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“BUSINESS CLIMATE BAROMETER 2018” → Business people expect growth, as well as reform in many areas PAGES 2-6

SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY

www.privredni.hr

BASIC INDICES OF BUSINESS DEMOGRAPHY FOR 2016 → A growing number of new companies

PV ANALYSIS: LAW ON UNFAIR TRADE PRACTICES → New rules for the market

PAGES 10-11

PAGES 18-22

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

March 2018, Year XI, No 278

CROATIAN NATIONAL BANK

FDI standing at €610 million The total of foreign direct investment for the third quarter of 2017 is mainly due to retained earnings, which accounted for 78.3% of investment during the quarter

A DURING THE FIRST NINE MONTHS OF 2017 TOTAL FOREIGN DIRECT INVESTMENT STOOD AT €1.29 BILLION

ccording to preliminary data provided by the Croatian National Bank, total foreign direct investment for the third quarter of 2017 stood at €610 million. In relation to the same period in 2016, its’ value was down by 14.5%. During the first nine months of 2017, total foreign direct investment reached €1.29 billion, 6% down over the same period in 2016.

Total foreign direct investment during the third quarter of 2017 is mainly due to retained earnings, which accounted for 78.3% of investment during that quarter.

Businesses involved in financial activities, accommodation services and trade saw the highest level of retained earnings. Nevertheless, the level of retained earnings over the third quarter, as well as during the first two quarters of 2017 showed a decrease compared with the same periods in 2016.

A REDUCTION IN EARNINGS BY LENDERS This was a consequence of a fall-off earnings, which throughout 2017 were faced with a rise in the costs of adjusted values on corporate lending; it is important to note here the loans granted to companies

within the Agrokor Group. The write-off of these loans resulted in a fall in earnings, or in retained earnings by banks and also on the level of foreign direct investment into Croatia. Potential new write-offs in 2018 will depend on the results of negotiations with creditors. Nevertheless, should that be the case, the amounts writtenoff may be substantially lower compared with those of 2017, since most bad debts have already been written-off. Moreover, banks that participated in the refinancing of the Agrokor Group have obtained seniority status, (preference over other creditors), concerning a proportion of the longest overdue loans based on the Contract on the Longest Overdue Loans, as pointed out by RBA analysts.

The remaining €147 million, or equity investment, accounted for the remaining amount of foreign direct investment over the third quarter. The Croatian National Bank stated that the third quarter of 2017 has seen a notable increase in new equity investment into Croatia, compared with the same period of 2016. Most investment was implemented in sports, entertainment and recreational activities, as well as in the property sector and the manufacturing of the means of transportation.

PRESENTATION OF THE “BUSINESS CLIMATE BAROMETER 2018”, FROM

BUSINESS PEOPLE EX AS WELL AS REFORM The general situation across the Croatian economy in 2017 was assessed as “good” by entrepreneurs, and the perceived average grade showed a slight improvement from 2.67 to 2.77. Optimism in this business year has been sustained by the opinion that economic growth will exceed the results achieved last year, albeit slightly by Krešimir Sočković

The only solution to the issue of Croatia bottoming the ratings is the implementation of reforms.

Structural reforms, tailored to meet the requirements of entrepreneurs, intended to ensure their further growth, boost investment and eventually achieve high growth rates in the Croatian economy.

Luka Burilović, President of the CCE

B

usiness people anticipate growth, as well as reforms, as shown by the survey Business Climate Barometer 2018, conducted and published by Privredni vjesnik. During the presentation of the results conducted across 400 local companies, the Editor-in-Chief of the oldest Croatian business weekly, Darko Buković, pointed out that the general situation of the Croatian economy, from the perspective of entrepreneurs, is on average – ‘good’. “The average grade has shown a slight increase from last year - 2.67 to 2.77. Concerning business expectations in 2018, optimism in this business year has been sustained by the opinion that economic growth will slightly exceed the results achieved in 2017. Irrespective of their wishes, entrepreneurs are realistic and they do not expect 2018 will bring significant change concerning the reduction of labour costs. One of the problems generating most concerning is that almost 90% of business people believe the judiciary to be insufficiently effective and dependent”, emphasised Buković.

ness, over the last four years, Croatia has ranked as the least competitive country amongst EU member states in Central and Eastern Europe.

The only solution to the issue of Croatia bottoming the ratings is the implementation of reforms.

Structural reforms, tailored to meet the requirements of entrepreneurs, intended to ensure

GUIDANCE FOR ECONOMIC POLICYMAKERS

IT IS ALSO IMPORTANT TO POINT OUT RELATIVELY NEGATIVE EXPECTATIONS CONCERNING BUSINESS CONDITIONS, NOTED BURILOVIĆ

Commenting on the survey results, the President of the Croatian Chamber of Economy, Luka Burilović, pointed out that most entrepreneurs expect both total revenue and export revenue to increase, whilst a far higher number of entrepreneurs suggested that they anticipate positive developments concerning employment.

“Nevertheless, it is also important to point out relatively negative expectations concerning business conditions. As a consequence, this survey needs to be considered as guidance for economic policymakers and other institutions, for the implementation of necessary and speedy reforms. According to the survey conducted by the World Economic Forum on global competitive-

2 | PVinternational | March 2018 | No 278

Luka Burilović

further growth, boost investment and eventually achieve high growth rates in the Croatian economy”, concluded Burilović.

PRIVREDNI VJESNIK

XPECT GROWTH, IN MANY AREAS

March 2018 | No 278 | PVinternational | 3

“BUSINESS CLIMATE BAROMETER 2018”

DAMIR NOVOTNY, WINNER OF THE GORAZD NIKIĆ AWARD FOR BEST ECONOMIC ANALYST

Unless there are large-scale structural changes over a short period of time, we are heading for decades of stagnation The Gorazd Nikić award ceremony was held during the presentation of the survey results. It is an entrepreneur’s selection award for the best economic analyst in 2017. The shortlist of candidates were six locally well-known economic analysts - Željko Lovrinčević, Damir Novotny, Guste Santini, Zdeslav Šantić, Velimir Šonje and Mladen Vedriš. This year’s award winner was Damir Novotny who, during the presentation of the award, pointed out that he has been working for decades in a profession where identical statements are issued on a daily basis, yet there are not many actual changes. “The situation in Croatia reminds me of an endlessly repeating winter’s day, as in the film “Groundhog Day”. We wake up every day and make a new start. No significant structural changes have occurred thus far and we are currently faced with a

Entrepreneurs can rely on continuity in fiscal policy implemented by the government.

We have cut spending as much as we are able We are constantly faced with huge pressure exerted on us from all sides to increase consumption, yet we have been able to successfully withstand it.

Zdravko Marić, Minister of Finance

Damir Novotny and Marko Jurčić

situation in which our farmers cannot meet the demands of tourist consumption. The demand side of economics has not met our expectations. We provided financing through borrowing abroad and through savings.

This resulted in a reluctance towards selfemployment opportunities and entrepreneurship, and expectations for an increase in transfers”, pointed out Novotny. He ad-

The Minister of Finance, Zdravko Marić, expressed satisfaction that economic policy has become a matter addressed in argumentative public discussion. Moreover, it is currently being considered from a long-term perspective as well as the issue of public debt is being tackled. “Labour productivity in Croatia lags considerably behind competitor countries, and GDP growth is primarily due to capital. This is where key determinants and challenges need to be identified. The implemented tax reform has been comprehensive and integrated and I believe that we have adopted the correct approach, which has yielded the best possible results considering the circumstances. It is important to point out the positivity of the intention to start the process of reducing both the administrative burden in addition to tax reduction”, noted Marić, adding that 2018 will see identical circumstances as those in 2017. “Entrepreneurs can rely on continuity in fiscal policy implemented by the government. We have cut spending as much as we have been able. We are constantly faced with huge pressure exerted on us from all sides to increase consumption, yet we have been able to successfully withstand it. There is a huge difference between working with a deficit of €2.3 billion that you need to reduce through additional borrowing, and the current situation

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ded that 2% growth will not solve structural issues and that Croatia is certainly entering secular stagnation – the national economy has been recording growth below its potential, especially when compared with the Eastern European average of 7% to 8%. “We are currently entering a period of stagnation and anaemic growth of 2% or 2.5% and I am not optimistic concerning long-term growth. Against a backdrop of a situation in which the government and quasi-governmental sectors have been creating 55% of jobs, unless large-scale structural changes occur over a short period of time, we are heading for decades of stagnation”, warned Novotny. This year’s award winner expressed his pleasure at the reforms launched

by Minister of Finance Marić, expressing his hopes that we will continue following this path more vigorously in the future.

Davor Sabolić

WHEN ONE OPERATES IN THE RED, HIGHER SALARIES ARE NOT AN OPTION, CONCLUDED SABOLIĆ when the deficit is non-existent or there is even a slight surplus. A decrease in interest rates on debt reprogramming would not have been feasible, had we requested it with a 5.5% deficit and

ZDESLAV ŠANTIĆ, CHIEF ECONOMIST OF SPLITSKA BANKA

The measures implemented so far are insufficient

Zdravko Marić

the promise to reduce it within a short period”, pointed out Marić.

GROWTH EXPECTATIONS President of the Management Board of Uniline, Boris Žgomba, believes that new regulations are fundamental for tourism, as well as a tax base reduction for this activity. “Expectations for 2018 are positive. There are currently no clouds on the horizon, although that can change rapidly, as tourism is highly vulnerable to changes”, stated Žgomba, pointing out that tourism accounts for almost one fifth of the Croatian economy is not satisfactory. “2018 will also see a high demand during one period of the year. We cannot be satisfied with this state of affairs for two reasons. An unrealistic pricing policy is being created, yet I believe we will be provided assistance concerning this issue by neighbouring countries, and demand will eventually be homogeneous. What is important is to ensure the sustainable development of tourism. During the peak season our infrastructure, from water supply system, sewage system, car parks, roads and motorways, is being pushed to the limit. What I wish and what I am hoping for is, that tourism will show identical results as in 2017, as well as that we will see an increase in tourism consumption”, stressed Žgomba.

The Director of Čateks, Davor Sabolić, explained that Čateks is an atypical textile company and that for 2018 it is expecting 20%growth in revenue. “We are too large for Croatia and too small for the world. Our geostrategic position is our advantage and we exploit to the maximum. We operate in almost all EU member states and have managed to increase our percentage of exports to almost 80%. Irrespective of the fact that the textile industry has been seeing increasingly poor results, the business environment is adverse and every decision that is taking the direction towards the freeing-up of our business operations is welcome. Although our salaries are low when compared with others, they cannot be increased prior

Positive trends have been recorded since mid-2014. Unemployment is low. Irrespective of the fact that everything appears ‘perfect’, we are not satisfied. Croatia is faced with a labour shortage, which is evident in construction and tourism, as well as throughout many sectors. Measures implemented so far are insufficient. This is not just a matter of incentives and encouragement. The problem is high youth unemployment, which requires labour market reform, changes in education and addressing the issue of youth housing, which will provide new solutions to help young families. I expect the reforms to be implemented and that we will improve the Croatian bottom of the ratings in the European Union, primarily concerning the idea of a two-tier European model, noted Zdeslav Šantić, Chief Economist of Splitska banka.

GUSTE SANTINI, ECONOMIC ANALYST

Tourism as a monoculture Against a backdrop of a situation in which tourism is the main propellant in the Croatian economy, rather than making it a locomotive, we are transitioning towards a monoculture.

Focusing only on one branch of the economy has never yielded any good results. This has not succeeded even with oil or diamonds. Last year we made a breakthrough, yet this year will see pressures and imbalances in the tax system. Tax needs to be discussed as an instrument in investment, exports and social policy. Unfortunately, we will be delighted if we achieve identical results as last year. Still, I am not convinced we will, due to a high impact exerted by events outside Croatia. I hope we will not be watching the same drama as in 2008, or a situation in which someone sneezes and we end up catching a cold, emphasised the economic analyst, Guste Santini.

MLADEN VEDRIŠ, PROFESSOR AT THE FACULTY OF LAW IN ZAGREB

A more effective economy makes for a more effective state Life is what happens to you when you have planned something else. We can say whatever we wish, but still a question remains over what will actually happen. I wish the quality of public services reached the level required in an effective economy. Should Croatia be compared with her environment, it would appear as a desert. Concerning demographic policy, substantial improvement can be made and that can be done in different ways. If something starts happening, we will be able to saytothosewho continue repeatingthat life differs from plansthat somethings, even things that have been planned, can happen. What we need to be aware of is that a better, more effective economy is important for all of us and it results in a better state, emphasised Mladen Vedriš, Professor of the Zagreb-based Faculty of Law.

March 2018 | No 278 | PVinternational | 5

“BUSINESS CLIMATE BAROMETER 2018” 18” According to the analysis, entrepreneurs are realisticc Comprehensive research has been systematically conducted for years by the Research Centre of Privredni vjesnik on a sample of 1,900 companies, where responses have been provided by 443 businesses.

Compared with last year’s survey, when none of those questioned assessed the business year 2016 as “excellent”, one respondent assessed the business year 2017

to an improvement in competitiveness.

When one operates in the red, higher salaries are not an option. The same applies when the situation is the opposite, when one has created the conditions to operate positively, one needs to transfer that to employees”, said Sabolić. He added that this year Čateks will focus on systematisation, collective bargaining and the retention of youth, pointing out they are concerned about a potential labour shortage that is becoming increasingly evident. The Director of Rasco, Darko Paviša, in his assessment of this business year, emphasised his expectation of a continuation in slight growth. “We have

veraas “excellent”. Hence, the overall averad” ge grade for 2017 is 2.77, which is a “good” grade, showing upwards trends, since, in relation to the previous year, it saw 0.1% growth in absolute terms. According to the opinion expressed by 59% of those questioned, economic growth in 2018 will see a slight rise compared with 2017. This is an optimistic level, as 32.1% of respon-

Boris Žgomba

currently entered the phase in which we cannot exceed 20% growth overnight.

Meticulous planning is imperative. We

VELIMIR ŠONJE, ECONOMIC ANALYST

Budget balance is just the start point; public sector reform is imperative Croatia has experienced psychological relief from the crisis, and we can expect this year to be more or less satisfactory. This is not desirable from a long-term point of view, since Croatia ranks almost at the bottom of the rating list in the European Union concerning development; she has actually outperformed only Bulgaria. Consequently, short-term solutions are not an option. If we focus on medium-term solutions, there is a possibility that fiscal policy will make an impact in a country in which a substantial impact on budgets is exerted by policies that are inclined towards stifling the economy and aggravating its development.

A balanced budget is an achievement that we have not made since the day Croatia declared independence. Nevertheless, this is not sufficient to spur the economy to opt for a way out of the structural hole in which it currently finds itself. The performance of the incumbent government, same as that of the previous government, is not satisfactory concerning public sector reform, which in turn would result in structural reforms in labour and capital development, noted Velimir Šonje, Economic Analyst.

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dent ntts believe belil ev beli be eve e that tha th at economic growth will dents i unchanged h d over 2017 hi h iis also l remain 2017, which satisfactory. Concerning expectations regarding reforms in tax policies, or expectations regarding taxation and mandatory contributions, although entrepreneurs are advocating their reduction, they are actually neutral, since no change is expected in that area.

are currently working on the preparation of new investment and the expansion of production capacities”, noted Paviša.

In order to provide an example of good employer-employee relationship in the company, Paviša stressed the scholarship programme, internship and the retention of high quality workers. “Employee standards need to be focused on. This does not only include salaries, but also a high-quality work environment. Nevertheless, more than several years of hard work are required to achieve that and ensure a solid labour base. This can be achieved after at least 15 to 20 years of committed effort”, highlighted Paviša.

ŽELJKO LOVRINČEVIĆ, ECONOMIC ANALYST

An aircraft in which only one engine is operating at full power The Croatian economy performs similarly to a four-engine aircraft. One engine is operating at full power, one is operating normally and the other two are barely operating at all. Industry is our most contentious problem, due to a 1.9% growth rate recorded, which is significantly below that recorded across the region. Performance of the construction sector is catastrophic, since there is an over-supply of flats on the market and we are not capable of absorbing the resources available through EU funds for that sector. Trade is in good health, showing growth rates that exceed 5%, and tourism is advancing at full speed, at a rate that exceeds 12%. The finance sector is showing poor performance, recording only a slight increase in lending of 0.8%, whilst agriculture has shown a drop compared with the previous year. I believe the trends this year will continue moving in the same direction as 2017. Nevertheless, it is important to highlight the unfortunate existence of an immense period of time that has not been used for the development of other branches of the economy, whilst tourism is occupying all our time, noted Željko Lovrinčević, Economic Analyst.

CROATIA AND THE REGION CROATIA-SERBIA BUSINESS FORUM

CROATIA AND SERBIA HAVE ON-GOING MUTUAL ECONOMIC INTERESTS The common interest of our two countries is to explore new business opportunities and strengthen our relationship. Co-operation is vital for the creation of new jobs and better prospects for all citizens, pointed out Kolinda Grabar Kitarović by Krešimir Sočković

S

erbia is an important economic partner for Croatia, confirmed by the fact that over 200 Croatian companies are currently operating in Serbia, pointed out the President of the Croatian Chamber of Economy, Luka Burilović, during the recently-held Croatia-Serbia Business Forum. “Consequently, foreign direct investment has been implemented by Croatia into Serbia valued at over €749.3 million, due to which Serbia ranks as the fourth most important country for Croatian investment. The two countries have mutual on-going economic interests, irrespective of the burden of history”, emphasised Burilović.

The common interest of our two countries is to explore new business opportunities and strengthen the relationship, added Croatian President, Kolinda Grabar Kitarović. “I believe that Serbia will continue to be open to Croatian investment and will continue encouraging investment in both directions. Croatia welcomes all Serbian companies that are wishing to invest in Croatia, and I believe we can offer them a broad range of benefits, such as access to the EU market. Co-operation is imperative for the creation of new jobs and better prospects for all citizens”, stressed Kolinda Grabar Kitarović.

Moreover, she pointed out the requirements for reconstruction of railway infrastructure intended to assist in the economic strengthening of the two countries.

Marko Čadež, Aleksandar Vučić, Kolinda Grabar Kitarović and Luka Burilović

A MORE INTENSE FOCUS ON INFRASTRUCTURE PROJECTS Serbian President, Aleksandar Vučić, stated that Serbia has sent her top delegation of entrepreneurs to Croatia. “Economic co-operation has been constantly enlarging and over the last five years it has been the best since records began, up by 62%. This clearly shows the extent to which the two countries are mutually oriented, and I believe we have immense potential for future growth. It is important to highlight that Croatian investors who operate in Serbia can always resort to the Serbian institutions and I hope Serbian investors into Croatia can expect an

identical level of potentially available assistance. Infrastructure projects require a more intense focus, primarily rail connections, since they provide the prerequisites for economic co-operation with countries such as Greece, Romania and Bulgaria. Substantial financial assistance could be provided for similar projects through EU funds. Simultaneously, we need to focus on the abolition of administrative and customs barriers in order to facilitate exports. Croatian entrepreneurs are welcome in Serbia, primarily as we are planning a large number of infrastructure projects for which we lack the required capacities”, highlighted Vučić.

March 2018 | No 278 | PVinternational | 7

CROATIA AND THE REGION ECONOMIC CO-OPERATION BETWEEN CROATIA AND SERBIA

Messages with a double resonance The trade balance between Croatia and Serbia at the end of 2017 exceeded €1 billion; businesses have increasingly been establishing new connections by Ljiljana Lukić

THE POTENTIAL FOR MUTUAL ECONOMIC COOPERATION BETWEEN THE TWO COUNTRIES HAS TO DATE NOT BEEN SUFFICIENTLY EXPLOITED, ACCORDING TO MILETIĆ

N

otwithstanding the fact that bilateral trade exceeded €1 billion, economic relations between Serbia and Croatia attracts great public attention and the recent visit of Aleksandar Vučić to Zagreb was a case in point; More high-level meetings are a prerequisite. Business people in both countries agree on this aspect and already organise meetings independently of large state and economic delegations.

This was confirmed by a meeting in the Chamber of Commerce and Industry in Serbia held in November 2017. This meeting was intended for the presentation of economic and investment potential in Eastern Slavonia, Baranja and Western Srijem for investment

by Serbian businesses. It was organised by the Croatian Chamber of Economy and the Joint Council of Municipalities, which also organised the recent visit paid by Serbian business people to Croatia. It is important to note that these meetings have shown that business

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people are poorly informed of each other, and that face-to-face meetings are unparalleled, irrespective of all innovations provided by the information and communication sectors. The role played by the chambers of economy in face-to-face meetings is immense.

“The Chamber of Commerce and Industry of Serbia, as the largest economic institution in Serbia, supports such meetings mainly due to the fact that both countries have received good references for business, our co-operation has traditionally been successful, there is already ample investment potential and this has all been confirmed to date through significant investment implemented by Croatian companies in Serbia and an increasing presence of Serbian companies in Croatia”, noted the Advisor to the President of the Serbian Chamber of Commerce, Miroslav Miletić.

Miletić believes that meetings of business people are an exceptional opportunity both for joint arrangements and for boosting sales of

Miroslav Miletić

Serbian products in Croatia, on the one hand and on the other an opportunity to increase the presence of Croatian goods in Serbia. Nevertheless, according to him, the potential for mutual economic co-operation between the two coun-

A new, deeper relationship is required According to those familiar with current circumstances and those responsible for the development of co-operation between the two countries, a new, deeper relationship is required, as well as the eradication of prejudice in doing business. This is the principal reason why the value of Croatian investment into Serbia has reached around €750 million, whilst Serbian investment into Croatia is currently about 10 times

less. The number of Serbian companies that have decided to invest in Croatia is currently almost insignificant. There are few obstacles; no language barriers as we share the common heritage and have a similar legislative framework and consequently need to exploit common mutual potential.

Barriers are normally abolished by business people. In addition, even the potential political problems will be solved with greater

increased from €36.7 million to €74.4 million.

DIFFERENCES IN STATISTICAL DATA Zdravković stated that data published by the Bureaux of Statistics in the two countries show considerable differences and that, according to the Croatian Bureau of Statistics, the value of trade between the two countries exceeded €1 billion for the first ten months of 2017. During that period exports to Serbia were €550.5 million, and imports Miroslav Zdravković

tries has thus far not been well-enough exploited. Moreover, Miletić stressed that 2017 saw a significant increase in bilateral trade (15% up over 10 months) and a surplus achieved by Serbia. Nevertheless, in addition to exporting raw and production material, Serbia needs to increase exports of finished products to Croatia. A more comprehensive analysis of the recently published data on bilateral trade between Serbia and Croatia has been provided by the economist Miroslav Zdravković, on the Makroekonomija (Macroeconomics) website. He reached the conclusion that “trade relations between the two countries have been continuously improving, notwithstanding rhetoric from politicians”.

According to data provided by the Statistical Office of the Republic of Serbia, trade between the two countries exceeded €1 billion in 2017. Exports from Serbia to Croatia were up from €468.3 million in 2016 to €550.7 million in 2017, and imports from Croatia to Serbia increased from €431.6 million to €476 million. The surplus recorded by Serbia over one year

TRADE RELATIONS BETWEEN THE TWO COUNTRIES HAVE BEEN CONSTANTLY IMPROVING, NOTWITHSTANDING RHETORIC FROM POLITICIANS, STRESSED ZDRAVKOVIĆ from Serbia were €482.1 million: consequently, Croatia achieved a surplus of €68.4 million.

This discrepancy in official data provided by those involved “honestly and conscientiously reported shows that through transportation of goods across the border one can generate earnings in other ways”, according to Zdravković.

ease once the two countries have established more effective Božica Lapić e co n o m i c connections, noted Božica Lapić, Assistant Managing Director of the Agency for Investments and Competitiveness of Croatia.

He stated that clever traders need to carefully read the data presented in the tables on the most important bilaterally traded products, and identify opportunities for new and considerably higher earnings. Moreover, he stated that such products include “underpants, socks, ice cream and chocolate, to name a few, and are the most frequently produced items by foreign companies”.

The Chamber of Commerce and Industry of Serbia shows graphs identifying the most important items. Hence, Serbian exports to Croatia mainly (66%) comprise of different finished products, vegetable fats and oils, furniture and furniture parts, animal feed and electricity. On the other hand, Croatian exports to Serbia include mainly non-metallic mineral products, fertilisers, various food products, paper and cardboard, as well as cellulose products. More specifically, Croatia exports to Serbia diesel vehicles, cement, oil, detergents and accessory products and seat parts, amongst others. On the other hand, Serbia exports to Croatia unwrought copper, motor petroleum, various types of oil, sugar and electricity, to name a few. The item “other products” accounts for 10% to 15% of the total goods trade.

Traders who highly value earnings, attribute even more importance to coexistence. Serbian and Croatian traders have been enjoying such a time for over two decades and they are greatly angered by occasional thoughtless words from politicians. Furthermore, they dislike mutual trade restrictions that interfere with regular cash flow and revenue, emphasised Zdravković.

March 2018 | No 278 | PVinternational | 9

BASIC INDICES OF BUSINESS DEMOGRAPHY FOR 2016

A GROWING NUMBER OF NEW COMPANIES The number of active companies is growing in the majority of activities, but mainly in the real-estate sector as well as professional, scientific and technical by Ilijana Grgić

B

ased on preliminary data provided by the Croatian Bureau for Statistics, the total number of active companies stood at 163,146 and employed 1.087,432 people in 2016. The highest number of active companies was seen in trade (36,620), followed by professional, scientific and technical activities (24,170) and accommodation, food preparation and catering (19,913).

In the processing industry, the number of active companies was 19,475 with 263,759 employees, which is more than for the trade sector. The number of active companies is growing in the majority of economic activities, but mainly in

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the real-estate sector as well as professional, scientific and technical. On the other hand, there were fewer active companies in mining and excavation, the processing industry, retail and wholesale, automobile repairs as well as transport and storage. CBS data show stability in construction, healthcare and welfare without large oscillations in the number of active companies.

DECREASED MORTALITY OF COMPANIES The number of ‘new born’ companies grew in 2016, to a total of 14,392. This number was considerably higher in mining and excavation, especially the excavation of stone, sand and clay where the number of new companies grew to 15 in 2016, compared with 6 registered in 2015. The mining sector is followed by financial activities and insurance w i t h 138 new

Number of companies based on activity status, 2011-2016 20,000 15,000 10,000 5,000 0

2011

2012

Number of new companies

2013

2014

2015*

2016*

number of collapsed companies

* Temporary data. The final data for the number of active companies and new companies as well as the mortality of companies will be published on 6 July 2018 Source: CBS

Survival rate1) of companies created between 2011 and 2015 New 2015

New 2014

New 2013

New 2012

New 2011

84% 2)

77% 2)

92%

84%

89%

81%

1st year of survival

63% 2)

72%

76%

68%

2nd year

55%

3rd year

61% 2)

67%

4th year

48%

43%2)

5th year

1) The survival rate shows the number of companies with continuous activity after their creation expressed in percentage.

2) Temporary data. Final data to be published in the database on 6 July 2018.

Source: CBS

companies in 2016 compared with only 63 in 2015. In 2015, the real-estate sector registered 248 new companies, but this number doubled a year later to 525.

Administrative and support services activities registered considerable growth in the number of new companies (from 749 to 940). Compared with the year before, the number of new companies decreased in the processing industry, water supply, wastewater removal, waste management and environmental sanitation. Stability was seen in retail,

wholesale, accommodation services as well as food preparation and catering.

The five-year survival rate of companies from 2011 and still active in 2016 is 43%. Compared with 2014, the’ mortality’ of companies reduced in 2015.

Preliminary data also show that 12,544 companies went defunct in Croatia in 2015, compared with 15,573 the year before. The rate of company ‘death’ was the highest in healthcare and welfare – of 258 companies in 2014, 58 perished in 2015.

THE FIVE-YEAR SURVIVAL RATE OF COMPANIES FROM 2011 AND STILL ACTIVE IN 2016 IS 43%

INTERVIEW DANIJELA ČAVLOVIĆ, PRESIDENT OF THE FAMILY TOURISM COM

THE MOST IMPORTANT THING IS – TO BE A HOST Family accommodation with more than 90,000 registered facilities has an over 50% of the total tourist capacity in Croatia and, considering the generation shift and changing trends, far faster growth is anticipated here than in the hotel sector by Sanja Plješa

T

he tourists of today prefer to spend their holidays in small family hotels or private accommodation where they feel more at home. Family accommodation in Croatia is becoming more significant in the country; it is getting better r, and in addition to the accommodation itself, it also offers additional activities. What is new in this type of accommodation, we asked Danijela Čavlović, President of the Family Tourism Community within the Croatian Chamber of Economy (CCE).

350,000 people live from family accommodation services

2.5 5 billion

€

generated by family accommodation services within the total tourism turnover

over $US S million

15 5

estimated value of currently built capacity

Family tourism is becoming more important in Croatia...

Family accommodation represents the most important area of commercial accommodation across the total Croatian accommodation scene. A total of 350,000 people live directly or indirectly from this facility, and they own almost 600,000 beds. In addition to owners and their families, transporters, guides, caterers, laundries and food producers are also included, not to mention all those responsible for activating these accommodation facilities (builders, designers, textile producers, furniture producers, producers of bathroom and other equipment, programmers or photographers). The value of currently-built accommodation is estimated at $US15 billion. Last year this sector generated €2.5 billion in tourism.

This shows the importance of family accommodation for Croatians and the country, which receives over €40 million a year from flat rates and tourist tax.

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Who can work in family tourism? Are there any legal limitations?

First, we need to distinguish two categories: accommodation service providers as private individuals, and as legal persons. Based on the present Act on hospitality activities, a caterer provides the services of preparing and serving food, drinks, beverages and accommodation services. Hospitality activities can be performed by companies, co-operatives and craftsmen,

FAMILY ACCOMMODATION REPRESENTS THE MOST IMPORTANT TYPE OF COMMERCIAL ACCOMMODATION WITHIN THE OVERALL CROATIAN ACCOMMODATION OFFER whereas as physical persons are defined as renters. Certification for rendering accommodation services in a household can be obtained by anyone who proves ownership and the right to use the property with attached proof of the

MUNITY IN THE CCE

It is important we are the promoters of an original lifestyle

March 2018 | No 278 | PVinternational | 13

INTERVIEW

The host does not necessary have to be the owner. The host can also be a family member or the person lending the facility. It is important the host is friendly and professional and offers visitors an unforgettable experience depending on their interests

facility’s usability or that the procedure for its legalisation is in hand. Furthermore, the layout of the accommodation also has to be attached, and the facility has to meet the minimum of the technical criteria for this type of facility, for example: room, suite, vacation house or camp, facility category (stars) as well as the services it plans to offer (for example, breakfast). The procedure is more complex for companies since further conditions need to be met (energy certificate, fire protection requirements, noise protection, visitor insurance), and tourist tax needs to be paid for each night.

There is a resistance in Croatia to the development of family accommodation. Why is that?

Hotels are losing the battle against family accommodation. Their share was 21% in 2001 and 17% in 2016. Family accommodation, with over 90,000 registered facilities has over 50% of the total tourist capacity. Also, considering the generational shift and changing trends, much higher growth is anticipated in this area than for hotels. For example, over 40% of new small accommodation facilities are opened in Zagreb every year. This growing trend has been on-going for four years since demand is also growing. It is obvious these numbers do not match the interests of large capital according to which 100,000 beds should be installed in hotel resorts during the next few years with the explanation that we earn too little per visitor due to excessive capacity in camps and family accommodation. However, what is more important for the country: that a foreign visitor spends €10 more and brings higher income for the hotel owner and its management, or that this money goes to the locals who provided accommodation and local products for this visitor? The question is what would then happen to 20,000 households that offer accommodation and feed families, provide education for their children, help the aged with this income if we create another 100,000 beds in hotels? Will this help Croatia’s demographic renewal? An-

other problem is that we do not have sufficient workforce and the additional question is who would work in these resorts? We believe it is better to invest in constructing smaller family hotels with about 20 rooms and creating flexibility, compared with the bigger systems since their lower expenses make it much easier to open them partially during the post-season or during weekends, olive or grape harvests or even over the Christmas period.

We are faced with the problem of quality workforce in tourism. How is this problem solved in family accommodation?

Households solve this problem within the family. If they are registered as companies, they can also hire someone to take care of visitors, serve breakfast or clean. Hotels could copy the model of the 1980’s when Croatia counted much higher tourist numbers and workers were recruited from the local population, which has a centurylong tradition in tourism, especially along the coast. Hotel houses paid scholarships to future waiters, chefs, chambermaids, receptionists since they knew these young people grew up in a tourist environment with a culture of working with visitors. Hotel salaries were not high even then, and the difference was compensated for by sending the excess of visitors to parents’ or grandparents’ suites. Everything functioned in this synergy of hotels and family accommodation: there was ample workforce and the young remained living in their country from their work.

What does it mean to be a host in family accommodation?

The host does not necessary have to be the owner. The host can also be a family member or the person lending the facility. It is important the host is friendly and professional, and offers visitors an unforgettable experience depending on their interests. The figure of the host is something visitors take away with them, since other destinations also offer beautiful nature, interesting buildings and additional activities, but it is

We are definitely recognised on the European market Are we keeping up with international trends in family accommodation?

Last year’s award ceremony European Best Holiday Home, where 18 countries competed, certainly showed we are recognised on the European market. Croatia was selected the winner, taking four awards in eight categories.

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This proves that investing in quality and focusing on market niches certainly pays off. Our Family Tourism Community is included in creating European policies in this area of collaborative economy through the European Holiday Home Association which encompasses over 20 million beds.

people who make the difference. It is important to be promoters of an original lifestyle.

Is working in family accommodation perhaps an opportunity for young people to stay in Croatia? Could it reduce, or even prevent their migration?

Of course. Many people inherited property or are able to rent it and thus become more seriously engaged in tourism if they see it as an opportunity. The state should definitely encourage them since the state is showing that family accommodation is a priority for the development of tourism and Croatia’s demographic picture, and it is building a system in that direction supporting it with favourable financial means, decreased taxation and further regulations.

The re-categorisation of family accommodation has been announced. What are its positive and negative aspects?

The largest proportion of the capacity have two to three stars, and this means they require further investment into their quality. This is why the Ministry has long been announcing the recategorisation of facilities older than 1997. The state should support this with favourable loans through the CBRD, just as it does for hotels, camps and other types of accommodation organised through companies. Our Family Tourism Community also participated in drafting this first national programme for crediting family accommodation. Actually, the first document was drafted four years ago. Therefore, this has been the subject for quite some time now, but we still do not have a precise date for issuing the first loans. Re-categorisation makes sense if the state will help the owners of the facilities to raise the quality, and not only burden them with new conditions they cannot meet since they require considerable investment. They have invested quite considerable personal funds, since the value of registered capacities is estimated at €15 billion. Furthermore, hosts invest €120 million every year in maintenance, a minimum of €200 per bed. They invest another €130 million for additional services (pools, wellness equipment, cycle-tourism, childrens activities, landscape design, marketing).

In your opinion what is the future of family accommodation in Croatia?

Today, Croatia should focus more on quality rather than the quantity, since we have reached the number of 600,000 beds which now require efficient management. This means that anyone registered should understand visitors’ needs, home-county markets and target groups to customise the offer. It is usually a bit upside-down in Croatia. We first issue a construction permit and

TODAY, CROATIA SHOULD FOCUS MORE ON QUALITY RATHER THAN THE QUANTITY OF FAMILY ACCOMMODATION then think about what to do with the building.

This is why we see a lot of mediocre big suites with a dozen or more units whose visitors are not offered any level of local background or hospitality. This then becomes a scenario of renters rather than hosts who should be the foundation of Croatian tourism. Recent research conducted

by Booking.com has confirmed that our hospitality is one of the best in Europe. However, we must be aware of Spanish or Italian scenarios as their most visited destinations suffer a great deal as the consequence of mass tourism. Croatia has just reached the number of 100 million overnight stays, almost three years before this was planned by the Tourism Development Strategy 2020. On one side, this is an excellent result. On the other, this is also dangerous. We are a small country, but we already have one of the highest density levels of tourist turnover in the EU, and even three arrivals per capita so we should focus more on planning and management. Organised tourism management organisations, envisaged by the new act on tourist boards and the promotion of Croatian tourism, should introduce more order to the market, since it will include more local administrations which connect through tourist travels. Further destination branding is also required since this implies connecting through a mutual concept, focusing on targeted markets and increasing popularity. We should also be “ourselves”: cordial, authentic and diligent hosts happy to be able to live from their own work and enjoying their country’s benefits (food, climate, nature, diversity). We want to share these beauties with the visitors who come here for the experience.

We believe it is better to invest in constructing smaller family hotels with about 20 rooms with greater flexibility, compared with bigger systems since their lower expenses make it much easier to open them partially during the postseason or during weekends, olive or grape harvests or even during the Christmas period

March 2018 | No 278 | PVinternational | 15

THE FUTURE IS IN THE HANDS OF THE YOUNGER GENERATION ALBERT GAJŠAK, OWNER, CIRCUITMESS

Both educational and appealing MAKERbuino is a DIY video games console intended for higher grade elementary school children and secondary school pupils. The pack includes a disassembled console comprising of some 60 electronic components and instructions for assembly, from which one can personally build one’s own console piše Jozo Knez knez@privredni.hr

A

lbert Gajšak, has transformed his hobby into an entrepreneurial venture. He is involved in the manufacture and sale of an educational DIY games console. In other words, prior to start playing one of the video games available, you need to assemble the game console yourself. His company, CircuitMess is involved in the manufacture of innovative electronic devices. The company name is a combination of an electronic circuit, and creative disorder (mess) that is a consequence of a development process.

Privredni vjesnik talked with him about his type of mess.

What is the MAKERbuino video games console and for whom is it intended?

It is currently our first product. It is a DIY video games console intended for higher grade elementary school children and secondary school pupils. The pack includes a disassembled console comprising of some 60 electronic components.

Instructions for assembly are provided, enabling one to personally build one’s own console on which one can play and even do some programming if one has the required abilities. Hence, simple instructions need to be followed from which one learns everything about the individual components and how they function. The entire assembly process takes five to six hours.

How did it get its name?

It is a combination of three words - maker, Arduino and Gameboy. Arduino is

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grade of elementary school, I was always assembling something. I started ordering components online and assembling my first gadgets. Concerning MAKERbuino, I developed the preliminary prototype in 2014. Initially I did not believe it could be commercialised, yet after I had presented my game console at several innovation fairs and after having seen positive reactions, I decided to become more seriously involved in this business.

IT WOULD BE EXCELLENT IF STATE SCHOOLS COULD PURCHASE SUCH DEVICES, YET THEY ARE FACED WITH MORE SERIOUS PROBLEMS well-known software in the DIY community, on which our game console is based. Maker stands literally for the developer, whilst Gameboy is a cult game console dating back to the beginning of the 1990’s.

What was the idea behind the product and how did it develop?

I became involved in electronics, robotics and microcomputer systems at a very early age. When I was attending fifth

Did you launch it by yourself?

Tomislav Car, CEO of Infinum, a software consultancy, helped me by investing in the project and we founded the company together. After participating at the Maker Faire in Rome, which is the largest fair of this type in Europe, we attracted media attention. Soon after, in March 2017 we started a crowdfunding campaign on Kickstarter.

Why crowdfunding?

Platforms such as Kickstarter or Indiegogo are perfect for different devices, gadgets and products like MAKERbuino.

They bring together people who are prepared to invest their resources in order to support different innovative products.

It functions according to the principle that the users of these platforms receive a return in the form of the entire games console, should they invest an amount that corresponds to the full price. If they invest less than that amount, they receive an item of symbolic value or something linked with the product in question. I had not considered any other source of financing besides crowdfunding.

How successful was the campaign?

Our objective was to raise $10,000 and sell 180 game consoles; at the end of the campaign we raised over $100,000 and sold 1,800 consoles. We used the campaign for the purpose of a speciďŹ c type of market research, as it provided us with an insight into who is interested in purchasing our products, what age groups we are dealing with, their countries of origin and their reactions to the price, to name a few.

How many game consoles have you sold to date?

Our largest market is the US, followed by the United Kingdom and Germany.

We have sold around 5% of the consoles in the region, whilst the total number of sold game consoles has slightly exceeded 3,000. Demand is ever-increasing and we can hardly manage to meet all the orders. It is important to highlight that we have not yet started advertising.

Where do you manufacture your consoles and how many employees do you have?

We have until recently been located within ZTK Karlovac, but we are currently headquartered in new business premises. This is also located in Karlovac, which is where our manufacturing

premises are also located. Our business currently has three employees, but we also employ pupils and students on a temporary contract basis. As the demand for MAKERbuino grows, we will employ new staff.

You won the award at Idea Knockout, the largest technology idea competition and you also won a journey to Las Vegas to CES, the largest and most influential international event for consumer electronics, gadgets, technological innovation and startups. What happened at the Fair?

CES provided access to the international market for us. On the ďŹ rst day our exhibition stand was visited by the Amazon scouts. The great thing was that they were not only observing, but were interested in the distribution of MAKERbuino on the American, as well as the international market. We agreed with them on the preliminary steps required in order to actually start co-operating and I sincerely hope it will soon start.

Have you considered offering your product to schools and educational institutions?

Since we are currently not yet involved in marketing and promotion, we have not

currently offered it to anyone. Nevertheless, several private schools and educational centres have contacted us and purchased consoles. It would be excellent if state schools could purchase such devices, yet they are faced with more serious problems and I believe that the price of â‚Ź39 per console would not be acceptable for state-funded institutions.

I am planning to launch a more affordable version in the future, which may attract more interest.

What are your plans for 2018?

We are planning to launch a new product. I have had a large number of inquiries concerning a DIY mobile phone, which would operate on an identical principle to the console. Nevertheless, we are currently focused on MAKERbuino and the mobile phone issue will be addressed sometime in the future.

Our long-term objective is to increase exports to western markets, as well as to launch a DIY product range that will combine the DIY culture and the mainstream culture in an innovative way.

Moreover, our objective is to continue launching products that are simultaneously both educational and appreciated and intended for children, since they are our end users.

March 2018 | No 278 | PVinternational | 17

PV ANALYSIS LAW ON UNFAIR TRADE PRACTICES

NEW RULES FOR THE MARKET The goal of the Government and the Ministry of Agriculture is to protect producers against unfair practices of traders and purchasers, or organise the market and sanction unfair trade practices in the food supply chain, Tolušić highlights by Jozo Vrdoljak

T I am convinced we are a fair partner and excellent distribution chain to various suppliers and I hope these new legal solutions will not have a negative impact on business results, and that products on the shelves will not increase in price.

Igor Milas, CEO of Ribola

he Law on unfair trade practice entered into force on 7 December 2017 and intensive preparations of new contracts are currently progressing.

The Law obliges purchasers and traders to harmonise their contracts in compliance with the new rules, by 31 March 2018. After this date the Croatian Competition Agency (AZTN), authorised by legislation for the supervision and issuing of sanctions, can begin inspecting the market and penalise those not acting in accordance with this law.

RESISTANCE AND SUPPORT However, there was a great deal of resistance against this act. The Ministry of Agriculture admitted during public discussion on this legal text that some businesses fiercely advocated the adoption of a codex rather than a law, and when the document underwent the procedure, they tried to dispute certain provisions.

However, Parliament gave its almost full support to the law, both the ruling coalition and opposition. As a reminder, Slovenia adopted the codex in 2011, but at an agricultural show in Radgona they announced they intended to draft a law since the codex did not yield the expected results.

Members of Parliament voted for even stricter sanctions for purchasers and traders compared with the original proposals. This shows they recognised the problem and its negative impact on the market. They increased the maximum penalty from €0.5 million to €0.7 million and the payment deadline, initially 60 days, is now divided into two parts (30 days for fresh products and 60 days for other products). In cases of serious violations of the law, such as selling products below the purchase price, legal persons will pay €0.7 million and private individuals €0.5 million in penalties.

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Tomislav Tolušić, minister of agriculture

The prescribed penalty for other types of violation is €0.36 million for legal persons and €0.2 million for private individuals.

The goal of the Government and the Ministry of Agriculture is to protect producers against unfair practices by traders and purchasers, or organise the market and sanction unfair trade practices within the food supply

THE LAW IDENTIFIES A LIST NOTING 25 UNFAIR PRACTICES chain. “I believe the Law will contribute to new practices and rules, and ultimately, fairer trade and partnerships of all participants in this process. Over 20 EU member countries organised their market relations in agricultural and food products according to different models. Croatia followed the model of those who opted for the law with a detailed description of illegal unfair trade practices and a fining system, which

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PV ANALYSIS

Great progress has been made in establishing fair relations between traders and suppliers or producers. The most important thing now is to monitor the implementation of this Law.

speeds up the procedure and make it more efficient”, Agricultural Minister Tomislav Tolušić highlights. The Law on unfair trade practices would first need to organise market relations and contribute to creating better partnership relations, not jeopardising anyone’s business or progress.

It is the legislator’s intention to set up fair market relations, protect local producers against unfair treatment from traders and purchasers, that is, to organise the market and sanction unfair trade practices in the food supply chain which exploit a considerable market force of purchasers or processors and traders in relation with their supplies, in compliance with the practice which has been implemented by the majority of EU members for many years.

Last year, the European Commission reported it was considering adopting a single document which would have to be implemented by each member country.

NO MORE CONDITIONS

Davor Karninčić, Board Member of Trenton

The Law sets a list noting 25 unfair practices.

They are mainly monetary or other types of compensation the trader or purchaser charges producers or suppliers, in order to buy their products or put them on the shelves of their stores. However, since this Law entered into force, compensation cannot be conditioned any more, and this also refers to charging compensation for investing in new stores or market research or product theft or some other compensation which had been charged previously.

UNFAIR TRADE PRACTICES NEGATIVELY AFFECT FAMILY FARMS AS WELL AS SME’S IN THE FOOD SUPPLY CHAIN

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT OF THE EUROPEAN PARLIAMENT

There should be only one law which should apply to all EU members In June 2017 the Committee for Agriculture and Rural Development of the European Parliament discussed improvements to the functioning of the food supply chain and the status of farmers. The Slovakian Agricultural Minister, Gabriela Matečna, used this opportunity to remind everyone that the EC initiative for short supply chains promised to eliminate unfair trade practices. She believes there should be only one law which should apply to all EU members. The Czech Minister of Agriculture, Marijan Jurečka, highli-

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ghted this practice causes imbalances in the agricultural chain and compares this problem to the joint approach towards solving the issue of roaming.

Dejan Židan from Slovenia said the maximum payment deadline in agriculture should be 35 days. It this is not followed stricter penalties should be introduced. Farmers are joining forces internationally, but they are still not as powerful as the trade chains, and they are forced to accept conditions imposed upon them. Unfair trade practice has to be defined – what is forbidden

and what are the penalties, Židan said.

Based on information given to Croatian members of the European Parliament by the European Parliamentary Research Service, all members of the EU, except for Denmark and Sweden have laws regulating the area of unfair trade practices.

Unfair trade practices negatively affect family farms as well as SME’s in the food supply chain. They can actually impact their survival on the market as well as insufficient financial investment into products and technology, which consequently impedes their progress.

In addition, there are potential indirect effects along the supply chain, that is, SME’s which could become reluctant to set up a business relationship to avoid the risk of unfair trade practices imposed on them. Although the total impact of unfair practices on the market is difficult to assess quantitatively, the negative effect these practices have on participants is indisputable.

Board President of Ribola Igor Milas, thinks this Law will have a great impact on Ribola’s business activities, mainly a detailed analysis of past contracts and the formation of new ones, and also a detailed analysis of the current purchase price per item and their potential change as well as other preparations and implementation activities required to be taken to ensure the new provisions may be followed.

“We a part of the Ultra gros group, and as such invest joint efforts together with lawyers and suppliers in order to establish an adequate form of contract rights and obligations. Talks with the suppliers did not make any substantial progress, but I can confirm that all the partners we have spoken to so far showed they do not want this Law to jeopardise business activities of the parties involved. I am convinced we are a fair partner and an excellent distri-

bution chain to various suppliers and I hope these new legal solutions will not have a negative impact on business results, and the prices of products on the shelves will not increase.

IT IS THE LEGISLATOR’S INTENTION TO SET UP FAIR MARKET RELATIONS, PROTECT LOCAL PRODUCERS AGAINST UNFAIR TREATMENT OF TRADERS AND PURCHASERS Naturally, we do understand the state’s efforts to protect small producers and give additional support to achieve higher growth and increase employment, and consequently become more cost-effective for the state budget in the sense of tax income, Milas explains.

Traders will become true traders and will monitor which goods are sold and which are not, compared with what they did before – merely sold places on shelves.

Ivan Šarić, owner of Nichi

PRODUCERS DEMAND SUPERVISION Davor Karninčić, board member of Trenton said his company had already inserted the pro-

CROATIAN CHAMBER OF ECONOMY

Workshops in six cities In co-operation with the Ministry of Agriculture and the Croatian Competition Agency, responsible for implementing this Law, the CCE will organise workshops together with the Croatian Employers’ Agency, the Croatian Chamber of Crafts and the Croatian Chamber of Agriculture, on the application of the Law on unfair trade practices. The CCE plans to organise these workshops in six locations and all those interested are free to send their questions prior to the start of the workshops so presenters can prepare answers. The goal of the workshops is to inform bu-

Božica Marković

siness in time about the provisions of this Law and to help them solve

possible dilemmas they might have on the implementation of this Law. “We think this is necessary since the Law for the first time in Croatia organises relations between traders, suppliers and producers, and its adoption is very important for business due to the changes which will occur. Considering traders, purchasers and processors have to harmonise their old contracts to the new ones by 31 March 2018, the workshops will take place before this date”, Director of the Sector for Agriculture, Food Industry and Forestry with the CCE Božica Marković explains.

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PV ANALYSIS visions of the Law on unfair trade practices with some suppliers and they expect to do the same with the remainder by the scheduled deadline. In any event, Karninčić is actually convinced great progress had been made in terms of establishing fair relations between traders and suppliers, that is, producers.

The most important thing to be done during the forthcoming period is to certainly supervise the implementation of this law, and this means that potential irregularities will have to be corrected. The producer should have some kind of a service within the Ministry to whom it could refer to in case of any dilemma or possible anomaly requiring correction. This has to be done fast and efficiently. A service for providing information and monitoring the implementation of this Law needs to be established, Karninčić says.

President of the Croatian Fruit Growers’ Association Frane Ivković, welcomes the adoption of the new Law and sees it as a step forward. “We participated in its drafting, but it remains to be seen how it will act in practise. I often compare this sort of things to an oak wine barrel. It is made of good material, but it will reveal its leaks only when we fill it up. The same applies to this law”, Ivković says.

The Law on unfair trade practice has long been awaited by producers and will definitely simplify their business activities, says Ivan Šarić owner of the Nichi company. This Law will bring a lot of good to companies. Nichi has not had that many product returns, but this Law will certainly improve our position on the shelves. Traders will become real traders and will monitor which goods are sold and which are not, compared with what they did before – sold places on the shelves, Šarić highlights.

REASONS BEHIND THE LAW The European Commission has been dealing with unfair trade practices in the food supply chain since the financial crisis of 2008. The research conducted at the EU level shows that 83% of participants had been exposed to unfair trade practices which consequently increased their expenses; 77% said their income had decreased. The supply of food and drinks for personal use and households depends on the food supply chain. In the food supply chain, the buyer is the ultimate end-point. However, producers, purchasers, processors and traders 22 | PVinternational | March 2018 | No 278

PURCHASERS AND TRADERS MUST CONCLUDE THEIR CONTRACTS IN COMPLIANCE WITH THE NEW RULES BY 31 MARCH 2018 also participate in this chain, as well as other participants connected to the chain through service activities. Based on its structure the chain in Croatia is similar to those in other EU countries. Considering the Croatian market gradually integrated with the start of the Stabilisation and Accession Agreement, and became part of the single European market, the trends of the business structure from the European market affected the formation of the food supply’s chain structure in Croatia, especially in trade.

STRUCTURAL CHANGES IN THE SUPPLY CHAIN In the EC Communication delivered to the European Parliament, Council, European Economic and Social Committee and the Regional Committee for solving problems of unfair trade practices between companies in the food supply chain, it is highlighted that during the past few decades activities such as concentrations and vertical integrations amongst EU market players brought about structural changes in the food supply chain. These movements caused quite different levels of negotiating power and economic imbalance in individual trade relations amongst co-partners in the chain. Even though differences in negotiating power

are normal and legitimate in business relations, their misuse can sometimes lead to unfair trade practices. These practices can generally be defined as practices with major deviations from good business practice which oppose good faith and fair trade and often simply imposed by one trading partner on another, according to the EC. These processes and events are present in every sector of the Croatian and European economy, and they caused significant changes in the food supply chain. The structure of the chain in Croatia, which is similar to the EU, consists on a very fragmented and weak production structure, in terms of economy and market, compared with the other end of the chain presented by market concentration on the level of the first purchaser or producer as the central part of the chain. High market concentration and power is found within supermarkets as the dominant retail channel in Croatia. It is precisely the differences in negotiating power which cause the phenomenon, which had been noticed on the European level and in Croatia – which is the fear factor of suppliers. They are afraid that lawsuits could make them lose their status in the eyes of traders dominating the retail market in food.

TRANSPORT INFRASTRUCTURE

€86 MILLION FOR 212 PROJECTS Due to investment projects in rural areas, over 200 local administrations will have better roads and street lighting by Krešimir Sočković

C

ommissioners and mayors of 212 local administrations signed contracts according to which €86 million will be invested through the Rural Development Programme of Croatia for constructing and repairing local roads, sidewalks, drainage, street lighting and traffic signalling. This is a 7.2.2 Measure - investing in the construction of unclassified roads. The funds will be distributed to 20 counties and they will be used for building new roads and repairing old unclassified roads in areas with a maximum of 5,000 people. The intensity of the public subsidy per project is up to 100% of total acceptable costs. Representatives of local administrations signed the contracts with the Director of the Paying Agency for Agriculture, Fisheries and Rural Development, Matilda Copić.

Due to the high level of user interest and the large number of quality projects received, it was decided that the available funds would be higher for the applications submitted for the first tender. That would mean that the available subsidies increased from €23 million to €86 million, offering financing possibilities to many high-quality projects. The local administrations, the end users, will improve their infrastructure through this measure which will be significant for the development of smaller rural areas.

PROMOTING RURAL LIFE Funds from the Rural Development Fund are not only intended for farms, plants or agricultural equipment, but also for improving living conditions in rural areas, Agricultural Minister, Tomislav Tolušić highlighted. Promoting infrastructure means promoting the living conditions in rural areas, better connections and safe passage to the fields. I congratulate the local administrations for well-prepared projects and I wish their fast and efficient implementation, Tolušić pointed out.

The Ministry of Agriculture is implementing the Rural Development Project based on

€2.4 BILLION FOR THE RURAL DEVELOPMENT PROGRAMME 2020 which they will disperse €2.4 billion through 19 measures until 2020. Although the majority of the measures of the Rural Development Programme are exclusively directed towards agricultural investment, some relate to improvements in the rural infrastructure, such as Measure 7 Fundamental Services and Renovation of Villages in Rural Areas. The implementation of this measure also includes calls for a further two tenders – Operation 7.2.1 Investing in the construction of public systems for water supply, drainage and wastewater treatment as well as Operation 7.4.1 Investing in activation, promotion and expansion of local fundamental services for the rural population, including free time and cultural activities as well as infrastructure connection (nurseries and joint projects of fire departments).

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CURRENT ISSUES VUKOVAR ENVISION IS STRIVING TO BUILD A SHIPYARD

Can Croatian river inland waterway potential be exploited?

A new company is working to use Dutch experiences in shipbuilding on the Danube or Drava, but is currently unable to find adequate facilities on the river and has a labour shortage problem by Svetozar Sarkanjac the idea of building a shipyard on the river bank on the Croatian Danube has surfaced several times. This idea was supported by data stating that all large-scale overhaul work on river cruise vessels should be performed by the nearest Serbian shipyard on the Danube,

VUKOVAR ENVISION MAY BE INVOLVED IN THE MANUFACTURE OF ALL TYPES OF METAL CONSTRUCTION, INCLUDING METAL FENCING AND DOORS

R

egrettably, over the last 25 years, the potential of Croatian rivers, as well as inland waterways, ports and vessels has been merely empty words on the unexploited potential. Whilst Western Europe, primarily Germany, France, Belgium and Holland, have been significantly exploiting and generating profits through activities linked to rivers and canals, Croatia has not yet achieved the capacity that existed in 1990. Moreover, a serious strategic and long-term vision of this method of transport is currently non-existent, which is a matter of great concern.

Nevertheless, over the last several years,

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in Apatin and Novi Sad. On the other hand, there is only one riverbank shipyard in Croatia – Brodocentar in Sisak. It employs some 20 people and performs overhauls on vessels up to 80 meters in length and up to 400 tonnes in weight. In addition to several other issues, this shipyard, has considerable constraints, as large vessels cannot reach it, being located on the shallow river Sava.

A DEMANDING AND EXPENSIVE PROJECT Nevertheless, the building of a shipyard and, more importantly, the future business operations of a shipyard, is an extremely demanding and expensive project. A capital intensive industrial facility, such as shipyard, requires a complex and well-studied approach that involves a large number of experts. Further-

ON THE DANUBE OR DRAVA

A shortage of welders, locksmiths and grinders In addition to adequate premises, a further problem is the shortage of skilled labour. They currently employ some 10 staff, but need at least as man again.

It is important to note the shortage of welders, as well as of professional staff involved in MIG technology. Moreover, they need locksmiths, grinders and shipfitters. Employees will be paid a generous salary and accommodation or organised transport to and from work, as well as paid professional training in Holland.

“The shortage of skilled labour does not come as a surprise to us. A much more unpleasant surprise is the fact that people refuse to attend training for specific occupations. Moreover, once you have found a locksmith, he refuses to attend additional training. That is truly disappointing”, noted Alenka Šegrt, adding that they are determined to use their own efforts to tackle current constraints, since they are crucial for the pace of future development.

more, a shipbuilding system requires the skilful synergy within an overall economy, as well as the financial, transport and certainly the educational system. Against a backdrop of market competitiveness, it is important to note that along the Danube, from Slovakia to Romania and Ukraine, there are 13 different shipyards currently operating.

In 2006, a preliminary design for the Vukovar Shipyard was presented in Vukovar. The plan was to construct a shipyard on premises covering some 40,000 m2 owned by Borovo, on the Danube. According to the calculations made at that time, the first phase of the project would require an investment of around €36 million, plus an additional €13.5 million for the accompanying infrastructure within the pier system.

Several years ago, news appeared in the media of one of the previous senior managers in Borovo being enamoured of the idea that Borovo could become involved in shipbuilding.

Nevertheless, it remained merely an idea.

NO ADEQUATE FACILITIES ON THE DANUBE OR DRAVA Nevertheless, the situation changed in 2015, when Igor Rosandić, an entrepreneur from Holland, (of Croatian origin), founded the Vukovar-based Vukovar Envision, aiming to become involved in shipbuilding, as well as in the manufacture of large steel constructions intended for a variety of purposes. The company is currently headquartered in the Business Innovation Centre BIC-Vukovar and, since this is a facility whose dimensions are considered inadequate for a shipyard, it is aiming to rent larger premises located in the immediate vicinity of the river.

According to Alenka Šegrt, Director of Vukovar Envision, the company is looking for premises with a minimum height of 7 meters, with an area of at least 1,000 m2. It must be

located by the river. “Unfortunately, we have not been able to find such facilities to date, and certainly not on the river. We have looked in Vukovar and Osijek, but have been unsuccessful. Unless we provide the facilities with at least those dimensions, we cannot become involved in shipbuilding. Hence, we have decided to do other work to start; in intermediate stages of vessel manufacture. We are currently expecting delivery of some new machinery, such as a CNC plasma cutter. It will enable us to become involved in work on the cutting and manufacture of vessel parts and assembly of minor elements during sub-assembly, which will subsequently be transported to the location where the complete vessel will finally be assembled”, explained Alenka Šegrt.

Against the backdrop of the currently limited potential of the Vukovar-based location, Vukovar Envision may be involved in the manufacture of all types of metal construction, including metal fencing, doors, and all types of metal elements intended for a variety of purposes.

Nevertheless, all long-term plans are linked with finding adequate facilities and location on the river in order to become involved in shipbuilding. Once this has been achieved, it is aiming to focus on comprehensive vessel equipment depending on the purpose, as well as on vessel maintenance and repair.

Members of the company are not concerned about the market, due to their previously acquired excellent business experiences in Holland and excellent the first class business references they can provide. Moreover, concerning the river vessels niche, including all types of vessel, European shipyards are still at a substantial advantage compared with competitors from the Far East.

The company is currently involved in the manufacturing of components, or sections for work boats for reputable customers.

Unless we provide the facilities of at least those dimensions on the river, we cannot become involved in shipbuilding.

Thus, we have decided to do other work as a start, in intermediate stages of vessel manufacturing.

Alenka Šegrt, Director of Vukovar Envision

March 2018 | No 278 | PVinternational | 25

RSVP FESTIVAL 2018

ARTIFICIAL INTELLIGENCE IN THE WORLD OF EVENTS Nikola Tesla - Mind from the Future interactive exhibition was voted the top event of 2017. It is open until 20 March, after which it is going on a world tour by Jozo Knez Cesarec, Slavica Olujić Klapčić and Igor Vukasović concluded that quality clientagency relation is based on trust, respect, transparency, openness, good communication, planning and evaluation. On the second day of the festival participants were able to attend 17 lectures on trends in industry and technologies used in events, as well as hear about the examples of successfully executed events.

Alen Nađsombat, Marketing Manager with NK Osijek, football club told how

T

he RSVP Festival, the only regional show dedicated to the event industry, was held on 22 and 23 February in the Plaza Event Centre in Zagreb, gathering many event managers and regional experts in this industry. Visitors were able to listen to a series of lectures, workshops and panels as well as find out new aspects in the world of industry. They were also introduced to some technologies of the future, such as Artificial Intelligence which is slowly entering every aspect of both private and business life. Keynote presenters, Caspar Mason from the Jack Morton brand agency and Bo Krüger from the Moving Minds creative agency, held interesting lectures on the first day. Caspar Mason talked about Artificial Intelligence, pointing out that its use has already started to transform the world of events.

In the near future, it will become inevitable in the event industry and other 26 | PVinternational | March 2018 | No 278

areas of life. He also mentioned the example of chatbots, popular but still not perfected, although they are on the right path. Bo Krüger held a workshop Meeting Design Game - a New Innovative Planning Tool, where he presented an innovative card game and a potentially good tool for planning and holding events and conferences.

EVENT AGENCIES AND CLIENTS SHOULD CONSIDER HIRING AN INFLUENCER, MAŠA ZIBAR SAYS

QUALITY CLIENT-AGENCY RELATION REQUIRED Klara Šimunović and Katarina Podobnik talked about art interventions in business within the conjunction of the Art Interventions in Business panel. Youtuber, Maša Zibar, discussed why event agencies and clients should reconsider hiring an influencer, and Jovan Marjanović Vanja presented the Street Musician Festival held every year in Novi Sad. At the panel programme Let Them Really Do the Work for You – How to Get More from Event Agency Mirjana Badurina Čanak, Illeana

the club brought its supporters back to the stadium. Dijana Zorić from Laboratorij zabave spoke about how to attract and retain a client. Iva Radošević, Matija Brlek and Matej Pašalić presented their project Bike Polo International Tournament Zagreb - Između sporta i kulture (Between Sport and Culture).

The festival ended with the ATTEND award ceremony covering eight categories. The Nikola Tesla - Mind from the Future interactive exhibition was voted top event of 2017, and is open until 20 March in Zagreb. The project also won the award for the best cultural event in 2017.