Pvi0282

BUSINESS PARTNER 2018 AWARDS → Privredni vjesnik - regional media leader PAGES 2-3

SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY

www.privredni.hr

INTERVIEW → Andreja Pavlović, President, Corporate Social Responsibility Association at the CCE PAGES 4-7

TOPIC OF THE WEEK: FINANCIAL AGENCY REPORT → Nett profit last year €2.9 billion PAGES 10-13

PVinternational C R O A T I A N

B U S I N E S S

&

F I N A N C E

M O N T H L Y

July 2018, Year XI, No 282

CROATIAN BUREAU OF STATISTICS

GDP up 2.5% on an annualised basis The positive contribution of final consumption to GDP growth reached 3.6%, non-profit institutions serving households final consumption expenditure contributing 4.3% and the state 2.8% by Ilijana Grgić

D

uring the first quarter of 2018 the Croatian economy saw 2.5% annual growth rate, an acceleration compared with the previous quarter, according to preliminary GDP growth estimates recently published by the Croatian Bureau of Statistics, which has also revised its original release data. During Q4 of 2017, GDP growth was revised from 2% to 2.2%, recording the 15th consecutive quarter of growth.

According to seasonally adjusted data, during Q1, GDP increased by 0.2% over the previous quarter, whereas compared with the first quarter of 2017, it was up by 1.5%. Seasonally adjusted GDP growth of 0.2% was below the EU average of 0.4% over the previous quarter, but rising 2.4% year-on-year.

CONSUMPTION A POSITIVE CONTRIBUTION TO GROWTH The increase in household final consumption expenditure saw the highest positive contribution to GDP growth, at 3.9%.

Consequently, the positive contribution

of final consumption to GDP growth reached 3.6%, as opposed to non-profit institutions serving households final consumption expenditure contributing 4.3% and the state 2.8%. Gross fixed capital formation was up 3.6%. Moreover, domestic demand contributed positively, as opposed to foreign demand, which turned negative. Exports of goods and services decreased by 0.5%, with exports of goods dropping by 1.5%, although the export of services showed a slight increase of 2.1%.

On the other hand, imports of goods and

services contributed to growth by 5.5%, with imports of goods contributing 4.5% and services 11.2%.

During Q1 of 2018, gross value added was 1.9% up in real terms compared with the same quarter of the previous year. It is important to note that the greatest contribution to GVA growth was that made by trade, transport and warehousing, accommodation, food preparation and serving which reached 4.1%, followed by information and communication with 4.8%.

CURRENT ISSUES BUSINESS PARTNER 2018 AWARDS

PRIVREDNI VJESNIK - regional media leader Recognition awards intended to promote excellence, business ethics and social responsibility in all aspects of business were given to Podravka, Edward Bernays University College of Communication Management and the Ulysses Theatre by Ljiljana Lukić ics, support provided to local community and responsibility for a wider social interest.

PARTNERS CRUCIAL

B

usiness Partner 2018 awards, organised by Mass Media International have recently been presented for the 24th consecutive year, to representatives of 40 companies and institutions in the Crown Plaza Hotel, Belgrade. Most award-winning companies were Serbian, whilst the holders of four awards, the largest number in the region, were Croatian: Privredni vjesnik, Podravka, Edward Bernays University College of Communication Management and Ulysses Theatre.

During the press conference prior to the presentation of the awards, the President of the Awards Committee, Professor Ilija Ćosić of the Novi Sad-based Faculty

PODRAVKA IS BOTH A BRAND, A PROJECT AND A TRADITION AND THAT IS INVALUABLE, STRESSED PRTORIĆ 2 | PVinternational | July 2018 | No 282

of Technical Sciences, highlighted that the specific feature o f the award is that companies from across the region select the best business partners and evaluate the performance of their colleagues.

“Over 3,000 respondents participated in our survey, after which we selected some 1,000, subsequently reducing the number to 300 and eventually down to 40 laureates”, noted Ćosić. According to him, award criteria included professionalism, good regional co-operation, quality of products and services, extraordinary results in the field of innovation, creativity and sustainable development, customer satisfaction levels, results achieved over the last five years, market and marketing approach, business eth-

Whilst addressing attendees, the event organiser and Director of Mass Media International, Milivoje Radovanović, noted that the Business Partner Award is traditionally awarded under the slogan Partner is Crucial both in Business and Private Life.

Radovanović emphasised that the award is granted primarily for excellence, business ethics and responsibility in all aspects of business and that a regional Business Partner Award is intended for all businesses operating in the region irrespective of the activity performed, size or ownership type. This provides equality of opportunity and competition between SME’s and large companies”, he emphasised.

Regional Business Partner 2018 award winners were Austrian Gebrüder Weiss, Croatian Podravka, Montenegrin AD Montenegro, GS-Machine Factory Travnik from Bosnia and Herzegovina, Macedonian Kanet Agro, Bema Footwear Factory from the Republic of Srpska, Slovenian Toneli and Hungarian Egrokorr Festékipari.

Ivan Prtorić, Director of Podravka Serbia, in his speech on receiving the award, stated that consumers deserve the highest level of gratitude, since it is mainly due to them that Podravka has become a strong regional compa-

DARKO BUKOVIĆ, DIRECTOR AND EDITOR-IN-CHIEF OF PRIVREDNI VJESNIK

Business journalism requires more media space Regional Media Business Partner 2018 awards were awarded to media companies that “have provided extraordinary support to business entities operating in the region” and the award winners were the Zagreb-based Privredni vjesnik, as well as RTV Pink, NID Kompanija Novosti and Kopernikus Cable Network-TV K:CN. Director and Editor-in-Chief of Privredni vjesnik, Darko Buković, invited business people and companies to invest in media who wish to hear positive business success stories. “Privredni vjesnik, which has recently marked its 65th anniversary, clearly shows the importance of conveying the message that work is crucial. We need to realise that business journalism is extremely important and profitable and requires more media space. Furthermore, good news needs to be given precedence over the bad”, emphasised Buković.

ny with multinational features. “Podravka is both a brand, a project and a tradition and that is invaluable. This market is extremely important for us, since Podravka is an international company that is currently present in around 60 markets and the Adria Region is considered its headquarters. That is the greatest strength of Podravka, since we consider it a domestic market. Hence, we are working to make a major breakthrough in the near future.

We are currently involved in distribution in this region and it is uncertain whether this will change. We need to focus on organic growth and be more aggressive.

Subsequently, many new products will be launched”, pointed out Prtorić.

SIGNIFICANT RECOGNITION The Zagreb-based Edward Bernays University College of Communication Management was awarded an EDU Business Partner 2018 Recognition Award for its contribution to education and the promotion of managerial knowledge and skills.

“We are the newest private faculty in Croatia, since our fifth anniversary falls this year. We specialise in communications, communications management and tourism management. We have completed one development cycle in Croatia and are delighted that our work has been recognised regionally, since the education sector is extremely specific. It is not classical entrepreneurship, although it contains some of its features, as it is a publicly regulated activity that requires a high level of quality. Hence, we highly value any recognition. We are currently focused on Croatia, but are also highly active in the EU, as well as in Bosnia and Herzegovina and Serbia through our international student exchange programmes. A significant breakthrough in the regional market is about to happen and this award will provide a sound incentive”, stated Dean Damir Jugo, Ph.D. A Business Partner Special Award was awarded for the first time. It was given for

A SIGNIFICANT BREAKTHROUGH IN THE REGIONAL MARKET IS ABOUT TO HAPPEN, AND THIS AWARD WILL PROVIDE A SOUND INCENTIVE, NOTED JUGO

the extraordinary contribution to culture and artistic creativity to the Croatian Ulysses Theatre.

“We are delighted that the work of our theatre has been recognised, since it is certainly an artistic gem in this part of

THE WORK OF ULYSSES THEATRE MAKES A SIGNIFICANT IMPACT IN THIS REGION, POINTED OUT LJUŠTINA Europe. It was founded 18 years ago and operates as an open-air theatre in the summer season on the Brijuni Islands attracting an audience of 12,000 to 15,000.

Moreover, it has established co-operation and co-production relationships with theatres regionally, as well as with international theatres. Its work makes a significant impact in this region. I sincerely hope we will manage to tackle all the problems we are currently facing. It is important to point out that the theatre budget is in the region of €350,000 and we get around €25,000 from the government, so we require €325,000. It is difficult to raise this amount, yet we need to do everything we can for our art”, noted Director of Ulysses Theatre, Duško Ljuština.

July 2018 | No 282 | PVinternational | 3

INTERVIEW ANDREJA PAVLOVIĆ, PRESIDENT, CORPORATE SOCIAL RESPON

Corporations and military, as opposed to politicians, are aware of dangers Many corporations now show a greater level of awareness about the plight of mankind compared with politicians or policy makers. The level of awareness in military circles is even greater. It is evident from their work and the issues they address in their writing that they are aware of climate change and the threat posed by inequality, which fuels conflicts

by Krešimir Sočković

Being realistic is fundamental.

The issue of corporate social responsibility is vital in corporate management.

This is not a matter of donations and philanthropy, or of paying one’s debt to society.

This is a matter of good corporate management and relationships between equity holders, equity markets and everything that is currently out of control.

P

rivredni vjesnik spoke with the new President of Corporate Social Responsibility Association at the Croatian Chamber of Economy, Andreja Pavlović, Senior Consultant and Partner with the Hauska&Partner Group, addressing issues of corporate social responsibility and concern for the future.

 You have been appointed President of the Association as someone who is deeply acquainted with its work. What are your plans for your four-year term?

A four-year term is a political term and it is also a period that is necessary to achieve certain goals. We had prepared the work programme before the General Assembly session, which many described as overly ambitious. Nevertheless, I am convinced that objectives need to be ambitious, since they are intended to reflect one’s ambitions. Throughout its development, the Association has undergone two phases.

Firstly, there was the phase of large-scale activity for the preparation and establishment of a CSR Index, which brought together a large number of enthusiasts who were involved in its foundation. They shared both their professional expertise and their worldview, working to make Corporate Social Responsibility in business imperative. We provided businesses with a tool intended to evaluate their practices and hence improve them on year-on-year. After that, the activities performed by the Associa-

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tion saw a slight slowdown. Nevertheless, the situation changed upon the arrival of the new Director, Marija Šćulac Domac and initiatives were launched yet again towards its revitalisation. The former President, Snježana Bahtijari, and I accepted this challenge and decided to become involved in this revitalisation, since we believe we need to both continue with previ-

OUR AMBITION IS THE ACHIEVEMENT OF SUSTAINABLE DEVELOPMENT GOALS AND WE NEED TO CONTRIBUTE TO EACH GOAL IN ORDER TO BE ABLE TO HOPE TO SEE SUSTAINABLE DEVELOPMENT. ous activities and take them one step further.

Our ambition is the achievement of sustainable development goals. 193 United Nations member states signed the 2030 Agenda for Sustainable Development, which is intended as an agreement on the development of humankind by that

NSIBILITY ASSOCIATION AT THE CCE

There are a large number of projects to be implemented at a global level which rely on the involvement and participation of the general public.

July 2018 | No 282 | PVinternational | 5

INTERVIEW

If one is faced with a situation in which average equity holders normally remain in a corporation between two and four months, only to replace it with another corporation in which they expect to generate greater profits, one certainly cannot expect them to be concerned about sustainable development or employee well-being. They are primarily focused on costs and their reduction in order to increase their own profits.

year. It includes seventeen goals and we need to contribute to each goal, in order to be able to hope to see sustainable development, as opposed to development that destroys the Earth’s capacities. Moreover, we are faced with climate change challenge. In addition, there is the issue of growing inequality that needs to be tackled. When these issues are considered here, it becomes clear that the awareness about the importance of sustainable development goals needs to be raised. This issues are insufficiently addressed and a deeper insight into them needs to be provided. During the forthcoming period Croatia will have to provide an analytical overview, as well as make a comparison of national policies and indicators with sustainable development goals and will also have to voluntarily provide progress reports. These activities will require the involvement both of the governmental and non-governmental sector, as well as of the business sector. During my term of office and that of our entire Committee, we will be working to show through both our involvement and commitment that we are aiming to implement changes and identify areas in which we could promote our programme through our professional expertise and competences, as well as with the help of our contacts. We are hoping to see some breakthrough results by the end of our term of office.

It appears that even amongst large economies many are currently insufficiently prepared for sustainable development. Would you agree with this statement?

I believe that, against a backdrop of the current policies advocated by the incumbent President, the United States have opted for an old-fashioned type of development, which is in some ways disastrous. Unfortunately, they are currently unaware of it. Nevertheless, these policies have not been given unanimous support in the United States. Many states in the US have openly expressed their disagreement with this concept of development. Against a backdrop of many years of environmental pollution and overexploitation of both human and natural re-

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sources, China has currently reached a turning point, and is currently moving to identify their comparative advantage over the United States.

Irrespective of the disputes over intellectual property rights, China eventually realised that it needs to change its attitude towards its own resources. China is amongst the leading players concerning investment in electric vehicles and technologies designed to reduce pollution and even purify a polluted environment. I believe the United States is about to realise that China has become a frontrunner in an area that they have not identified as an opportunity and as a fundamental issue for growth and development of the United States. Innovations will be launched in this area, and will follow the same path as new business opportunities. MIT is currently intensely focused on developing an approach to the circular economy. New design approaches are being developed, whilst methods for redesigning existing business models are also being identified. The currently available models are focused on customers and end-users, considering them as people who will make purchases, use products and discard them. Trends in Europe are already heading towards the circular economy. This is both political and quintessential. When the Council of Europe realised

FINANCIAL CAPITAL IS DOMINANT AT A GLOBAL LEVEL AND THERE IS CURRENTLY NO PRODUCTION CAPITAL THAT USED TO BE SO DOMINANT. that planned obsolescence was a problem, it adopted a rhetoric stating that members of the general public need to make sure that they reuse products. Consumers have been placed in a position that they need to strive to reuse a product or have it repaired. Nevertheless, if product design does not enable repairs, one is prevented from being socially responsible.

Is the level of awareness of Corporate Social Responsibility greater compared with the level of awareness amongst politicians?

I would say this is both true and false. When corporations came under public scrutiny and were severely criticised by groups and nongovernmental organisations, as was the case

with Nike concerning its sweatshops, and Shell for sinking of oil platforms and its scandal in Africa, these companies were taught a severe lesson. Many corporations are currently showing a greater level of awareness about the plight of mankind compared with that amongst politicians or policy makers. The level of awareness in military circles is even greater. It is evident from their work and the issues they address in their writing that they are aware of climate change and the threat posed by inequality which fuels conflicts. This is evident from their reports, as well as from the reports provided by companies such as Shell. Their scenarios for the future are either bleak or promising. It all depends on the attitude we will adopt within the business models in which they can be sustained. Being realistic is fundamental. The issue of Corporate Social Responsibility is vital in corporate management. This is not a matter of donations and philanthropy, or of paying one’s debt to society. This is a matter of good corporate management and relationships between equity holders, equity markets and everything that is currently out of control. Financial capital is dominant at the global level and there is currently no production capital that used to be dominant. If one is faced with a situation in which average equity holders normally remain in a corporation between two and four months, only to replace it with another corporation in which they expect to generate greater profits, one certainly cannot expect them to be concerned about sustainable development or employee well-being. They are primarily focused on costs and their reduction in order to increase their own profits. We perceive the complexity of the world through business decisions in which we need to choose whether we will be responsible in managing different contexts. The Croatian context differs from the European, not to mention the international context.

T o what extent are Croatian businesses, primarily small businesses, focused on Corporate Social Responsibility?

We have recently considered preparing a survey that would address this issue, yet we have not succeeded in identifying the required number of respondents. I believe the situation is ambivalent. Businesses aim to implement changes and they may opt to use both acceptable and unacceptable methods in order to achieve their goals. It eventually depends on individual conscience and on what they believe to be acceptable or unacceptable. Nevertheless, unfortunately, business opportunities are frequently not identified. There is a wide range of fields with huge potential to encourage Corporate Social Responsibility in business, yet their

potential concerning this issue has not been identified. New technologies and the momentum of the fourth industrial revolution, which is also insufficiently frequently addressed, are about to be included on the agenda. I am referring to process redesign, connectivity and smart cities, which are currently only being sporadically mentioned, irrespective of a broad range of opportunities that they provide for connecting citizens and databases, as well as high quality city management. Amsterdam provides an example of citizens participating in decision-making concerning the location of air quality monitoring stations. There are a large number of projects to be implemented at the global level which rely on the involvement and participation of the general public. We are faced with different problems and have been implementing different practices, yet we will need to face such issues in the forthcoming future.

Unfortunately, some of my projections eventually proved to have been correct. Still, I would not wish us to remain trapped in transition and unable to find a way out. I am using all my efforts to prevent this from occurring. Action is required both at individual and group level and the latter would only increase the likelihood of success.

Your company has been propagating these ideas for a large number of years.

How do you explain that?

We do not only propagate these ideas, we implement them. Hauska&Partner adopted a Corporate Social Responsibility Strategy in 2004, having identified a niche that we are able to address. Unless one establishes one’s own patterns of behaviour and processes, one cannot be relied upon. We monitor our work through reporting cycles. Our clients have been aware of that for a large number of years. The quality of our work has been recognised as a result of our systematic approach to work and through continuous knowledge acquisition, which is imperative for provision of client consultancy services. We are still focusing on these issues, yet knowledge needs to be continuously acquired. We are aware of our expertise, although we are also aware of the fact that we are operating in a multidisciplinary field, which requires keeping abreast of a wide range of fields in order to come across new ideas, different new perspectives and fresh insight into the situation.

We provide our clients with a framework and they need to use their best efforts in order to be able to proceed. We do not impose anything on them, as we only provide guidance and they independently elaborate on that and proceed. We use our expertise to help them be as successful as possible.

During the forthcoming period Croatia will have to provide an analytical overview, as well as make a comparison of national policies and indicators with sustainable development goals and she will also have to voluntarily provide progress reports. These activities will require the involvement both of governmental and nongovernmental sector, as well as of business sector.

July 2018 | No 282 | PVinternational | 7

CURRENT ISSUES

FINA GOLDEN BALANCE AWARDS

HS PRODUKT IS THE BEST OF THE BEST The Financial Agency organises the Golden Balance Awards to promote business excellence and entrepreneurs, said Dražen Čović during the awards ceremony by Krešimir Sočković

T

he best company in Croatia and overall winner of the Golden Balance Awards for the most successful entrepreneur based on financial rating for 2017 is HS Produkt from Karlovac, a large-sized company in processing industry specialising in producing and exporting weapons.

A member of the Supervisory Board of HS Produkt Bernarda Ivšić, says the company employs 1,620 workers. “We started in 1991 with 20 staff. We have developed and researched the labour market and we moved towards the global market and fierce competition. Due to the knowledge of our engineers and owners we reached the American market where we have been competing with the best for the past 10 years. We develop new designs and models which will secure our position on this market, Bernarda Ivšić said.

RANKING IS BASED ON 11 INDICATORS IN FIVE CATEGORIES The Financial Agency has been organising these awards for 10 years for top entrepreneurs in individual activities based on overall ranking achieved on 11 financial indicators in five categories: profitability, liquidity, activity, cost-effectiveness and indebtedness.

The winners of the category based on activities were: Sunčane šume, Kamenolom Gorjak, Termo servis, Spectra-Media and Forset, Bauhaus, Trade Ar, Helios, Inochoo and Zagrebinspekt. This year’s winners of the special award were companies who have received three Golden Balance awards since 2009, proving successful continuity.

The Financial Agency gives the Golden Balance award to promote business ex8 | PVinternational | July 2018 | No 282

LAST YEAR’S 2.8% GROWTH SHOWS YOU WERE ABLE TO FIGHT AGAINST THE CHALLENGES, MARIĆ TOLD ENTREPRENEURS cellence and entrepreneurs, FINA’s CEO Dražen Čović said during the ceremony.

BUSINESS RESULTS – THE MERIT OF ENTREPRENEURS “Business results for 2017, of which I am personally proud as a minister, are due to entrepreneurs, said the delegate of the Government President and Finance Minister, Zdravko Marić. Last year’s 2.8% growth showed you were able to fight against the challenges”, he said. By increasing private investment by over 7% entrepreneurs responded positively to tax reforms, Marić evaluated.

Of 120,081 entrepreneurs (tax payers) – companies, excluding banks and in-

surance houses, 3,785 competed for the Golden Balance 2018, of which 200 were micro-companies, 2,478 small-sized, 902 medium-sized and 205 large-sized.

The financial results of the business activities of Croatian entrepreneurs in 2017 were presented during the ceremony, and economic analyst Velimir Šonje presented his macro-economic trends.

Exports have had the largest influence on GDP growth, but personal spending also grew last year and this growth continued in 2018. It is also excellent that microcompanies and small companies intensified their dynamics in 2017 which is also a consequence of the tax reform, Šonje evaluated.

8TH CCE ASSEMBLY

We need a constructive dialogue The Chamber will focus its work on solving problems for entrepreneurs, promoting companies and their products abroad, Burilović highlights

by Krešimir Sočković

T

he business report for 2017 was accepted at the recently held assembly of the Croatian Chamber of Economy. Members of the Assembly were presented with new chamber projects – Digital Chamber and Economic Network business portal.

“We are all aware of the problems of our economy and the entire society, said CCE President, Luka Burilović. It is not necessary to constantly repeat them.

From where I’m standing, as the President of the umbrella institution of the Croatian economy, I would like to highlight I do not doubt that all social actors, at all levels of authority and all of us have the same common goal – Croatian prosperity. Our vision on how to achieve this does not have to be the same. We do not need a non-critical unanimity; we need a constructive dialogue which is going to be an illustration of social maturity”, Burilović highlighted.

He also announced the Chamber will focus on common problems and how to solve them. “We will work more on promoting your companies and products on international markets. We will offer solutions for your problems and insist from the creators of policies to eliminate them, that is, to accept the proposals of entrepreneurs. We will support faster and more decisive implementation of the required measures – especially cost relief on business and labour”, Burilović added.

DUAL EDUCATION WILL HAPPEN CCE President highlighted that the CCE has been working intensively on implementing dual education and it offers its mentoring capacities and help to competent bodies. “We will not give up on this project despite the difficulties. It is equally

important to transfer the Competency Centre from schools to companies so students can find it easier to complete their practical work and acquire the relevant knowledge”, Burilović opines.

PROJECT DIGITAL CHAMBER AND ECONOMIC NETWORK BUSINESS PORTAL PRESENTED AT THE ASSEMBLY New CCE projects were presented in conjunction with the Assembly: Digital Chamber and Economic Network business portal.

The Digital Chamber is a unique information-communication platform with seven new e-services which will speed up communication and improve relations between the Chamber and its members.

As the CCE President announced, the process of issuing documents for public

authorities will be digitised and will allow entrepreneurs a more active approach in creating and changing legislation. We will also make the potential financing sources more accessible and will allow better promotion of products and services of entrepreneurs. The project’s implementation marks the digital transformation of the Chamber’s business activities which will confirm CCE’s status of the leading economic association around, Burilović said.

Total value of the project’s implementation exceeds €3.7 million and is co-financed by the European Regional Development Fund.

The decision on concluding contracts on allocating non-repayable funds for the project HR.izvoz - s HGK-om do stranih tržišta was also adopted. This project is supported by the Ministry of Economy, Entrepreneurship and Crafts which allocated €1 million to the CCE for its implementation.

The Business Report 2017 of the Croatian Chamber of Economy was also adopted at the Assembly as well as the Plan on amendments to the plan on property management of the CCE. July 2018 | No 281 | PVinternational | 9

TOPIC OF THE WEEK

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FINANCIAL AGENCY REPORT

NETT PROFIT LAST YEAR€2.9 BILLION Entrepreneurs tax payers (120,081) increased the number of workers by 5.8%, total income by 9.5%, total expenditure by 10.4%, profits for the period by 8.7% and losses for the period by 40.6 by Ilijana Grgić

T

he consolidated financial report for Croatian entrepreneurs for 2017 shows they earned €2.9 billion in nett profit, some 9.5% less compared with 2016, according to data provided by the Financial Agency. Tax payers (120,081) excluding

18,532 ENTREPRENEURS SOLD PRODUCTS AND SERVICES TO FOREIGN MARKETS, A 15.4% INCREASE banks, insurance companies and other financial institutions, employed 882,884 staff last year (per working hours), 48,667 up compared with the year before. These entrepreneurs paid an average of €716 as a monthly nett salary, 4.3%

more compared with 2016.

In relation to 2016, entrepreneurs increased the number of staff by 5.8%, total income by 9.5%, total expenditure by 10.4%, profits by 8.7% and losses by 40.6%. The increased losses resulted in a decreased consolidated financial result of nett profit over 2016 (-9.5%).0.19 Generated income totalled almost €90.5 billion, total expenditure was €86.6 billion. Of the €90.5 billion total income generated, €18.4 billion was through exports, 16.6% more compared with 2016

MORE PROFIT MAKERS THAN LOSERS The number of exporting companies has also grown: a total of 18,532 entrepreneurs sold their products and services on foreign markets, an increase of 15.4%. Imports s also saw growth.

Over 120,000 entrepreneurs imported €15.7 billion in goods and services, giving a trade surplus of slightly over €2.7 billion.

Profits for the period for 2017 of €5.52 billion were earned by 80,947 entrepreneurs (67.4%), with losses for the period amounting to €2.6 billion and it was generated by 39.134 entreJuly 2018 | No 282 | PVinternational | 11

TOPIC OF THE WEEK Financial business results of 120,081* Croatian entrepreneurs in 2017 and comparison with 2016 (expressed in HRK’000; salaries in kuna) Description

2016

2017

Index 2017/2016

834.217

882.884

105,8

Total income

619.511.457

678.395.213

109,5

Total expenditure

588.419.169

649.769.441

110,4

Profit before tax

44.964.035

48.336.965

107,5

Loss before tax

13.871.747

19.711.194

142,1

Profit tax

6.904.972

6.740.274

97,6

38.069.666

41.397.246

108,7

Period loss

13.882.351

19.511.749

140,6

Consolidated financial result (period profit or loss)

24.187.316

21.885.497

90,5

Exports

118.237.344

137.843.044

116,6

Imports

Number of employees

Period profit

103.369.414

117.810.277

114,0

Trade balance (exports minus imports)

14.867.930

20.032.767

134,7

Investment in new fixed assets

23.573.591

23.722.668

100,6

5.151

5.372

104,3

Average monthly nett salary per employee

* The above number and the business results do not relate to all companies included in the Agrokor Consortium since of the 34 companies in the Agrokor Consortium only seven submitted their financial report for 2017 to the Register Source: Financial Agency, Register of Annual Financial Reports

9,5% smaller net profit than in 2016

preneurs (32.6%). In 2017, the largest profit was earned by INA (€0.19 billion). In 2017, INA Group achieved one of the best results in its recent history. “We showed we were capable of using the advantages of a positive external environment with higher prices, and our EBITDA is over

BASED ON THE SITE, MICROENTREPRENEURS ARE THE LARGEST GROUP NUMERICALLY (107,635 OR 89.6%)

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€0.5 billion which is 52% up compared with 2016. We defined two main pillars of business, one of which focuses on growth, and the other on operational excellence and a high level of efficiency. We succeeded in both areas. INA focuses on promoting sales activities and this led

COMPANIES THAT DID NOT HAND IN THEIR FINANCIAL REPORTS

Of the 34 companies in the Agrokor Consortium only seven handed in their financial report The mentioned number and business results of entrepreneurs in Croatia, does not concern all companies included in the Agrokor Consortium since of 34 companies in the Agrokor Consortium only seven handed in their financial report for 2017. Reports were submitted

by Backstage, e-Kolektor, Krka, Moslavi-

3.16€ BILLION INVESTED IN NEW FIXED ASSETS LAST YEAR to a 20% higher income compared with 2016.

The costs of capital investments remain high (€0.19 billion) in line with increased investment in Croatia”, said INA CEO, Zoltán Áldott, in his comments on business activities of the largest oil company in Croatia. Although we are faced with a natural downward trend of production in our mature fields, we invested considerable effort in order to increase production, exploiting maximum potential by implementing the concept of Production Optimisation in existing fields and by successful performance of various mining works. All this has resulted in increased local oil production, which is now at the same level as a decade ago. Áldott also added that the Refinery and Marketing departments generated strong EBIDTA with a positive financial flow, and this is their best result of the decade.

NEW INVESTMENT BELOW 1% Even though it was barely noticeable, last year’s investment into new fixed assets grew. A total of 12,193 entrepreneurs invested €3.16 billion, up 0.6% on a yearly basis. This slight growth is quite expected since 76% of entrepreneurs in Croatia evaluate the business and investment climate as hardly stimulating, based on research presented by the Croatian Chamber of Economy in April 2018. In fact, the research shows that 23% of entrepreneurs feel indifferent about the Croatian investment climate and only 1% see it as stimulating. Based on the research related to entrepreneurs perception of the past three years, the business climate index in Croatia has worsened, said the Head of the Department for Attracting Investment with

na voće, Multiplus card, Poliklinika Aviva andTisak usluge, but large companies such as Agrokor, Konzum, Jamnica, Ledo, Belje, PIK Vinkovci, PIK Vrbovec, Vupik, Roto dinamic, Tisak, Zvijezda did not hand in their reports for 2017. The reports for 2016 were submitted in October 2017.

the CCE, Svjetlana Momčilović. She added that entrepreneurs said that although progress was visible in some areas, the dynamics of the reforms does not meet their expectations.

MICRO ENTREPRENEURS STILL THE LARGEST GROUP IN NUMERICAL TERMS Based on size, macro-entrepreneurs are the largest numerically (107,635 or 89.6%), followed by small entrepreneurs (10,717 or 8.9%), medium-sized (1400 or 1.2%) and then large-sized (329 or 0.3%). All categories finished 2017 in profit. Nett profits of micro-entrepreneurs were €0.15 billion; small-sized €0.7 billion, mediumsized, €0.73 billion and large-sized entrepre-

BASED ON THE SITE, MICROENTREPRENEURS ARE THE LARGEST GROUP NUMERICALLY (107,635 OR 89.6%) neurs with €1.3 billion in nett profit. One of the best-known medium-sized entrepreneurs in Croatia is Mate Rimac, founder and manager of Rimac Automobili and Greyp Bikes, who won the title of Entrepreneur of the Year in March 2018. As he said, there’s nothing greater than to visit factories and see how they work. I was in a garage eight years ago. I work with 350 people now. We contribute with what we can. My goal has always been to show things can be done.

They told me in college it was impossible to build a car in Croatia, but we proved otherwise, Rimac said. He also said their goal for this year is to open about 100 new positions.

Concerning counties, FINA’s reports shows that nett profits increased mainly in the County of Dubrovnik and Neretva (104.8%); Zadar (29.3%), Split and Dalmatia (27.1%) and Bjelovar and Bilogorje (22.3%).

Approximately

€90,5 billion last year’s total income

€86,6 billion total expenditure

July 2018 | No 282 | PVinternational | 13

BUSINESS FORUM

SPORTS, TOURISM AND THE ECONOMY GO HAND IN HAND What I like about Croatia is that it is a small country, but you still need the courage to conquer foreign markets, Lapin highlighted

O

ver one hundred Croatian and Russian business people met in Kaliningrad for the business forum in conjunction with the Croatian Chamber of Economy initiative Sports connect business. The Croatian delegation was led by the CCE President, Luka Burilović, who announced stronger economic co-operation between the two countries and an intensification of co-operation with specific Russian regions.

Due to the size of the Russian market and trade concentration in the main centres such as Moscow and St. Petersburg, our companies need to strengthen their co-operation with specific regions which have much to offer. The CCE campaign Sports connect business has opened the doors to the possibility of using this regional potential, Burilović said at the opening ceremony. He also congratulated Russia for winning their opening match of the World Cup. Deputy Governor of the Kaliningrad Oblast, Aleksandar Šenderjuk Židkov, said he hopes to see Croatia and Russia play in the finals and he wished good luck to the Croatian football representatives at the World Cup. He also said he sees

IN 2017, TRADE EXCHANGE BETWEEN THE TWO COUNTRIES STOOD AT $540 MILLION

NEW PLANT FOR PRODUKTY PITANIA

€9.6 million investment This investment has a value of €9.6 million, and the company we are commissioning is fully automated and the most modern in Europe, said the Honourable Consul of Croatia and Honourable CCE representative in the Russian Federation, Stefano Vlahović, at the opening ceremony of the new plant of the Produkty company in the Kaliningrad Oblast. This is an incubator for farming poultry with a capacity of 42 million chickens each year. The Croatian economic delegation was also present at the opening ceremony, and the visit was organised by the

14 | PVinternational | July 2018 | No 282

CCE. I am convinced sport connects people which is why the CCE created the project Sports connect business and organised the business forum during the World Cup. We are especially interested in co-operation with various Russian regions, and I think it is a good way for improving economic relations, highlighted CCE President Burilović.

He also added that representatives of around 50 Croatian companies also travelled with the economic delegation. Whilst preparing for the World Cup, we visited Croatia and started our business talks. Business

co-operation with Croatia is not something new. Stefano Vlahović has been here for 20 years and we hope there will be more of similar investments and investors, said Anton Alihanov, Government President of the Kaliningrad Oblast. Vlahović is the generator of our business co-operation which has lately become more intense, especially through the Chambers. I am convinced our co-operation will be even better in future, said the Croatian Ambassador to the Russian Federation, Tonči Staničić. Produkty Pitania was founded in 1998. Today it is one of

PRESIDENT PRESENTS MEDALS great potential for economic co-operation with Croatia, and after his visit to Zagreb, organised by the CCE, he is convinced Croatia will become an even more interesting tourist attraction in the near future. Croatia and Zagreb are beautiful. I will return with my family, he said.

He also added that the Kaliningrad Oblast is special for its excellent geographic position and transport infrastructure, which makes it a junction for exports and imports to the EU.

CO-OPERATION HAS ALREADY BEEN FORMALISED The Honourable Consul of Croatia and Honourable CCE representative in the Russian Federation, Stefano Vlahović, said he was delighted the forum was taking place during the World Cup and that sports, tourism and the economy go hand in hand. The President of the Chamber for Economy and Industry of the Kaliningrad Oblast, Feliks Lapin, pointed out that they had joined the campaign at the invitation of Vlahović and that their co-operation has already been formalised by signing an Agreement on co-operation between the CCE and the Chamber for Economy and Industry of Kaliningrad which took place a month ago. What I like about Croatia is that it is a small country, but you still need the courage to conquer foreign markets, Lapin highlighted.

Until introduced sanctions, Russia ranked quite high on the list of Croatian foreign trade partners, when total trade exchange ranged between $1.5 and $3.5 billion. After sanctions in 2014 and the fall in the Russian economy, primarily depreciation of the Russian ruble, trade exchange slumped and Croatian exports to Russia halved. In 2017, the value of trade stablilised at $540 million, and the value of exports/imports also remained at the level of 2016..

Stefano Vlahović i Luka Burilović

the largest producers of processed food in Russia and Eastern Europe. In their four hitech plants they farm fish and poultry and produce semi-ready food and conserved good. Their line of produce Zolotoy Petushok (the Golden Cockerel) is the strongest brand of chicken products in Russia.

Medals for Burilović, Bago, Horvat, Kamenski and Marodi The President of the Croatian Chamber of Economy, Luka Burilović received the Order of Danica hrvatska medal showing an image of Blaž Lorković, a medal which is given to Croats and foreigners for special contributions to the economy.

The medals were given by Croatian President, Kolinda Grabar Kitarović on the occasion of Statehood Day. “It is my great honour and privilege to receive this medal for contributions to the economy. I do not see this medal as a personal one, but as recognition to the complete institution that I preside over. As an umbrella institution of the full Croatian economy, our mission is to boost the economy on which the CCE is constantly working”, Burilović said. “I would also like to take this opportu-

nity to thank the Croatian President on excellent co-operation in economic diplomacy. I am convinced this synergy of promoting our enterprises abroad will continue in the future and for the well-being of all Croatians, Burilović concluded. The Order of Danica hrvatska was also given for special achievements in the economy and contributions to economic relations between Croatia and other countries to Darinko Bago, Đuro Horvat, Dragutin Kamenski and Antun Marodi.

CCE IN THE STRATEGY BODY FOR DEFENCE INDUSTRY DEVELOPMENT

Lopandić becomes NIAG member

Deputy Director of the CCE Office in Brussels, Bruno Lopandić, was appointed a member to the NIAG (NATO Industrial Advisory Group), strategy body of the North-Atlantic Alliance for the defence industry.

This is an opportunity for the more intensive engagement of Croatian companies, making new deals and promoting competitiveness amongst allies. NIAG is the voice of Croatian defence in NATO where it can influence the processes at the highest strategic levels, said Lopandić on the occasion of being appointed member to the body in which he will represent the CCE

and the interest of its members. The body discusses all aspects of development and research of military equipment in NATO based on information of all related NATO bodies.

One key task is to find opportunities for international co-operation of the military industry in order to meet NATO’s requirements. NIAG’s important role is to offer advice on how to promote relations between individual governments and the industry as well as how to connect different industries within the Alliance. The Croatian defence industry consists of around one hundred business operators with 3,000 employees, 1.5% of the total number of employees in the processing industry. The companies’ annual production is around €200 million, or 1% of total value of the processing industry’s production. Annual exports are €100 million or 1.2% of total exports of the processing industry.

July 2018 | No 281 | PVinternational | 15

PV ANALYSIS RESEARCH CONDUCTED BY THE AUDITING AND CONSULTAN

€1.2 BILLION OF INVESTMENT INTO THE HOTEL INDUSTRY OVER FIVE YEARS 90% of projects are focused on the coast and coastal region. 60% of investments will be implemented into new projects and hotels and 40% into comprehensive reconstructions of existing capacities, noted Marija Noršić by Jozo Vrdoljak

The Croatian hotel industry will see accelerated development, as a result of investment worth millions of euros implemented by major market players, as well as strategic takeovers and mergers. In addition to the hotel brands traditionally present on the market, we will see the arrival of leading international hotel companies.

Marija Noršić, Manager in the Consultancy Department for Tourism and Catering in EY

O

ver the next five years, Croatia will see a record high investment into the hotel industry, according to new research conducted by the auditing and consultancy company, EY. According to the research, during the previously mentioned period and based on currently available information, the expected level of investment will be €1.2 billion.

Through the research entitled Investment in the Development of Hotel Industry 20182022, conducted by experts at the Croatian office of EY, 83 hotel projects have been identified, which will undergo an advanced phase of planning, development and construction or sale on the market during the period 2018 to 2022. Greenfield investment accounts for 50% of projects, and all the projects will be focused 12 Croatian counties.

“According to fDi Magazine, the leading publication for business of The Financial Times, by the end of 2017 Croatia ranked 7th amongst destinations with the greatest potential for tourism investment. This analysis is yet further confirmation that Croatia is seen not only as an attractive tourist destination, but also as a country that attracts investment. This year Croatia is expecting almost €1 billion of investment into tourism, 15% up compared with 2017 and an increase of 40% over 2016. Moreover, this is confirmation that the activities performed to date and the programmes provided by the gov-

16 | PVinternational | July 2018 | No 282

ernment and the Ministry of Tourism focused on quality development, have been recog-

83 HOTEL PROJECTS HAVE BEEN IDENTIFIED, WHICH WILL UNDERGO AN ADVANCED STAGE OF PLANNING, DEVELOPMENT AND CONSTRUCTION OR SALE ON THE MARKET DURING THE PERIOD FROM 2018 TO 2022. nised by foreign investors, who normally invest into high-end accommodation facilities.

Croatia is currently recognised as a quality holiday destination and I believe that these announcements will provide sufficient incentive for all those involved in tourism, both public and private sectors, to continue on the path of success of Croatian tourism with joint forces”, commented Gari Cappelli, Minister of Tourism.

CY COMPANY, EY

ISTRIA AND SPLIT-DALMATIA COUNTY THE MOST ATTRACTIVE 90% of projects analysed in the research are focused on the coast and coastal region. Nevertheless, Split-Dalmatia and Istria Counties need to be highlighted for the large number of projects and their value, followed by Opatija, Zagreb and Dubrovnik outskirts.

“It is important to note that 60% of investment will be implemented in new projects and hotels, and 40% into comprehensive reconstruction projects of existing accommodation. Hence, during the previously mentioned period, investment will be implemented in a total of 9,700 hotel rooms, of which 6,000 are newly-built or expanded capacities, mainly in four and five-star hotels. The Croatian hotel

industry will see accelerated development as a result of investment worth millions of euros and implemented by major market players, as well as through strategic takeovers and mergers. In addition to the hotel brands traditionally present on the Croatian market, we will see the arrival of leading international hotel companies. Since the investment will be focused primarily on capacities that provide high-end services, 50% of the investment in this cycle will be implemented into projects with up to 200 rooms and the average investment value per room for four-star hotels will reach €140,000, whilst for five-star hotels it will be in the region of €370,000”, emphasised Marija Noršić, Manager in the Consultancy Department for Tourism and Catering in EY. July 2018 | No 281 | PVinternational | 17

PV ANALYSIS SIGNIFICANT LOCAL AND ASIAN INVESTORS Research has shown significant changes concerning the country of origin of investors into Croatian hotel facilities. European investors have traditionally prevailed thus far. Nevertheless, by 2022, according to the research, 42% of investment will come from Asian hotel companies and investors. Consequently, Croatia will see an identical share of Asian and local investors, whilst only 13% of investment will be implemented by European investors. Investors expect to see a return on investment over a period of 4 and 15 years, depending on the type of investment implemented, whilst projected average cost-effectiveness is 10 years. Most investors will be providing 25% to 40% of equity financing with the remainder being provided by commercial banks. Investors opting for the absorption of EU funds will have to participate with 70% to 75% of equity capital, according to the research.

“Croatian tourism and its hotel industry are increasingly attractive to Asian investors. They are interested in investment projects in Croatia primarily for its tourism potential. Asian investors are already present on the Croatian market; nevertheless, Croatia needs to focus on administrative effectiveness and enhancing the investment climate. Moreover, Croatia needs to provide investors with opportunities to implement their pro-

THE AGE OF RENOVATION AND RECONSTRUCTION OR THE AGE OF BROWNFIELD INVESTMENT IS ON THE WANE, NOTED IVA BAHUNEK jects and simplify investment. The age of renovation and reconstruction or the age of brownfield investment is on the wane, since most facilities have already been reconstructed. The forthcoming period will mainly see investment into the con18 | PVinternational | July 2018 | No 282

struction of new hotels. Asian investors have already implemented investments throughout Europe. They have also implemented several investments into Croatian tourism to date”, explained Iva Bahunek, Director of Association of Employers in Hotel Industry of Croatia. Nevertheless, she stated that the only obstacle to process is shortage of labour. “I hope we will manage to solve this problem in the near future and offset labour shortages by foreign workers, provided all available local workers have already been employed”, noted Iva Bahunek.

INVESTMENT INTO QUALITY IMPROVEMENT Ivana Budin Arhanić, Vice-President for Business Development and Corporate Affairs at Valamar Riviera, pointed out that this year, Valamar created 600 new jobs.

In addition, during the 2018 season it will be employing around 6,600 staff in its facilities located from Istria and Kvarner to Dubrovnik.

“Since Croatia currently ranks amongst the safest and the most popular holiday destinations in the Mediterranean and as a result of favourable investment conditions, this is an excellent period for tourism investment. Furthermore, this is an opportunity that needs to be exploited to increase value-added in tourism. Valamar has identified this opportunity and we rank amongst the most prominent investors into Croatian tourism. In the past we invested over €0.53 billion into our tourism portfolio of hotels, holiday resorts and camping sites, including this year’s investment cycle of €93 million.

Investment plays a vital role in growth promotion and greatly affects positive expectations for the upcoming season. This year’s key investments implemented by Valamar Riviera include the completion of the Rabac-based Valamar Girandella Resort, within which the five-star Valamar Girandella Maro Suites have recently been opened, as the first Kinderhotel in Valamar portfolio. Moreover, it is important to mention the repositioning of the Dubrovnik-based hotel Valamar Argosy, the renovation of Valamar Imperial Hotel on the island of Rab and further investment into camping sites in Istria and on the island of Krk”, stressed Ivana Budin Arhanić.

The value of investment implemented thus far by Adris Group has exceeded

€0.53 billion. “Hence, Maistra Hotels are currently in a top position amongst Croatian premium hotels, concerning prices and consumer satisfaction. Further investment of €0.27 billion will be implemented into similar projects, of which €60 million of investment will be imple-

DURING THE PREVIOUS PERIOD VALAMAR RIVIERA INVESTED OVER €0.53 BILLION, STRESSED IVANA BUDIN ARHANIĆ mented in Vrsar by 2021. With Rovinj as our role model, we are planning to upgrade all the accommodation facilities in Vrsar to four and five-star category. The construction of the new Rovinj-based Grand Park Hotel owned by Maistra Group, a project of over €80 million, is currently underway. This is the largestscale one-time investment implemented by the Adris Group into tourism and the largest investment in Croatian tourism this year. The hotel will provide 209 accommodation units with a view of the old town nucleus, six restaurants, plus a wellness & spa centre covering an area of 3,800 m2, a shopping mall, a conference hall and a large number of other facilities. The most reputable Croatian and international architects and designers are involved in this project. Completion is expected by the end of this year and the hotel will create around one hundred new year-round jobs”, pointed out Vanja Mohorović from Maistra.

Ivana Hatvalić, President of the Management Board in HTP Korčula, stated that during the past several years the value of investment implemented in HTP Korčula and HTP Orebić reached around €18.7 million. The specific objective of the investment was to upgrade the hotel rating to four-stars. “Development strategy anticipates additional investment into these two hotel companies headquartered in Orebić and Korčula. The anticipated value of these new investment projects is around €45 million, most of which will be

preneurs, as well as amongst those who have already invested in tourism as family businesses. I believe this is mainly due to the unfavourable investment climate in which we have been operating for years.

It is important to highlight that local entrepreneurs who have thus far invested in the

Opening of hotels in the forthcoming years1) Unpublished information

4

2 2

2021-2022 1 1 2020

4

2019

3 1

2018 1)

2

5 12

4

Unpublished information

5 30

6 Source: EY

According to currently available information

Investment volume (in millions of €) by investment origin 498.7

Croatia

37.9 110.5

Europe

51 488.6

Asia North and South America

55.4 Newly-built facilities

4.7 35

implemented into the planned construction of a new five-star hotel in Korčula, on the location of the currently existing Park Hotel. Croatia is considered an attractive and popular holiday destination. Hence, great interest is aroused in investment into

THE VALUE OF TOURISM INVESTMENT IMPLEMENTED THUS FAR BY ADRIS GROUP HAS EXCEEDED €0.53 BILLION, ACCORDING TO VANJA MOHOROVIĆ hotel capacities. Nevertheless, administrative procedures need to be simplified and accelerated without delay, whilst implementing long-term measures concerning

Modernisation

Source: EY

the retention and motivation of labour.

Moreover, the creation of a stable tax environment is imperative. I believe that during the forthcoming period we will see the entry of large global hotel brands into the country, against a backdrop of their extremely low presence in Croatia. Their entry into this market will result in additional investment”, explained Ivana Hatvalić.

LACK OF INITIATIVE AMONGST SMALL INVESTORS The owner of the small boutique San Rocco Hotel, Tulio Fernetich stated that the current situation in tourism is not as rosy as one may believe. In terms of investment, Fernetich is concerned about the impact on the environment and also on the attractiveness of tourism programmes provided. He believes that both a comprehensive and systematic analysis of trends in tourism needs to be performed. “Foreign investors are welcome.

Nevertheless, they invest and primarily focus on return on invested capital and, given the right opportunity, they do not hesitate to sell. I am interested in identifying the reasons for the lack of initiative for investment amongst local entre-

DURING THE PAST SEVERAL YEARS THE VALUE OF INVESTMENT IMPLEMENTED IN HTP KORČULA AND HTP OREBIĆ REACHED AROUND €18.7 MILLION, EMPHASISED IVANA HATVALIĆ hotel industry are reluctant to implement additional investment and are showing little interest. I believe this is alarming.

Many colleagues who have been involved in the boutique hotel business for a large number of years are showing little interest in investment through EU funding. We are faced with many specific problems and they have adverse effects. We need to provide answers to questions concerning the type of tourism we are working to develop, before becoming involved in investment at any cost. Croatia currently has excessive tax and other burdens on the boutique hotel business. Furthermore, the purchasing power of Croatian citizens is significantly lower compared with that of Austrians, Italians or the French. The government has not yet identified boutique hotels as an important category.

I believe the local population needs to exploit the benefits of tourism. I am not convinced of the huge advantages derived from large-scale investors, who exploit space and reap returns on investment, whilst in the next decade they will be employing foreign staff. Defining goals in Croatian tourism is imperative”, believes Tulio Fernetich.

July 2018 | No 281 | PVinternational | 19

CURRENT ISSUES 13TH CROATIAN EXPORTERS CONVENTION

SOLVIS AND MCZ EXPORTERS

Photo: Franjo Maltar

15% of Croatian companies are exporters

66% of income generated by sales

76% total profits generated by exporters

E

xporting as the generator of growth and development for Croatia was the main subject at this year’s 13th Convention of Croatian Exporters organised by Croatian Exporters in co-operation with the Croatian Bank for Reconstruction and Development, the Croatian Chamber of Economy, the Croatian Employers Agency, the Croatian Trade Chamber, the Croatian Business Angels Network (CRANE) and the Financial Agency.

We can expect a multipolar world in the future, and the economies of China, India, Brazil, Russia, Indonesia, Mexico and Turkey will be the largest economies globally, according to research conducted by PwC, suggested the President of Croatian Exporters in his opening speech. Digitalisation is changing the world and we need to adapt. Even though the level of our exports is high, it is still lower than that of imports, and what is worrying is that we are exporting ‘cheap tonnes’ and importing expensive ones, Bago evaluated.

TAXATION INCREASES Pharmacy has a positive balance sheet. Pliva and Belupo are showing good figures for 2017,

20 | PVinternational | July 2018 | No 282

and the food sector has the largest imbalance.

Agrokor and its problems are to blame for the high increase in food imports. The number of employees per company is in steady decline.

Some 15% of companies are exporters and they employ 51% of workers and generate 62% of investment. At the same time, they generate 66% of sales income and 76% of total profits. They are the most effective part of the Croatian economy, Bago highlighted.

Exporting is one aspect that can generate growth. It will be too difficult to reduce imports or increase spending. What is important is to be competitive globally, Bago says. He also warns that tax burdens increased 20.5% between 2009 and 2017. Our economy has the potential to grow, but there are certain obstacles: negative demographic trends, Agrokor, fires, floods, Petrokemija and many other problems. We are seen by young people as a country filled with dissatisfaction, failure and without a future. We do not trust our institutions and we are inclined to criticise. External perception of the country is completely different. The education system is bad, but those who leave Croatia are welcomed workers. We do not need radical changes, we need continuous changes, Bago says.

The Croatian economy today grows on healthy foundations, said Prime Minister, Andrej Plenković. Exporters are the most effective part of the Croatian economy. In order to reduce the number of obstacles to our development and enable further growth, we must be focused on more favourable, safer and more predictable situations on the market; on providing a greater technological innovation capacity for companies and more efficient public administration and justice system, Plenković pointed out.

The Prime Minister added he is satisfied with the 2.5% growth in the economy, and he is convinced that it will reach 2.9%. Furthermore, he announced that the process of creating a better business environment is something they will

Photo: Franjo Maltar

Exporting is one thing that can generate growth. It will be too difficult to reduce imports or increase spending. What is important is to be competitive at the global level, says Bago by Krešimir Sočković

TOP TODAY CROATIAN ECONOMY GROWS ON HEALTHY FOUNDATIONS, PLENKOVIĆ SAID continue with. “We are focused on systematic reforms to ensure investment and entrepreneurial potential, and that is part of our programme, whose overall goal is to increase competitiveness and connect the education system with the labour market as well as the sustainability of public finances. The new tax reform will not be agreed upon before the autumn, and it will enter into force at the beginning of 2019.

VAT will reduce by 1%, but this will not be the only measure which will not jeopardise budget income. We will also enable better income and will decrease the fiscal pressure on taxpayers and enterprises, Plenković stressed.

GOLDEN KEY AWARDS At the convention top exporters of 2017 received the Golden Key award.

The leading tourist company, Valamar Riviera, is the best large exporter and winner of the Golden Key. Solvis from Varaždin, specialising in photo-voltaic modules is the best mediumsized exporter. The small and micro exporting company is MCZ, producer of pellet stoves, from Labin. Pharmaceutical company JGL from Rijeka is the most innovative exporter.

Pliva is top exporter to the German market, and Vetropack Straža is top exporter to Italy. The winner of the Golden Key for exports to Bosnia and Herzegovina is Podravka; for exports to Slovenia AD Plastik, for exports to Serbia DS Smith Belišće and for exports to Austria, Selk. Top exporter to the USA is Omco Croatia, and Žito is the top exporter to Hungary.

The best exporter to France is LPT and the best

exporter to the Czech market is Končar Energetski transformatori. The best large exporters to other countries also received the Golden Key. Elektro-kontakt won the award for exports to Turkey. Top exporter to Egypt is Šerif ExportImport; to Canada, Končar Mjerni transformatori and to China, Harburg-Freudenberger. Belupo won the award for exports to the fastest growing market, Russia.

For the first time in the history of these awards, it went to a tourist company which has been contributing to Croatian GDP growth for three decades, said Marko Čižmek, Board Member of Valamar Riviera. Tourism is the art of creating memories and emotions. Therefore I am pleased we have been recognised amongst exporters and that we can actually export emotions in this way, Čižmek concluded.

There was also a discussion on exporting as generator of economic growth and development in Croatia, and its participants were Tomislav Tolušić, Agricultural Minister and Government Vice-President, Darko Horvat, Minister of Economy and Entrepreneurship, Boris Vujčić, Governor of the Croatian National Bank, Marko Jurčić, special advisor for economy to the Croatian President, Branko Grčić, President of the Parliament Committee for Tourism, Marijana Ivanov from the Faculty of Economy and Darinko Bago. in the afternoon there were parallel workshops with focus on the global chain of added-value, fiscal policy for increasing export competitiveness, financing and the insurance of export deals and EU funds for exporters.

EVEN THOUGH THE LEVEL OF EXPORTS IS HIGH, IT IS STILL LOWER THAN THE LEVEL OF IMPORTS, AND WHAT IS WORRYING IS THAT WE EXPORT ‘CHEAP TONNES’ AND IMPORT EXPENSIVE ONES

July 2018 | No 282 | PVinternational | 21

CURRENT ISSUES CONFERENCE INVESTMENT IN CROATIA: POTENTIAL AND

OBSTACLES PERSIST. ARE WE THE PROBLEM? Investors into Croatia are mainly those countries in its vicinity. However, Croatia should turn to new markets and attract new investors as well as speed up the pace to reach countries that have reached Croatia over the past several years, Fogec highlights

by Boris Odorčić

Reforms start with drastic cost cuts for the employer and the mentality is changed by creating a transparent business framework.

Davorin Štetner, President of the Croatian Business Angels Network (CRANE) ( )

D

uring the past several years, Foreign Direct Investment has ranged around €1 billion a year. Private money of Croatians, which, for example, is deposited by immigrants from Australia, Germany and Switzerland into bank accounts in Croatia total €2 billion. Therefore, the sum of money of expatriates is double that compared with the almost stagnating investment level, a fact highlighted at the international conference Investment in Croatia: Potential and Reality, organised by the Foreign Investors Associations and Deloitte.

The President of the Foreign Investors Associations, Mladen Fogec, said this was bad and it is not good to blame individuals or governments for such stagnation. If we are failing to remove obstacles then maybe the problem is within us and our mentality, said Fogec. He also added that Eurostat’s survey reveals that Croatians find happiness and political ties more important than hard and dedicated work, Fogec highlighted. Investors into Croatia are mainly countries in its vicinity. However, Croatia should turn to new markets and attract new investors as well as speed up the pace to reach those countries which have reached Croatia during the past several years. My biggest wish is that something starts happening and that the brain-drain stops. If you want to attract people, you need to create quality workplaces, which means staff need to be paid and they need to be paid well, said Fogec in his comments on salary relief. Young people like Croatia and we should give them the opportunity to remain here and earn, Fogec added.

22 | PVinternational | July 2018 | No 282

EXAMPLES OF GOOD PRACTICE DO EXIST One of the often-mentioned obstacles to business and attracting foreign investment is legal insecurity, frequent legal changes, an imbalance with the European Union, retroactive application of some regulations. After the tax reform we still have the highest tax burden in the EU, a

DESPITE THE TAX REFORM, OUR TAX BURDENS REMAIN ONE OF THE HIGHEST IN THE EU, VANJA VLAK SAYS partner with Deloitte Croatia, Vanja Vlak notes.

Numerous parafiscal taxes and ineffective public administration is another obstacle for investment. How many times do we need to repeat the same thing? I feel these are not the only problems; I feel the problem is within us, said Vlak. He also added not everything is grim.

There are examples of good practice in Croatia. The Financial Times chose the County of Međimurje as one of ten counties with up to 1.5 million people and with some of the best strategies for attracting foreign investment. Ivanec was chosen as a city which knows how to attract investment. Therefore, Croatia has positive examples, but we need to find a good way to multiply them, said Vlak.

State Secretary with the Ministry of Economy, Entrepreneurship and Crafts, Mario

D REALITY

Antonić, says changes are small, slow and inefficient. Why? One of the problems is that we, as a people, find it hard to change, but this is something which would be good to do. We do the same things year after year, then stop and stagnate and then become even worse, whilst others change, says Antonić. He also pointed out that a series of initiatives for decreasing parafiscal taxes have been initiated during the past two years. Some results are already visible, but there is much room for improvements.

One of them is certainly political stability. To be a member of the EU and be in the market of 550 million people is a factor which increases security. The same thing applies with NATO membership. When Croatia enters the Schengen area and the Eurozone, the flow of goods and capital will be easier both to and from Croatia.

The recently amended Act on strategic investment projects should contribute to their faster development. The new framework shortened the path from idea to project finalisation, which mainly concerns various permits, he said.

A TRANSPARENT AND EFFICIENT LEGAL SYSTEM IS CRUCIAL He also reminded that the Act on Investment Promotion has also been amended, and with around 900 applications during the past several years it has generated a lot of investment, and has been recognised in the EU as being one of the best.

The Commissioner of the General Justice Policies and Judicial Systems from the Directorate of the European Commission, Niovi Ringou,

said that the EC has been stressing for many years that a good and efficient legal system is crucial for creating an investment friendly environment. A good and efficient legal system should be independent and at the same time ensure quality decision-making and efficiency, said Ringou. She also said she supported its members in their attempt to improve the judicial system through EU subsidies for implementing the related reforms.

The President of the Croatian Business Angels Network and Deputy of the Croatian President, Davorin Štetner, thinks reforms start with drastic cost cutting by the employer and the mentality is changed by creating a transparent business framework. A transparent frame-

WE DO THE SAME THINGS YEAR AFTER YEAR, THEN WE STOP OR STAGNATE AND THEN WE BECOME EVEN WORSE, WHILE OTHERS CHANGE, SAYS ANTONIĆ work is what we need. Therefore, we need rules which do not change as well as tax relief on salaries. It is somehow always stressed that employers are those who are adamant about not wanting to increase salaries. I could say that relief in that area would make it possible to increase salaries and that every amount taken from the back of the employer would result in higher nett salary for the employee, he concluded.

July 2018 | No 282 | PVinternational | 23

A STORY WITH A MORAL TIE ME, Zagreb

UNIQUE TIES Customers are delighted with these handmade products, of Croatian origin. They are interested in high quality products, used for special occasions, behind which there is a fascinating story. In addition, the opportunity of personalising them provides them with added- value, pointed out Vanesa Tipura piše Jozo Knez knez@privredni.hr

W

hen the Croatian Light Cavalry during the Thirty Years’ War (1618-1648) appeared in France, no-one could have imagined the consequences on fashion during the ensuing years. It is well-known that the French have taken over the necktie, as a fashion accessory, from the Croats. It is now an unavoidable item of men’s and occasionally women’s clothing. During the that war, waged

THE IDEA BEHIND IT WAS TO PROVIDE A TRADITIONAL CROATIAN PRODUCT, ALBEIT SLIGHTLY MODERNISED AND PRESENT IT TO A YOUNGER POPULATION, STRESSED VANESA TIPURA across Europe, Croats used to tie their collars using a scarf, which was named by them as cravate by the French. Since French soldiers were delighted with this fashion accessory, they started wearing it and after the war the tie spread throughout Europe. Subsequently,

a large number of variations on this fashion theme appeared. Thus, at the beginning of the 19th century, bow ties appeared and became an unavoidable item of men’s clothing. At the beginning of the 20th century, this small fashion accessory was included in women’s wear, introduced by film stars Audrey Hepburn and Marlene Dietrich.

The bow tie is not only an accessory worn with a suit for formal occasions; it has become an unavoidable clothing item, whilst its styles, colours and patterns are designed in order to meet the needs of all. As Croatia is a country that can be held meritorious also for the design of a bow tie, it is not surprising that there are successful bow and necktie Croatian businesses.

“Tie Me is a brand in the hand crafting of fashion accessories, mainly men’s and women’s bow ties, pocket-squares and recently, neckties. The idea behind it was to provide a traditional Croatian product, updated, and present it to the younger population. The project was developed whilst I was a student, when I decided to launch my own business together with two friends from university and to become an entrepreneur. I am self-employed and have three members of staff on a student employment contract basis, who help me in my handicraft business”, explained Vanesa Tipura.

JAMES BOND BEHIND THE CONCEPT According to Vanesa Tipura, the idea for the business was defined during a night out.

Notwithstanding that it may not have been the best time for great ideas, this one proved both inspirational and successful. “During a James Bond themed dinner party, several girls appeared on stage wearing suits and classic black bow ties. This interesting fashion accessory immediately attracted our attention and we decided to include it in our wardrobe. Un24 | PVinternational | July 2018 | No 282

fortunately, we were soon disappointed when we realised that it was almost impossible to find it in stores, especially in one’s favourite colour, pattern or design. Consequently, the idea to become personally involved in hand crafting of this product resulted from trying to meet our own requirements. Since the appearance of our products was appealing and effective, we started making them for our friends and thereafter our bow ties became popular through word-of-mouth”, she remembers.

Notwithstanding the fact that her colleagues used to help her during the product launch, Vanesa Tipura is the person behind the project. “Three students help me with the business and, although I launched the brand with two friends from university, they decided quit.

So, I became the sole person responsible for brand maintenance and growth. Irrespective of the fact that I graduated from the Faculty of Economics, I have always had the urge to express myself through creativity. I have been making jewellery and remodelling clothing from a young age in order to have different and unique items. This hobby eventually resulted in the building of a brand, which has now marked its fifth anniversary”, stated Vanesa Tipura.

“We use unconventional materials for all our products, such as lace, leather and feathers, amongst others. Our first necktie collection has recently been presented and we are planning to focus on it in the forthcoming months”, she emphasised.

The design was provided by those who launched the brand, yet inspiration originates from both their surroundings and materials. “Most women’s models were designed from the start when the brand was launched.

We provide ideas and design everything ourselves, finding inspiration most frequently whilst moving to meet our personal needs for a different fashion accessory. Moreover, we are frequently inspired by new fabrics or materials that we come across. We normally use imported fabrics, although occasionally we manage to find adequate fabric in Croatia”, stated Vanesa Tipura. The success achieved by the bow ties is also due to social media, which merit most of our sales. “In addition to social media, which made it possible for us to reach a large number of customers who can see our products and place orders, we also sell through our online store, as well as at our workshop”, she pointed out.

PERSONALISED PRODUCTS Customers are delighted with new ‘modernised’ bow ties. When they find out that it is now possible to personalise these items, they are exhilarated. “Customers are satisfied since these are both handmade products and a Croatian creation. They are interested in high quality products, used for special occasions, behind which there is a fascinating story. In addition, the opportunity of personalising them provides added-value. Through personalised details and text, the bow tie becomes a wonderful gift that will always be a reminder of specific moments”, she pointed out. Since they are involved in production of personalised items, customers frequently provide their own materials. “Most frequently a best man and a maid of honour aim to co-ordinate their appearance. In that case we make a bow tie using the material used for the maid of honour’s dress to match their clothing from the fashion aspect, create some harmony and make an additional connection between them.

Customers occasionally bring us their favourite neckties, which we remodel into bow ties and in this way they can preserve and reuse them”, said the owner of the brand Tie Me. Since the launch of Tie Me brand, there have been several brands following a similar path.

Nevertheless, none of them are currently still operating. “Croatia can be considered as our indirect competition, since its product range includes similar items, yet its target group is different”, she said. Finally, she announced the global market penetration of her business and expansion of both the team and the product range.

I have been making jewellery and remodelling my clothing from my youngest age in order to have

different and unique items.

This hobby eventually resulted in the building of a brand, which has recently marked its fifth anniversary.

Vanesa Tipura

July 2018 | No 281 | PVinternational | 25

PRIVREDNI VJESNIK

BUY CROATIAN INITIATIVE IN RIJEKA

CROATIAN PRODUCTS AT THE FIUMANKA REGATTA The ‘Buy Croatian’ initiative is extremely important, as it has been raising awareness of buying locally produced goods for over two decades, stressed Zaher by Krešimir Sočković The Croatian Chamber of Economy organised the ‘Buy Croatian’ initiative on the waterfront of Rijeka. In addition to the presentation of the Croatian economy, the promotion of the holders of Croatian Quality and Croatian Creation labels, as well as all other high quality Croatian products, the initiative was implemented during the traditional international sailing regatta Fiumanka.

The ‘Buy Croatian’ initiative is extremely important, as it has been raising awareness of buying locally produced goods for over two decades. Buying local products results both in job preservation and the creation of new jobs, pointed out the Vice-President of the Croatian Chamber of Economy for Tourism, Trade and Finances, Josip Zaher, during the opening ceremony. “Over 130 exhibitors will be showing their products, some of which are holders of quality labels awarded by the Chamber. These are products with a 63% higher probability of being included in the market basket”, added Zaher.

More optimism and enthusiasm, as well as larger quantities of locally produced goods available on store shelves in retail chains are imperative, according to the Deputy Mayor of Rijeka, Marko Filipović. “I hope you will decide to buy 26 | PVinternational | July 2018 | No 282

at least some of these products and contribute to the development of SME’s, which are the backbone of our economy”, emphasised Filipović.

BUYING LOCAL President of the Assembly of PrimorjeGorski Kotar County, Erik Fabijanić, pointed out that the County supports activities such as the ‘Buy Croatian’ initiative through its Centre for Agriculture and Rural Development. “A special focus will be placed on the promotion of local

the County”, reiterated Fabijanić. The CCE has been implementing this initiative for 21 years, working to stress the importance of the promotion of top quality local products, which are holders of Croatian Creation and Croatian Quality labels. The initiative has made a major breakthrough in raising awareness of buying locally produced goods. According to latest research conducted by the CCE, 78% of the general public focuses on buying Croatian products, whilst 86% of them are prepared to spend more for a

MORE OPTIMISM AND ENTHUSIASM, AS WELL AS HIGHER QUANTITIES OF LOCALLY PRODUCED GOODS AVAILABLE ON STORE SHELVES IN RETAIL CHAINS ARE IMPERATIVE, POINTED OUT FILIPOVIĆ produce from family farms and the joint appearance of such farms on the market. Consequently, we have built a brand intended to bring together all producers and, in addition to conveying the message to ‘Buy Croatian’, I would also encourage you to buy local produce from

high quality local product. After Vukovar and Rijeka, the initiative will be implemented in Zagreb and Bjelovar, whilst a specialised project Buy Croatian – Croatian Products for Croatian Tourism will be implemented by the end of the year in Zagreb.