Arriving with the storm

february 17th - february 29th

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feature / Kukuriku Orchestra Marching With a Thump: the 2012 Budget Is Finally In politics / The Strangest Post-Election Period: Circus à la Slovène legal / b&h Council of Ministers Finally Confirmed: But What Now?

south east europe · a fortnight in review no.01 / subscription only / 17 february 2012 th

interviews / h.e. Ahmet Yildiz: Ten Minutes with the Turkish Ambassador to b&h

ARRIVING WITH THE STORM

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february 17th - february 29th

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content

introductory epistle

Arriving With the Storm

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fortnightly news

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The Economy Of General Interest

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fortnightly feature

Kukuriku Orchestra Marching With a Thump: the 2012 Budget Is Finally In

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in the margin

Just say Yes:Croatian eu Referendum Ultimately a Success 16

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politics

The Strangest Post-Election Period: Circus à la Slovène

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legal

b&h Council of Ministers Finally Confirmed: But What Now?

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interviews

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H.E. Ahmet Yildiz: Ten Minutes with the Turkish Ambassador to b&h

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Serbia's Agency for Regional Development: Doing It Right

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editorial

A Serbian Wake-Up Call

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A Lingering Cloud over the cee Economies

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real estate

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Belgrade–Zagreb-Sarajevo Office Space

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finance

Serbia Tax Snapshot

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Croatia: Electronic Tax Return Submission

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around the globe

The Scottish Question

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destinations

The Feast of Saint Blaise 44

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good stuff

A Man's St Valentine’s…

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to do list

50

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february 17th - february 29th

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introductory epistle

Arriving With the Storm

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elcome to the first issue of see: A Fortnight in Review, and we hope that you might receive this magazine with the same thing in mind as we had whilst deciding to launch it. It cannot be denied that there are common cultural, linguistic, political, and, most important of all, economic ties between the countries in this Region, and by “this Region” we mean the former Yugoslav basin. As a natural continuation of Croatia: A Fortnight in Review, we also hope that our Croatian readers might respond well to this upgrade, and as for the rest of you – in Serbia, b&h, and Slovenia – we can only wish you a good first read. For the record, further expansion into Macedonian, Montenegrin and Kosovo markets is planned for q4 of this year.

Writing an introduction for a first issue, especially the one dealing with current economic and political affairs across a gamut of different countries, must be one of the hardest things in journalism. For where does one start temporally, and how does one adjust the general editorial approach in such a manner as to accommodate the different statuses the countries in

this region have? At least – being an English language publication – we’ve managed to circumvent the long arm of sundry local “linguistic” regulators.

We had an eventful January, and even February, especially on the political front, leaves little to be desired, as the arrival (and return) of many regional politicos has coincided with the snowstorm – or with these rather extreme weather conditions we’ve been facing for some time.

The same is true of our own launch which, for that matter, we had to postpone twice.

As could be expected, troubled by the

prospect of having (pardon, wanting) to write for an audience who, by definition, will have been well acquainted with the goings-on in the countries where they reside but not necessarily in the rest of the Region, we have decided to take the middle road: for some of you, certain explanations and parenthetical remarks will seem superfluous, but bear in mind that they will be instrumental to your colleagues in other countries. Be that as it may, we shall always insist on substance, as I believe we have done in this first issue, more politically coloured and, for lack of a better phrase, generic, than will be the case in the future. But, with the formation of no less than three governments (in this order, Croatia, Slovenia and b&h) and an eu referendum, we had very little choice as concerns to the principal subject matter.

Many thanks to our contributors, all of them top professionals in their fields of expertise, and all I can add is, “Let the games begin”, hoping, of course, that most of you will decide to subscribe after the initial two month grace – or gratis, if you will – period has expired.

impressum

editor-in-chief Igor Dakić igor.dakic@see-magazine.eu executive editor Lee Murphy graphic editor Ivor Vinski art editor Stiv Cinik sub-editors Dylan Alexander (Slovenia) Milan Milošević (Serbia) Aida Tabaković (B&H) Miroslav Tomas (lifestyle)

expert contributors Paul Suchar (tax & financial) Igor Lončarević (tax & financial) James Price Chuck (M&A) Maja Šahbaz (real estate) David Boruta (real estate) Ivana Marić (politics) Jerko Markovina (politics) Marc Dukanac (defense) Paul Bradburry (culture) photography Mens-Libera Photo, Shutterstock, IStock, SEE Photo printer Tiskara Radin Gospodarska 9, Sveta Nedelja, Croatia

director Igor Dakić igor.dakic@see-magazine.eu sales & marketing (cro & slo) Miroslav Tomas miroslav.tomas@see-magazine.eu + 385 99 7357 356 sales & marketing (serbia) Miša Milošević misa@see-magazine.eu + 381 63 223 334 sales & marketing (b&h) Amela Tanović amela@see-magazine.eu + 387 63 691 393 publisher Mens Libera Media d.o.o.

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fortnightly news / the economy

imf on a balkan tour

serbia telecommunications

Croatians will be expected to tighten their belts as the new government seeks to make savings across an overly inflated Public Sector, and maintain confidence in the international financing markets. Having delayed their visit because of the December elections, the imf have finally arrived in Zagreb, and are expected to give a glowing report as the government has just announced substantial cuts, totaling €600 million in an effort to reduce the deficit. It is imperative that the government keep the markets stable until July 2013, when accession to the eu is expected to lead to a marked boost and economic growth. Furthermore, so as not to make them feel left out (following their trip to Croatia), the imf will also be entering talks with Serbian representatives over the coming weeks. The Serbian delegation, which will include members of the banking sector as well government officials, are simply seeking to ensure a lasting stability of the Serbian economy, which will also help with the eu accession talks which are due to start shortly.

After the Croatian Government announced further taxation on telecoms (3%), news from Serbia emerged that Telekom Srbija had recouped 20% of its own shares from Greek company ote. The Serbian Government still own 80% of the shares and are seeking a purchaser. The company is valued at almost €2 billion, but with the global recession buyers are thin on the ground, especially after Deutche Telecom decided against the acquisition a few years back. As the Serbian economy improves, it is hoped that Telekom Srbija will prove an attractive prospect once more.

unemployment in croatia set to increase The banks, not for the first time, are taking a different line from that being peddled by the current government. Whereas the Croatian Prime Minister, Zoran Milanović, feels an eight billion Kuna investment plan will help revitalise certain aspects of the economy and attract new investment, the banking sector is not quite so confident. Deputy Governor of The Croatian National Bank (hnb), Relja Matić, suggested that currency fluctuations and general malaise in the markets would ultimately lead to a further recession, adding to the unemployment figures. The unemployment rate in Croatia is currently over 18%.

agrokor expansion into slovenian market collapses Following protracted negotiations and maneuvers from both parties it had appeared that Agrokor’s purchase of the Mercator chain was likely to go ahead; however all of has changed in recent days. Despite having spent several weeks in negotiations it was the likelihood of several more weeks spent that sank the deal. Agrokor felt it would be detrimental to their overall company brand to have their resources tied up attempting to reach a finalised buyout deal with Mercator shareholders. While some elements of Agrokor will be disappointed that the takeover ultimately failed the Slovenian retail chain will breath a small sigh of relief as they seek to strengthen their own business to prevent any possible future bids. Mercator had looked at buying Pivovarna Laško late last year and perhaps that deal will be revisited at some point.

serbian steel mill (re)nationalised US Steel, formers owners of the steel mill in Smederevo, announced recently that they were being forced to pull out of the European market due to the global economic climate. Having first purchased the company in 2003, they handed over the keys to the State who will have stepped in to prevent any job losses. Serbia already has an uncomfortably large unemployment crisis, and the mill closure will add over 5400 to that, with the local impact leading to further job losses in the town itself.

Serbian Prime Minister Mirko Cvetković was quick to note that the company would not stay nationalised for long, and that they were already seeking a strategic partner who would be willing to take over the mill.

b&h economy and environment: a joint boost It has been announced that a wind-farm, consisting of 20 horizontal-axis turbines is to be built on Mount Vlašic, in the Municipality of Travnik. Costing in excess of 100 million eur, the project is being implemented

by Elektroprivreda BiH and Eberkon, who will each build 10 turbines. It is expected that the endeavour will contribute to the job market, and presumably aid in the education of future students in ‘green’ engineering. Any contribution to the actual energy market might yet be minimal, as Bosnia is still not seen as a prime location for such enterprises.

copper plant for bor Copper, though, might be a different story, with the Harsco Corporation having invested 20 million euro in a plant in Bor, in eastern Serbia. Harsco, who utilise green technology, will be recovering copper from over a century’s worth of waste material from the previous mine which operated in the area. While the initial investment is likely to see only 60 new jobs created, it is hoped that this will increase on a yearly basis.

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same old, same old, as state companies shell out overtime pay You wouldn’t think there was a global recession the way that hep and hrt are throwing around money. Both state owned companies paid out in excess of 8.2 million Kuna for less than 150,000 hours of overtime, approximately 56 Kuna per hour. While moves are afoot to prevent such future largesse it still underlines the strengths of the unions involved; if so many hours of extra work were needed why not simply hire extra staff?

Croatia is not unique either as other state owned broadcasting companies across Europe exhibit similarly blinkered viewpoints in the face of badly needed austerity.

slovenian air company in trouble Adria Airways Tehnika, the former maintenance division of the Slovenian national airline Adria Airways, is in deep financial difficulty following the bankruptcy of its client, Spanair, which accounted for almost 30% of its business. Given that the company was already in a precarious position the future looks very bleak, unless they can attract replacement business, or perhaps find a buyer.

croatian shoemakers to get a kick up the backside Austrian shoe manufacturer Paul Green is to open a new factory in Croatia in 2013, employing at least 200 people. Paul Green manager Bojan Rezonja was quick to praise the Croatians for their history in the industry: “The shoe industry was developed here”, he went on to explain why they chose a European site over outsourcing further afield, “(We had) been thinking about a strategic position nin europe for some time now, because we have never compromised and manufactured shoes in China or the Middle-East; we decided on Croatia.” Producing over two million pairs of women’s shoes annually, Paul Green coming to Croatia may be seen as a major vote of confidence in the Croatian economy.

sale of split winery looks unlikely American businessman Salamon Berkowitz will not be buying the Split winery Dalmacijavino after both parties were unable to reach an agreement. Berkowitz claimed that the winery was seeking to change the details of the contract to which he agreed some months ago. On the other hand, audio, the Croatian state company responsible for the tendering process, claimed that Berkowitz was yet to offer any substantial bank guarantees which might show there was funding in place to revitalise the company. Unless an alternative purchaser can be found it is expected that the winery will be declared bankrupt and the workers left unpaid and jobless.

fdi drive in macedonia The Macedonian government believes that recent changes in bureaucracy and redtape will help in their efforts to attract a significant increase in Foreign Direct Investment (fdi). While fdi has been on the up since 2009, a year after the global recession nearly crippled the country; it is still yet to match the 2008 figures, much less the 2007 figure of €500m. While not naming names, it was inferred that almost a dozen large firms were expressing interest in coming to Macedonia. Prince Michael of Kent was recently in the country leading a business delegation from the uk, while there are also plans to take a business expo on the road in order to showcase the advantages of setting up in Macedonia. Turkey, with its phenomenal growth, is a key target for government officials, who hope to sell the Bundarzik free economic zone as a launchpad for future expansion into Europe.

disused mining operation to be reopened in montenegro Australian mining company Sultan Corporation has announced plans to reopen an idled mine at Brškovo in Montenegro. Sultan acquired a 25-year lease on the mine for a criminally nominal fee of 120,000 eur. The price can be considered a literal steal since the mine has a history of output, plus an established infrastructure. Mining is expected to commence within four years, but given the low corporate tax in Montenegro (9%), one must wonder if a better solution wasn’t available to the Montenegrins. Still, who was it that said that governments are poor entrepreneurs, whether running or selling?

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fortnightly news / of general interest

trouble for hdz as uskok announce further investigation

moves to clear illegal buildings in kosovo not an attack on religious freedom

When it rains it pours, as Jadranka Kosor, the leader of the Croatian Democratic Union (hdz) and former pm herself faces new allegations in the (in)famous slush fund case. While Kosor claims that any money involved would have fallen under the remit of Party Secretary Branko Bačić, it is difficult to believe that any party leader would be as oblivious as to the origin of their finances. This isn’t the first time that hdz has come under scrutiny, with Ivo Sanader standing trial for corruption and illegal financing charges. During those investigations, while Kosor’s Presidential campaign was a matter of interest to the authorities, Kosor herself was not. It should be expected that these matters might also be revisited.

Should the recently ousted pm be discovered to have known about the money and its alleged sourcing, then she may well be facing gaol-time alongside her predecessor.

In excess of 100 mosques have been erected across Kosovo without any form of planning permission, and while authorities are talking about ways to deal with these buildings they have spoken at length to ensure that such moves are in no way motivated by religious bias. Such disregard for the planning process has been endemic in Kosovo since the end of the war and certainly not confined to places of worship. Mayor of Gjakova Pal Lekaj stated that “we are awaiting approval of a law on how to handle illegal buildings, and then all illegal buildings, together with mosques, will be reviewed.”

croatia: rtl off air While there can be no denying that Croatian television regulations can be, at best, inconsistent, the relevant authorities, the Council for Electronic Media, have stood their ground in a recent dispute with rtl. rtl Croatia was taken off air after refusing to act upon instructions from the Council with regard to the airing of Serbian movies; specifically that such movies should be subtitled in Croatian, since that they count as foreign programming. While rtl feel that there is no need to subtitle such output, since the languages are almost identical, the Council persisted. Who knows, perhaps the next time we switch on the telly to watch, say, The Battle of Neretva, we’ll have the rare treat of seeing the subtitles when some characters speak, and not seeing them when others speak – in what was then the same language?

elephant in the room to be dealt with by croatian and serbian summit Relations between neighbours Croatia and Serbia might see some further improvement as the Croatian Foreign Minister, Vesna Pusić, called for deeper cooperation between the two states. There are currently three outstanding issues to resolve; stolen property, missing persons, and war crimes.

Pusić pointed out that much of what had been stolen or appropriated during the conflict was already retrieved; she also said that “no one is denying the existence of missing persons”, and that the perpetrators of war crimes committed during the war are already known. It is hoped that an official state visit to Belgrade might lead to both governments choosing to drop mutual genocide lawsuits, which would help the process of reconciliation between the two states, so badly needed even in the wider region. All of this comes in the same week when further sentences were handed down to five Bosnian Serbs, found guilty of murder in 1992, and the same week when an appeal date was set for Croatian Generals Gotovina and Markač, currently serving 24 and 18 years, respectively, in The Hague.

talks to continue between kosovo and serbia Cool heads will be called for as the leader of Kosovo, Prime Minister Hashim Tachi, looks to meet Serbian President Boris Tadić.

Tachi told the media that Serbia needed to understand that Belgrade was no longer in charge in Kosovo, and that internal policy would be decided upon solely by the Kosovo government. How much of this is sabre rattling, or playing to the masses, remains to be seen, as it is understood that both men have met on a few occasions in the recent past. With both nations hoping to begin talks with the eu in the coming year, suits in Brussels are hopeful that Belgrade-Priština relations might become more cordial.

sporting fever over The Balkan Peninsula has started 2012 with a bang, this time of a more pleasant nature.

Serb Novak Đokovič took 5 sets to defeat Spain’s Rafa Nadal in the final of the Australian Open Grand Slam event. Djokovic appeared down and out during the fifth and final set, barely able to react to Nadal, but he rallied and ran out the eventual winner, 5-7, 6-4, 6-2, 6-7, 7-5. Serbia also hosted the Men’s European Handball Championships last month, but fell short in the final match as Denmark took the title. The Croatians, having been eliminated by the Serbs in the semi finals, were able to overcome Spain in the bronze medal match.

However, the event did not go off without a hitch as Croatian fans were attacked by their Serbian counterparts following a match in Novi Sad. Cars were demolished and, according to eye-witness testimony, even knives pulled. Still, we won’t read too much into it, as we hope that such matters will continue to improve in the future.

Lastly, things went swimmingly well in the Netherlands, as Balkan dominance in water-polo continued. Defending champions Croatia were unable to retain their title, but the trophy did remain in the region as Serbia edged Montenegro 9-8 in a thrilling final.

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serbia takes the fight to the zemun

balkans catching the europe bug

Serbian's position on criminality took on a new light recently as several members of the notorious Zemun gang were arrested in Spain, and are expected to be extradited back to Belgrade shortly. This is in stark contrast to the authorities' earstwhile 'inability' to apprehend known war criminals.

Luka Bojović, Vladimir Milisavljević, Siniša Petrić and Vladimir Mijanović will all be tried for varying criminal activities, as well as any potential war crimes committed during the war; Bojović was reportedly a member of Arkan’s notorious Tigers and his arrest might lead to further prosecutions. This follows an attempted prison break in Belgrade, where Sretko Kalinić and Željko Milovanović sought “early release”, but were foiled in the process. A number of prison guards were also suspended and placed under arrest pending an internal inquiry into potential collusion, as it is unclear how Milovanović and Kalinić were "permitted" to saw through solid steel for days on end. It would be a major embarrassment for the Serbian penal system was it to emerge that the Zemun had undue influence on their gaolers.

I’m sure everyone is sick to death of the campaigning in Croatia with regard to the European Referendum, but it all begins again in earnest in Serbia and Kosovo over the coming weeks. As we speak Kosovo has started talks on visa liberalisation, with a view to entering the Schengen agreement, the European Union’s passport-free zone.

This will be of huge logistical importance as Serbia, Macedonia, Montenegro, and Bosnia & Herzegovina are all already members. In Serbia the Government has emphasised its commitment to a series of reforms in order to meet standards for eu accession.

alexandria the great municipality?

Relations to the far South East are due to get more complex as calls have been made to rename the Skopje municipality, currently called Centar, after that most famous of Macedonians, Alexander the Great. Todor Petrov of the World Macedonian Congress has suggested that the only logical step is to change the name from Centar to Alexandria, since the area already houses a giant statue of Alexander and is soon due to play host to an equally imposing figure of his father, Phillip of Macedon. However, not everyone is as eager for such an event to occur; Greece has long been contending that the name ‘Macedonia’ should only be used to identify the Greek province of the same name, not to mention the fact that both nations have differing views on the history of the original Macedonia. As we all know, this is a serious issue between both countries, so much so that many Macedonians refuse to refer to the statue of Alexander as anything other than “The Horse Statue”. Greece has already blocked moves towards Macedonian memberships of the eu and nato.

lack of political accountability likely to tarnish outgoing b&h government The Bosnian Council of Ministers has opened a hornets’ nest by stating that the Government was not considering any action in relation to allegations regarding Foreign Minister Sven Alkalaj. On the night of January 15th Minister Alkalaj’s state car was involved in a collision with another vehicle in the centre of Sarajevo. Police records showed that an individual, s.a., was under the influence of alcohol, and that the other driver, a female only known as m.b., was found to be completely sober. Alkalaj claims he was on his way to the Foreign Ministry at the time of the incident, but he also gave local journalists an interview in which he said that he had not been drinking, something which is clearly under debate given the police evidence.

off season tourism seen as a priority The Croatian tourism industry is hoping for a boost in off season visitors following an announcement by Veljko Ostojić, Minister of Tourism. Facing a reduction in his annual budget Ostojic said that there is to be a concerted drive to increase tourist numbers over the winter and off-peak seasons, though not at any overall cost to the traditional holiday periods of July and August, trusting that Croatia remains high on anyone’s choice of destination without the need to be swayed by glossy, printed, ephemera. Dubrovnik, already a top pick for many Western tourists, is currently home to one of TV’s best shows, A Game of Thrones.

With a further two seasons being announced for the show, it could reasonably be expected that the region will benefit from the inevitable influx of those wishing to tread the footsteps of their favourite characters.

orašac murderers brought to account The Bihać Cantonal Court has found 5 men guilty of the 1992 murders of 25 Bosniak villagers in Duljci and Orašac. With so much of the recent talk between Zagreb and Belgrade aiming to mend relations between the two countries, there will be some small comfort in that at least one more of the past atrocities has been addressed by the (oftentimes too slow) long arm of justice, this time in b&h. Having been sentenced to a combined total of 56.5 years in jail, the five men (Jovica and Zoran Tadić, Zoran Berga, Željko Babić and Goran Mihajlović) expressed deep regret for their actions. In addition it has been revealed that they have agreed to aid State Prosecutors in identifying other, as yet unknown, war criminals still at large.

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fortnightly feature

Kukuriku Orchestra Marching With a Thump: the 2012 Budget Is Finally In The Croatian Cabinet has been around for a whole month, and the honeymoon is over – as everyone knew it would be rather swift this time round. As harsh economic (and budgetary) realities press hard on the country that, some would have it, should be experiencing at least a measure of euphoria on account of the successful eu referendum and impending 2013 eu berth, will Finance Minister Slavko Linić’s cuts suffice, or are we looking at another case of mere ‘cosmetic surgery’? Whatever the case, the march continues…

By Igor Dakić

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hen the ‘left wing’ Kukuriku Coalition (named, actually, after a restaurant in Istria, not in onomatopoeic imitation of a rooster’s crow), composed of the Social Democrats (sdp), Croatian People’s Party (hns), Istrian Democratic Alliance (ids) and the Pensioners’ Party (hsu), took the victory in the early January parliamentary elections, thus ending eight years of Croatian Democratic Union’s (hdz) rule, few were surprised. Then, as is the custom, the victors took to forming the cabinet, but mild bickering between pm Milanović and President Josipović as to who would run the Defence Ministry notwithstanding, the process did not take long and was in fact curiously amicable – given that there were as many as four parties involved . Then came the eu referendum, and, as the low turn-out at the

polls would suggest, Croatians ostensibly had other things on their mind. In other words, everyone – especially the media and all those innumerable special interest groups roaming en masse the territory of the Republic of Croatia – was waiting for the 2012 Budget to come in.

cuts and bruises Like pretty much all transitional economies possessing, historically, the legacy of the socialist experiment, Croatia too finds it difficult to deal with (relatively) new free market realities on one hand, and the tremendous pressure brought on the Budget by a whole plethora of acquired rights on the other. Social giving has been indiscriminate for two decades running, and now that we’ve stated the obvious, we shall state another obvious thing:

lest Croatia become the new Greece, major interventions are needed, and such interventions as would turn the tide not only fiscally, but also in terms of changing the mentality of a population easily recognisable for its awfully strong sense of “entitlement”.

The Croatian Finance Minister, Slavko Linić, appears to understand this. Although he has managed – or was allowed – to “save” only 3.6 billion Kuna (the initial target figure was 5.4 billion), he has persevered in reducing or eliminating certain, under current economic circumstances, borderline controversial items such agricultural subsidies (all in all, subsidies have been reduced by 933 million kuna, or by roughly 15%), and Christmas and Easter bonuses for those employed in the State Administration.

In total, almost 2 billion has been

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PEOPLE IN CHARGE OF CROATIA’S ECONOMY

A COMPARISON: 2011 vs 2012 € 1 = cca. hrk 7.5 figures are in bns of Kuna

108.9 REVENUES

107.3

64.5

Radimir Čačić (hns) Minister of the Economy Born in Zagreb in 1949, and a graduate of Zagreb Faculty of Architecture. A businessman and an entrepreneur, and one of the co-founders of hns. Served as Party President for two terms from 1994-2000. Was Minister of Public Works, Construction and Reconstruction in the Coalition Government of 2000-2003.

Branko Grčić (sdp) Deputy Prime Minister, Minister of Regional Development and EU Funds Born in Knin in 1964. Holds a phd in Economics from the Split Faculty of Economics where he served as a tenured professor prior to becoming minister. Member of the sdp since 1999. Closer to the statist economic model.

Mirando Mrsić (sdp) Minister of Labour and Pensions Born in Split in 1959, Mrsić is a physician (holding a phd from the Zagreb Faculty of Medicine) who joined sdp in 2007. Member of Parliament from 2007-2011. A member of the Parliamentary Board on Information, Informatisation and Media. President Josipović's Campaign Manager in the 2009 Presidential elections.

Zlatko Komadina (sdp) Minister of Maritime Affairs, Transport and Infrastructure Born in Ljubljana in 1958. An alumnus of the Rijeka Faculty of Engineering. Member of the sdp since 1990. Prefect of Primorsko – Goranska county from 2001 until 2011. Party Vice-President since 2004.

Gordan Maras (sdp) Slavko Linić (sdp) Minister of Entrepreneurship and Crafts Minister of Finance Born in Grobnik, near Rijeka, in 1949. An Born in Zagreb in 1974, Gordan Maras gradeconomist by profession, he served as May- uated from the Zagreb Faculty of Economor of Rijeka in the period 1990-2000, and as ics and also holds an emba from the Cotrugli Vice President of the Coalition Government Business School. Member of SDP since 1997 between 2000 and 2003. In favour of major and Vice-President of the Zagreb branch budgetary cuts, especially as concerns state since 2009. Member of Parliament in the 2008-2011 Assembly. and local-level administration.

SPENDING

60.9

14.9% DEFICIT

9.9%

2011 2012

saved by reducing the mass of salaries in the public sector, and the ‘loss’ side of Croatia’s balance sheet is now estimated at 118.8 billion kuna, which spells a sub-3% deficit in terms of the gdp, which should be sufficient for Croatia to retain its hardly enviable credit rating (bb-). On the bright side of things, for the Government at least, we may mention that an agreement has been reached with the Croatian National Bank (hnb) and other bankers, whereby the State will borrow about 700 million kuna at an interest rate of 5.25%, which will help alleviate the immediate pressure.

However, a statement given by pm Milanović showed, to a nicety, all the contrasting and oftentimes paradoxical imperatives all politicians face, as he has called this Budget “realistic, ambitious with respect to fostering development, and protective of those most in need in this time of crisis.” For can, at least to some measure, a socially oriented budget foster development? Željko Rohatinski, the Governor of the Croatian National Bank, has expressed further concerns, as he is not sure that the projected revenues are realistic. In light of these developments, the increase in vat from 22% to 25% is not necessarily a bad move, provided, of course, that the new Government manages to do something in their fight against illiquidity. The real sector must breathe.

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pressure from all corners In an economy marked by a high degree of liquidity in the banking sector, and an even higher degree of illiquidity in the economy at large, Linić’s statement dating back to January, when he implied that he would “expect” the bankers to convert a portion of their financial claims towards (especially state) companies into shares, it is of little surprise that the bankers were the first to alight on Saint Marks’s Square in Zagreb to express their ideas before the newly appointed Cabinet. Then, followed the unions; panicking in the face of announcements that there would be changes and amendments to the Labour Law, which has thus far allowed endless prolongation of collective contracts, more befitting economies with double digit growth rates than Croatia’s (at best) stagnant one. The telecommunication industry had to have their say as well – reinforced by delegations from Austrian and German embassies – unhappy with the announced provision stipulating a further 6% taxation of telecom services. Then

PM Milanović remains rock solid. He must have known things would get rougher; he seems to be weathering the storm with a seasoned politician's acumen. came the food companies, reacting to Croatia’s abandonment of the cefta customs arrangements, which means higher duties; shipyards, looking for more subsidies); the fallen in need of restructuring (such as Varteks, Dalekovod etc.); and so on, in what looks awfully like a funeral

march. The only parties that have at least some reason to rejoice – although they too will undoubtedly complain – should be the pensioners, as the mass of pensions was actually increased by 275 million Kuna, and war veterans, whose relevant ministry was subjected to no cuts.

Indeed, pm Milanović, orchestrating the march, remains rock solid. He must have known things would get even rougher, and so he seems to be weathering the storm with a seasoned politician's acumen: not having promised either to give or take away too much during the election campaign, he knows what he can get away with, and which hornet’s nests not to touch. For now, we shall not criticise him – it appears that the sdpled government truly is doing something constructive in an impossibly complex situation. And let us muse on another Balkan – though not exclusively Balkan – paradox: though declaratively socialist, this Government may well turn out to be, in many respects, the most liberal, economically speaking, Government Croatia has ever had. Let us hope I am right.

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in the margin

Just say Yes: Croatian EU Referendum Ultimately a Success Croatia recently elected to become the 28th member of the European Union. However, while the yes vote was overwhelming, the turnout was abysmal. In fact very few actual Croatians voted yes once we look at the numbers. Does this morally invalidate the result? Does anyone even care?

Or was it such a foregone conclusion that it simply wasn’t worth the walk to the local polling booth?

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t has been over 20 years since Croatians took to the polls to answer a single question. The last time that they practiced this sort of democratic procedure they were asked to leave a union, while this time they were persuaded to join another union. Since the 12th century, the history of Croatia has been one of different political associations - kingdoms, empires, socialist experiments, all of which we entered more or less reluctantly, without any real choice; Croatia was, and is, a small nation that needed protection within a larger community. Only with these last two unions, people were able to decide via a referendum whether to stay, or whether to leave (Yugoslavia), and whether to join or whether to stay out (European Union).

The first referendum was a huge success, with 84% voter turnout and an overwhelming majority in favour of Croatian independence (94%). So, leaving a union proved to be an easy decision, even though it was followed by a ruthless war with many casualties, economic damage, and other consequences the effects of which are still lingering in Croatia’s society. The referendum to join the eu, however, inspired much less

By Jerko Markovina

Mr. Markovina has served as a research fellow and teaching assistant in the Department of Agricultural Marketing of the Faculty of Agriculture in Zagreb since 2001. He possesses a B.Sc. from the Philosophy Faculty and a MA from the Faculty of Agriculture, Zagreb (2009). His scientific interests include consumer behaviour and decision processes, behavioural economics and methodologies of market research. He is an alumnus of the JFDP programme at the Walton College of Business (U. Arkansas) and presently serves as the President of the U.S. Alumni Community of Croatia.

enthusiasm. Less than half of all eligible voters (43.5%) came to their polling stations and, of those that did vote, a healthy two-thirds majority (66.3%) voted in favour of Croatia joining the eu, something which will happen in July 2013.

Voter turnout in referendums (in this case regarding eu accession) very much depends on the social and political context at the time, as well as on the situation in the country concerned. Considering the current financial trouble that the eu finds itself in, it is hardly surprising that Croatia delivered a record-low voter turnout. Hungary, too, was another country where the voters did not rush out to vote on the eu (45% turnout), whereas other former socialist countries, voting in better times admittedly, fiscally speaking, recorded turnouts of 60-70%.

On the other hand, Denmark and Malta both managed to attract almost all of their citizenry to vote, with circa 90% voter turnout. It is also interesting to note that Norway, whose voters rejected eu membership twice (in 1972 and 1994) – to date the only country to have said no – had a very high voter participation (73% and 89% respectively), which suggests the theory that clear attitudes on the issue

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will result in high participation, whereas confusion and ambivalence tend to keep voters at home.

While referendums on eu accession rarely fail, there have been some cases where voters returned a very thin margin of approval; Sweden and Malta joined the eu with 53% of voter support, followed

by Finland with 56% of voters in favour.

The process of Croatian eu accession has been long, and involved many obstacles during negotiations. In that period the real debate, the pros and cons of joining, has been mostly absent from the public arena. All relevant political parties were enthusiastically in favour of the move, while euro-sceptical voices were mostly marginalised, or simply ignored.

However, in the fortnight preceding the referendum, there was a late surge of awareness by Croatian people who probably realised that the decision they were about to take was long-term, and a very serious one. Suddenly, public areas were awash with debate, discussion, argument, and haughty assertions, both rosy and grim, of how Croatia would be changed, changed utterly…

VOTER TURNOUT - 43.5%

No 33.7%

Yes 66.3%

This belated surge in would-be national pride, and eagerness to debate the situation, could be viewed with a modicum of disbelief as people who had hitherto expressed no interest in politics suddenly began to voice their opinions, and voice them with unrelenting passion. Social media outlets such as Facebook were used to coordinate this anti-eu effort, but it all smacked of desperation rather than of any real legitimate intellectual position. In the grand scheme of the eu campaign, which started many years ago, it was all too little,

Social media outlets were used to coordinate the anti-eu effort, but it all smacked of desperation rather than of any real legitimate intellectual position.

and definitely too late. It seems that all of the preceding issues, dating from 2001, such as the Stabilisation and Association Agreement, the protected economic zone in the Adriatic (zerp), cooperation with the Tribunal in The Hague, property rights for foreigners in Croatia – all passed over the heads of the indifferent and lethargic Croatian public and failed to inspire any level of public interest. The euro-sceptics, free to monopolise the media in the absence of any real yes campaign, did their best to convince the voters that the eu was a disaster waiting to happen, and they did so – although without success – with gusto.

But the question remains; what of the rest of South East Europe? Currently, the countries which were once collectively known as Yugoslavia are all seeking to make their own steps towards eu membership, despite the fact that most of them are in varying degrees of economic and political disarray. Ideally, Croatia should support them in these efforts, if for no other reason, than to have a more stable region.

Considering “Croatia’s long journey home” (as some politicians call it), one cannot help but be at a loss when it comes to offering any sound advice for aspiring members – apart from that one should start the debate process earlier rather than later.

What comes next is a logical question that was hardly ever debated, even though most Croatians simply knew – there being no other coherent alternative – that they were inevitably going to join the eu. As this piece goes to print the Croatian Prime Minister has already attended an eu summit. Admittedly he was only there as an observer, but he decided to take a more active role (call it proactive, or call it foolhardy) and pledged Croatia’s adherence to any such rules as may be agreed upon, even as Croatia waits to become a full member.

New fiscal discipline, imposed by France and Germany, but opposed by Britain and the Czech Republic, is clearly something Croatia has already agreed to without much discussion. It would seem that policy-making will continue to be a privilege of the political caste, and that the people will have to wait for a number of years to make another big decision. One can only hope that the next referendum will not be a question of leaving this European Union, a union (almost) everyone on the “Who’s who? List” in Croatia spent so much time and so much effort trying to join.

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politics

The Strangest Post-Election Period: Circus à la Slovène When we speak of Balkan politics all too often we can forget Slovenia. Good old European Slovenia. A bit like that family member who managed to exceed all expectations and limitations of birth… And like someone who grew up with all the drama we associate with Balkan politics, they now tend to be a little more balanced, a little more predictable; or are they?

By Dylan Alexander

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hock win in Slovenia election, the bbc headline roared… who then meekly qualified their exuberance by adding, “early results show.” What really shocked was the paucity of headlines abusing the potential punnery stemming from the leading left-wing party, and pretenders to the throne, Positive Slovenia (ps). However, the leader of this party, one Zoran Janković, seemingly had his heart on bringing a degree of levity to the proceedings.

Zoran Janković

It definitely appeared that Janković would be Slovenia’s newest Prime Minister once the tallies were in; Positive had secured 28.5% of the vote, returning 28 deputies.

28 out of 90 was a nice return, especially when you consider that the party was only formed in October of last year. Janković, formerly Mayor of Ljubljana, looked set to sail home, driven by the ever proverbial winds of change. The outgoing Government, ostensibly the Social Democrats (sd), led by Borut Pahor, experienced a

much heralded collapse, and saw their 29 seats quickly become 10.

number crunching With there being only 90 seats in the Slovenian Parliament (88 if you rather harshly omit the singular Italian community seat, and solitary Hungarian seat allowed for by law) the permutations were very straight forward. Only the Slovenian Democratic Party, led by Janez Janša, and holding 26 seats, could offer any alternative.

Yet it was clear that the popular mandate lay with Janković, and it would be his prerogative to form the new Government.

Already it was common knowledge that he had the support of the Social Democrats, Gregor Virant’s Civic List (lgv), and the Democratic Party of Pensioners of Slovenia (desus), and this grouping would return a majority of 52, comfortably over the required 46. However, the world of politics is never far from controversy, even in Slovenia. Doubts began to surface over Janković’s political manifesto (which used the slogan “Positive Change”); on the surface it appeared wonderfully egalitarian: 4% growth in gdp, and no more than a 3% budget

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On February 10th, 2012, Janez Janša was sworn in as Prime Minister, but at what price? for Prime Minister yet again. Following Janković’s defeat in the first vote, it was suggested that there was a third option, mirroring that of neighbouring Italy, a technocrat. Marko Voljč, former chairman of nlb, the largest Slovenian Bank, was reported to have been considered for the position of Prime Minister, and would have been nominated for the post had there been more consensus amongst the parties. Janković, who would presumably be in Government should Voljč succeed, was in favour; Janša, who would surely face a further term in opposition, was opposed. While there are those who feel a technocratic Government is more in touch with the stark realities of day to day life, clearly politicians have more awareness of career-mortality than we give them credit for. Voljč was quietly dismissed as a potential candidate.

Janez Janša

deficit. Of course the latter is eu policy, policy which is being enforced in recent times, while the former is simply common sense. Still, those words fell sweetly upon the ears of the electorate, who were ever fearful for their domestic economy – export driven – which was suffering from the global downturn.

currying favour It soon became clear that Janković, while a former mayor, was unused to the cut and thrust of national politics, with his party a disparate group of individuals rather than a consolidated unit. His four-party alliance soon became three as the lgv (a centre left party) decided to withdraw, leader Gregor Virant citing ideological differences. Indeed, when it came to voting for Prime Minister, Janković appeared to lose the support of some individuals within the Social Democrats, the party to whom Positive Slovenia were natural, and political, successors. With such disarray on the left there was an opportunity for Janša’s sds to attempt and salvage a result.

However, the Slovenian President, Danilo Türk, was clearly not inclined to allow Janša an opportunity to stand

end game Janša, who had overseen previous economic growth while serving as Prime Minister from 2004-08, was able to come to an agreement with the rebellious lgv, as well as desus, sls and New Slovenia: Christian People’s Party (nsi), who held 10, 6, 6, and 4 seats respectively. Despite having the initiative, Janša was forced to give heavy concessions to his would-be partners, as it was they, not he, who held the key to any successful formation.

On February 10th, 2012, Janez Janša was sworn in as Prime Minister, but at what price? Despite the sds holding half of the seats in Government, they only have one third of all positions in cabinet. Each of the junior parties holds 2 portfolios, which is rather impressive when you consider the number of seats they hold individually. One could argue that this cabinet bears more of a resemblance to a National Government than to a de facto coalition, which could lead to great things for Slovenia. However, the portfolio ratio could also indicate a fear on Janša’s part that his Programme for Government is too weak, surrendering an undue amount of

SLOVENIAN GOVERNMENT Prime Minister Janez Janša (SDS) Minister of Foreign Affairs Karl Erjavec (DeSUS) Minister of Justice Senko Pličanič (LGV) Minister of Defence Aleš Hojs (NSi) Minister of Finance Janez Šušteršič (LGV) Minister of Interior Vinko Gorenak (SDS) Minister of Education et al Žiga Turk (SDS) Minister of Social Affairs Andrej Vizjak (SDS) Minister of Health Tomaž Gantar (DeSUS) Minister of the Economy Radovan Žerjav (SLS) Minister of Agriculture Franc Bogovič (SLS) Minister of Infrastructure Zvonko Černač (SDS) Minister without a portfolio (for the Slovenian Diaspora) Ljudmila Novak (NSi)

power to the other parties, specifically to lgv. Whichever it is, it is imperative that Slovenia experiences similar economic prosperity during this term as it did during Janša’s last stint in power; Janković, who, for a brief moment, stood to become the only, technically speaking, member of an ethnic minority in a Balkan country to run a Government (his father hails from Smederevo, Serbia, where Zoran too was born), is waiting in the wings should Janša fail.

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legal

B&H Council of Ministers Finally Confirmed: But What Now? The former Speaker of the American House of Representatives, Tip O’Neill, once said that a week was a long time in politics. If that’s the case, then just how long a time is 16 months – without a proper Government? Indeed, the Council of Ministers may have finally been confirmed, but Ivana Marić from the Konrad Adenauer Foundation is here to explain as well as to expose a number of failures in the implementation of election results and all the inefficiency of constitutional and legal frameworks in Bosnia and Herzegovina.

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he Agreement has finally been reached. Everyone was satisfied, and no one was satisfied – all at the same time. All the parties felt that they could get more (as they would), and that they, for lack of a better phrase, did not drive hard enough a bargain. The face that all these parties reserved for the public eye, on the other hand, was a completely different matter. Assuredly, smilingly, they attempted to let it be known that they had prevailed.

After Vjekoslav Bevanda, a Croat, was given the mandate roughly a month ago to serve as the President of the Council of Ministers – as a pm of sorts – these are the remaining candidates for the new Council of Ministers of Bosnia and Herzegovina that were approved last week by the House of Representatives of the Parliamentary Assembly: Ministry of Foreign Affairs: Zlatko Lagumdžija (Social Democratic party, sdp b&h, Bosniak); Ministry of Finance: Nikola Špirić (snsd, Serb); Ministry of Justice: Bariša Čolak (Croatian Democratic Union, hdz b&h. Croat); Ministry of Communication and Transport: Damir Hadžić (sdp b&h, Other);

By Ivana Marić

Ivana Marić has worked for the Konrad Adenauer Foundation since 1998, and she currently serves the Foundation in the capacity of a political advisor for Bosnia and Herzegovina, with a special focus on political education and democratisation processes.

She holds undergraduate degrees in administrative law and public administration (Universities of Osijek and Sarajevo, respectively), and a master’s degree from the Faculty of Political Science and Faculty of Economics at the University of Sarajevo.

Vjekoslav Bevanda

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Ministry of Foreign Trade and Economic Relations: Mirko Šarović (Serb Democratic Party, sds, Serb); Ministry of Security: Sadik Ahmetović (Party of Democratic Action, sda, Bosniak); Ministry of Human Rights and Refugees: Damir Ljubić (hdz 1990, Croat); Ministry of Civil Affairs: Sredoje Nović (snsd, Serb); and Ministry of Defense: Muhamed Ibrahimović (sda, Bosniak).

This list, like most lists, means very little. Even the people on it, practically all of them seasoned politicians hailing from a myriad of parties, cannot expect to excel in the department of historical importance in the circumstances in which b&h finds itself nowadays – and of which the long deadlock was probably the best illustration. Unfortunately, one’s ethnicity has remained the deciding factor – one has but to look at the content of the parenthetical remarks inserted above – and indeed, it would be almost pointless to mention a Bosnian politician, especially in an English language magazine, and omit his or her ethnic background. For such are the current realities, and they are hardly poised to change. Administrative division into two entities and three constituent peoples might have once sufficed as a

HOUSE OF REPRESENTATIVE OF PARLIAMENTARY ASSEMBLY OF B&H – COMPARISON OF ELECTION RESULTS IN 2006 AND 2010 sdp sda snsd sbb&h sds hdz sb&h nsrzb hdz 1990-hsp dnz dns pdp

2006 5 9 7 3 3 8 1 2 1 1 1

2010 8 7 8 4 4 3 2 1 2 1 1 1

…it was clear that the forming of any government would not go smoothly. solution to end a war, but b&h has since, regardless of what the local sceptics might say, come a long way. Its future undoubtedly in Europe, it needs to find new political mechanisms and even a new mental framework – if it wants, that is, to join that same Europe sooner rather than later.

deadlock on the state level As already stated, following the General Election in Bosnia and Herzegovina, held on 3rd October 2010, there was an almost 16-month long deadlock in the establishment of Government on the state level.

Constitutions and laws are formulated in such a way as to determine a deadline for the establishment of government; however, in this instance, almost all the deadlines passed and no one was seemingly responsible for it. The main culprit would appear to be the failure, by the lawmakers, to adopt legislation which would prevent the current lack of implementation of the election results. As it stands, there are no sanctions which can be issued in response to this impasse. Even if there were, there is no doubt that they would

simply be ignored. Under this type of legal framework there is too much open space left to the “free will” of leading politicians and their abhorrence of compromise. All this clearly indicates the necessity, and urgency, for reform of the Constitution and laws that regulate this area; otherwise we will see the same situation arising election after election after election.

In late 2011, a ministerial working group was formed, with the express purpose of preparing proposals on b&h election law amendments. Ironically, many existing political problems could be solved without any constitutional changes, if only there were at least a measure of political consensus within the ranks of the ruling majority.

One month after the General Elections, on November 2nd, 2010, the Central Election Commission of b&h (cic) issued a decision on the ratification of the results, when things actually began to happen. At the constitutive session, held on November 10th, 2010, the fifth b&h Presidency was convoked, consisting of Nebojša Radmanović (snds), from Republika Srpska, Željko Komšić (sdp b&h), a Croat,

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and Bakir Izetbegović (sda), a Bosniak.

Even then it was not a smooth process; Željko Komšić, the Croatian representative, is generally believed to have won on the back of a strong Bosniak vote rather than ethnic Croatian vote.

Although the first session of the House of Representatives was held on November 30th, 2010, further process proved nigh impossible because no group could secure the necessary majority for the election of the Collegium members. The formation of the House of Representatives was completed six months later, on May 20th, 2011, but the public had to wait until June 9th, 2011, for the House of Peoples of the Parliamentary Assembly to make their move.

After the announcement of the first election results, it was clear that the forming of any government would not go smoothly (bearing in mind the numerous, contradictive, and mutually exclusive statements of certain political actors). In an atmosphere where each party had different conditions and desires, it was almost impossible to reach any agreement.

In the end, three blocks were formed: the Croat block – hdz b&h and hdz 1990; the Serb block – sds and snsd; and yet a third: sdp b&h and sda, where sdp b&h

was explicitly against any notion that this block would have an ethnic, i.e. Bosniak, prefix, while the other two blocks insisted on it. These three blocks formed the basis for the formation of the state level government.

Cooperation between the Croat and Serb blocks was, as you might expect, out of the question; however, the problem

was that they did not want to accept sdp b&h as an equal partner either. Of course, to add to the problem, they did not have an alternative in mind, considering that sda insisted on being in coalition with sdp b&h. With diametrically opposite outsets, it was clear that any agreement would not be easily achieved. Like some strange game of political chicken, everyone

CONSTITUTIONAL & LEGAL FRAMEWORK FOR THE ESTABLISHMENT OF GOVERNMENT IN B&H ∙ Presidency of b&h consists of three directly elected members. The Bosniak and Croat members are elected from the territory of the Federation of b&h, in a way that eligible voters may cast their ballot either for the Bosniak or the Croat candidate. In other words, those Bosniak and Croat candidates who obtain the largest number of votes of all the candidates from the same constituent people get elected. The third member of the Presidency comes from the territory of Republika Srpska (the Serb member), and he or she is elected directly by the voters from RS. The Chairman of the outgoing Presidency is obligated to convene the constitutive session of the newly elected Presidency within 15 days from the date of certification of the election results. ∙ House of Representatives of the Parliamentary Assembly of b&h consists of 42 directly elected members. Two thirds (28 members) of them are elected on the territory of the Federation of b&h (in five electoral units), and one third (14 members) on the territory of Republika Srpska (in three electoral units). Out of a total of 28 members from the Federation, 21 of them are elected in multimember electoral units, and the remaining seven are compensational mandates that are distributed to the lists of political parties or coalitions in accordance with the number of valid votes these have received. Out of a total of 14 members from Republika Srpska, nine members are elected in multimember electoral units,

whilst the remaining five are compensatory mandates. The deadline for the constitution of the House of Representative of the Parliamentary Assembly is 30 days after the date of publication of confirmed electoral results. ∙ House of Peoples of the Parliamentary Assembly of b&h consists of 15 delegates: two thirds of them come from the Federation of b&h (five Bosniaks and five Croats) and one third from Republika Srpska (five Serbs). Croat and/or Bosniak delegates are elected by the Croat and/or Bosniak delegates at the House of Peoples of the Federation of b&h. Delegates from RS are elected by the National Assembly of rs. The election of delegates must be concluded within 30 days from the date of publication of confirmed electoral results. ∙ Chairman of Council of Ministers of b&h must be appointed no later than eight days after the constitution of the House of the Representatives of the Parliament Assembly of b&h, and it is the b&h Presidency that decides on the appointment.

The confirmation of his or her appointment must be completed within 30 days from the date of the appointment. The Chairman then appoints nine ministers and deputy ministers, who assume their office upon approval of the House of Representatives. This procedure must be completed within 30 days from the date of the Chairman’s inauguration. However, this was clearly not the case after the last elections in Bosnia and Herzegovina.

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expected the agreement of the six parties involved, but no one was willing to entertain the notion of reaching a compromise.

This situation lasted until December 28th, 2011, when the leaders of the six leading parties finally reached an agreement on the formation of the government and subsequent division of functions. In accordance with this agreement, the House of Representatives of the Parliamentary Assembly b&h on January 12th, 2012, confirmed the appointment of Mr. Vjekoslav Bevanda as the Chairman of the Council of Ministers of b&h. Immediately upon his inauguration, Mr. Bevanda, in agreement with the ruling parties, proposed candidates for ministers and their deputies. As we all now know, it would take another whole month for these people to be confirmed.

forming the government in the two entities Authorities in the Federation of b&h were faced with various forms of obstruction, the problem being in the inability to reach any political agreement on the part of two hdzs on one hand, and sdp and sda on the other. Sdp b&h, as a multi-ethnic party, wanted to participate in the division of positions that were intended for Croats, while neither Croatian group wanted to share any of these positions, claiming that they had secured over 90% of the Croatian vote in b&h and that that effectively gave them the sole Croatian mandate. Of course, in b&h, there hasn’t been a census since 1991, and there is a distinct lack of data regarding the Croatian population there, much less any exit polls which might suggest how many people voted, and for whom.

When it was obvious that national politicians were stuck in negotiations, the High Representative for b&h, as well as other representatives of the International community, intervened. They attempted to reach a suitable compromise, keeping the election results in mind, but, still, the parties were inflexible, and this promising initiative failed.

After that, the signatories of the agreed programme platform entitled “Basis for the formation of the Government in fb&h and platform for joint action in b&h institutions in the mandate period 2010 - 2014”, agreed, with the support of the High Representative, to form a government without

HOUSE OF REPRESENTATIVE OF PARLIAMENTARY ASSEMBLY OF FB&H: COMPARISON OF ELECTION RESULTS IN 2006 AND 2010 sdp sda sbb&h hdz b&h sb&h nsrzb hdz 1990-hsp dnz snsd asda

2006 17 28 8 24 3 7 2 1 -

Cooperation between the Croat and Serb blocks was, as you might expect, out of the question…

2010 28 23 13 12 9 5 5 1 1 1

the participation of the two hdzs.

With both ethnic Croatian parties now confined to the opposition, and no “Croat” sitting in the b&h Presidency (Željko Komšić of sdp not being regarded as a “proper” Croat), they actively sought to block all further steps in the government’s formation. They started by preventing the election of delegates in Cantons where they held a majority, thus preventing the formation of the House of Peoples, until such time as they were ‘allowed’ to become part of the Government.

In b&h Election Law there is no provision that contends that elections in all ten

NATIONAL ASSEMBLY OF REPUBLIKA SRPSKA: COMPARISON OF ELECTION RESULTS IN 2006 AND 2010 snsd sds pdp dns sprs dp sdp b&h nds sda srs sb&h independent

2006 41 15 8 4 3 1 3 2 4 2

2010 37 18 7 6 4 2 3 2 2 1 1

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cantons must be completed in order to call the House of Peoples to session. Therefore, the signatories of the Platform decided to form the government based on earlier ohr decisions, which envisages the possibility of forming the government, given one has the necessary majority, even if the processes of electing delegates in all cantons are not finished. Moreover, these parties could provide a majority in both Houses of Parliament of fb&h. The constitutive session of the House of Peoples was held on March 17th, 2011, while on the same day, the constitutive session of House of Representatives was scheduled, finally enabling the formation of the Federal Government.

Just for reference, the dominant ruling coalition in the National Assembly of Republika Srpska (snsd, dns and sp) elected new leadership at the constitutive session held on November 15th, 2010: President of rs – Milorad Dodik (Serb, snds); VicePresidents – Enes Suljkanović (Bosniak, sdp b&h) and Emil Vlajki (Croat, dns).

Jakob Finci

Dervo Sejdić

On December 27th, 2010, the rs Council of Peoples was formed, although the Bosniak delegates left the session before the voting began as their candidate for the

Chairman had not received the required number of votes. The Government of RS was formed on December 29th, 2010, and the government was approved by Constitutional court of rs on January 31st, 2011.

The ruling majority consists of snds, dns and sprs.

It should not surprise that the implementation of election results and overall political climate is more stable in Republika Srpska – after all, there is a higher degree of “homogeneity” in rs: for obvious reasons, as rs, unlike the Federation, is an entity with one dominant ethnic group, administratively and otherwise.

Still, Bosnia and Herzegovina only has a future as one, whole country, regardless of the tendencies – oftentimes openly voiced, especially in Republika Srpska – to the contrary. As it stands, it is the only country in Europe that comes awfully close to practising – or, as we have established, failing to practice – this rather quaint and awkward “confessionalist” method exercised, for instance, in Lebanon, where the President has to be a Maronite Christian, where the Prime Minister has to be a Suni Muslim, and so on, endlessly. May we, then, posit an extremely controversial idea: instead of trying to implement, most of the time with little concrete political and economic success, all these various ethnic keys, could the powers-that-be in b&h take a different approach and start to get rid of them. This may seem like a monstrously romantic suggestion, but after all, when all else fails…

THE SEJDIĆ/FINCI CASE: B&H PRESIDENCY A HOUSE OF DISCRIMINATION? In 2006 Dervo Sejdić and Jakob Finci filed a complaint with the European Court of Human Rights in Strasbourg stating that they were prevented, by the Constitution of b&h and the corresponding provisions of the Law on Election, from being candidates for the Presidency and the House of Peoples of the Parliamentary Assembly solely on the ground of their ethnic origin (Sejdič is Roma and Finci Jewish).

On December 22nd 2009, the Court issued a ruling that determined discrimination of all persons who do not identify themselves as a member of the constituent peoples, i.e., as Bosniak, Serb, or Croat. The ruling obliged b&h to amend the relevant provisions of the Constitution and Election Law in order to eliminate a repeat discriminatory event.

Authorities of b&h are systematically trying to find the solution for this problem, in such a manner as would be acceptable to all parties – such is the official position. After the establishment of the Parliamentary Assembly of b&h, for the second time, the Temporary Joint Committee of both Houses was formed with the express purpose of implementing the ruling. The mandate of this Committee has been extended until March 12, 2012.

The International Community does not hide its disappointment because b&h has not yet implemented this ruling. At the last session of the Parliamentary Assembly of the Council of Europe a deadline was determined, March 15, 2012, whereby the International Community would monitor the development of the situation.

Within this period, full and final implementation of the ruling is expected. However, if there is no consensus, the International Community will consider sanctions and b&h could even be expelled from the CoE. In the process of amending the Constitution and Election Law, other obvious discriminatory provisions should be taken into consideration and resolved. Before the Court in Strasbourg there is yet another petition with similar content. Ilijaz Pilav, a Bosniak from rs, has no legal right to stand as a candidate for the Presidency of BiH. The Constitution of Republika Srpska gives that right only to Serbs, meaning that Croats residing in Republika Srpska are also discriminated against, while the Serbs themselves suffer the same problem in fb&h.

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interviews

H.E. Ahmet Yildiz: Ten Minutes with the Turkish Ambassador to B&H Over the past number of years we have watched as our own economies have shrunk; yet Turkey has belied that trend and is experiencing incredible growth, which is so rare in these times. We picked the brain of the new Turkish Ambassador to Bosnia and Herzegovina to see if we could get some answers…

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EE You took over the post as Turkish Ambassador to Bosnia and Herzegovina relatively recently, about three months ago. Have you managed to acclimatize to the region, and what are your first impressions?

AY Yes, I arrived in mid-November, although I had been here before, during the Ramadan Bayram, when I had also taken part in Minister Davutoğlu’s last visit, at the end of August. Being a Middle Eastern specialist in fact, I had the opportunity to follow closely the issues about b&h during my tenure in Jeddah, where I was the representative of Turkey in the Organisation of the Islamic Cooperation (oic). Also, after having served in Iraq, I know how the existence of different ethnic groups in a political system affects the policy-making. But to answer your other question — yes, I feel I have acclimatised quite quickly. And I am very much looking forward to the rest of my time in office here.

SEE Bosnia and Herzegovina has had difficulties with establishing a functional government on the Federal level for quite some time, and the problems persist. Is it perhaps that the Dayton Accord has failed to serve the function of a proper Constitution, which this country has essentially never had?

“After having served in Iraq, I know how the existence of different ethnic groups in a political system affects the policy-making.”

AY While this has been a contentious issue in the recent past, I think that, since March 2011, this has no longer been a problem; also, the agreement that was reached last month by the six political leaders is welcomed, so hopefully the formation of the State government is something we will see finalised very soon.

SEE Both Turkey and b&h have clearly expressed interest in joining the eu. How would you compare the two bids and, in your opinion, what are the key issues

that stand in the way of these two countries’ entering the eu?

AY We have said in the past, on a number of occasions, that membership of the eu for b&h is more important than our own bid. In fact, when you look at the map, you see that b&h has no other option. It is in the middle of Europe and the Western Balkans, and as such it simply needs to be part of the eu. Indeed, we believe eu membership will help address many of the internal concerns b&h is dealing with at the moment.

SEE Turkey and Serbia have been cooperating extremely well in the recent period, but the “Kosovo issue” is hardly poised to go away any time soon. There is also the issue of Sandžak, where the Bosniak minority is demanding a higher degree of autonomy. Mufti Zukorlić, the religious leader of the Sandžak Muslims, has even made a number of controversial statements to that effect. What are your thoughts on the issue?

AY Thankfully, due to efforts by wise and sensible leadership in both countries, our relationship with Serbia has been improving rapidly. However, I am not in the position to talk in great detail about this issue. Suffice it to say that the Serbian Foreign Minister, Mr. Jeremić, was

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“B&H is not a mere foreign policy issue for us. None of the countries in this region is! Anything that happens here will inevitably affect us in Turkey.”

SEE In light of Turkey’s economic strength as well as the general potential of this region, can we expect more fdi coming from Turkey? What are the biggest hurdles to bringing in more business, and which countries in the region might benefit most?

AY There are already quite a lot of Turkish businessmen operating in the region, and of course we would love to see more.

In time, with more structural and political change in the Balkans, we expect to see the economic climate become more and more investor friendly. This reflects what I said about the importance of b&h joining the eu. As thing stand at the moment, the red tape and legal and administrative procedures with respect to fdi are proving too long and difficult. This is the main enemy of new business. With the adoption of new legislation and the development of a more dynamic economy, I am sure that more businesses would seek to set up shop here.

SEE How important is Bosnia and Herzegovina to Turkey? Your colleague in Croatia, H.E. Burak Ozugergin, once told me that it is more than a mere foreign policy issue.

AY My colleague is right. b&h is not a mere foreign policy issue for us. None of the countries in this region is! Anything that happens here will inevitably affect us in Turkey. The war in the 1990s proved as much, through extremely painful experiences. Bosnia and Herzegovina, to say the least, is a very important country for us, with all the geographical, historical, and cultural contexts that we share in common. There is also a large Bosnian community residing in Turkey. Put simply, we consider Bosnia and Herzegovina to be a post of great importance.

amongst the dignitaries who addressed a gathering of all Turkish Ambassadors last month in Ankara; he clearly reiterated his country’s commitment to the territorial integrity of b&h.

SEE On a different note, this region isn’t exactly booming economically. In terms of gdp growth, Macedonia is actually leading the way with a growth rate of 3% in 2011, but even that cannot compare with Turkish growth, standing at the (for us) unimaginable figure of 8.7%. What is the secret?

AY I don’t think this is a valid comparison; Turkey is a big country, with over 70 million inhabitants, and has had an open economy for quite some time now. To get to where we are now involved many sacrifices – decades of inflationist economic policies. Nowadays, however, this generation has seen its own crop of entrepreneurs come into their own, which will be of untold benefit to our economy in the future. Painful as it may sound, the secret is time, and then experience. I personally believe that in time, all countries in this region can reach a similar point.

SEE Anything to add?

AY I like to think that I am familiar with the issues which affect Bosnia and Herzegovina — the consequences of the war, the handicaps of the political system, as well as the difficulties in policy-making, especially with all the different ethnic groups in the region. People often forget that Turkey too is a Balkan country, and that our fates are intertwined. To say it again, that is why I view this post as being of the utmost importance to me, both professionally and personally.

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interviews

Serbia's Agency for Regional Development: Doing It Right There are good agencies, and there are bad agencies. The same goes for vision, efficiency, and the like. And this is a good one, for multiple reasons.

To clarify what these were we turned to Director Ivica Eždenci, who certainly knows his stuff…

SEE Governments in this neck of the woods are often criticised for turning a blind eye to the problems of entrepreneurs, but the National Agency for Regional development has launched, and jumpstarted, a number of projects and initiatives that have already reaped major results. Tell me more about that, as well as about your approach to improving the business climate in Serbia?

IE The National Agency for Regional Development (the legal successor of the

Agency for sme Development), in cooperation with its partners, i.e., the ministries and regional agencies, aims to provide entrepreneurs with support programmes and packages which the entrepreneurs themselves have suggested should be implemented. Every year we ask entrepreneurs what their problems and needs are.

On one hand, they are in need of services like mentoring, business matchmaking, consulting. For potential entrepreneurs we even provided start-up training

Ivica Eždenci A lawyer by profession, Ivica Eždenci has had extensive experiences in the State Administration and the State Prosecutor’s Office, project management and organisational capacity building. He started his career in the State Prosecutor’s Office, and continued in the Ministry of Justice and Local Self-Government (Assistant Minister), followed by appointments in the Ministry of State Administration and Local SelfGovernment (Deputy Minister and Acting Minister). Years of experience in the fields of law and state administration have taught him much about how to improve, through project management and capacity building, the overall State Administrative framework and how to further advance the rule of law.

seminars where they could acquire basic skills. In addition to this, we recognise that entrepreneurs also need additional funds to strengthen their competitive position on the market, which we provide through grants for the introduction of quality standards, certification, for

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business matchmaking, especially with foreign enterprises, which the Network provides them with. There is great interest in participating in business meetings which provide an opportunity to make direct contacts with potential partners.

The economy needs a friendly environment, which is why great efforts, through Regulatory Reform, are being made in order to facilitate business, making it less daunting in a bureaucratic sense, which is equally important when it comes to attracting foreign investments.

“Mentoring is such a key service; it directly assists enterprises, provides capacity building and facilitates the development of new products.” development of new products, packaging, software solutions, for their appearances at fairs...

When it comes to loans, the Development Fund of the Republic of Serbia has created lines of credit which are available to entrepreneurs under favourable terms,

and there are also special lines of credit that are intended for entrepreneurs in underdeveloped areas of Serbia. Serbia is also one of 47 countries in which the Enterprise Europe Network exists – the largest network supporting entrepreneurs. Serbian entrepreneurs are most interested in

SEE What specifically caught our eye was your mentoring programme. In a day and age when the authorities tend to overspend on subsidies, this mechanism might well be just what we need – and that is to raise awareness that the knowhow and industry, not necessarily capital, are the most important things.

IE Mentoring is such a key service; it directly assists enterprises, provides capacity building and facilitates the development of new products. Also, it has been shown that enterprises need not necessarily have to raise funds for better financial results; indeed, sometimes it is enough that a fledgling company be in a specific place in time so as to improve its productivity, or even its work environment. In other words, in order to improve business and to reduce costs, large financial resources are often not required. The aim of a mentor is to support entrepreneurs in their further development, or in the crucial moment for survival, by means of providing comprehensive and prompt support. In cooperation with the Japanese International Cooperation Agency (jica), through a three-year project, we have designed a mentoring model and we have trained and certified a number mentors. So far, thanks to the professional assistance of 44 mentors, 179 small and medium enterprises and entrepreneurs have improved their business in Serbia. The entrepreneurs in Serbia can expect the same service this year too, and the negotiations with the Government of Japan, aiming to implement a similar project in other countries in the region, are in process.

Also, our experience in the field of mentoring has enabled the National Agency, in cooperation with the Association of Business Women of Serbia, to implement the project called “Mentors of

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NATIONAL AGENCY FOR REGIONAL DEVELOPMENT

“In short, we here in the National Agency see Serbia as a competitive country, whose sustainable development is based on a balanced regional development…”

Women Entrepreneurship in Serbia”, as a part of a European network of women entrepreneurship mentors, whose aim is to provide the entrepreneurs in their first years of business with the necessary support. It is a project which is funded under the auspices of the eu Competitiveness Framework Programme. Just for reference, the European network of mentors exists in 17 countries (Albania, Belgium, Montenegro, Greece, Holland, Ireland, Italy, Cyprus, fyr Macedonia, Romania, Serbia, Slovakia, Slovenia, Spain, Turkey and Great Britain).

SEE How important is agriculture, or rural development, in terms of Serbia’s future?

IE Agriculture is of great significance to the current and future socio-economic development of Serbia, which is reflected in its contribution to the country’s GDP. Agriculture is recognised as a key sector for employment and increase in exports, and the state seeks to support farmers and agricultural companies, both in terms of modernisation and innovation of production processes. There is also huge potential in rural tourism in Serbia, particularly in the south-eastern and south-western

parts of the country, immanent in the wealth, degree of preservation and overall attractiveness of natural resources.

SEE Regional development here means development of Serbia’s regions, but have there been any instances of crossborder cooperation? In other words, what is your rapport with similar agencies from other countries in the region?

IE Regional development does imply both inter-regional and international cooperation. In fact, the National Agency has really good cooperation with similar agencies in the region, from Slovenia to fyr Macedonia. This cooperation is most often realised through the implementation of assorted projects, and it is by this very means that the Enterprise Europe Network was established, through cooperation between similar institutions in various different countries.

SEE For last, what is your next big project, and how do you see the development of Serbia’s economy in the next 5 years?

IE In the future, the most important project of the Agency will be the mapping and branding of the regions, establishing a single point of information relevant to

The National Agency for Regional Development is a public agency, established in 2009 with the aim of advancing professional and regulatory regional development-related affairs at the national level. The Agency implements its activities and programmes through three segments: by participating in the creation of the legislative framework and institutional infrastructure for the implementation of regional development policies; by supporting the development of enterprises and entrepreneurship; and by managing infrastructural projects. The goal of the Agency is to achieve economic growth, help create jobs, develop a more modern infrastructure, build new ones and strengthen already existing partnerships, foster interregional and cross-border cooperation and balanced regional development through the implementation of projects.

regional development. It is through these types of projects that we can create an economic tool that can in turn strengthen a whole region.

The mapping of regions, as one of the tools, is aimed at forming the analytical documentation basis and defining the developmental profile of Serbian regions, i.e., at forming the reliable basis for creating support measures and projects which, in turn, can result in a more balanced regional development of Serbia. These tools can also be used for creating small, smart strategies – strategies for a defined, specific area, which recognise the potential and possibility in any given area, and, naturally, are used in the best way.

In short, we here in the National Agency see Serbia as a competitive country, whose sustainable development is based on a balanced regional development, a dynamic economy based on knowledge, modern infrastructure, and quality human resources. In accordance with this vision, in the following five years we will strive to keep the economy developing, to help the small and medium-size enterprises strengthen their competitive potential and be recognised in foreign markets, too.

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editorial

A Serbian Wake-Up Call Our man in Belgrade wakes up and puts on his Sunday’s best clothes to muse on Serbia’s belated response to the realities of 2012. But that may be a misplaced statement. For the issue is, can Serbia wake up and put on her Sunday best to face the realities of the future?

By Miša Milošević

W

ith the beginning of February already behind us, Serbia is, it would seem, yet to wake up and get ready for work. After New Year's festivities, which were extended to another New Year's Eve (which, according to the Julian calendar, falls on January 13th), the year's first working day for many companies was postponed until as late as January 16th. In other words, Serbia's kickoff for 2012 appeared rather comfortable and lazy, as if it were veritably earned.

And then came the sporting successes: Novak Đoković's triumph at the Australian Open, followed by European gold and silver medals in waterpolo and handball, respectively, unleashed a burst of happiness and, perhaps, a false sense of achievement. Bread and games, as they say, and this triumphant wave was by and large used by the officials and the media once again to hit that proverbial snooze button on the ticking alarm clock.

And then came the blizzards, severe cold and heavy snowfall. Although not really any icier than the winters of our childhood, this cold front nearly paralysed the entire society: supplies, schools – there were even a number of fatalities. This time round, the Government used the given predicament – as governments would – to boast of their organisational skills in what, in between two fierce winters, had become an even more fragile society.

And then, as Serbia opened one eye to wake up, another prodigal son of privatisation came back home: us Steel decided to let Sartid go to its parents (the Government again) who, according to independent analysts, will have to pay roughly half a million Euros of pocket change every day to keep it alive and pacify the unions until it is sold again. Hardly a portentous morning – if one has positive thoughts in one’s mind.

But what are the prospects, so to speak, of this long day called 2012? As has more or less become the custom, they are mainly determined by unaccomplished and postponed processes and issues which start crawling out beneath the carpet every time the Government tries to make a step forward. The economy or – let's face it, the money – remains the hot topic. The Government has already spent more than was agreed with the imf, also in a manner not agreed with the imf, which has of course weakened its position in the current discussions – or negotiations, if you will. Let us draw a broad metaphor: much like in a Greek myth, the Government – or the State Budget – has been so preoccupied with slaying any manner of monster that it seems to have lost sight of the fact that it too has turned into a monster of sorts. Then again, are we not the company we keep?

For even the forthcoming elections are poised to bring a general sense of discomfort and uncertainty, especially among foreign investors, as the polls indicate that the probable outcome might be the Radicals’, or Nikolić's, pyrrhic victory and the subsequent formation of a minority government. Although foreign investors and

international organisations will still see more or less the same colours on Serbia’s side of the negotiating table, such an outcome will also mean a less stable government and less long-term security.

Another three internal policies need to be re-addressed in a proper fashion. The first is the restitution of property, which makes almost every investment a potential case for the International Court of Appeal in Strasbourg, and by whose success(es) the powers-that-be in Brussels will measure the legislative and “European” power of the Serbian government. The second is efficiency of the judiciary and law enforcement, particularly in the continuing fight against corruption, where Serbia still leaves much to be desired. And thirdly, last but not least, there’s the Kosovo question. A definitive and formal answer as to Kosovo’s status still hangs in the air, and until this situation is resolved all those eu membercountries opposing Serbia’s entry into the eu (or, for the nonce, its status as a candidate) will have a permanent trump card up their sleeve. Although the silent (may we say unspeakable?) definition of borders and the general administrative dissociation is currently being executed on the ground, the official recognition of Kosovo will play a vital role in all the yes answers Serbia expects to get this year: from the European Union, nato, the imf.

In this Mexican stand-off, the whole prospect might look somewhat dire. Although the bulk of all those conjuring tricks, sleights-of-hand and jacks-inthe-box have already been played out – both internally and on the international plan – Serbia, again, is yet to wake to the call of a new morning, shave and dress up for a bright new day. Like a man – the lady that she is.

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editorial

A Lingering Cloud over the CEE Economies Money, as they say, makes the world go round. But what happens when no one seems to have any? Some of Europe’s finest minds braved the elements to try and find a solution to the ongoing economics crises.

I

t is January 17th, 2012, and a heavy snow, both physical and metaphorical, is falling. Inside the Vienna Hilton more than 400 members of investment management firms, banks, and multinational agencies huddle. This is the Euromoney Central and Eastern European Forum, a two day event, whose focus is the region’s economic and investment outlook for the coming year and beyond. The key issues are addressed through macro presentations, round table discussions, breakout workshops on specific country topics and conversations amongst participants over coffee and meals. Business as usual, but, all in all, there were bright and dark spots, and reasons for hope and despair. The Viennese weather matched the sentiment of the conference with a cold wind that was impossible to escape.

Heavy emphasis was put on the state of the European Union and public finances.

No one voiced Euro-scepticism, but it was clear that attendees felt that the European Union’s structure needs amendment and that its capability to react with strength needs augmenting, the logic behind this being that it is less daunting to slay Medusa than Hydra. With each country’s government taking different approaches to their debt problems, the pieces of the puzzle are always moving in varying directions and speeds. A deal in one jurisdiction does not necessarily lead to an increase in economic stability in another. One needs to look no further than Greece, as a clear example of this fluidity, not liquidity. Italy, in contrast, was cited as a country that has taken action to rein in its public spending and is

By James Price Chuck

An American currently based in Dubrovnik to launch his Adriatic Aviation Group, James has lived and worked in Croatia since 2007 as an entrepreneur, financial consultant and investment fund director. From 1997-2001 he lived and worked in Sarajevo, first as a diplomat and then as a social-entrepreneur.

In between stints in the region he earned his mba from Columbia Business School in New York City and served as a management consultant to several Fortune 500 companies.

In addition to the Adriatic Aviation Group, James is involved in a number of ventures to promote Croatian cultural heritage.

seeing early positive results.

Turning back east, the cee region’s outlook was described as being quite dour, the main culprit being a re-pricing of risk which will conspire to keep new investment from occurring, and increase the total capital needed to support prior investment. The reason given for this repricing was that Western European investment managers had initially failed to price cee risk properly because they were

not familiar with cee business culture and practices. They also failed to do so because they did not, so to speak, have the “tools” to understand risk adequately, as their economies had been experiencing general growth during their tenure. Most investments performed adequately, and the bubble, under the circumstances, did not burst. Though there are a number of technical methods used to arrive at the price of risk, it appeared that the failure to do so correctly came down to cultural aspects of the people and firms involved. Seemingly, the lessons have been learned, but at a cost. Stagnation and fear have gripped these managers and in dealing with the region’s economic challenges it is clear that no new approaches, or solutions, are forthcoming.

The overwhelming attitude can be summed up by one panellist’s comment: “We need to be more careful and probably more conservative.” Bank leaders kept on insisting that they were committed to the region, but it sounded more like an unwelcome task than an opportunity for growth – indeed, many of the cee countries have little reason to expect growth, or a new source of prosperity. Among the “dead zones” for investment in cee were Bulgaria, Slovenia and Croatia, though this may change for the latter given the recent eu Referendum held there. Bulgaria is currently over-leveraged in leisure-related investments, while Slovenia and Croatia are small markets with few exports of note.

Having said that, there was a glimmer of hope in relation to Poland, Russia, and Turkey, all of which have performed

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The overwhelming attitude can be summed up by one panellist’s comment: “We need to be more careful and probably more conservative.” quite well, given the nature and pervasiveness of the crisis. Russia and Turkey have enjoyed positive gdp growth since 2009, and Poland has done so almost continuously since 1999. The underlying challenge of this growth is that is seems to have been driven by increases in commodities’ prices and global demand.

Thus, Poland and Russia are just exporting raw materials and have not developed or diversified their economies. This could lead to a slowdown in gdp growth should commodities prices soften, but with oil currently selling for in excess of $100 a barrel, one doubts that Russia is overly concerned.

Turkey’s growth, which has now reached nearly 12% annualised, is being driven by demographics, by effective government involvement, and by a diversified economy. Its government has

actively enforced regulations to prevent its banks from involving themselves in toxic assets, which forced them to keep their powder dry and available for additional investment in growing a real economy. To put this into context only six

GDP GROWTH IN 2011 Slovenia Croatia B&H Serbia Montenegro Macedonia Turkey

0.1% 0.6% 1.5% 1.9% 2.7% 3.0% 8.7%

European economies have larger economies than Turkey, but none of them have similar growth prospects.

At the conclusion of the Forum, there was little in the way of euphoria amongst the participants, no “gold at the end of rainbow” stories that might invigorate the market. In fact, most were concerned that investment positions had weakened during that short time spent in Vienna. Perhaps risk will be priced properly in cee from now on, but hopefully innovation will have a new value, as well. The challenges the cee region faces are real and growing and cannot be resolved by finance or politics alone. They will require new solutions and creativity, not in accounting, but in deployment of capital to achieve growth and generate wealth.

Otherwise, it will be Groundhog Day for quite some time.

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real estate

Belgrade–ZagrebSarajevo Office Space Serbia is (at least) regionally recognised as a prime location for foreign investment, and Bosnia plays host to an ever increasing number of businessmen from Turkey and beyond. Croatia, having just voted yes to Europe, can expect to see a degree of improvement in its economy. All of this will require office space, so if you’re looking to do business in the area, you had better read on…

A

b ovo, as the Romans would say – it is certainly no surprise that the political changes following the fall of Milošević in the year 2000 marked the commencement of the modern office space development in Serbia. Of a sudden, so to speak, Serbia became an attractive country for international companies to set up shop, and Belgrade, with its favourable location, and being the country's capital, faced large demand for modern office premises.

In the early stages, this type of space was virtually non-existent in the city.

Most of new companies entering the market rented apartments for office usage or assisted their potential landlords in refurbishing existing space by providing detailed requirements and standards. However, modern class a and b office buildings were painfully lacking in Belgrade.

It took several years, more precisely until 2005, before the construction of Belgrade office inventory experienced the start of an expansionary phase – a phase which would continue for the next few years. In the period between 2005 and 2008, supply was increasing at steady pace of 15%. In the atmosphere of prevailing optimism in office space development, the number of planned office projects increased, reaching the record 400,000m² of office space under active construction at the end of 2008. During its growth phase, the office market saw a larger percentage of class a office space brought

By Maja Šahbaz

Maja Šahbaz is the Managing Director of Colliers International Serbia, one of the leading real estate companies in the country. She was born in Sarajevo, Bosnia and Herzegovina, and has been residing in Belgrade since 1992. Ms. Šahbaz holds a BA in Japanese Language and Literature from Belgrade University. She joined Colliers in 2004 and changed several positions within the company before becoming the Managing Director in 2011. She specialises in the retail segment of the real estate market. Maja is a member of Mensa Serbia and a proactive advocate for animal welfare.

in, as class a premises were significantly more in demand in the early stages of development, the result being that the ratio eventually swung in favour of class a in the later stages (55% : 45%).

As could be expected, the most soughtafter area of Belgrade, since the beginning of market expansion, has been the Central Business District (cbd), an area that includes centre-town Belgrade and the central part of New Belgrade, while the Broader Centre covers newly emerged commercial areas in Third Boulevard, Omladinskih Brigada and Jurija Gagarina Streets, as well as some older parts of the city such as Lower Dorćol, Vračar and Senjak. The suburban office market is still poorly developed, with a very small percentage of developments overall hailing from this area.

the downturn In 2009, the global economic crisis hit Belgrade's office market as well, causing an effect similar to that experienced in the surrounding countries in Central and Eastern Europe. Many office projects were delivered to the market with noticeable delay, and the demand for office space was decreasing rapidly year-on-year. Although Belgrade's total office space inventory is still lower compared to other capital cities in the region, decreasing demand caused this section of the market virtually to come to a halt.

The current status of the market suggests no significant degree of change on the horizon, as Belgrade does not appear to be poised for any new office building deliveries. The main reason behind this

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reality is, of course, the global economic crisis – those few planned office developments were postponed in order to avoid low absorption rates and unfavourable leasing conditions commanded by the tenants, who, under the circumstances, are the force driving the market.

At this moment, the total class a and b office space inventory in Belgrade is estimated at about 660,000m² of gross leasable area (gla). At the end of the second half of 2011, class a office space accounted for 62% of total space, comprising about 420,000m² of gla. The remaining percentage of 38% is related to Class b office space, or about 240,000m² in terms of gla.

Towards the end of 2011, most companies were still looking to renegotiate the terms of their leases, many of which were signed when the market peaked, in the period between 2006 and 2008. Demand for new office space had slightly decreased compared to the first half of the year, with the majority of companies coming from the service industry, finance, insurance, real estate and the media. The most sought after premises are of course of class a, in between 100m² and 200m² in size, with a favourable parking ratio and many amenities for employees available on site. These types of requests accounted for roughly 34% of all office space requests in the second half of 2011, followed by office premises in between 300m² and 500m² (23%), and then 1,0002,000m² (20%). The remaining percentage of requested space refers to premises of up to 100m² (10%), and premises sized between 500m² and 1,000m² (13%).

During its peak, the Belgrade office space market had a vacancy rate of 7-10%, which is the industry average. However, as demand plummeted and as over-supplied set in, vacancy rates remained at a high level indeed. In the second half of 2011, the overall vacancy rate for class a and b office space stood at about 21%.

Rents for office space in Belgrade

When reviewing future trends, it is obvious that a positive response to Serbia’s eu candidacy should have an extremely positive effect on the office market in Belgrade.

remained stable throughout most of 2011.

The highest rents were recorded for premium class a office space in cbd New Belgrade, reaching 16 €/m². The market average for New Belgrade was between 10 and 16 €/m² (asking rents), depending on the micro-location and amenities available. class b office space slightly overlapped

in rents with class a: asking rents ranged between 9 and 14.5 €/m², the lower end of the scale being applicable for older class b office buildings, or those with a less favourable micro-location. Achieved rents were slightly lower, ranging from 12 to 14 €/m² net in cbd for class a, and from 7 to 12 €/m² net for class b.

future expectations GROSS LEASABLE AREA Belgrade Zagreb Sarajevo

660,000 719,000 97,670

VACANCY RATE Belgrade Zagreb Sarajevo

21% 10% 30%

When reviewing future trends, it is obvious that a positive response to Serbia’s eu candidacy should have an extremely positive effect on the office market in Belgrade, along with a general improvement of the overall investment climate. At the moment, the Belgrade market features

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With the expected expiry of many leases signed during the first phase of Zagreb's office market development, 2012 will be an exciting year, featuring an additional 110,400m² of space arriving on the market.

about 51.000m² of class a office space under active construction, set for delivery within the next two years. This new supply of office space will be the result of developments in the New Belgrade business area, and the deliveries will include headquarters of two banks, constructed for the banks’ own purposes: Raiffeisen (21,000m²), with the scheduled completion date in h1 of 2012, and Banca Intesa (30,000m²), with the announced completion by the end of 2013. However, stagnation of rental rates is expected to continue in the first half of 2012.

zagreb Unlike Belgrade, Zagreb has witnessed deliveries to the office market in 2011, with five new buildings totalling 40,400m². With the total office supply 10% higher than in Belgrade, Zagreb is still witnessing growth and higher absorption rates. Similar to Belgrade, class a developments make up 52% of the market, and class b+ and Class b office buildings account for the remaining 48%.

Most of the leases represent relocations, with only 4% of the leases representing new market entries, unlike in Serbia where the two biggest leasing transactions on the market (both over 3,000m²) were new market entries. However, in 2011 the Belgrade office market witnessed only a few leasing transactions larger than 1,000m², while Zagreb had several, the largest one being a 7,500m² lease in the Auto Hrvatska office building.

Prime headline rent is somewhat similar to Belgrade, standing at 15 €/m². Class

a and b office space average rents stood at 14.5 €/m² and 12.2 €/m², respectively. This is comparable to rents in Belgrade, although Zagreb had only a 10% vacancy rate in 2011.

With the expected expiry of many leases signed during the first phase of Zagreb's office market development, 2012 will be an exciting year, featuring an additional 110,400m² of space arriving on the market, which will increase the vacancy rate to about 15%. The rents are expected to remain at similar levels as in 2011.

sarajevo Compared to Belgrade and Zagreb, the office market in Sarajevo is still relatively underdeveloped. The market is also displaying trends which were present in the other two cities in earlier development phases – a considerable number of companies still rent converted office space within residential buildings. The owners prefer short lease terms, while international companies seek lease stability with longer leases and potentially break options.

Currently, Sarajevo has 97,670m² of office space (of which class a accounts for 70% of the total), which is significantly lower than in Belgrade or Zagreb. Even so,

Compared to Belgrade and Zagreb, the office market in Sarajevo is still relatively underdeveloped.

in 2011 the demand was still lower than the existing supply – a situation which stands in contrast to the workings of the office market several years ago. In fact, demand in 2012 is expected to decrease further, mostly as a result of the negative macroeconomic climate. That said, the majority of the existing demand came from international companies which had recently entered Bosnia and Herzegovina, and, to a measure, from already present companies looking for better, higher-class office space (most of which was, at that time, still either in the planning phase or under construction). As a response to a decreased in demand, most owners are offering additional amenities, customized fit-outs and favourable leasing conditions.

The current vacancy rate for office space in Sarajevo is around 30%, a result mainly of a high number of deliveries to the market in 2010, and of many companies decreasing the size of their office space due to downsizing or cost-cutting.

This trend is expected to continue in 2012.

In general, Sarajevo’s prime rents are slightly lower than in other Central and Eastern European capitals. At the end of 2011, office rental prices stood between 8 and 16 €/m2 for class a office space, and 8 and 15 €/m2 for class b office premises.

It is important to mention that the given price ranges appear “awkward” because of the scattered nature of both categories of buildings, which means that the location of the premise itself, access to it, and a number of other variables affect the actual asking price for these class a and class b buildings.

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finance

Serbia Tax Snapshot

By Igor Lončarević

Tax laws in Serbia have not changed significantly in the last few years, and it remains to be seen what the policy of the new government will be after the May 2012 parliamentary elections.

T

he latest changes to the Corporate Income Tax Law, adopted at the end of December 2011, have been in effect as of the 1st of January 2012. One of the most important changes is the introduction of a tax holiday for users of free zones in the manufacturing sector. However, a by-law that would prescribe the methodology of application of this exemption has yet to be implemented by the Ministry of Finance.

In addition, withholding tax is no longer levied on interest revenues generated by non-resident legal entities from securities issued by the Republic of Serbia, the Autonomous Province, local authorities or

DOUBLE TAXATION CONVENTIONS As of the 1st of January 2012, Serbia has 49 effective double taxation conventions. 45 conventions cover income and capital: Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia & Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Germany, Greece, Hungary, Iran, India, Ireland, Italy, Kuwait, Latvia, Libya, Lithuania, Macedonia, Malta, Moldova, Montenegro, Netherlands, North Korea, Norway, Pakistan, Poland, Qatar, Romania, Russia, Slovakia, Slovenia, Spain, Sri Lanka, Sweden, Switzerland, Turkey and Ukraine.

Agreements with Egypt, France, Great Britain and Malaysia cover the avoidance of double taxation of income only. Effective application of the treaty with Montenegro was quite important as well, since it has eliminated Montenegrin withholding tax burden on service fees charged by Serbian companies to their Montenegrin partners.

the National Bank of Serbia. This amendment intends to attract investors from foreign capital markets to purchase Serbian government-issued securities.

In contrast, the scope of the 20% corporate income withholding tax is extended to include any such revenues generated by non-resident legal entities from any bankruptcy mass, as well as from liquidation proceeds of a Serbian company.

Igor is a tax partner in kpmg responsible for clients’ tax portfolios in Serbia and Montenegro. Igor has more than 10 years of extensive experience in tax advisory services, including corporate income tax, international taxation, cross border tax structuring, pre- and post privatisation tax optimization, m&a tax. He has also worked in the kpmg office in London. Igor holds a Master’s degree in International Tax Law from Vienna Wirthschafts Universität, and a ba in Economics from the University of Belgrade.

transfer pricing The Ministry of Finance is yet to make any changes to the existing general transferpricing rules. For instance, Serbian cit Law still recognises only three traditional transfer-pricing methods (the comparable uncontrolled price method, the cost plus method, and the resale price method) that have only limited practical applicability in a modern business environment. Other methods (profits split and the transactional net margin method) allowed under oecd Guidelines are not permissible in Serbia.

The absence of detailed local Serbian transfer-pricing rules needs to be changed, as the obvious Serbian advantage (the ten-percent cit rate) could become irrelevant with such broad authorization procedures entrusted to the Serbian Tax Authorities. It is of crucial importance that cit Law and related bylaws be amended in order to allow use of methods prescribed by the oecd Transfer-Pricing Guidelines. In addition, Serbian national transfer-pricing guidelines with clear a clear frame of reference to oecd Transfer-Pricing Guidelines – as an authoritative source of international best practices – also need to be adopted. What certainly deserves mention is the initiative shown by the Serbian Fiscal Society, which has translated the oecd

Transfer-Pricing Guidelines into Serbian and published the translation in December 2011; however, there is a need for a clear decision of the Ministry of Finance on this issue. It goes without saying that the subsequent training of tax inspectors is of crucial importance to a proper implementation of the adopted rules.

other developments In the last two years companies have faced a significant proliferation of earmarked revenues at the national level (a forest fee, an irrigation fee, etc.), as well as the introduction or increase of parafiscal fees and charges at a local level (city construction usage land fees and signboard fees have been significantly increased in many municipalities in Serbia). Parafiscal charges have been introduced by various levels of government, and this has significantly reduced the transparency of the fiscal system. Such practices could distort Serbia’s position as a country with moderate taxation levels, which is one of its advantages in the pursuit of foreign investments. It is vital that such practices be changed, and that additional charges not be introduced without prior notification and public debate.

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finance

Croatia: Electronic Tax Return Submission In case not everyone is aware of this new provision and respective obligations, as of 1 January 2012 additional categories of taxpayers are required to submit tax returns and other reports electronically. Paul Suchar of kpmg in Croatia is here to provide more detail.

A

s of 1st January 2012, the following taxpayers are obliged electronically to submit to the Croatian Tax Authorities (cta) tax returns and other reports, supported by the cta’s electronic ePorezna service: (1) medium and large size entrepreneurs (according to the Accounting Law); (2) vat taxpayers whose annual taxable deliveries of goods and services exceed hrk 800,000 (domestic taxable deliveries and exports).

If not otherwise required to submit tax returns and other reports electronically, employers or payers of salary and pension that have more than 100 employees, retirees and other persons to whom receipts are paid in accordance with the Personal Income Tax Law, are only obliged electronically to submit monthly id forms.

Tax payers not otherwise required to submit tax returns and other reports electronically may voluntarily register and use ePorezna services (there are a number of benefits of doing so).

tax returns and other reports that can be submitted electronically Currently, electronic submission of the following tax returns and other reports the ePorezna service allows: · monthly and annual vat returns (evat and evat-k returns); · monthly reports on salaries and other income (eid and eidd reports); · annual corporate income tax return (ecpt return); · annual calculation of monument fee (esr); · annual calculation of tourist fee (etz); Insight into the cta records of the taxpayer (epkk) will also be allowed.

The following tax returns and reports must be physically submitted on electronic media (diskette hd 3,5, cd, dvd or usb): · annual information on salaries or pensions (ip form); · annual report on allowances disbursed and the advance payments of withholding tax on other income, income from property rights, income from capital and income from insurance (id-1 form); and · annual information on personal income tax deductible insurance premiums and voluntary health insurance premiums.

Furthermore, from 1 January 2012 the submission for public announcement of Annual Financial Statements to na (Financial Agency) is no longer free of charge.

However, if Annual Financial Statements are submitted electronically (the possibility provided by fina e-card), the service continues to be free of charge.

By Paul Suchar

Paul is partner responsible for Taxation & Regulatory Services practice in Croatia and Bosnia & Herzegovina. Paul has more than 20 years of extensive experience in providing advisory assistance in respect of crossborder tax strategies and global tax services to local and multinational companies. Paul holds degrees in Law and Economics from the University of Sydney, is a Chartered Accountant in Australia, a Fellow of the Taxation Institute of Australia, a Croatian Registered Auditor, and a Certified Mediator with the Croatian Ministry of Justice.

eporezna In order to use ePorezna services a digital certificate that contains information proving the identity of the legal entity, including an electronic signature (a signature is an obligatory part of every tax return and report) must be obtained. The authorised issuer of digital certificates is fina and the certificate is issued on a fina e-card that also allows users access to certain other services. For both ePorezna services and fina e-card services a taxpayer may empower another person, such as a bookkeeper, who, on behalf of the taxpayer, may submit tax returns and other reports to the cta and fina.

penalty provisions The General Tax Law prescribes penalties for both legal entities and individuals who do not electronically submit tax returns and other reports, and who are obliged to do so, ranging from hrk 5,000 to hrk 500,000 for entities, and from hrk 2,000 to hrk 100,000 for the responsible person. In other words – without much further ado – one should consult with one’s tax specialist and pay heed indeed.

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around the globe

Of course, despite everything about an independent Scotland being of great advantage to England, there is still a measure of political will to keep the United Kingdom, well, united.

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The Scottish Question Is it possible to have your cake, and eat it?

Scotland is certainly going to find out soon enough.

The constituent elements of the United Kingdom have already secured devolution, with their own Parliaments; Northern Ireland has Stormont, the Welsh are in Cardiff, and the Scottish sit in Holyrood.

However, Scotland has long since resented its ‘membership’ of this union, and, for a long time now, talk of a referendum has been akin to that most famous of Scottish plays, hinted at knowingly, referenced as needed, but never mentioned by name.

And, by the by, it makes perfect sense in this region that an Irishman should be writing about it. Doesn’t it?

By Lee Murphy

I

f you’ve ever read Lewis Carroll’s Alice’s Adventures in Wonderland you may recall the riddle posed by the Mad Hatter during the tea party: ‘Why is a raven like a writing desk?’ In truth there is no answer, at least none which we might consider satisfactory.

Scotland and England are currently negotiating their own riddle with regards to the question of the former’s independence from the larger body of Great Britain.

At first glance it does not seem to be an overly difficult concept to navigate; the Scottish National party (snp), following a comprehensive victory in the 2011 General Election declared an intent to hold a referendum on independence in 2014, and Westminster have no choice but to let them. However, it is remarkably more complex than that. The referendum itself is not in doubt, it will happen, but the

devil is in the detail. So far both sides are at odds with each other as to what exactly they will ask the Scottish people, whether to seek full sovereign independence, or to retain certain economic and militaristic ties to England; a federal state if you will.

Westminster are naturally not keen on any such ‘ties’, Scotland being a net spender as it is, while the snp are all too aware that a no vote will put an end to Scottish Independence for another few generations.

Stranger still is that it appears England’s citizenry would gladly rid themselves of what they view as free-loading Scots, while the Scottish citizenry are none too keen on full independence whilst Scotland relies so heavily on English financing (prescription medicine and the educational system are heavily subsidised in Scotland while this is not the case in England).

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of oil and nuclear weapons There remain questions to resolve in regard to the North Sea oil fields, which would clearly lie within the new Scottish territorial waters, and to whether the British fleet (we won’t even go into who gets to own this!) along with its nuclear arsenal will be moved from its current location in Faslane or not. The overwhelming opinion in Scotland is that they prefer it be moved ever so slightly south; or ever so greatly south; as long as it’s south and no longer in Scotland. In order for this to happen Scotland would need to vote for full independence, but of course they’d clearly prefer this aforementioned federal link, known as Devo-Max (maximum devolution), in which case they’d still like the ships and weapons to set sail south.

This, ironically, would be incredibly advantageous to England, in that they could then justify the savings made by scrapping the contentious Trident missile, saving the state a considerable fortune, and simultaneously blame those north of Hadrian’s Wall. The savings involved would be in excess of usd $2.6 billion on a yearly basis, an amount which would help ease the fiscal burden, or save the Greeks – if you will allow us to have recourse to a popular pun.

“Nations are nations if they feel themselves to be a nation.

And Scotland overwhelmingly feels itself to be a nation.”

Alex Salmond, Prime Minister of Scotland

independence at a cost?

Of course, despite everything about an independent Scotland being of great advantage to England, there is still a measure of political will to keep the United Kingdom, well, united... This at the same time that Westminster does its utmost to keep at arms length from the European Union.

While this region does not necessarily consider itself Yugo-nostalgic by any significant stretch, at least on the political level, it is safe to say that independence for independence’s sake can sometimes be a bad thing. In other words, does Scotland really need to be independent when it already reaps the fruits of devolution?

It is not difficult to understand Nationalist prerogatives, and the desire almost all ethnic groups have for self-determination; but what of Wales, what of Northern Ireland? Surely the question of Scottish independence affects others too, not just those who seek to throw off the (at this day and age surely imaginary) colonial yoke – not that England, in this instance, has needed an iron fist for the first time, preferring the velvet glove since 1707 (the Act of Union, joining Scotland to the United Kingdom was signed in this year).

When we consider the turmoil (and turmoil is a very tame word indeed) that this region went through, and is still enduring to some degree, we can only look on with disbelief and slowly, surely, we realise that we have finally joined Alice through the looking glass.

“When I hear the Scottish Nationalists, who are so keen to leave the uk, yet so anxious about having a referendum – perhaps they should remember Burns’ words ‘Small, sleek, cowering, timorous beast. O, what a panic is in your breast!’”

David Cameron, Prime Minister of the uk

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The Feast of Saint Blaise When we think of Dubrovnik we quite rightly think of the jewel in the Adriatic’s crown, a place of such pristine beauty; no graffiti, no rubbish soiling its streets. But also of bustling markets, thronged by the tourists needed to keep the local economy afloat. Has Dubrovnik sold its soul, or is there still something of the Republic of Ragusa that remains?

Text: Miroslav Tomas Photos: James Price Chuck

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destinations

L

ong a proud, independent city Dubrovnik resisted, by means of wiles if not force, countless would-be conquerors throughout the Middle Ages and beyond. This we know. But what remains of the true Dubrovnik, one might wonder? For what is a city? Is it the walls and the buildings, or is it the people?

One might argue that Dubrovnik’s population has been lost and obscured, not only in this modern age of commercialisation of everything and anything, but in all the turmoil and wars that the last two hundred years have brought to this neck of the woods. First the patricians left - indeed, nowadays not a single scion of the old aristocratic families such as Gondola, Pozzi, Gozze, Cerva, Zamagna etc. resides in the City (anyone know the slavic variants of these surnames?) - and then came the age of real estate booms and of the (comparatively) wealthy Anglophones seasonally retiring to the idyllic Adriatic (pardon the rhyme). In addition, what with the young leaving to study elsewhere, what with the influx of cruiser-borne tourists in mass numbers, one of the most beautiful cities in the world may well have been permanently overwhelmed by sheer numbers, market forces and instant tourism; and this process, as well we know, can be quite dehumanising.

One might even say that Dubrovnik has turned into a ghost-town of sorts, whether busy or not. In the summer months it of course serves as a backdrop for holiday photos or as a majestic set for adaptations of fantasy literature, beginning to share, in that respect, the decadent destiny of its once-upon-a-time great rival Venice; in the winter months, it is literally empty.

Whilst not so long ago more than five thousand people lived within the walls of the Old Town, these days these number have dwindled to less than a thousand. May we quote an old Spanish proverb, and say that where there’s no rubbish, there’s no life.

However, there comes a time of year when Dubrovnik once more looks its part as the heart of the old Republic, the Renaissance maritime superpower; people get dressed (to the nines) in traditional costume to perform a pageant, not as a sideshow for camera and camcorder abusing tourists, but as a real part of life, honouring a tradition woven deep into the fabric of their ethos and life itself. Enter “local colour” at its best; commence the celebration of the life and legend of Saint Blaise.

the legend Having lived during the 3rd and 4th centuries his story is a relatively familiar one. Saint Blaise is one of the fourteen Holy Helpers, or Auxiliary Saints, a group of venerated individuals whose divine intercession is widely held to fend off a variety of illnesses and diseases. He himself lived in Asia Minor, where he would become Bishop of Sebastea (Sivas in modern-day Turkey).

A pious and humble man, Blaise worked as a physician for the benefit of the inhabitants of his hometown. A Christian and a man of some authority, he was chosen by popular acclaim to become the new Bishop of Sebastea following the death of the incumbent. However, he had the misfortune of living in the time of Emperor Diocletian, an ardent persecutor of Christians. The legend tells us that fleeing from persecution he took shelter in a secluded cave where he was visited by wild animals that he came to communicate with and tame. Eventually he was arrested and taken into the city where he refused to renounce his faith and was thrown into prison. While in captivity he blessed a boy who had a fishbone stuck in his throat, curing him instantly. Having consistently refused to embrace the Roman pantheon

Eager to visit the pearl of the Adriatic and dread the prospect of crowding with tourists that swarm the city in summer months?

You should definitely put the Feast on your calendar for next year.

of gods, he was tortured by means of iron wool combs – which were used to tear his flesh – and subsequently beheaded.

To this day he is considered to be the patron saint of throat afflictions and of the wool industry, for the suffering he endured by the tools of their trade. In religious iconography Blaise is often depicted holding candles and iron combs, thereby asserting his patronage; all around the world, not just during his festival, candles are used in the Catholic Church to bless the throats of the faithful.

saint blaise & dubrovnik According to legend, in the year 971 ad, the Venetian fleet, having subdued the inhabitants of the Neretva region to the north of the city, set sail for Dubrovnik and laid anchor in the city port under the false pretence of restocking food supplies while on their way to the Levant. On that same evening a pious monk named Dum Stojko was praying long into the night.

While deep in his meditations the ghost of St Blaise and an army of celestial soldiers paid him “a visit” to inform him of the Venetians’ true intentions, and instructed him to warn the city of the imminent threat. Dum Stojko then informed the Council, who raised the city guard to arms and managed, with the aid of the celestial soldiers, to fend off the Venetian assault. From that day on Saint Blaise was declared a patron saint of the city. Testament to the deep bond between the

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people of Dubrovnik and their patron saint is evident in the numerous representations of his likeness on everything related to the city – the white flag with his image, the letters sb (Sveti Blaš) and Libertas inscribed at the bottom; coinage; the city crest, and the city seal. The image of the saint was even crafted onto weapons and armour made in the city, not to mention numerous sculptures displayed all over the Old Town – on churches, fortifications, government buildings, private homes. These representations of Blaise were said to safeguard the Republic from violence, thievery and ill fortune.

Blaise’s portrayal in Dubrovnik is – unlike elsewhere, where the Saint is depicted with either crossed candles or iron combs – that of the Saint in a bishop’s attire, handing out blessings with one hand and holding a model of the city in the other.

the feast The first written document that mentions the feast dates back to the year 1190 ad, when one would assume it was a strictly religious affair. Over the centuries, however, it has evolved into its present form, embracing both Church life, and secular.

Starting with a spectacular release of white doves on Candlemass Day (February 2nd) in front of Saint Blaise’s Church, and the raising of Saint Blaise’s flag on Orlando’s Column we can see the almost natural mix of deep faith and devotion with the traditionally less pious festival goer. Early on the morning of the 3rd there is a gathering of the faithful from all of Dubrovnik’s parishes at Gruž, where they form into a procession, making their way to Saint Blaise’s Church for mass. The relics of Saint Blaise are carried down Stradun and the streets of Dubrovnik in this huge procession of banners and people. The most valuable amongst these relics, which usually resides in the Dubrovnik Cathedral, Jesus’ loincloth, is carried under a canopy.

For those who might not necessarily find such events to their liking there are many other options on offer around the city. Concerts, exhibitions, literary readings, and theatre performances all abound as the city seeks to express its cultural heritage in a more open setting.

Indeed, the festival is recognised even by unesco, having been added to the “Intangible Cultural Heritage” list, underlining the significance of such a celebration.

No more descriptions of pageantry and festival lore: one must visit and see for oneself, between the 2nd and 4th of February.

In any event, no more descriptions of pageantry and festival lore: one must visit and see for oneself, between the 2nd and 4th of February. Suffice it to say that in the days of the old Republic the feast of Saint Blaise was a national holiday and for its duration all the folk of the Republic were welcomed into the town to receive a blessing - even the banished criminals were given right to set foot in the city without fear of prosecution. And though banishing a criminal from the city has long since disappeared as a criminal penalty (perhaps wrongfully so), the feast attracts the inhabitants of what was once the Dubrovačka Republic as they venture into the old town to bring back the blessing of Blaise to their communities.

Our story of Dubrovnik and its patron saint is perhaps best summed up with the following. If you are eager to visit the pearl of the Adriatic and dread the prospect of crowding with tourists that swarm the city in summer months, you should definitely put the Feast of Saint Blaise on your calendar for next year, as it will truly give you a taste of Dubrovnik as it once was, and indeed as it continues to be in true spirit.

DID YOU KNOW? In its heyday of the late Middle Ages and the Renaissance, Dubrovnik was virtually a maritime superpower rivalling the likes of Venice and Genoa, especially in the spice trade business. As such, Dubrovnik’s merchant vessels sailed around the Cape of Good Hope to the East Indies, where Dubrovnik established a trading outpost that eventually turned into a bona fide settlement of some thirteen thousand inhabitants in Goa, India. The colony was named after the Town's patron saint, or to be more specific after the Portuguese version of his name, Sao Bras. Saint Blaise is not merely a “local” saint though, with Blessings of the Throats taking place, among others, in Ireland, Britain, and Germany, while February 3rd is also considered a bonfire night in parts of England, in reference to the Saint’s name, Blaise, and the homophone “blaze”.

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good stuff

A Man's St Valentine’s…

These belated suggestions are meant to set you on the right track for next year – regardless of the budget you have in mind. And, as will be made apparent almost immediately, there is absolutely no reason why you shouldn’t be thinking about yourselves as well whilst buying presents for your better halves.

On Beauty by Umberto Eco € 25 - 30

There is no doubt that Umberto Eco is a man’s man, but any woman receiving On Beauty can only feel appreciation, as the title can obviously refer only to her and none other. Furthermore, On Beauty, though heavy on pictures, contains just the right amount of serious commentary and academic gravitas to make her feel appreciative of your appreciation of her intellect. However, do not forget that On Beauty is also a part of a double-decker, the antipodal title being, it should not surprise, On Ugliness. Though perhaps even more interesting a read, we do not suggest that you buy the latter title for Saint Valentine’s, unless you have balls of steel, a particularly gorgeous significant other, and the good sense to package the doubledecker – which, of course, will eventually end up in your bookcase, not hers – in a very tasteful and elaborate bouquet of aqua roses.

Mini by Goodwood € 45.000 - 55.000

The new Mini is not necessarily a girls’ or girly car, but girls sure love it – in all its incarnations. But this version – made in cooperation with Rolls Royce – is something special indeed. With the metallic black of the exterior, on loan from the legendary Rolls Royce Phantom, the bespoke beige leather of the interior and the 185 horse power Cooper S engine, this is the car of all cars for any sophisticated dandy. After all, this is, prima facie, nothing flashy: only you and a few others will recognise (from afar) this rare automotive delicacy. As for your better half, she is likely to tire of it soon, in which event you’ll have a true gem and a true classic reposing with haughty understatement on your side of the garage.

Omega Seamaster Planet Ocean € 3.000 - 3.500

Here, we shall be brief. The ladies’ variant of the Seamaster is in effect a unisex wristwatch, and, as it is somewhat smaller in size than the gentlemen’s variant, it tends to solve the ageold problem posed by chronometers – their sheer size and girth. In other words, she won’t mind your borrowing it every now and again, and, in addition, any object that makes people feel more adventurous should never be underestimated.

Yali House, Istanbul € 1,5 - 15 million

Turkey’s been hot for quite some time, and we’re not talking about the weather; Istanbul’s in Europe, yet it also a part of the Orient. In other words, it is sensual, and can there be a better way of showing how sensual you too are than buying the perfect weekend house, dating back to the days of decadent Ottoman hauteur, right there on the Bosphorus, completely renovated…? Technically, you are buying it for her and your romantic getaways, but we know that you’ve always wanted to find out what all the fuss was about throughout all those centuries, why Constantinople/Istanbul – or rather the feat of conquering and possessing it – has represented one of the most acute passions of the human mind since time immemorial.

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to-do list

February 16th

February 23rd - 26th

February 22nd

Chris Rea

Vino 2012

Belgrade Fair, Belgrade / Presentation of wine and wine distillates

Grand Hotel Union-Executive, Ljubljana / Culinary event featuring freshwater and sea fish specialities

February 18th

February 22nd -26th

February 12th

Boćarski dom Zrinjevac, Zagreb (21h) / Distinctive, husky voice and slide guitar sounds

Herring Feast

Dvorana Tivoli, Ljubljana / Enter the (Year of) the Dragon

Zagreb Boat Show

Zagrebački velesajam, Zagreb / The largest business boat show in the region

Yamato

February 20th - 24th

February 12th

February 22nd -26th

Shaolin Kung-Fu

4th Int. Conference GNP

Int. Tourism Fair 2012

KC Dražen Petrović, Zagreb (21:30h) / A Japanese musical group of taiko drummers founded in 1993 by Masa Ogawa

La Traviata

Žabljak, Montenegro / Civil Engineering-Science and Practice

Belgrade Fair, Belgrade / Promotion and presentation of Belgrade as a city break destination

Narodno pozorište, Sarajevo (19:30h) / Giuseppe Verdi's opera set to an Italian libretto by Francesco Maria Piave

February 21st

February 17th

February 29th

Mostar Sevdah Reunion

Gardenia

Madame Butterfly

Tvornica kulture, Zagreb (21h) / Sevdalinka and gypsy music in modern arrangements

Cankarjev dom, Ljubljana / Les Ballets C De La B (Belgium) Contemporary Dance Production

Narodno pozorište, Beograd / Puccini's opera based on events that actually occurred in Nagasaki in the 1890s

February 23rd

February 19th

February 12th

Tko to tamo peva?

Narodno pozorište, Belgrade / Ballet adaptation of a classic Serbian comedy

Rijeka Carneval

Korzo, Rijeka / The third largest event of its kind in Europe

Johnny Winter

Tvornica kulture, Zagreb (21h) / Blues legend performs alongside the band Sunnysiders

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Grand Hotel Imperial A true pearl of the Adriatic, absolutely 5*.

First opened more than a century ago, on January 29, 1897, and completely renovated in 2005, the Imperial has always been an unmistakable symbol of luxury and elegance. Overlooking the famed Old Town of Dubrovnik, it exudes that old world charm, yet it also offers the most modern amenities and culinary wonders prepared by Chef Christopher Gauci. Join us for Christmas, New Year’s Eve, for the traditional Feast of Saint Blasius...or anytime.

Hilton Imperial Dubrovnik | Marijana Blažića 2 | 20000, Dubrovnik |+ 385 (0)20 320 320

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