination systems. “We are able to fully adapt the product to the end-user and deliver illumination systems and solution based on the turn-key princi-
of projects are achieved based on the ESCO model, that is, they are financed from the savings achieved through its implementation, all production and installation expenditure are covered by the producer, in this case, the company. Debt collection is through monthly payments over a longer period of the duration of the ESCO contract. Kaluđer also adds that on the one hand the company has to finance production, and on the other there is competition from cheaper, imported
products from the East. With such a buysell attitude, Kaluđer says knowledge is not accumulated, added product value is not generated, new jobs are not created, and there is no long-term future for young people in Croatia. “I think the state should help in protecting local production since this is not only a matter of us and our people, but the entire chain of subcontractors”, opined Kaluđer. Since ESCO projects for public illumination reconstruction have started to be taken seriously only recently, banks are still somewhat sceptical about their financing. Kaluđer continues that it is difficult to gain their trust without further additional mechanisms, such as mortgage or bank guarantees. Overall, the entire financial and operational risk falls on the service provider or the producer. The company plans include further expansion on the Croatian market and transfer on to the EU market and beyond. The company also wants to form a team of young engineers who are able to adapt well to the current economic climate in Croatia, and who can also accumulate new technologies as well as find their commercial use. In addition to promoting existing products, LED Elektronika also plans to sell their knowledge as a service in order to develop new custom-made products. February 2017 | No 266 | PVinternational | 17
INTERVIEW MILIVOJ DRAGOŠEVIĆ, OWNER/DIRECTOR, PUREX
FOOD SAFETY FULLY IN FOCUS It is important to stress that the level of control over imported food has increased substantially, since imported food appears to be of a highly inferior quality compared with locally produced food, noted Milivoj Dragošević, whose company owns a large number of chicken, turkey and pig farms. Imported food of poor quality negatively impacts on the health of the general public, as well as the operations of local producers who cannot produce food at such extremely low prices by Jozo Vrdoljak
T
he issue of food safety has been one of the most widely covered by Croatian media. This is primarily due to the Minister of Agriculture, Tomislav Tolušić, who when taking up office, launched a broad range of procedures aimed at increasing food safety. It has to be noted that a large percentage of food is imported, and a large number of incidents that occurred meanwhile (amongst which were the severest cases such one resulting in death from salmonella found in imported eggs), will actually have a positive impact on local producers, primarily those who exclusively focus on organic production. Privredni vjesnik spoke with one of the local organic food producers, Milivoj Dragošević, owner of Purex from Hrvace, and the owner of several poultry and pig farms. The issues tackled included the daily operations of his company, the current
market circumstances and the impact of inspection service initiatives. How is Purex organised? We own a factory which is intended to meet the requirements of our farms in the village. Moreover, we also own several farms in the region from Ugljan near Trilj to Muć. Our farms and other facilities cover around 15,000 m2. Several years ago, in 2012, in the business zone located in the municipality of Hrvace, we constructed a slaughterhouse and production facility in which we invested €3.5 million. We used €1.4 million through IPARD funding. It is a modern facility in compliance with all European standards. Moreover, we currently have 21 points of sale in which around 85% of our products are sold. Our annual production currently stands at around 2,000 tonnes of chickens and turkeys, including processed poultry meat and a minimal quantity of
Ultra-high growth not our objective How many employees does Purex have, and what is its annual turnover? Are you planning to increase capacity? We employ 160 staff and our annual turnover is around €5.3 million. Our plan is to maintain this level of quality. We provide special solutions and models within our system and we do not use antibiotics, hormones,
18 | PVinternational | February 2017 | No 266
coccidiostats or other harmful substances. We are aiming to continue being involved in the production of local products of exceptionally high quality. Ultra-high growth is not our objective. We are focused on planned growth and are planning expansion of primary production and a 10% to 15% increase in farm capacity during the forthcoming two years.
processed pork. A proportion of the turkey meat produced is sold on the market through Interspar and Super Konzum. A small quantity of meat is delivered to PIK in Vrbovec which supplies HoReCa.
THE MARKET MUST BE FREE. YET, THE SAFETY OF IMPORTED FOOD MUST BE CONTROLLED Our partner, Gala, produces eggs for us, since its production methods are similar to ours. This means chickens are fed on home-grown grain and are treated with natural products for animal husbandry.
trol needs to be primarily pointed out, since imported food is often of considerably inferior quality compared with that from local producers. This also affects prices. In addition to the fact that the inferior quality of imported food adversely affects the health of the population, it also negatively impacts on the operations of local producers, since we cannot produce food at such extremely low prices.
Our competitive advantage is our traditional method of production, identical to the method used by households, albeit under incomparably superior technological and hygienic conditions, noted Milivoj Dragošević
Are there any hotels and restaurants to whom you directly deliver your products? Yes, there are several, yet it represents an insignificant share of our overall sales. Our primary sales channel consists of our retail facilities in the wider regions of both Zagreb and Split. Nevertheless, as we increase our production capacity, we will also develop our retail business. What are the special features of your production and what is the competitive advantage of Purex? There are two production categories for chicken farming. The first is involved in standard farming and the second involves special local chicken breeds whose raising lasts over 70 days. Our competitive advantage is our traditional method of production, identical to the method used in households, albeit under incomparably superior technological and hygienic conditions. Our quality process is clearly defined and we pay special attention to the safety of our products. We primarily
focus on animal husbandry, such as feeding and breeding conditions, since these are the most important parameters required to comply with the health and safety standards of the meat produced. When did you become involved in raising local chicken strains? We started two and a half years ago. It is important to stress that we have a wide range of customers who primarily opt for home-reared roosters, with longer legs and small breast. They have recognised the quality of this product in our sales outlets and currently exclusively opt for it. It is a superior standard product. What is the current situation in the meat industry? We are faced with something that I advocate and agree with – the level of meat control has increased substantially and the principal focus is on both food safety and quality. I support this decision of the Croatian government. The importance of an increased level of imported food con-
Should food importation be restricted? Definitely not. The market must be free. However, imported food safety must be controlled and the import of food that is considered unsafe for human health must be banned. Inspection services need to operate constantly in order to eliminate food considered as unsafe, not only concerning food contaminated with pathogenic microorganisms, but also that containing harmful additives. Food safety means that meat or a product has not been contaminated with pesticides, herbicides, heavy metals, additives and food preservatives, amongst others. If this standard is complied with, both local products and producers will increase their competitiveness. There is a large number of small and medium-sized businesses in the EU involved in the production of high quality food. Nevertheless, they are not competitive in Croatia, since prices for their products are higher than those of local products. Food is normally exported by large organisations involved in the mass production of cheap food whose safety is questionable. Is there an increase in the number of consumers interested in local produce or higher quality products? There is a continuous increase in their numbers, and we are delighted with this fact, since we have established our market position in this way. All local producers aiming to produce high quality products are certainly pursuing a way to success. Are domestic consumers prepared to pay 10% or 15% higher prices for such products? We believe they are, yet exclusively in case they are entirely convinced of the quality of such producers and hence their confidence is a challenge. Once they have been convinced of the quality, they are prepared to pay up to 30% higher prices. This trend will certainly grow once consumers are better educated. February 2017 | No 266 | PVinternational | 19
BISNODE: ECONOMIC MOVEMENTS IN 2016
THE POPULARITY OF €2 COMPANIES IS FALLING OFF Even though simple limited liability companies hold 54.1% share in total number of established companies, it can be concluded, based on data, that 2016 was the second consecutive year to see a lower number of newly created simple limited liability companies
14,181 economic operators established in Croatia last year osnovan lani u Hrvatskoj
878 operators in bankruptcy procedure during the past year
A
nnual economic analysis, prepared by the company Bisnode, shows that a total of 14,181 economic operators was established in Croatia during 2016. This is a 10% increase over 2015. In effect, the record year was 2013, with a total of 14,663 established companies. It should be noted that the Companies Act started to be implemented at the end of 2012, and enabled establishing a simple limited liability companies, the so-called €2 companies. Compared with the record 2013, 3.3% fewer companies were established last year. Despite the growth in the number of established companies recorded last year, the number of companies which closed grew across year. In 2015, 7,901 companies closed and last year 15,140.
TRADE TAKES THE LEAD
0.9 9billion
€
unpaid tax debt of 3,480 companies in 2016
Even though simple limited liability companies hold a 54.1% share in total number of the established companies, it can be concluded based on data that 2016 was the second consecutive year to see a lower number of newly created simple limited liability companies, pointing to a slight drop in the popularity of the so called €2 companies. Limited liability companies have a 41.9% share of the total number of established companies, with other types of companies holding a share of just 4%. It is interesting that the Požega and Slavonia County, (a county with the lowest number of established operators), has the best ratio between established and closed companies (1.7). This means that of every 10 companies which close, 17 new companies are established. This county is followed by the Sisak and Moslavina County as well as Krapina and
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Zagorje county. The poorest ratio was identified in the Bjelovar and Bilogorje county, Koprivnica and Križevci as well Virovitica and Podravina, with almost twice the number of companies closing compared with those that opened. Concerning sectors, trade takes the lead with a 19.9% share, followed by hospitality, intellectual activities, construction and processing industry. The leading five sectors held a 63% share of all established operators. These five also dominated the number of operators closing, at 73.4%. On the other hand, the entertainment-recreation sector had the best ratio between established and closed operators, considering that for every 10 closures, 17 new were established, on average. This sector is followed by education, administration, transport and ICT. Last year, the number of established simple liability limited companies increased, even though their percentage reduced in terms of the total number of established companies. This put a stop to a two-year downward trend of establishing simple limited liability companies.
Activities of established and closed companies 2013 – 2015
10.000
14,181
12,896
12.000
12,939
14,663
14.000
15,140
2000
13,636
16.000
Movements of established simple liability limited companies across years based on sectors
1600 HOSPITALITY
1400 1200
6915
6.000
7901
8.000
4.000
1000
600
0
2013
2014
ESTABLISHED
2015
2014
2015
2016
Counties with leading ratios between established and closed companies
1
1.1
1
1.3
2
1.4
CLOSED
1.4
4729 4212
ESTABLISHED
1.7
2
3000
1
2500
1
500 City of Zagreb
709 923
858 775
1000
1190 1443
1393 1573
1500
1219 1520
2000
0
2013
CLOSED
5000
3500
PROCESSING
400
2016
Leading counties according to the number of established and closed companies
4000
CONSTRUCTION
800
2.000
4500
TRADE
1800
1 0 0
County of County of County of County of County of Split and Primorje and Istria Zagreb Osijek and Dalmatia Gorski kotar Baranja
0
County of County of Sisak Požega and and Moslavina Slavonia
County of Zadar
County of Krapina and Zagorje
County of Šibenik and Knin
Source: Bisnode
An analysis of established simple limited liability companies based on sectors, shows that the majority were established in trade, followed by hospitality, professional activities, construction, processing and production. Over the years, the arrangement of sectors based on the popularity of establishing simple liability companies did not change, and the leading five sectors held same positions. 238,000 unemployed registered During the past year, 878 operators underwent bankruptcy procedures. In relation to 2015, with 620 bankrupted operators, this is a 41.6% increase. At the same time, only 87 operators exited bankruptcy procedure,
confirming that the bankruptcy procedure in Croatia usually implies the closure of companies rather than their recovery. It should be highlighted that 6,052 operators were in bankruptcy procedure at the end of the last year. At the end of 2016 there were 3,480 companies with a tax debt exceeding €40,000, a 5.1% fall in relation to the end of 2015 (3,667). Total tax debt of these companies is €0.9 billion compared with €0.82 billion in 2015. It should also be pointed out that the number of registered unemployed individuals was 238,000 at the end of 2016, 8.3% fewer compared with the same period of 2015. (V.A.)
IN 2015, 7,901 COMPANIES CLOSED AND LAST YEAR 15,140
February 2017 | No 266 | PVinternational | 21
COMMENTARY FROM THE CROATIAN CHAMBER OF ECONOMY
FAVOURABLE FISCAL MOVEMENTS CONTINUE Favourable movements recorded in Croatia are due to several factors: mainly accelerated economic growth and consequently higher GDP as well as a reduced budget deficit and thus a reduced need to fall into further debt
A
ccording to data provided by Eurostat, the last quarter of 2016 saw a positive deficit and debt movements of EU member countries. This is a consequence of economic growth and continuous efforts in the direction of fiscal consolidation. As a result, average debt of EU member countries was 83.3% of GDP in the third quarter of 2016. This is 0.9% down compared with the previous quarter and 2.6% down compared with the third quarter of the year before. At a quarterly level, five countries saw an increase in debt to GDP (Cyprus 3%, Portugal 1.7% and Lithuania with 1.2%). At the same time the share of debt in GDP reduced in 22 countries, mainly Greece (by 2.9%), Italy (2.8%) and Austria (2.3%). The debt share
in Finland stagnated. In Croatia, however, the debt level increased by a moderate 0.3%. At an annual level, the increase of public debt in GDP was seen in 10 EU member countries; one country saw stagnation, and 17 countries showed a fall. The highest share growth was seen in Greece, Lithuania, Portugal and Bulgaria, whilst Ireland, the Netherlands and Hungary saw the largest reductions.
PUBLIC DEBT MOVEMENTS At the end of the third quarter of 2016, 17 EU member countries continued to have a percentage of public debt to GDP higher than the 60% allowed by the Maastricht criteria (Croatia included). Six countries had debt exceeding 100% of GDP. The largest percentage
Public debt share of GDP in the third quarter of 2016 (%) 180 160 140 120 100 80 Maastricht limit
60 40
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Greece
Portugal
Italy
Cyprus
Belgium
Spain
France
UK
Croatia
Austria
Slovenia
Ireland
Hungary
Germany
The Netherlands
Finland
Malta
Poland
Slovakia
Sweden
Lithuania
Denmark
Czech Republic
Latvia
Romania
Bulgaria
Estonia
Luxembourg
Eurozone
0
EU-28
20
Source: Eurostat, Processed by: CCE
was recorded in Greece (176.9%), Portugal (133.4%) and Italy (132.7%). The lowest state debt to GDP was recorded in Estonia (9.6%), Luxembourg (21.5%) and Bulgaria (28.7%). With its public debt share of GDP at 84.9% Croatia finds itself below the Eurozone average (90.1%) and above the EU average with the highest percentage compared with similar countries (Bulgaria 28,7%, Romania 36.2%, the Czech Republic 38.7%, Slovakia 52.7%, Poland 53.2%, Hungary 74.3% and Slovenia 82.6%). It is an encouraging fact that Croatia belongs to the group of countries with recorded reductions in the share of public debt in GDP on an annual level. In relation to the third quarter of 2015 Croatia’s index decreased by 2.4% and was the seventh country based on success of other EU member countries. Favourable movements recorded in Croatia are due to several factors: mainly accelerated economic growth and consequently higher GDP as well as a reduced budget deficit and thus a lesser need to fall into further debt. Eurostat also published data on seasonally adjusted movements of the budget deficit of EU countries. Based on them, the deficit in the third quarter of 2016 was 1.7% of GDP, which is 0.2% up compared with the quarter before, but also 0.1% less compared with the third quarter of the year before. Unfortunately, seasonally adjusted data on the deficit are not published for 10 member countries, including Croatia. Due to considerable seasonal oscillations in achieving budget income and expenditure during the year as well as differing dynamics of drawing dividends, profits of the central bank, transfers to public companies or payments of obligations, the original quarterly data on achieving the budget are limited. However, based on the original seasonal unadjusted data, it is evident that Croatia achieved good results last year. Consequently, the budget surplus of 2% of GDP was recorded in the third quarter of 2016, which shows significant progress compared with the same quarter for the year before, when the surplus totalled 0.7% of GDP. According to the original data, a significant budget surplus in the third quarter was achieved only by the Czech Republic, Hungary, Cyprus and Greece. This is mainly the influence of the high growth of budget income, which was 43.7% of GDP in the third quarter of last year (1% more compared with the third quarter of the year before). This is mainly due to economic growth and a high increase in tax revenue after a successful tourist season, as well as increased local spending through higher salaries and a better situation on the labour market. At the same time, budget expenditure was kept under
control (41.7% in third quarter of last year and decreasing by 0.8% at an annual level), partly due to provisional budget financing last year and limited possibilities of the technical government in creating new expenditure.
MOVING IN THE RIGHT DIRECTION Eurostat data confirm Croatia is heading in the right direction for achieving the goals of public finances and meeting the fiscal criteria set out by the European Commission. This means that by the end of 2016, it will have achieved a budget deficit considerably lower than the 3% of GDP allowed by the Maastricht criteria, and its share in the public debt of GDP will start to fall after having grown continuously for eight years. These results create
WITH ITS PUBLIC DEBT SHARE IN GDP STANDING AT 84.9% CROATIA FINDS ITSELF BELOW THE EUROZONE AVERAGE a real possibility for the country’s exit from the procedure of reducing excessive budget deficit this year, at the same time having a positive influence on improving the credit rating which is currently two points below investment grade. (V. A.) February 2017 | No 266 | PVinternational | 23
RIJEKA CARNIVAL 2017
NOT EVEN WINTER WEATHER CAN STOP THE FIFTH SEASON Rijeka Carnival has been listed in the Top 500 European Events. According to the Sunday Times it is one of the most exotic events in the world by Sanja Plješa
T Rijeka Carnival in numbers Last year 10,000 people participated in 110 carnival groups and 73 allegorical floats. The children’s parade included 5,000 youngsters in 69 carnival groups.
he season has started in Rijeka and across Kvarner – the famous and popular carnival, which will end on Ash Wednesday, 1st March. During this exciting time - after erecting Pust – the king of the Carnival or fašnik, as it is called in north western parts of Croatia, the new queen of the Carnival will be elected on Kvarner, and visitors will be able to enjoy many fancy dress parties, songs and dance as well as various sport, gastronomic and charity events. Concerning this year’s Rijeka Carnival, mayor of Rijeka, Vojko Obersnel, said that to the satisfaction of everyone this 34th Carnival will last longer than before. “A varied and interesting programme has been prepared and I am convinced that everyone will find something for theirselves in numerous fancy dress events. We anticipate around 10,000 participants in 100 groups in this year’s international parade”, Obersnel said. He also added that Rijeka Carnival is part of the project of the European Capital of Culture. Furthermore, this year the Carnival will carry a humanitarian note since funds will be raised during the traditional ball for the association of people suffering from muscular dystrophy. The Carnival will
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also include two sporting events - Carnival Snowboard Session on the mole of Karolina
FANCY DRESS IN THE STREETS OF RIJEKA ENDS ON 1st MARCH of Rijeka and a fancy dress rally Paris-Bakar. Once again Export Delta is the main concert centre where famous singers will hold concerts.
CARNIVAL IS RIJEKA’S BRAND For its long-lasting tradition and influence on the community, the Rijeka Carnival is one of the biggest and most popular public events in the Kvarner area. Furthermore, it has recently become one of the most recognisable parts of Rijeka’s image. Its parades and imaginative events make it one of the most unique carnivals in Europe. It has been listed in the Top 500 European Events. For the Sunday Times, it is one of the most exotic events in the world.