see magazine 09 by Igor Dakić

june 14th

feature / Croatia: New National Bank Governor and the Eurozone Future in the margin / The Serbo-Greek Umbilical Cord the economy / From Austerity to Affluence?

southeast europe · a fortnight in review no.09 / subscription only / 14th june 2012

/ M & A in Pre-EU Croatia technology / A Brief Walk through…‘Cloud’

GREEK FIRE

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june 14th

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content

introductory epistle

Greek Fire

fortnightly news

The Economy

Of General Interest

fortnightly feature

Croatia: New National Bank Governor and the Eurozone Future

in the margin

The Serbo-Greek Umbilical Cord 20

the economy

Slovenia: From Austerity to Affluence? Not Quite Yet.

m&a

Mergers & Acquisitions In Pre-EU Croatia

editorial

The State of the World Economy

technology

A Brief Walk through…‘Cloud’

politics

The Man of Two Oaths

event horizon

A Bosnian Reshuffle 32

eu accession

Montenegro: The Beginning of a New Chapter

destinations

Sveti Stefan: Crown Jewel of Montenegro

good ftuff

Tech & Trendy

to do list

june 14th

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introductory epistle

Greek Fire

he above title is no mere pun, but an actual incendiary weapon used by the Byzantines to great effect, usually in naval battles. The exact ingredients of the cocktail represent a secret that has been lost in the dark and violent recesses of (Balkan and Levantine) history, though it is usually speculated that this devilish invention, which could continue burning while floating on water, involved the mixing of naphtha, quicklime, sulphur and nitre. And God knows what else. A thousand-odd years later, the Greeks seem to be in the chemical or mixology business yet again, although this time they are not experimenting with flammable potions and materials, but rather with the stuff that societies are made of. The repeat parliamentary elections mere days away, they have traded in sulphur for fiscal irresponsibility, nitre for suspect work ethic, quicklime for high nationalistic passions, naphtha for stubbornness. As before, all the ingredients of this destructive power, threatening to disrupt the entire financial system of the Old Continent (and consequently the whole world), may forever be lost to posterity.

It may be true, as Peter Frankopan, Director of the Centre for Byzantine Research at Oxford and the author of “The First Crusade: The Call From the East” said in a recent article published by the New York Times, that Athens now as Constantinople during the time of the Crusades became addicted to easy money provided by the West, their greedy and irresponsible dealer; it may also be true that in either instance the lending led to some sort of demise on a grand scale; but it is undoubtedly true that the Greeks had better sober up and rise to the occasion, or else…

we can only imagine the dark apotheosis. Let us just look at the surface, with the immediate region in mind. Slovenia is a member of the Eurozone, and so is Montenegro, unofficially. As for Serbia, Greece is to this country one of the main sources of fdi, whilst Croatia, should the Greeks persevere, can expect to see even more trouble for its already massively troubled shipping and shipbuilding industry. The Bosnians, delicate as they are, can hardly afford another disruption – of any sort – and we could say, if we wanted to be wicked, that only Macedonians stand to profit from an even further weakened Greece, as this might give them a bargaining chip in the long standing name dispute. But even the Macedonians – the sane ones, that is – know that Greece is one of their principal trade partners and that this fact far overshadows any romantic notions and much abused populist platforms. Indeed, Greek fire...may it not strip us of the pleasure of indulging in those wonderful and fast-approaching summer pursuits. I, for one, solemnly proclaim that I truly deserve a decent holiday. Perhaps even in Greece...less the fire.

impressum

editor-in-chief Igor Dakić executive editor Lee Murphy lee@see-magazine.eu graphic editor Ivor Vinski art editor Stiv Cinik country editors Miša Milošević (Serbia) Aida Tabaković (b&h) Sebastijan Maček (Slovenia) Miroslav Tomas (lifestyle)

issn 1848-4107

contributors Dylan Alexander (Permanent) Jerko Markovina (Permanent) Ivan Bilić (M & A) Stephen Young (Editorial) photography Mens-Libera Photo, Shutterstock, IStock, Wiki Commons unless otherwise specified printer Stega tisak d.o.o. Zavrtnica 17, Zagreb Croatia

director Igor Dakić igor.dakic@see-magazine.eu sales & marketing (cro & slo) Miroslav Tomas miroslav.tomas@see-magazine.eu + 385 95 63 99 702 sales & marketing (serbia) Milan Milošević misa@see-magazine.eu + 381 63 224 223 sales & marketing (b&h) Amela Tanović amela@see-magazine.eu + 387 63 691 393 publisher Mens Libera Media d.o.o. Ksaver 215, 10000 Zagreb tel/fax +385 (0)1 46 77 165

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june 14th

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fortnightly news / the economy

death knell for b&h airlines

direct flights from belgrade to split

That Turkish Airlines had announced they were withdrawing their management team from Bosnia and Herzegovina was news in and of itself. That this was in relation to B&H Airlines was a revelation very much unexpected. For all intents and purposes B&H Airlines has been defunct for a number of weeks already, and it is expected that Turkish Airlines will seek to rid themselves of their 49% holding. It is unlikely that B&H Airlines will be able to maintain any semblance of independence should that stake be purchased by a larger carrier, be that carrier national or regional.

After an absence of 21 years Croatia Airlines has announced that they will be beginning flights connecting Split and Belgrade. The flights are scheduled twice a week, for Mondays and Fridays, but are still in a trial phase up until September, or until the end of the tourist season. Croatia Airlines have stated that this trial period is meant to gauge interest for prolonging the route, but also to see whether a route between Zagreb and Belgrade might be feasible: an inter-capital flight has long been sought after by the business community. The flights between Split and Belgrade will be serviced by a Dash turboprop which can seat 76 passengers.

the imf gives their opinion on serbia With the rapid loss in value of the Serbian Dinar it was never going to be long before the IMF made their views known: Bogdan Lissovolik, the IMF Permanent Representative in Serbia, has stated that Serbia is in need of fiscal consolidation and must give more focus to their efforts to address their balance of payments deficit. “Structural reforms imply creating conditions for attracting foreign direct investment, primarily in manufacturing and export-oriented sectors,” said Lissovolik.

car sales market in jeopardy In a week when Croatia unveiled its new utility vehicle, Rasco’s MUVO, there remain serious question marks as to the future of the car market in the country. According to European-wide figures the Croatian market is one of the worst, with just over 2,600 cars being sold during the month of April, a 37% decrease on the same period in 2011. This decrease means that total sales for 2012, to date, have fallen below those of 2011. This pattern is being repeated across Europe with sales for 2012 totaling some 340,000 fewer vehicles than in the same period in 2011. Mercedes are the only car producer to have reported a significant rise in sales so far this year.

possible investment on the horizon for croatia

limpio opens plant in lukavac Limpio, who produce paint and plaster, have opened a new plant in Lukavac, B&H, in an investment worth over 1.5 million Euros. The completely automated production facility will employ 30 workers and will have a daily output of 100 tonnes. The plant will produce a wide range of products, from decorative stucco and façade paint to construction adhesives and mineral plaster. Limpio started life back in 1989 as an importer of building materials but soon moved into production. Exports to Croatia account for almost 34% of their business.

The Croatian Chamber of Commerce (HGK) recently hosted two business meetings: the Croatian-Chinese business forum attended by a delegation from the China Council for the Promotion of International Trade (CCPIT) and the Croatian-Turkish business forum attended by Turkish textile companies, which was organised by the Association of Exporters of Textiles and Clothing from Istanbul. The Turkish delegation said that as many as 17 companies were looking at expanding into the Croatian market. Similarly, the Chinese see Croatia as being an attractive market. “Croatia occupies an important geographical position, has valuable water resources and forests, and particularly developed tourism, which can be important for attracting Chinese investment. It is also important to develop cooperation by linking SMEs, and to encourage mutual investments,” said Dong Songgen, Vice-President of the CCPIT.

b&h to give out mining concessions Erdal Trhulj, the Bosnian Minister for Energy, Mining, and Industry, has stated that as soon as the Federal Concessions Act is passed the State will be publishing a public tender for various mining operations throughout the territory of B&H. European industry, the Minister explained, currently has a demand for a number of different metals, 14 of which can be found in B&H. Mining of these metals had been discontinued at various stages between the 1930s and the 1960s due to a decline of value on the International markets. Bakovići Mine is a site that will draw the most attention, as it is estimated that it still holds some 4.2 tonnes of gold and as much as 6 tonnes of silver. At current prices that would amount to over 300 million Euros, something the B&H economy can hardly afford to forfeit.

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shareholder convention for belgrade airport The management of Belgrade's Nikola Tesla Airport has scheduled their annual shareholders meeting for the 28th of June. At the meeting the shareholders will be presented with information relating to the airport's business plans for 2012, as well as financial reports for 2011. There will also be a vote on a new pricing structure which will include reduced rates for carriers using the Serbian capital's airport. Although Nikola Tesla witnessed a decline in profits – over 29% when compared to 2010 – dividends may yet be paid out, which is another thing to be decided at the aforementioned shareholders’ meeting.

moody's downgrade croatia's outlook

montenegro becomes part of medcruise

In response to a reported 1.3% decline in Croatia’s GDP during Q1, Moody’s have downgraded the country’s outlook from stable to negative. Moody’s have explained their decision by highlighting Croatia’s dwindling economic growth, declining exports, and the failure of the State to implement any meaningful austerity measures. The Eurozone crisis has not helped matters and has impacted on the Croatian economy. Moody’s is the last credit rating agency to downgrade the Croatian outlook as Standard and Poor’s and Fitch have already altered their estimates earlier this year. Moody’s have left the Croatian credit rating unchanged at BAA.

The Port Authority of Kotor has become a member of Medcruise, an association of port authorities of various cruiser destinations in the Mediterranean, the European Atlantic, and the Red and Black Seas. Dubrovnik had proposed Kotor’s entry and, clearly, as the largest cruiser destination in the Eastern Adriatic, their opinion held sway. As part of Medcruise Kotor can now expect to see a rise in tourist numbers as it plays host to regular cruise visits by all the major companies operating in the region.

adria airways up for sale?

imlek buys out natura vita

It is being speculated that a public tender for the sale of the Slovenian carrier Adria Airways will be published towards the end of June. BDO Revision, an auditing firm, have been contracted to perform a survey of Adria's assets, especially AA assets such as hangars and the newly constructed airport building at Brnik Airport. All business agreements will also be examined. Adria Airways, along with other carriers in the region, recently rejected a EU proposal to merge and form a larger brand.

Imlek, a dairy based in Belgrade, together with Mlijekoprodukt, from Kozarska Dubica in B&H, have concluded a deal worth 8 million Euros whereby they take control of Natura Vita, a Bosnian dairy from Teslić. This deal will confirm Imlek as one of the leading investors in the dairy industry. Already Imlek have invested 20 million Euros into Mlijekoprodukt and they own several dairies in B&H, Serbia, and Macedonia. Their combined output totals over one million litres of milk per day.

lack of government part of currency's problems As Serbia still waits to learn who will be part of the new Government, it seems as if the currency, the Serbian Dinar, cannot stabilise. Despite the Serbian National Bank selling off almost 70 million Euros the currency has continued its slide and is now trading at over 116 RSD to the Euro. Serbia has sold off 1 billion Euros since the turn of the year, but this has done little to arrest the currency's inexorable descent. It has been widely suggested that it is Nikolić's victory in the Presidential campaign, as well as the lack of a Government, that has caused the International markets to shy away from the Serbian Dinar.

danieli buys sisak ironworks Italian firm Acciaierie Bertoli Safau (ABS), a part of the larger holding company Danieli, has bought the Sisak Ironworks for 30.4 million Euros from U.S. Company CMC, which owned the works since 2007, during which time they invested 200 million Euros into the reconstruction of the production facilities. Danieli have bought the grounds, steelworks and rolling mill, with the exception of coldforge facilities which remain in CMC’s ownership. Danieli is one of Italy's largest industrial consortiums, their annual revenue exceeding 3 billion Euros. They are also well acquainted with the facilities in Sisak, since it was they who supplied the machines used in the modernisation of the ironworks under CMC.

new supervisory board for abanka A shareholders meeting of Abanka Vipa has approved the appointment of a new supervisory board, and has also adopted a proposal to increase the bank's core capital, by 50 million Euros, through a new stock issue. This new supervisory board will see the appointment of Andrej Andoljšek (of Sava Insurance), Kristina Ana Dolenc (formerly of New Ljubljana bank), Andrej Harzabet (former board President of NKBM), and Andrej Slapar (of Triglav Insurance). The stock issue was opposed by a number of shareholders who see it as being against the interests of their portfolios. Abanka Vipa reported a loss of 119 million Euros during 2011.

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fortnightly news / of general interest

gloves are off for the slovenian government In an effort to oversee a greater economic recovery within Slovenia the Government has adopted a series of measures which are designed to stimulate growth. These measures are divided into four categories: improving the business environment; improving asset management; changes to legislation regarding construction; and modifications to the payment and repayment scheme. The Government ministries involved have been instructed to start enforcing these measures as of July 1st, 2012.

road tolls to rise 15% As of June 1st the toll rates on Croatian motorways will rise by 15% for cash or credit card payments. Users of the electronic toll system (ENC) will be able to avail of frozen rates for June, however, as the Government is attempting to encourage as many motorists as possible to switch to the remote system. The cost of an ENC unit will be lowered to a mere Kuna plus VAT, and so long as ENC users have a balance of 500 Kuna or more they will be able to avail of discounted tolls. The aim of this stratagem which ostensibly benefits ‘prepaid motorists’ is, as always, to collect as much money for the State purse as possible, in as short a period of time as possible.

kosor takes a back seat following hdz primary

macedonia commits to job programme Nikola Gruevski, Prime Minister of Macedonia, has announced that his Government, as part of a 12 point economic and social plan, is to provide over 13 million Euros for job creation. The money will be spent in those areas most affected by unemployment, and it is expected that it will take up to 4,000 names off the live register. Incentives will also be offered to small companies that are willing to employ extra staff and to self-employed workers in the hope that it will generate some entrepreneurial activity. Other measures include helping vulnerable families, improving access to education for children, and removing some levels of bureaucracy in the agricultural sector. The opposition, however, viewed this announcement with some scepticism, noting that this was announces at a very ‘convenient’ moment, with the local elections due early in 2013. The Social Democrats, who lead the opposition, have held, and will be holding, a series of protests which will not end until September 2, 2012, when it is expected all protesters will descend on Skopje. Despite forecast figures indicating growth in the Macedonian economy (they vary from 1-2%), Nikola Popovski, the former Minister of Finance, is not confident that this Government programme will yield any significant results, as, in his view, it fails to address the core problems of the economy.

Former Prime Minister Jadranka Kosor has stepped down from her position as President of the HDZ Parliamentary Representatives Club, this in the wake of Tomislav Karamarko's election as HDZ Party President and her defeat in the primary. Karamarko's Vice Presidents will be Goran Jandroković, former Minister of Foreign Affairs, and Ivan Šuker, former Minister of Finance. Kosor's position as Vice President of Parliament remains as is, at least until such time as the HDZ leadership decide otherwise.

putin pledges loan to serbia Vladimir Putin, the Russian President, recently spoke with his newly elected Serbian counterpart, Tomislav Nikolić. A 150% growth in economic exchange, during 2011, was highlighted during talks and it is felt that this figure can continue to grow. Putin added that he is willing to approve an 800 million USD loan to Serbia, which can be used for various infrastructural projects across the country, so long as he is kept abreast of such projects.

european commission to look at neum Croatian Deputy Prime Minister Neven Mimica recently visited Brussels to present the European Commission with the Neum Corridor project, which, following Croatian Government’s decision not to build the Pelješac bridge, should spare the passengers travelling in the South of Croatia the hassle of having to cross the border with B&H. Cecilia Malmstrom and Johannes Hahn, EU Commissioners for Internal Affairs and Regional Policies, met with Mimica to discuss the best way in which to design the proposed corridor so that it complies with EU regulations. The questions which require addressing revolve around the implementation of the Schengen Agreement in a unique situation where a EU member state (or soon-to-be member state) is seeking free passage through the territory of a non-EU member. According to Mimica, the Commission will be working closely with the Croatian Government to find a pragmatic solution to all problems, as they view the proposed project in quite a favourable light.

serbian mps sworn in Vowing to do their duty as a Member of Parliament (in an honest and conscientious manner), and to serve the Serbian people in the best way they know, 250 men and women were sworn in as MPs for the new Serbian Parliament. In the absence of a confirmed Prime Minister or Government it falls to Zaharije Trnavčević, the Parliament's oldest member, to oversee proceedings. It is hoped that a new Government would be in place within the next week as political uncertainty is having an undue effect on the economy.

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čačić to face trial

tadić seeks next best thing

Croatian Deputy Prime Minister Radimir Čačić is set to face trial in Hungary following a ruling made by the Hungarian Ministry of Justice. Čačić had previously claimed diplomatic immunity after he had caused a fatal road accident on the Nagykanisza-Budapest motorway in 2010, when two people lost their lives. The Hungarian Ministry has ruled that Čačić was in the country as a private citizen, and that diplomatic immunity does not apply in this instance. Čačić claims that he was not driving recklessly, but that it was an unexpected cloud of fog which led to the fatal crash.

janković under investigation

protesters clash with kfor It was almost too good to be true: there had been no incidents of note for some time in Kosovo, but that couldn’t last. When KFOR learned that local Serbs had erected a road block near the town of Zvečani, blocking access to the Southern part of Kosovska Mitrovica, they took measures to remove the barricade. As the forces went about their business they were reportedly attacked by a mob numbering close to 1,000. KFOR retaliated with rubber bullets and teargas, but it has been said that live ammunition was used as well. Three Serbs were injured during the affray and one KFOR soldier. Serbian President Tomislav Nikolić called an urgent conference to deal with these events, but some of his statements will hardly do much to quell any fears. “We cannot sit still, nor can we be silent while witnessing what is taking place in Kosovo and Metohija,” he said. On the other hand, the relevant Kosovan authorities have been tasked by the Kosovo Government to impound all vehicles which are still displaying old Serbian licence plates.

Mayor of Ljubljana and former candidate for the position of Prime Minister Zoran Janković has come under investigation for an alleged corruption scandal regarding the acquisition of a plot of land in Niš, Serbia, where a Mercator supermarket had been built. The Slovenian attorney's office is investigating the occurrences of 2006, a period when Janković, then CEO of Mercator, supposedly received a kick-back of 100,000 Euros, which was in relation to a land deal that preceded the opening of the aforementioned supermarket. Janković's lawyer has confirmed that an investigation has been launched but maintains that his client is innocent of any wrongdoing.

montenegrin embassy for priština Milan Roćen, the Montenegrin Minister of Foreign Affairs, has announced that the country is to open an embassy in Priština, the capital of Kosovo. Montenegro recognised the independence of Kosovo back in October 2008, and diplomatic relations between the two were established in January 2010. Roćen went on to say that this move had been long overdue, but that it had been delayed until after the Serbian elections since there had been tension between Podgorica and Belgrade over the issue: the Montenegrin Government did not want to be accused of interfering in the Serbian election campaigns. No date for the opening has been decided upon, nor a name for the new ambassador: former Managing Director of the Montenegrin State Television, Radovan Miljanić, is rumoured to be the man picked for the position.

Boris Tadić, runner-up in the Serbian Presidential Election, has agreed to be put forward by his party, the Democrats, as a candidate for Serbian Prime Minister. He made his decision late on June 3rd, just one week after his defeat, claiming that any future Government under his auspices would be "armed with aims and values, as well as with a plan which is both realistic and attainable". Tadić is expected to meet Serbia's new President, Tomislav Nikolić, and present him with a Parliamentary majority, which, apart from the Democrats, will involve the coalition consisting of SPS (Socialist Party), PUPS (Pensioners’ Party) and JS (‘Unified Serbia’). There is also a chance that either LDP (the Liberals) or URS (‘United Regions of Serbia) will also be asked to join Tadić's broad parliamentary camp.

josipović visits brussels Croatian President Ivo Josipović has just been on a two-day official visit to Brussels, where he met with President of the European Council Herman van Rompuy and President of the European Parliament Martin Schultz. The men discussed the various intricacies of the pending Croatian accession, focussing on the ratification process – something which is of concern given recent discourse between Slovenia and Croatia. Both the EU officials and the Croatian President stated that all was going according to schedule and that it was expected nothing would halt the eventual ratification procedure. Aside from these meetings, Ivo Josipović also spoke at the State of the European Union 2012. He also attended a conference, held by the INSEAD Business School, where he was joined by the Italian Prime Minister Mario Monti and a number of CEOs from European and American companies. This gathering of luminaries discussed the role of the private sector in the future development of the European Union.

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fortnightly feature

Put simply, the Government â&#x20AC;&#x201C; or at least the men directly in charge of economic and fiscal policy â&#x20AC;&#x201C; mean well, but are still in the process of setting up the sort of structure that could reap direct benefits.

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Croatia: New National Bank Governor and the Eurozone Future It had been quite a turbulent week for the Croatian economy: industrial output, as reported, had dropped by 9% during Q1 of 2012, and Croatia fell back into recession. On June 1st, the Prime Minister announced that Croatia was “pretty short of money.” It was looking very bleak indeed. At least it couldn’t get any worse, right? Well, there is light yet at the end of the tunnel, and the new Governor of the Croatian National Bank, among others, will have to try his hardest to make sure that we see this light. By Lee Murphy

n 2011 Croatia experienced growth in Q2 and Q3 but saw a 0.4% decline in Q4. Following the 1.3% drop in Q1 of 2012, according to figures provided by the State Statistics Institute, Croatia has officially entered into recession again. There is some slight relief, true, in that the majority of analysts had predicted that the drop in gdp would be higher, between 1.5% and 3%, but what is truly disconcerting is that spending is not down and tourist figures for 2012 are already up 11.4% on last year’s numbers, but that the two most crucial things, industrial output and investments, are hurting severely. Finance Minister Slavko Linić has been trying to consolidate the State purse and the general fiscal area with some unpopular measures such as an increase in vat from 23% to 25%, announcing major cuts which are yet to be implemented; Deputy pm Čačić, for his part, has been courting foreign investors, but in the game he plays courtship only has value if it is crowned with a marriage of interest, and to achieve that he would need to have the benefit of a more functional system and less red tape.

Before long it was made public that Rohatinski, Governor of HNB, was now going to be known as Rohatinski, former Governor of the HNB. Put simply, the Government – or at least the men directly in charge of economic and fiscal policy – mean well, but are still in the process of setting up the sort of structure that could reap direct benefits. It is in this sort of climate, harsh but still somehow at least marginally promising, that the Director of the Croatian

National Bank of 12 years, Željko Rohatinski, has decided to step down. Or was put in a position in which he had to step down? It matters little. Waiting on some statements whilst at the Croatian National Bank (hnb) just last week, we noticed that a television crew was setting up their gear outside the building: ominous indeed. It quickly emerged that there was something in the offing. Before long it was made public that Željko Rohatinski, Governor of the Croatian National Bank, was now going to be known as Željko Rohatinski, former Governor of the Croatian National Bank. It would seem that Prime Minister Zoran Milanović could no longer work with the man who had occupied the top banking position for the past 12 years, and it soon became known that Milanović, with a long-term plan in mind for hnb, had asked Rohatinski if he would accept a shortened 3rd mandate (1-2 years), after which time he would be replaced by his then-deputy Boris Vujčić. Rohatinski refused, demanding instead the full 6-year mandate, giving the Prime Minister no choice but to withdraw all offers and

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“Greece leaves the Eurozone and brings back the Drachma; the Euro has to devalue, but it can’t devalue as quickly...and Croatia sees almost all of its shipping business lost.” give Vujčić the job instead. As Rohatinski brushed off most queries, (“You need to ask Milanović”, was his all but uniform answer), the Prime Minister took the time to explain his reasoning: “This is not a case of anybody ‘relieving’ Rohatinski, but rather of making a strategic decision on who will lead the Croatian National Bank for the next six years.” The now-ex Governor would speak to the press, clearly disappointed at the path events had taken: “I am leaving after two mandates as Governor of the Croatian National Bank: I was ready to remain in the position and the Government should have been able to see we could enjoy further – and successful – collaboration. Since I’m leaving, it’s obvious that they didn’t.”

the governor is dead – long live the governor Boris Vujčić could be called a pupil of Rohatinski, having served as Deputy Governor for the past 12 years; as might be expected, no great changes are likely to occur in hnb’s policy. This was certainly how Vladimir Ferdelji, the President of croma (Croatian Managers’ and Entrepreneurs Association), saw things as well. “The change of Governors will not lead to a change in monetary policy as Rohatinski is succeeded by a man who learned only from him. If one were to see a change in

Željko Rohatinski

Željko Rohatinski, PhD, was born in Zagreb in 1951. He graduated in 1974, and then received his doctorate in 1988, both from the Zagreb Faculty of Economics. In the same year as his graduation he began working as a trainee in the Republic Bureau of Planning, and after 15 years there he was elected to the position of General Manager. Just one year later he was appointed Head of the Macroeconomic Analysis and Policy Division, Institute of Economics, Zagreb, which he managed until 1998. Up until 2000 he was Chief Economist at Privredna banka Zagreb, at which time he joined Agrokor as Director for Macroeconomic Analyses. He was on this last job for mere 3 months when he was appointed Governor of the Croatian National Bank. In 2006 he was reappointed for a further 6 year term. In 2009 he was awarded Governor of the Year by ‘The Banker’

magazine. He has been awarded several international scholarships (including the Fulbright grant), and he has written a number of scholarly papers on economic issues, as well as two books, on which was co-authored. Željko Rohatinski was resented by the economic community for a number of policies, specifically his protection of the Croatian banking sector and his decision to peg the Kuna to the Euro, something which affected the value of exports. He also foresaw the economic crisis to some degree and made sure that the banks under his care could only have a limited amount of liability. It is believed that this is the reason why the Croatian banking sector was not as affected as those in Ireland or Italy, or, for that matter, pretty much all across Europe and the globe.

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remain. While it is accepted that certain policies will remain unchanged, it would be foolish to assume this will last indefinitely. As a well known pro-European, Vujčić might be expected to seek to get Croatia into the Eurozone at as early a date as possible. On May 29th, in a presentation given at the British Croatian Chamber of Commerce, he stated as much: “it makes sense to enter the Eurozone as soon as possible – the costs of entry may be increasing due to the crisis, but the benefits should still outweigh them.” We had hoped to interview Boris Vujčić following that presentation, but given the events that transpired it must be imagined that he was quite busy.

beware of greeks bearing drachmas Boris Vujčić

Boris Vujčić, PhD, was born in Zagreb in 1964. He graduated in 1988, and received his doctorate in 1996, both from the Zagreb Faculty of Economics. From 1989 until 1997 he worked as an Assistant Lecturer at the Faculty, at which time he was appointed Assistant Professor. A Fulbright Fellow, he also spent time at Michigan State University, USA, as part of his doctoral studies. From the

the current monetary policy, legislation would also need to be changed, so as to make the Croatian National Bank co-responsible for the future creation not only of monetary policy, but of Croatia’s economic strategy as a whole.” This was echoed by Ljubo Jurčić, former Minister of the Economy and current President of the Croatian Association of Economists, who said that “the change of Governors will lead to no significant change, and that’s a good thing as any radical change would do more harm than good.” Ferdelji, advocating the implementation of monetary scissors and an immediate production and export boom, and Jurčić, the traditional Statist, may agree on the future of hnb as governed by Vujčić, but not necessarily on the degree – or rather the manner – of ‘responsibility’ the national bank should assume. It has to be said, however, that the pupil becoming the master does not have to mean that the status quo will necessarily

end of 1996 until July 2000 he was Director of the Croatian National Bank’s Research Department. Following this he was appointed Deputy Governor of the Croatian National Bank, earning a second term in 2006. As of June 6th, 2012, he has assumed the post of Governor of the Croatian National Bank, replacing Željko Rohatinski. An ardent pro-EU economist, he was Deputy Chief

While it is accepted that certain policies will remain unchanged, as a well known proEuropean, Vujčić will to seek to get Croatia into the Eurozone at as early a date as possible.

Accession to the European Union is but a year away, but the crisis which is sweeping across Europe (and not only within the Eurozone) is showing no signs of abating: indeed, given recent events in Spain, it would appear that things are likely to get even worse. It’s not Europe, however, that Croatia needs to worry about, or at least not all of Europe: it’s Greece. That this is the case should be of no shock to anyone who has been aware of the headache that the Greek economy has been causing Brussels. The Eurozone might still be some years away for Croatia, but that does not mean that a Greek withdrawal would not have an effect: Croatia already uses the Euro for 70% of all transactions. Should Greece leave the Eurozone, and presumably go back to the Drachma, it could spell disaster – palpable if not major – for the Croatian economy. The argument goes like this, as perhaps best summed up by Ante Babić, the independent macroeconomist: “Greece leaves the Eurozone and brings back the Drachma; the Euro has to devalue, but it can’t devalue as quickly as the Drachma, which impacts heavily on the Croatian markets – specifically in the area of shipping where the Greeks are a rival to Croatian business. With the Drachma devalued, Croatia would see almost all of its shipping business lost.” All the cheap holidays in Greece would do little for the Croatian economy. It feels crass to add that the Croatian tourism market would suffer to the benefit of the Greek islands and the Ouzo industry.

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If it comes to that...well...Croatia cannot control Greek behaviour and will have to bear its own portion of the burden. The more intelligent question is: could Croatia itself become the next Greece, especially in light of the fact that not a small number of Eurozone countries find themselves in very perilous regions indeed: Italy, Spain, Portugal, Ireland...?

kuna no more? eventually. Željko Rohatinski, in his final speech to the World Bank, suggested that the following cocktail might work: “a combination of structural reforms, restrictive fiscal policy and reasonably expansionary monetary policy – so as to effect a dynamic redistribution of limited funding from consumption to investment, and to use this investment to initiate sustainable economic growth aided by low inflation and exchange rate stability.” Very conservative, all this, as far as monetary policies go, but according to the former Governor this policy would “create a favourable environment for foreign capital inflows in the form of direct investment and not loans.” This is all well and good, and quite correct should all the dominos fall as planned, but perhaps the investment climate is not quite so welcoming: in previous issues we have highlighted the general distrust for foreign capital, something which may change in time but, then again, it might not. It might be that Vujčić, with his European experience, will be able to alter certain mindsets amongst the business

Vujčić may even manage to negotiate an early entry into the Eurozone. Now, wouldn’t that be something, even in the eyes of his detractors. community. Certainly Vesna Pusić, Minister of Foreign Affairs, speaks highly of the new appointee: “There had been talk, previously, whereby the Parliament might elect a new Governor, and Vujčić was mentioned as a possible successor. My opinion of the man is excellent: he is a first class expert, as I have learned through his role in the European Union negotiation team.” Croatia entered into those talks with the European Union back in October 2005, and the Kuna has been rigidly pegged to the Euro ever since. In fact, were the European Union amenable, Croatia could join the Eurozone literally tomorrow, as all the criteria have already been met, and are adhered to. Since the Kuna has been pegged against the Euro, the only remaining targets to attain were keeping inflation under 1.5% of

the average of the three Eurozone countries with the lowest rates, for two years, and keeping the budget deficit under 3% of gdp; although the current Government estimates that this will be mere 2.8%, Rabobank feel that it will more likely be 4.5%. In any event, we shall see later on in the year. The final criteria relates to the amount of public debt a nation can carry – under eu law this can be no more than 60% – and while Government estimates have Croatia meeting this target, it must be noted that Rabobank forecasts actually predict that the public debt will increase to 65%. Whatever the case, the Croatian economy needs to be, ultimately, part of the Eurozone; once Croatia is operating fully with the Euro as its currency – the operational date of the switch is projected for sometime in 2017 – the country should be far more attractive to foreign investors. The Catch 22 is that the Eurozone criteria might yet be tightened, leading to further delays of Croatian entry. A delay, in and of itself, might not be such a problem, but for the growing crisis in Spain: the European Union has €440 billion set aside, by way of member contributions, for the European Financial Stability Facility (efsf), but the risk now exists that this sum will not be enough to service such potential bailouts as might be needed. Prior to the announcement that the Spanish banking system was in dire of need of liquidity, it was felt that this fund should be able to service the needs of Greece and Ireland: the former almost definitely in need, the latter already on the way to recovery but in need of a safety net. When Spain and Italy are added to the mix, undue pressure is further placed on the finances of the European Union. Should the efsf (soon to be restructured and renamed the European Stability Mechanism – esm) be emptied, then it is unlikely that Brussels would allow any additional nations into the Eurozone. Croatia’s banking sector is stable when compared to others around the continent, but is it stable enough? It is certainly liquid and, despite certain scenarios entertained above, Boris Vujčić, Europhile as he is, might just turn out to be successful in keeping Croatia to its current Eurozone schedule. Who knows, he may even manage to negotiate an early entry. Now, wouldn’t that be something, even in the eyes of his detractors...

june 14th

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in the margin

The Serbo-Greek Umbilical Cord When it comes to the Eurozone, Serbia is much closer to the eu than it seems - and particularly sensitive to the stability of its weakest member: Greece. And, with Greek banks accounting for as much as 16% of the Serbian banking sector, yet another doomsday question cannot help but be asked. By Miša Milošević

reece is one of the largest investors in Serbia: over 200 companies and businesses from this traditionally friendly country have made more than 2 billion Euros of direct investments and employ more than 20,000 people. Let us take a look at the banks. There are currently four Greek banks operating in Serbia: Alpha Bank, efg Eurobank, Piraeus Bank and Vojvođanska (National Bank of Greece), which together hold a considerable market share of 16.3%. In spite of certain problems in banks’ abiding to Government's recent regulation of the banking market, previously unregulated particularly in client relations and conditions, they seem to be pretty stable: Eurobank efg recorded a positive balance in q1 2012 and the remaining three only moderate losses. Veroljub Dugalić, Secretary General of the Association of Serbian Banks, is very much confident in the Greek banks: “They are established in accordance with our laws, entirely autonomous, safe and solvent, and our citizens’ deposits are entirely safe”. Similar antipanic messages are coming from the National Bank of Serbia, which claims there are no reasons to withdraw deposits from Greek banks in Serbia, stating that their capital cannot be withdrawn or taken out

of Serbia, except in case a bank in Serbia has to repay a debt to the mother bank in Greece. And this is exactly what happened in April: when the Serbian National Bank reduced the mandatory hard currency reserve for banks, more than half a billion Euros were withdrawn by banks and most of it was sent ‘back home’ - not only to Greece, of course. This is a clear indicator that the mother entities in the Eurozone need money. Should Greece decide, or be forced, to step out of the Eurozone, it is impossible to foresee how

Should Greece decide to step out of the Eurozone, it is impossible to foresee how diligent the Serbian Government will be in enforcing their monetary policy.

diligent the Serbian Government will be in enforcing their monetary policy and keeping the mandatory reserves where they should be. Should the Greek general elections on June 17th fail to bring a reform-oriented Government, it is very likely that Greece will step out from the Eurozone and that the Greek banks will be cut off from most international sources of funding. This could cause one of two consequences: a short term shock to the money market, due to the fact that banks are the primary channel of Greek investments in Serbia. It would soon become obvious which Greek banks are directly involved in the crisis back in their homeland, which would likely result in their withdrawal from Serbia or, adversely but less probably, see them attempt to restructure their market positions through mergers and acquisitions. As a long-term consequence, the Greek public debt crisis would cause the cost of capital in the Eurozone to jump, reducing the overall amount of direct eu investments in underdeveloped countries, including Serbia. Other industries in which Greek capital is invested include food and beverage, oil, tourism, construction and trade: all of these would also be affected either by withdrawal of investors or slowdowns in investment cycles and reduced export volumes. The remaining part of a 100 million Euros Greek donation, for Serbian Corridor 10 highway, would also have a question mark over it. The conclusion seems to be clear enough: Serbian people would prefer seeing a stable Greece which invests in Serbia, rather than enjoying cheaper holidays in Drachmas yonder in the (now very troubled) land of the Olympian gods.

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the economy

Slovenia: From Austerity to Affluence? Not Quite Yet. Having just enacted a series of austerity measures, and having convinced the public sector to forfeit a part of their earnings, the Slovenian Government could be forgiven if they sought to indulge in some self-congratulation. There doesn’t seem to be much back-patting going on, however, perhaps because they don’t want to antagonise the already irritated trade unions. It may also be because the Government knows that tougher times still lie ahead. By Sebastijan Maček

usterity budget? Check. Public sector pay cuts? Check. Glimmers of economic recovery? Check. Well, sort of. Things seem to be going reasonably well for Slovenia at the moment, even against the backdrop of the continuing conundrum of the Eurozone and the increasingly likely prospect of Greece abandoning the Euro, presumably plumping for some kind of ‘Geuro’ or a ‘new Drachma’. In keeping with its ‘teacher’s pet’ image, Slovenia is taking its eu prescription of austerity and reform very seriously indeed. If we look closer, however, the picture is far more nuanced than immediately obvious, and far more troubling.

not as austere as expected The austerity package, a voluminous omnibus law that amends dozens of pieces of legislation, was originally expected to cut Government expenditure by approximately 820 million Euros during 2012. The end-result was somewhat stark in difference: after weeks of tense negotiations

There is talk of the Government finding extra savings in investment spending, but that carries its own risk... with trade unions and an unprecedented public sector strike that figure was reestimated, downwards, to around 220 million Euros in savings. This has not deterred the Finance Ministry from asserting that it still plans to meet its target of reducing the budget deficit to 3% of gross

domestic product (gdp), down from last year’s 6.4%. Just how it plans to do that, given the disparity in estimates, is anybody’s guess. There is talk of the Government finding extra savings in investment spending but that carries its own risk: that of losing the support of the corporate sector. The corporate sector had been all too happy to embrace spending cuts so long as they had been coupled with an increased expenditure on things that businesses benefit from, such as investments and subsidies. Fresh incentives in the form of grants, loan subsidies and guarantees have been announced, but they are not nearly big enough to offset investment cuts and may yet be deferred to late in q4 2012. In other words, they are not likely to have any tangible impact this year.

reform or go bust With austerity out of the way, the focus has now shifted to structural reforms. Slovenia has often been berated for its complacency and lack of zeal when it

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The Socratic Janša

comes to the reform process. Pundits have eagerly pointed to Greece as an example of the failure to reform, and the ‘Greek scenario’ has become a scareword liberally tossed around whenever any reform naysayer needs to be brought into line. A recent report by the European Commission says that “no major structural reforms were taken in 2011”. In the short-term it doesn’t seem that Slovenia is ready to get out of this mess: the Eurocrats say that the degree of ambition “seems modest, given the scale of the challenge”. The Government, however, seems confident that reforms, although delayed, will be put in place. The reform drive will be two-pronged, focusing on pensions and the labour market. Both have been attempted before, and both are riddled with risk. When we consider labour market reform, the Holy Grail is flexicurity, a system that allows employers to hire and fire workers without excessive restrictions while also giving employees a soft enough cushion to fall back upon should they lose their job. Corporate bosses are salivating at the prospect of ‘adjusting’ the headcount depending on the economic situation, but the trade unionists are understandably hung up on the ‘–curity’ part of the equation, demanding a strong social safety net. Talks have not yet even started in earnest, but both sides are already entrenched, having made it clear that they will not settle for minor adjustments (the corporate lobby) or accept a fully-fledged labour market liberalisation (the union bosses). Pension reform is easier in principle: the country simply does not have enough workers to support a growing population of pensioners. Since importing huge numbers of immigrants to balance the ratio is unthinkable, and politically unpalatable, the only apparent solution is to change the retirement age (and not in a good way), and reduce pension payments. The problem is that both labour market and pension reforms have been tried before, by the centre-left Government, which was voted out of office before the expiry of their mandate, at the end of 2011. At the time they were shot down by the unions, which mobilised their rank-andfile and initiated referenda at which voters decisively rejected the reform laws.

The Golden Rule has now been shelved, a price that must be paid for having pragmatically objected to reforms that are now more urgent than ever. The union movement had had very generous help from the parties that now make up the ruling centre-right coalition, an irony not lost on the leftist parties which have since been relegated to the opposition precisely because they supported the reforms.

the golden rule of politics For a while it seemed as if the ability of unions to shoot down legislation with referenda would be curbed. Slovenia has made the commitment, within the eu, to amend its Constitution with a Golden Rule determining that except in times of severe economic crisis, the budget must be balanced or in surplus. This, the European Fiscal Compact, also means, conveniently, that any referendum which could have ran afoul of this rule would have to be declared unconstitutional by the Constitutional Court. But, after Francois Hollande was elected President of France, the tide of austerity in the eu has started to turn in favour of the proponents of stimulus, which the main opposition party, the Positive Slovenia, quickly seized upon to withhold support. The Golden Rule has now been shelved, a price the ruling parties are paying for having pragmatically objected to reforms that are now more urgent than ever.

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This approach, we 're afraid, won't do any more.

There is broad agreement that it is far too easy to call a referendum in Slovenia. Some have even suggested that the threat of referendum hanging over every key piece of legislation makes the country ungovernable and want to clip the wings of the unions. A deal of sorts, to amend the Constitution, may still be hashed out, as all parties have reached an agreement (in principle) to make it more difficult to call referenda while explicitly prohibiting voting on issues such as human rights and public finances. But the leftist parties may still backtrack, for they are in hock to the trade unions, which may see the new rules as a somewhat excessive curb on their power, and may force their political allies to change tack.

it gets worse before it gets better All this makes the politics of dealing with the crisis devilishly difficult. What is required is a broad political consensus on ways which will aid Slovenia

A ‘GREXIT’? THAT WILL BE 1.7 BILLION, PLEASE. The fallout from a Greek Eurozone-exit is difficult to gauge. Some estimates suggest that the combined Eurozone GDP would fall by about one fifth in the short term and Greece’s by as much as half. The direct impact, however, can be measured. The Government says Slovenia’s exposure to Greece is tantamount to about 2% of GDP, the majority of that in loans and guarantees that Slovenia extended to the troubled country as part of the EU bailout. The Finance Ministry optimistically claims a Greek exit would, therefore, be manageable. But that is only the direct exposure of the State. The exposure of the State plus the Central Bank is estimated at about 1.5 billion Euros, according to a recent study by the Centre for European Policy Studies (CEPS), a Brussels think-tank. Add to that an estimated 200 million Euros on bank balance sheets and the total ends up being an eye watering 5% of GDP.

in emerging from the quagmire. The country has a poor track record when it comes to bipartisanship; the constant bickering, and the preoccupation of the new Government with the taking control of the levers of power, is dangerously deferring much needed action. As some level-headed commentators have suggested, it will have to get much worse before everyone realises that things need to change. Ironically, the latest gdp figures show that Slovenia’s economy contracted by 0.2% in q1 2012, which was less than expected. This will make it easier to bring the budget deficit to 3% (or below) of gdp, but it will also make it difficult for the Government to convince the people of the need for more austerity and reform. There have been only a handful of occasions in the past twenty years when everyone came on board for what was perceived as a common goal. The ditching of the Tolar in favour of the Euro, in 2007, was one such project. Hopefully, taking action to prevent economic calamity, tough as it may be, will be another.

june 14th

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m&a

M&a activity in 2012 will likely undergo a slow-down in the region, as it begins to match Global and European trends...

june 14th

Mergers & Acquisitions In Pre-EU Croatia Enough talk about rising debts, recessions, crises and the like. Things are as they are, and companies quite simply have to go on. And, as always, some will be bought, others will be buyers. Enter Ivan Bilić of Ernst and Young to help us navigate through the always captivating field of M &A.

he world of Mergers & Acquisitions was so much simpler when I first joined Ernst & Young in 1999. My first job was on a merger of several banks, as an assistant: even after that, in the years to follow, there were still plenty of banks which were available for purchase within Croatia and the region. The first due diligences I took part in were uniform, thorough, and lengthy, and almost always resulted in reports, hundreds of pages long, that often detailed more than could be read on the subject in several sittings. When a market emerges, even as small as the Croatian market was then, acquisitions seem the easiest way to grow into it. As a consequence, we advisors were very busy and highly valued, which means that it made perfect sense to build whole departments around m&a. Ten years of simplicity later, at the onset of the crisis, advisors were engaged in formulating smarter and less threatening expressions of a term “all-out-crisis”, and assessing (not to be confused with guessing) whether the recession will last a year or maybe two. Neither activity paid much. Since then there has been much discourse, debate, discussion, even discord, about the recession. What I’d like to focus on, however, is an upside to a crisis, be it this one or another. For, you see, each crisis induces, or at the very least creates, potential for progress. In other words, although much of Europe is still in the restructuring process (or should be), there are some indicators of better times ahead, for both Croatia and the region.

By Ivan Bilić

Ivan Bilić is a Senior Manager in Transaction Advisory Services with Ernst & Young Croatia. He has been with Ernst & Young for over 12 years, working on audit and transaction support engagements from the offices in Zagreb and Ljubljana. He has extensive experience in cross border transactions, advising investors across the region. He has a Degree in Business Administration, with a major in International Finance, from Georgia State University, USA, and is a member of the Association of Chartered Certified Accountants (ACCA).

These indicators, buried as they are beneath a myriad of questions, make for some interesting analyses.

m&a trends Central and South Eastern Europe, in terms of m&a, saw growth during 2010, and this continued into 2011. Although this was mostly driven by large individual transactions in Poland (Polkomtel sold for 6.6 billion usd and Bank Zachodni sold for 3.8 billion usd) most cee/

see countries saw an increase in both the number of transactions and the volume. In Croatia more than 70% of all transactions during 2011 were made by strategic investors rather than the financial sector, something which is mirrored throughout the region. If we break it down by industry, most transactions took place in Manufacturing (163 deals), Services (130), and Energy & Mining (110). The sectors with the most valuable transactions were Telecommunications & Media, Chemicals, and Banking & Financial Services. M&a activity in 2012, however, will likely undergo a slow-down in the region, as it begins to match Global and European trends: this should continue into H1 of 2013. Ernst & Young recently published a Global Capital Confidence Barometer, which compiled data based on the answer provided by as many as 1,500 corporate executives from 57 countries and 40 sectors, as well as 150 Private Equity investors. The results are quite interesting: although the executive body view the global economy more positively than they did six months ago, they, for the most part, nevertheless see their companies focussing on organic growth – only 31% of those queried expect to pursue acquisitions over the coming twelve months. This last figure is in stark contrast to 57% polled in April 2010 and 41% in October 2011. Unfortunately, even those with an appetite for investment are likely to be lured away by more attractive markets such as those in China, India, the us, Brazil, and Indonesia.

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On a positive note, however, it must be said that m&a fundamentals are becoming much more favourable: many believe that the number of opportunities is increasing and that the quality of potential targets is also improving. When we compare the current environment to six months ago there is now a greater likelihood of any given deal being concluded satisfactorily. In addition to this market upswing, it is likely that the divesting of assets will in the future be less of a contingency and more of a core strategy: companies will be making difficult decisions on which direction their business will take, and where they should seek to compete. This new focus on the core business will not only enhance shareholder value, but can also provide a way to raise capital in order to compensate for the underperformance of the aggregate business. Furthermore, many companies have taken advantage of the globally improved lending climate – and hence more favourable interest rates – to gain access to additional leverage and reduce their cost of capital. It will be interesting to see if such trends will stretch further a-field to some of the countries with the highest debt-to-capital ratios, such as Italy, the Netherlands, Russia, and Spain. Unlike strategic investors, Private Equities will increase the rate and volume of investment, benefiting precisely from divestment trends of strategic investors, which will make available a large number of interesting targets. Private Equities will also look less in the direction of Europe and more towards emerging and even developed markets elsewhere. This may well become the general trend as companies based in the Eurozone tend to display a more negative sentiment towards their local economies than their counterparts elsewhere. Sovereign austerity, combined with a heavy emphasis on corporate cost-cutting, will make economic growth even more difficult in the future.

croatian outlook Back to the Ernst & Young survey, many of the respondents will continue to focus on cost cutting, supply chain rationalisation, and the divestment of non-core assets to achieve operational fitness. When asked how they are managing through the Eurozone crisis, 55% of European respondents cited cost reduction as their primary

In contrast to a number of these new opportunities, the shipyards have been on the menu for quite some time now. 3. Maj Shipyard

focus, which is a significantly higher rate than is the case with the rest of the globe. Fortunately for Croatia, the nearing of Accession to the European Union (July 2013) will likely nullify this negative trend. Prior to Croatia joining the eu it is expected that foreign investors will seek to acquire domestic companies across a wide range of industries, while some of the larger domestic companies will continue the trend of acquiring subsidiaries in their non-eu neighbouring countries. Furthermore, the new Government seems pretty busy trying to attract buyers for some of the larger State-owned companies that had been left out of previous privatisation rounds, but also for larger manufacturing companies in which the Government has interests other than ownership (e.g., former cmc Sisak). As for us at Ernst & Young, we keep looking on with anticipation to see how much serious interest there will be for Croatia osiguranje (Croatia Insurance) and hpb (Croatian Postal Bank). It is unclear at this stage whether the two companies in question, or the Government, have had, or will have, a sufficient amount of time to prepare for any transaction whereby they might extract the most value out of any future sale: indications suggest that any transactions relating to these two will be sooner rather than later. In contrast to these new opportunities, the shipyards have been on the menu for quite some time now. The Government will likely have to amend its current approach – that of seeking a sale – with

regard to some, if not all, of its assets in this department. The difficulty here does not lie with the Government, nor the labour movement, but rather with the market itself: following a slight recovery in 2010, shipbuilding looks like it might be re-entering a global crisis. Shipbuilding, by its very nature, is slow to react, and any knee-jerk reactions to market shifts can be catastrophic. The industry is driven by freight rates that are realised by operators in the spot market, but the main challenge is that the construction of a ship takes several years. It is obvious to many that this reality forces shipowners, worldwide, to anticipate future economic developments, just as it forces shipyards to plan and build production facilities for projected demand. Let us illustrate this in a more recognisable language: in June 2008, just months prior to the Lehman Brothers collapse, spot rates for capsize bulkers (the largest bulk carriers) reached 219,000 usd per day. The rates for second hand ships, however, exceeded that of new ships, simply because they were available within a relatively short period of time. After a period of double-digit increases in freight rates, the size of the worldwide order book peaked in 2008. However, the impact of the global downturn, once things started going downhill, was devastating: the spot rate for the same capsize bulkers reached the low of 3,000 usd per day, a drop of almost 99%, by November 2008. Although, as these figures hint, orders for new ships

june 14th

increase of m&a transactions in Croatia. While the hotel industry only amounted to 1% of all transactions during h1 2012, and though the market is not particularly welcoming of such transactions, the Government’s decision might yet prove a catalyst for change. Many potential investors view Croatia as perfect for the tourism industry, specifically health-tourism: facilities can remain open all year round as the climate is attractive. This positive tone, as set by the Government, is further emphasised by the very active fgs funds which have already completed several investments.

exit-readiness

decreased significantly, an overcapacity of tonnage will persist until all ships, already ordered prior to the downturn, are finally delivered. In this environment only the Chinese and Korean shipyards can compete: this is due to lower labour costs, but also due to a lack of standardisation when it comes to building highly customised ships. Even the efficient Japanese shipyards are losing ground, and the European shipyards seem unable to compete in the face of the Asian economy. So, is there a solution? Bernd Richter, Ernst & Young’s emeia Restructuring Shipping Leader, recently states: “The disparity between capacity of shipyards and demand for new ships spurred negative price effects and the risk of being driven out of the market. In these surroundings, Western shipyards can only survive by offering high-quality niche products.” That said, another Government directive, which will see the sale process for all State-owned hotels begin by Q4 2012, may well yet play a significant role in the

Below are just a few of the large number of variables that may affect the volume and number of transactions in Croatia – and the region – in the coming months. One factor not mentioned, but nevertheless important for the value of transactions in Croatia and immediate region, is the ability of a Seller and a Target to a) Prepare for a successful transaction and b) Extract the optimal value from a sale. While all large transactions require a thorough and timely preparation (and a thought-out process), many small- to medium-sized transactions are motivated by the need to sell only, and are often not well prepared. This may lead to a deterioration of value and/or disruption to operations as a consequence of significant level of strain upon management and key personnel of the Target. For several years Ernst & Young has been offering an Exit Readiness service to its clients and has performed a survey, with Private Equity professionals, on the subject of value enhancers and eroders: the Exit. Value enhancers identified during Exit most commonly included the following: 1) Early preparation helps identify key risk areas (i.e., many easy wins can be captures with mid-term working capital

While all large transactions require a thorough and timely preparation, many small- to medium-sized transactions are motivated by the need to sell only...

management projects). 2) Alternative exit strategies planned and communicated from the outset (i.e., alternative exits both enhance the capture of optimal value, but also help sellers understand the buyer’s perspective). 3) Strong leadership and ownership of the process (i.e., these often provide clarity and comparability around the bidding process). 4) Well supported forecasts and a robust model (i.e., management rarely understand the level of detail and support required by the buyers). 5) Cost reduction plans supported by operational due diligence (i.e., performing operational due diligence focused on specific cost reduction initiatives provides comfort around the management process and capabilities). Most commonly mentioned value eroders include: 1) Little support for the upside (i.e., value enhancing opportunities were not well thought out or articulated). 2) Poorly addressed key business issues (i.e., management rarely have well thought out and detailed capex plans). 3) Drawn out process (i.e., partly thought out plans to address key risks can result in caveats and draw out the process). 4) Little or no access to management (i.e., reduced access to management results and poor understanding of the business and equity). 5) Poor records/kpis (i.e., the business needs to be packaged in the way in which it is managed). Exit Readiness is just one of the services provided here: Ernst & Young also have new, and more complex, restructuring and working capital management services on offer. The recession has had a significant effect on our standard services, such as due diligence. When compared to what was the case before the crisis, our reports are now much more focussed as the clients are now more demanding and require a more tailored approach. The client is also more involved in the process than before, and as a consequence the client is also far more informed than previously and hence able to make better decisions. Given that the environment is much more sceptical and complex, this is much needed. Thor Heyerdahl once wrote: “Progress is man’s ability to complicate simplicity.” If that holds any truth, we are surely making progress.

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editorial

The old model is believed broken: it is four years since the 2008 collapse of credit markets and no real reforms have been put in place.

june 14th

The State of the World Economy Too often do we tend, especially in this region, to embroil ourselves in the (often almost insignificant) ins and outs of national agendas and peculiarities that just as often tend to ignore the bigger picture. Steve Young of Caux Round Table, commenting on the high level thematic debate at the un on the state of the world economy, is here to remind us what is truly at stake.

n May 17th and 18th, 2012, the President of the United Nation’s (un) General Assembly and Secretary General jointly convened a High Level Thematic Dialogue on the State of the World Economy. High level thematic dialogues are used by the un to address important challenges that are not being thoroughly addressed conceptually by standing departments and committees of the un. In his remarks, Secretary General Ban Ki-moon called for a “conceptual revolution” in addressing what was wrong with the world economy. Other speakers insisted it was time to “think outside the box” or that “business as usual” will not trigger enhanced economic growth. The old model is believed broken: it is four years since the 2008 collapse of credit markets and no real reforms have been put in place. I believe it was a moment for innovation – a perfect environment in which the Caux Round Table (crt) and our partner, the Convention of Independent Financial Advisors (cifa) – should step forward and lead. The dialogue was called by the majority of member states who are left out of g8 and g20 discussions on global financial architecture. Their perceptions were that the strong economies failed in the 2008 collapse, the ongoing crisis of Eurozone finances and in tolerating systemic imbalances in current accounts and financial reserves, which led to unsustainable swings in global finance. The majority of

By Stephen B. Young

Stephen B. Young received his ab degree from Harvard College in 1967 and his jd degree from the Harvard Law School in 1974. While in the Harvard Law School, he was made a term member and then a member of the Council on Foreign Relations, and the served, among other things, as a university professor, consultant for a number of governments, Dean of the Hamline University School of Law and, from 1990 until 1996, as the Honorary Consul of Singapore in Minnesota. Stephen B. Young became the Global Executive Director of the Caux Round Table in 2000. He wrote the book Moral Capitalism to explicate the economic and moral approach of the Caux Round Table to free market capitalism.

these countries view themselves as dependent on the wealthy ones for investment, absorption of exports, steady currency values and reasonable prices for energy and food. They believe they suffer most when the global financial system performs poorly.

These countries voiced three main concerns: 1) growth to create jobs; 2) moderation in the prices of energy and food; and 3) investment in their economies. The perception was that the world economy has not delivered on these essential outputs. Growth has not resumed sufficiently so as to make up for the losses in employment, income and production caused by the 2008 collapse. Qatari Ambassador, Nassir Abdulaziz Al-Nasser, President of the General Assembly, stated that the pressing issue was global recovery – escalating inclusive development to reduce poverty, while sustaining the environment and its future fecundity. The role of the un, as compared to the g8 and g20, was to be the only inclusive, multilateral forum, where a common vocabulary and agenda for real action could emerge. A system is needed which can provide sufficient jobs under conditions of climate change and growing resource scarcity. On May 19th, g8 leaders met at Camp David with President Barack Obama and declared that “Our imperative is to promote growth and jobs.” But, how is this going to be accomplished? Therein lies the rub. Paul Volcker, former Chairman of the Federal Reserve, reminded participants that only private sector trade and finance lead to growth. Imbalances and speculation lead to financial strains. He said we are faced with no intellectual or political consensus on what is to be done, which has produced a paralysis of will and contributed to policy stagnation.

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The need, therefore, is to think well before acting – to arrive at a consistent set of rules for bank capital requirements and accounting conventions and a commitment to open markets. He called for a partnership between private capital, business and national public responsibility. José Manuel Barroso, President of the European Commission, said that irresponsible, private behaviour, coupled with lax regulation, led to the misallocation of capital, which added to public expenditures, which in turn increased public debt levels, producing the current crisis in the European Union. The eu governments, he affirmed, have delivered a robust response of creating firewalls between unsustainable financial practices, reforms of government programs and help to vulnerable member states. The eu now recognises that debt-fuelled demand to stimulate growth is unsustainable. Fiscal consolidation is needed to cut borrowing costs and provide confidence for financial markets. New infrastructure projects will be financed with bonds secured by such projects. More capital has been contributed to the European Development Bank to finance new loans. The eu is a political process, not just a source of monetary advantage. It is facing up to its internal needs and international obligations. Leaders and ambassadors, from a variety of countries, spoke to the common theme: the financial system must be placed in service of the real global economy. This high level dialogue was far better at defining the problem than in providing specific guidelines for actions that would accomplish that objective. In the subsequent dialogue sessions, I was made aware of how, ahead of the curve, the 2008 recommendations of the crt’s Global Governing Board had been put forth. Crt’s understanding of the ethical responsibilities on the respective parts of business and government is still cutting edge, with four years of hindsight now available – a most credible record of intellectual leadership, but a poor reflection on the actual leadership which has been confronting our global economic shortfalls. The crt’s ideas, along with the insights provided by our colleagues from cifa, were very welcome. Jean-Pierre Diserens, Secretary General of cifa, expressed his belief that private investors now have little to no

PERCENTAGE OF RESPONSES SELECTED AS HIGH PRIORITY

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trust in great financial houses, regulators or in sovereign responsibility. Without trust, markets stagnate and investment-driven growth is fitful. Professor William Black of the University of Missouri-Kansas City reminded participants that criminality is a constant in private affairs; no system of private ordering is entirely free from predators.

In financial intermediation and corporate profit-seeking, it is often “control fraud” – providing misleading information – that permits executives to “loot” companies of current income, as was the case with Enron. Under these procedures, current income is privatised and long-term losses are socialised to owners or the public.

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CRT NETWORK RECOMMENDATIONS Integrity in governance was advised by members of the Caux Round Table network as having highest priority in the effort to rejuvenate global capitalism. One hundred and forty-two members of the CRT network responded to a recent questionnaire asking for their considered opinion as to what steps should be taken to improve the world economy. The four priorities most advised for immediate attention were: (1) Addressing inequality; (2) more discipline in public finances; (3) separating banking from proprietary firm trading; and (4) improvement in corporate governance. In short, the considered judgment of these professionals in business and corporate social responsibility looked to the fundamental quality of stewardship responsibility for the common good as the foundation for enhanced world economic outcomes. They placed that responsibility primarily with public officials to provide for responsibility in public spending, in management of credit markets, in redressing unbalanced wealth accumulation in the hands of the few, and in private sector leadership of wealth-creating institutions. It is a powerful insight to acknowledge that strategic values matter in the long run, as well as a telling reminder that unrelenting and unconstrained selfinterest is not seen as being in the best interests of the community at large. It is therefore not an argument between austerity and deficit spending on entitlements that should be paramount, but rather on the selection of leaders – both public and private – committed to a stewardship ethic that promotes change in current policies.

It is a time for leadership, for the elevation of human capital over financial market plays. Additional steps recommended by survey respondents for high priority attention focused on incentives in the private sector that can be skewed towards mismanagement of wealth creation. There are needs to predict systemic risk in financial intermediation, set compensation incentives to favour long-term growth, and reduce outflows of illicit capital from poor and developing countries. It is the private sector that creates systemic risk in financial markets; it is the private sector that puts a bias for short-term results in compensation packages; and it is private individuals in poor and developing countries who abuse their status and illicitly divert financial resources out of their country, denying it capital for investment. In the second rank of recommendations came more technical concerns: liquidity provision by central banks; predicting systemic risks in financial intermediation; improving valuation formulas and more reliable pricing by markets; and the adoption of CSR standards by firms. Also in the second rank were endorsements of the recommendations made for higher priority initiatives, which add credibility to the soundness of taking these steps: Addressing inequality, separating banking from proprietary trading, more discipline in public finance, and improvement in corporate governance. On the third level of recommended action items was a hefty preference for increasing competition among rating agencies, again an echoing theme of responsibility to serve a common good by providing information that influences investment decisions.

Efficient financial markets require quality information as a public good to reduce the impact of “fat tail” or Black Swan unforeseen occurrences. Good information should help distinguish what is within a range of predictability from considerations that go far beyond the range but should not, for that reason, be completely divorced from consciousness. The quality of market information confers reliability on prices set by free competition. On the third tier of priorities, survey respondents further focused on decision making conditions within private firms: Increasing capital requirements for all financial institutions; adoption of CSR standards by firms; compensation incentives for long term growth; and improved valuation formulas and more reliable pricing by markets. Among the numerous written comments sent in, a theme of addressing the mechanics involved was evident. Comments noted that the root cause of banking and other corporate failures was often cultural; another expressed cynicism that many discussions of what to do to enhance the global economy go no deeper than stigmatising symptoms of poor performance. On the substantive side, comments pressed towards diffusion of economic power so that markets would have more players and more opportunities to get it right. These comments also referenced corruption and cronyism where concentrations of authoritarian power lead to misallocation of national income and wealth in favour of a few. Lastly, comments exposed the tension between aggressive acquisitiveness and sustaining the ecosphere that ultimately supports economic production and consumer consumption.

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technology

A Brief Walk through…‘Cloud’ What do early science fiction flicks, Amazon, Apple, Croatian Telecom (t-ht) and Luxor Group, a company specialising in cleaning, catering and facility management, all have in common? Well, ‘Cloud’ computing, to begin with… By Lee Murphy

f we were to tell you that there were over 1 billion users of Cloud technology, would you believe us? The truth is that that figure is for social media alone: Twitter, Facebook, Skype, Google+, etc. Also, services such as Youtube, Hotmail, Gmail, Dropbox, as ubiquitous amongst the technologically savvy consumer today, all utilise what is now commonly referred to as the ‘Cloud’, or ‘Cloud Computing’, a notion far older than one might immediately suspect: the concept dates as far back as the 1960s (some say even the fifties), and was the subject of much (science) fiction of that era. The idea of all computers being inter-connected and all-powerful has provided the world with innumerable novellas and films over the decades. It wouldn’t be until 2006, however, that 'Cloud' became what we’re familiar with today. Amazon.com, who started life as an online bookstore, realised that their

data centres were only running at approximately 10% of capacity: in 2006 they launched Amazon Web Service (aws), and from there it was only a matter of time before other players entered the market. With Amazon estimated to be taking in over 700 million usd per annum as a result of their foray into the Cloud, who could blame them? Who could blame anyone?

what’s in a name? The term Cloud Computing has been around for some years now, and can be attributed, in part, to Sean O’Sullivan, a panellist on the Irish version of Dragon’s Den (Zmajevo gnijezdo in Croatian but strangely never broadcast). At the time O’Sullivan, from Kinsale in the South of Ireland, was heavily involved in providing software solutions for other firms, and it was he, along with George Favaloro of Compaq, who coined the term we all

Apart from offering server space and leasing synced computers, T-Com has identified three specific areas in which Cloud can be put to best use: Human Resources, Finance and Accounting, and Vehicle Supervision.

know today. The company O’Sullivan was involved with at the time was NetCentric, who were then negotiating with the larger American firm. This was in 1996. According to the Irishman, “NetCentric correctly predicted the evolution of lan services and in-computer services to the Cloud, and although we didn't manage to capture much of the business for ourselves, Cloud Computing has had an impact on close to half the people on the planet.” Given that Cloud Computing will soon be the default business model for practically all companies in the business, O’Sullivan may well regret allowing his 1997 trademark on the term to lapse. Naturally, it just wouldn’t be the same unless Apple too got involved, and involved they are, proving, in a most direct way, the immediate practical bankability of the technology in question. iCloud is celebrating its first anniversary this week (or at least the first anniversary of its beta release) and has been available as a stable platform since March of this year; whether one is a fan of Apple gadgetry (and software) or not, there is no denying the sheer ingeniousness of it all. Of course it’s possible to sync non-Apple devices with your main pc or laptop, or to upload your photographs, taken by your iPhone, to whatever social media stream you so desire. Now, it’s not that this isn’t possible, as such, with other smartphones as well, but these uploads are automatic and have managed to do away with the awkward fiddling needed to open Facebook

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or Twitter and go through the trouble of attaching files, etc. As to how much time exactly this can save us over the course of a year may be a matter of debate but, as one Katy McCaffrey discovered, it can certainly save something of real, intrinsic, value. It was in April, just a matter of weeks after the iCloud platform went online fully, when Katy had her iPhone stolen. The theft of phones is usually a terminal crime – they’re rarely recovered – but this was not to be one of those cases. The phone had been stolen while Katy was on a cruise and found its way into the possession of one of the staff members (we won’t debate whether he was the thief or whether he purchased it from a third party); however, because the phone had been synced to Katy’s other devices and social media, every photograph that our ‘villain’ took suddenly appeared on Facebook. The cruise organisers were quickly informed and, eventually, the matter was resolved. We’ve used the cliché ‘sync or swim’ before, but far too many users of modern technology are woefully naïve when it comes to doing all they can do to secure their 'investments'. Katy was not.

cloud & the business world It’s wrong to think of Cloud Computing as being somehow different to the generality of the Internet: it’s merely an evolutionary step. In the same way that our concept of the Internet is far more advanced

In the same way that our concept of the Internet is far more advanced to what we had 20 years ago, so too is Cloud a degree ahead of that. to what we had 20 years ago, so too is Cloud a degree ahead of that. Companies, long before the Cloud debuted in 2001, already operated what could be called mini-clouds: internally operated server banks, all linked to whatever pc terminals were needed around their office buildings. One need only watch tv to see that every villain, every law enforcement authority, every multi-national entity have their own servers, oh-so vulnerable once our hero decides he needs to break-in. This will soon be an anachronistic representation of how business is done. There are savings to be made by outsourcing

your server needs to a larger Cloud provider: a company can save on security costs, energy costs (no longer a need for so much electricity or climate control), and it goes without saying that their original hardware might never have been running optimally in the first place. Any company can calculate which the most profitable route is (although this might well be a case of trial and error) – all the board need do is ask their accountants to do the math. Efficiency is a little vaguer: profitability cannot be used as a gauge here, as that does not necessarily indicate that the best services are being provided. Thankfully the firms which might find such calculations the most difficult are exactly the ones that can use Cloud technology the best. If we consider, for instance, any hotel chain, it goes without saying that it will have many premises worldwide, and each separate hotel may well be subject to a variety of taxes, currency fluctuations, wage structures, etc, which the next in line does not. In order to compare like with like, it is necessary to compare vast amounts of data, something which can be awkward when the systems are internalised and not always synchronised with other servers within the parent group. Taking advantage of more powerful server technology (whether that firm invests in its own Cloud server or chooses to outsource to another company), that chain can now isolate all those variables and look at the data in a purer sense. Being able to identify troughs and peaks in business performance will allow any company, not just the larger chains, to alter their business model seasonally, or on a more regular basis, which hypertrophies its ability to adapt. Indeed, the benefits are many, and one need only look at Cloudrelated services of the Croatian Telecom, the first company in the region which offers a fully integrated model. Apart from offering server space and leasing synced computers, t-com has identified three specific areas in which Cloud can be put to best use: Human Resources, Finance and Accounting, and Vehicle Supervision. With this in mind, seeing as the market for these services and solutions seems to be growing (as it would), we turn to Luxor Group’s Executive Director of Development, Mislav Kraljević, to discuss his company’s foray into ‘Cloud’ and consequent collaboration with t-com. ‘Hands on’, ladies and gentlemen, ‘hands on’.

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technology interview

SEE Luxor is a company with many strings to its bow: catering, cleaning, etc – these are commonly understood activities, but what of facility management? What, exactly, is facility management? MK I suppose that it could be confusing to someone unfamiliar with the industry. Quite simply, facility and property management is becoming more and more important to the owners of commercial properties, mainly because it encompasses such a range of operational activities, which are naturally tailored to the specific needs of a client. It can include, as you mentioned, cleaning and catering, but there is much more involved: technical maintenance of the building, landscaping, pest control, organisation of desk reception services, and a number of other related services. The advantage to having someone like ourselves coming in and doing this work is that the owner and their company can then devote themselves fully to their core business, assured that their facility is fully functional. That, in short, is what facility management is: we enable our clients to operate more efficiently and help preserve the value of their properties. SEE Cloud computing is essentially virtual computing – a user doesn’t need much in the way of infrastructure (no need for servers, or the warehousing to store it all). Does the switch to Cloud have much in the way of benefit for Luxor in this regard? Is there a secret warehouse somewhere full of hardware? MK It’s not quite as glamorous as the movies might suggest. We currently have a server room, where there are four distinct cabinets. If you know anything about computers then you will know that they generate a tremendous amount of heat: you can imagine how much heat servers produce. Then, on top of that, the room itself needs to be highly secure: you can’t have it open to absolutely everybody; they’re delicate and expensive machines at the end of the day. There is a need for adequate ventilation and air-conditioning systems as well, and the room has to have a secure, stable, back-up power-supply in case anything goes wrong. All of this costs money, and to have a specialist provider available to us is of immense benefit – and it does take a logistical burden off our plate.

LUXOR GROUP Luxor Group was founded in 2002 and is a group of service companies which operate in the regional market of Croatia, Serbia, Macedonia, as well as in Luxembourg. Luxor specialises in cleaning, catering, maintenance, and facility management. Today they employ more than 1,100 people and have more than 400 customers: these include Hrvatski Telekom, Hypo banka, Allianz, Cvjetni Shopping Centre, Atlantic Group, Croatian Television (HTV), and many others. The services Luxor offers enables them successfully to implement various quality-management certificates such as the Quality Management System ISO 9001:2008, the Environmental Management System ISO 14001:2004, Energy Management System 16001:2009, Occupational Protection System OHSAS 18001:2007, and the Food Safety and Quality Management System HACCP. Mislav Kraljević, Executive Director of Development, Luxor Group

SEE Ok, so you get to free up a room, and solve some logistics headaches, but why the switch? Luxor is clearly a successful company and has an existing business model. Was there any need to move to ‘Cloud’? Is this Luxor identifying Cloud as the future, or is there a degree of risk involved? MK There’s always risk involved in any business decision – it wouldn’t be a decision otherwise. There’s a certain degree of risk in ‘Cloud’, but that’s in no way greater than any risks we’d encounter normally. In fact we’re of the opinion that the risk, in relation to our servers, is reduced by our switch to ‘Cloud’. There’s increased data security – data is being continually copied and backed-up so we can be sure that what we need is available when we need it. It makes our business much more dynamic as well, since we can access that data without the need for any particular personal computer, which might not even be in the same place as the person who needs it! Luxor has offices all over Croatia, so this move to the ‘Cloud’ significantly increases data exchange and accessibility, and we no longer have to worry about enforced downtime and inactivity because of loss or damage to our own hardware.

SEE Well, it sounds like you’ve put considerable thought into all of this. I’m sure T-HT wanted to sell you a product, but you don’t strike me as someone who might have their head in the clouds, so to speak. MK We definitely considered the switch for what we felt was a reasonable period of time. We weighed up the costs involved in making the switch with our current annual costs: what did it cost for hardware updates; how much did it cost when we needed to invest in new equipment, etc? I won’t include the amount of money we’ve already invested into our own hardware because that can often distract you from the best bargain – if the switch will cost us on a year-by-year basis then that’s what is most important; money already spent is not money we can recoup, so it should not factor highly in our decision-making process. Our goal is to be the leader in our industry. Past experiences have shown that the best path to success is through the continuous improvement of service-levels, knowledge, efficiency and quality. It would be hard to argue that the ‘Cloud’ does not provide all of these. SEE Like with any new technology, Cloud too has given rise to a new cybercriminal element. Are you confident in

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the safety of these systems? I’m not going to be getting spam emails from you, advertising products of dubious origin, am I? MK No, you can be assured that you won’t be getting spam emails from a Luxor email address. As I've already mentioned, the risks are pretty much the same as they used to be: except that by outsourcing our data storage we get the benefit of vastly improved digital security. After all, advances in online security are being made all the time, and the server farms we outsource take full advantage of these improved programmes. SEE BMSs – Building Management Systems allow a company to maintain a building’s environment remotely: each building would have its own system, which is usually operated by a computer within the building itself. With ‘Cloud’, all of those will likely be operated offsite, back at headquarters. This reduces the need for as much on-site presence as Luxor might have right now. Are we looking at job losses? MK No: this is simply going to make our business far more efficient. The people who are currently responsible for monitoring these systems can do so now, just as before, but without having to worry

“Again, ‘Cloud’ saves us quite an amount of time, and, to reuse the term, it is highly efficient.” about hardware difficulties. This will help us generate more accurate data: the BMS allows us to compare like with like, warehouses with warehouses, hotels with hotels, and the more accurate our data the better services we can provide to our clients. If it transpires that we find ourselves overstaffed in one area because of this switch, then we can simply 'redistribute' those individuals, which is, in and of itself, being efficient. Given that we’re an everexpanding company, I’d say that we’re far more likely to be hiring than firing.

SEE Cloud has some advantages, obvious even to luddites such as us: software updates, as needed, happen once, and once only, instead of several times all over the region. It’s clear that this is highly efficient. How does this translate for Luxor? MK Again, this saves us quite an amount of time, and, to reuse the term, it is highly efficient. There is no more need for manual upgrades, meaning that it is no longer necessary for so many on-site visits to do software installation – all of this is done centrally at the server farm, and since they can back up all our information we don’t experience any downtime. That’s ‘downtime’ in which we can be productive. SEE Finally – what difference will ‘Cloud’ have for Luxor’s overall business, and, just as important, what difference will it have for your customers' businesses? MK The two, naturally, are intertwined: because ‘Cloud’ will improve and accelerate the flow of information within the company we will be able to conduct our business with far more, that word again, efficiency. With more accurate data and information being available to us we will be able to provide an even better service to our clients, and they will get a better return on their investment.

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politics

In spite of his early moves, we dare predict that his political sacrifice will be the informal Serbian abandoning of Kosovo, as well as a complete deflection away from Moscow.

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The Man of Two Oaths Having had, in Boris Tadić, arguably the best-looking President in the region for nearly a decade, Serbia now has some very high expectations – at least aesthetically speaking – from its politicians. But what else? Presidential Silver Foxes aside, the real question for the newly elected Tomislav Nikolić is whether he’s fit for the job. By Miša Milošević & Igor Dakić

hose who do not learn from history are condemned to repeat it, or so the old adage goes. When we look at Serbia’s recent elections, campaigning included, there would appear to be more than one thing which has repeated itself when compared to the past decade. On the eve of the 2000 elections Slobodan Milošević, feeling overly sure of victory, resigned as President and subsequently lost. Boris Tadić, with no small amount of similarity, resigned just prior to the 2012 elections and, despite expecting a victory, lost as well. In 2000 the Serbian electorate did not vote for Vojislav Koštunica as much as they voted against Milošević – and then it took some years to get rid of Koštunica. In 2012 it may be that the electorate have repeated their mistake by voting against Tadić: he polled 800,000 fewer votes than in 2008. But the people cast their die and now they must live with the outcome: the thing is, did Serbia actually vote for Nikolić by design, or by default? Will it soon turn into lamenting after the ancien régime?

breaking the silence Quite remarkably, the new Serbian President remained relatively silent during his first two weeks in Office. Of course this allowed his predecessor, Boris Tadić, to stew in his anger and discontent, all the while denying the possibility of building a so-called large coalition with Nikolić’s ‘Progressives’ of sns – although there was in fact no such offer officially on the table – and watch Ivica Dačić’s obvious backtracking in the harsh light of the Progressive’s Presidential victory.

Behind this silence Nikolić, in the manner of a wise statesman, was biding his time and carefully listening to how his appointment was playing out on all latitudes, from Moscow to Washington (he ranks those two cities in that order as well), and, in-between, in the ex-Yugoslav capitals. Barring the rumblings of concerned journalists on various social media sites, there was a dearth of comment coming from Governments around the world: it would be Nikolić who would have to speak first. Nikolić’s international debut, though made before he formally assumed office, was a State visit to Moscow – a bit of a cliché in its own right. There he had the opportunity to unveil what would seem the real face of his party’s heretofore

Nikolić’s prior statements my have been inflammatory, but this offering was literally caustic: “There was no genocide in Srebrenica”.

ambiguous political programme, at least as far as foreign policy is concerned. “I assure you that the Serbia-Russia collaboration will be progressive. I would also like to reassure you that Serbia is Russia's partner in the Balkans,” the new President said. The first explicit deflection from the existing political course was with respect to Kosovo, as could be expected: “Serbia is on the path to the eu... I am not aware that this is conditioned by Serbia’s recognition of Kosovo and Metohija... We can never do it, even at the cost of stopping the negotiations”. Nikolić also reiterated that Serbia is obliged to adhere to its military neutrality in accordance to its own parliamentary declaration and that “Serbia would not join nato”, which, in Nikolić's own words, was the position on the basis of which he won the elections. Back in Belgrade, Nikolić continued with his political exposé: addressing the neighbouring Montenegro, he said that its independence was a fait accompli but that there was no difference between Serbs and Montenegrins. This remark actually had little political relevance, but it does have the potential to harm relations with Podgorica and people with strong local feelings, especially in the face of the ex-Yugoslav republic's internal struggle for identity and state symbols, strung between the Serbian and Montenegrin ‘dichotomies’. If it appeared that Nikolić’s statements were inflammatory, or had the potential to be, then that was exactly what his next offering was: “There was no genocide in Srebrenica”. These were his exact words. Although he would go on to explain that

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it had certainly been a massive crime, this denial went not only against the existing consensus between Brussels, Belgrade and the entire region, but it also openly repudiated the International Tribunal in The Hague, which clearly decreed the events in Srebrenica as an act of genocide, the same tribunal which Serbia consulted with regard to the Kosovar self-proclaimed independence. And so the President's seemingly sage silence at the beginning quickly shattered into three serious instances of verbal effrontery in the space of mere two weeks, justly raising questions about his intentions, his transparency and - having in mind his much greater responsibility than in the role of an mp - his fitness for the job.

the last true right wing paradox in the balkans Tomislav Nikolić is the man of two oaths: he gave his first oath 19 years ago, in the torrent of the Bosnian war in which he took part as a volunteer, and during

nationalistic elements: the core, in fact, of Nikolić’s own electorate which he, morose, scruffy, and monoglot as he is, personifies to a nicety. Or such is, at least, the general perception. Strange as this may sound, this may be one of Nikolić’s principal advantages, the fact that he rather ‘looks’ bad. For a country cannot thrive on good looks alone, especially if there is no national consensus in place as to how to get the economy going, and how to resolve the single biggest national issue, which is Kosovo. When a country is in the dire straits, as Serbia is overall, it needs to rally up all its forces; and, as is usually the case, the hardest demographic to set on the right track are the generally disenfranchised, downtrodden Right wing voters, whose only political and intellectual solace is that there is someone – preferably another ethnic group or neighbouring country – who is even worse (off) than them. Nikolić commands an army (and arguably heads a party) of people who cannot live without a natural enemy, in an overly centralised

since he has a wonderful precedent to learn from, in a very recent past and in a very familiar country to boot. For, roughly a decade ago, Croatia found itself in a very similar predicament. After the death of Franjo Tuđman, in the year 2000, a wide coalition led by the Social Democratic Party took power but couldn’t hold on to it for more than one (very tumultuous) term: memories of the War were still fresh, and Croatian society wasn’t yet ready for technocratic political options bereft of a strong ethnic prefix. So, in 2003, the Croatian Democratic Union would take over once again, now under the leadership of Ivo Sanader, former Head of Tudjman's Cabinet and, initially, a very ‘loud’ nationalist himself. His tirades against the SDPled government’s practice of extraditing Croatian generals to The Hague won him the Election, yet he is precisely the man who extradited General Gotovina – or helped create the sort of climate in which this was possible – and persuaded

However, more than having only to reconcile words of past and present, Tomislav Nikolić will have to rise to a much tougher occasion, for Serbia is a polarised society that has to regain faith in itself. which he was promoted to the position of a Chetnik Duke (‘vojvoda’) by his then party chief, Vojislav Šešelj. His mission: to reinvent the united Serbian state, or a Greater Serbia, which would encompass all territories inhabited by Serbs. His second oath to the State of Serbia was given just a matter of weeks ago, when he was sworn in by the President of the Serbian Parliament in the ceremonial transfer of duties. However, more than having only to reconcile words of past and present, Tomislav Nikolić will have to rise to a much tougher occasion, for Serbia is a polarised society that has to regain faith in itself. On one hand there are the forward-looking and ardently pro-Western forces – in many ways epitomised by the ‘civilised’ but comparatively inefficient Tadić – whilst on the other there are the retrograde, ‘rustic’ and vehemently

country marked by low wages and a high unemployment rate. In other words, he just may be the man who can pull off the unimaginable: write Kosovo off, which of course is a must if Serbia intends to become fully integrated into the Western world. In immature societies, it is very difficult for well-mannered mannequins, such as Tadić, to get things truly done, as they cannot control the large mass of potentially volatile social and political interest groups. A ‘man of the people’ – whether phony or not is not the issue here – such as Nikolić, furthermore bearing the title of a Chetnik Duke, just might be the answer. Awfully pragmatic, all this – let us call it a populist right wing paradox, whereby democratically elected nationalists get things going by the faculty of their limitations and ‘bad looks’ – and let us hope that some of this pragmatism will not be lost on the new Serbian president, especially

Generals Čermak and Markač to turn themselves in. His anti-Serb sentiments won him the Election, yet he is precisely the first Croatian Head of State who publicly wished a happy Christmas to Eastern Orthodox Christians, which in Croatia amounts to Serbs. And so on, all the way to Croatia signing the Accession Agreement with the eu, a long negotiation process during which he himself bore the brunt of the effort, his later problems with the Law notwithstanding. These authors are of the opinion that a Left wing Balkan government, in this period, couldn’t have achieved the same, at least not without avoiding major clashes within the ranks of the Croatian population, which is as polarised – and along identical lines – as that of Serbia. And here is where we’ve run a full circle. Although Nikolić's agenda is free from Hague warrants, we dare predict that his

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political sacrifice will be the informal Serbian abandoning of Kosovo, as well as a complete deflection away from Moscow. We can also add to the equation the need for regional reconciliation, which will be expected of Nikolić as it would be expected of any Serbian president: he will need to renounce his own words and deeds, giving up at least a part of Serbia’s sovereignty as it is perceived by him and his electorate.

two brothers ride together again? Back to reality, the elections results might yet give us a hint: both Nikolić’s sns and Dačić’s sps have reasons to claim electoral victory. Both parties seem to have risen back from the lows of the past – and indeed they actually do share the same past: Ivica Dačić was the long time spokesman and Deputy President of the Miloševićruled Socialist party, the Serbian warmongers; Nikolić, on his part, was Vojislav Šešelj's deputy and right hand in the extreme-right Serbian Radical Party during the same period. In simplistic terms, one was a volunteer in the battlefield, while the other was helping the Commander in Chief. So what exactly makes Tomislav Nikolić less appropriate for the presidential function than Ivica Dačić? One last comparison, though it is unlikely that the two would enter into a coalition agreement: it is their positions that make the whole, and possibly the only, difference. Although Ivica Dačić, the Vice-pm and Minister of the Interior, clearly had important work and was even voted the best performing member of Serbian Government, he was never in the political spotlight: he was comfortably shaded by Prime Minister Mirko Cvetković and the ‘actual’ Prime Minister, President Boris Tadić himself, and was exhibiting his approved operational excellence. For Nikolić, it is all different: he has nobody to hide behind. On the contrary: he will have to personify many of the things which the Government and the nation will be forced to do. When Tomislav Nikolić cites “a French philosopher” who said that “only a fool never changes his opinion”, it seems that he will have to change his own a great deal more than he may currently think. And let us hope he will, for the alternative is unspeakable.

JOSIPOVIĆ MISSES NIKOLIĆ’S INAUGURATION Political consensus is something which is rarely reached in Croatian politics, and yet such a moment has come to pass with regards to President Ivo Josipović’s (non)attendance at his Serbian counterpart’s inauguration on June 11th. Circumstances have dictated that all the political forces within Croatia have found themselves sharing the same opinion: a person who has been caught saying that Vukovar is a Serbian city, and that there was no genocide committed in Srebrenica, does not deserve to be honoured with the presence of the Croatian President at his inaugural ceremony. Although Tomo the Undertaker’s loose dialogue was deemed abhorrent by both the regional and European officials alike, Ivo Josipović, being his usual diplomatic self, explained that in spite of Nikolić’s invite, extended in a TV interview,

he had never received a formal invitation, as is customary protocol. It has been suggested that Josipović is boycotting the event in response to former Serbian President Tadić having refused to attend the Croatian’s own inauguration, on the grounds that Kosovan officials had been invited. Josipović and Tadić, both friends outside of the strictures of regional politics, did meet afterwards and confirmed the principles on which a stable bilateral relationship is to be built: a relationship which remains to this day, at least for now. With this latest shift in power, it remains to be seen what will become of Croatian-Serbian relations now that a former Chetnik ‘Duke’ (though warlord would be a more fitting appellation) is the new Serbian Head of State, his half-hearted extensions of friendship notwithstanding.

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event horizon

A Bosnian Reshuffle Bosnia and Herzegovina has provided us with yet more political theatre. Even as the Federal budget for 2012 was being passed, the Party of Democratic Action (sda) were being removed from Government on the cantonal level, to be replaced with the Alliance for the Better Future of Bosnia & Herzegovina (sbb). Paula Abdul couldn’t have sung the song better herself. By Dylan Alexander

t almost appeared as if things were starting to look up in the troubled land of Bosnia and Herzegovina: a six party consensus had ushered in the State Aid and Census Laws, decent headway was being made in the implementation of the Sejdić-Finci ruling, and at long last Bosnia and Herzegovina had a budget (overdue but confirmed nevertheless). Before any celebrations could begin, the news broke out that sdp were looking to enter into coalition with sbb, meaning the end of the road of their arrangement with the sda (a coalition considered unnatural by many in the public to begin with). That sda had failed to back the budget was given as the justification for the breakup of the coalition, even though the budget made it through the House of the Peoples of the Bosnian and Herzegovinan Parliamentary Assembly. Sulejman Tihić, a leading member of the sda, voiced his discontent that there was not enough funding allocated towards defence: sda felt that this was an impediment to b&h’s entry to nato and duly opposed the budget. It was, of course, touted that sda had a vested interest in prolonging the temporary financing arrangement which had been in situ and that their nato argument was merely an excuse; no one could honestly expect an increase in military spending in a country which is on the brink of bankruptcy. There is a bright side, of course: although sda are somewhat reformed, they are nevertheless a nationalist party; many of the Bosniak electorate had felt that sdp should have entered into coalition with a more progressive party – a party like sbb, led by Fahrudin Radončić, an entrepreneur and media magnate who owns the daily

Fahrudin Radončić

In the light of recent events, we just might be looking at a dangerous period of interregnum, which will mean no green light when it comes to eu accession talks.

newspaper Dnevni Avaz. The talk emanating from this newly forged civil alliance is all about progress, both social and economic; the absence of such talk, until now, has naturally been levied on sda. While Tihić, perhaps with good cause, is calling out Lagumdžija and his lot for incompetence and opportunism, sda officials at the cantonal level are being ousted and replaced by members of sbb. As for the Council of Ministers, Lagumdžija is turning to Bevanda so that he, as Chairman of the Council, can revoke the Ministerial mandates held by sda. The ball is rolling, which is all very well and good, and it even seems as though some prospects for social (if not economic) betterment might be shaping up. Alas (when dealing with Bosnia and Herzegovina there is often an ‘alas’), any attempt at change on a federal level needs to be authorised by the Federal President Živko Budimir, of the Croatian Party of Rights, and co-signed by his deputy who is, unfortunately enough, one Mirsad Kebo of sda. Under the circumstances, it would be asking too much to expect him to comply with any such reforms. That said, we just might be looking at a dangerous period of interregnum, possibly no progress in the implementation of the Sejdić-Finci case, which will mean no green light when it comes to eu accession talks. Oddly, there is one specific, ardent, supporter of this new coalition, and that is Milorad Dodik, a man who, to say the least, has a vested interest in further destabilisation of the country. A political pragmatist of the first order, he just loves those situations when it gets even more difficult to pass legislation in a country in which passing new legislation is virtually impossible in the first place.

june 14th

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eu accession

Montenegro: The Beginning of a New Chapter Montenegro hasn't had it easy the past number of months, or years if truth be told. If we must be completely honest, they've had a tough six years. That, however, might yet change: despite being the youngest of the region's countries (Kosovo excepted), they might well be racing their larger neighbour Serbia to the finish line. By Dylan Alexander

rva banka Crne Gore and its bailout, and former Prime Minister Milo Đukanović and the (alledged) tobacco smuggling: certainly Montenegro has had its fair share of political missteps the six short years it's been in existence. Igor Lukšić, the Prime Minister, has also had his few moments in the limelight, with repeated protests led by Vanja Ćalović and the Network for the Affirmation of the ngo Sector (mans). It might come as some relief to our readership, as indeed to us in see, weary of yet another critique of Montenegrin politics, that the beginning of the end (if not the end itself) may well be in sight. On May 23rd of this year the European Commission recommended the official opening of accession talks between the European Union and Montenegro. Like many of the countries in the region, Montenegro sees the European Union as its (ultimate) natural habitat. Not only would Montenegro benefit from the various structural funds, but an expanded market would, ideally, bring added economic prosperity. None of this is anything new, but now that Montenegrin entry to the European Union has taken a major step forward, we need to look at how likely eventual entry actually is. We were fortunate to speak with Dragan Mugosa of the eu Delegation in Montenegro, who told us that the eu was determined to be thorough in their vetting processes, likely only too aware of the damage the Greek ‘deception’ has caused to the Union’s reputation. Montenegro,

PM Lukšić and President of the European Commission J. M. Barroso

also, would need to prove that their entry was earned, not just some sort of political ‘making up the numbers’. “Strengthening the rule of law remains a major challenge for most enlargement countries,” Mr Mugosa told us, “including Montenegro. It is a crucial condition for moving towards eu membership. The European Commission will continue to prioritise reforms in Montenegro, in the judiciary and in the area of public administration, the fight against organised crime and corruption, including regular monitoring of the implementation of reforms.” Mr Mugosa was quick to point out that this was not an indictment of Montenegro, merely the protocol that must be observed. “The experience we acquired from previous negotiations (with Croatia, as well as Romania and Bulgaria) will benefit any future negotiations with countries wishing to join the European Union, and that includes Montenegro.” Again, it was underlined that this ‘experience’ was simply best practise, not that the Commission had found

specific problems with the recent (or near-future) accession States. “Specifically, the Commission has proposed a new approach in accession negotiations, whereby issues related to the judiciary and fundamental rights and to justice, freedom and security (chapters 23 and 24) will be addressed from the very beginning to the very end of accession negotiations.” A chapter, generally speaking, would last approximately six months, but by beginning with chapters 23 and 24 (and keeping them open throughout the process), the overall negotiations gain a greater air of authority. “The Commission would report regularly, at all stages of the process, on progress achieved in these areas along milestones defined in the action plans,” finished the delegation official. Montenegro has reached a milestone: the eu accession talks will confer a certain amount of legitimacy on Lukšić’s Government. The trick is for mans, and other bodies like it, to find their place in this new Montenegrin future. May it come soon.

june 14th

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destinations

It took five years of reconstruction and refurbishment (the sort of work that would warrant its own television series on satellite these days), but Hotel Sveti Stefan opened its doors in 1960.

Aman Resorts

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Sveti Stefan: Crown Jewel of Montenegro Picture, if you will, an historic fortress-town, an island, and a five star resort, all rolled into one. No, this isn’t The Twilight Zone, but rather the Aman Sveti Stefan Resort which, after four years of reconstruction, has finally reopened only this April. The reopening proved a fitting excuse, as if one was needed, for us to visit Montenegro and see for ourselves what has become of the fabled Saint. By Miroslav Tomas

ew places, if any, like Sveti Stefan exist in the world. The island, which covers an area of 12,400m², is completely urbanised and is connected to the coast by a narrow isthmus. Named after Saint Stephen the Martyr, it can be found in the centre of the Montenegrin Adriatic Coast, nestled between the foothills of the Lovćen mountain range and the villages of Pržno and Sveti Stefan. There is a church dedicated to the eponymous Saint which sits on the highest point of the island. During the 1950s, following a long and gradual depopulation, the island’s remaining denizens were relocated and the original hotel commissioned. The story of this transformation is a curious one: in contemporary terms it has become quite the romantic tale, and is certainly shrouded in myth and legend.

the history Local lore tells us that a fortification was built on Sveti Stefan in 1442 ad, and was intended for use as a refuge, by the surrounding population, from the onslaught of pirates and the Ottoman Turks. A

band of brigands, hailing from Paštrovići, raided a Turkish galleon, and came away heavily laden with riches. This wealth was then used to fortify the island: twelve houses were built within the walls, one for each of the Paštrović clans. This new settlement, intended for use during tumultuous times, evolved over time to become a centre of commerce between the local populace and the Venetian Republic. The community’s society also evolved with its Judiciary passing rulings from a balcony, now called ‘the place of justice’, atop the city gates. The eventual downfall of Venice marked the end to the lucrative trade enjoyed by the island, and though the fishermen were still able to ply their trade it would be to no avail: from the 19th century onwards there was already a steady exodus in progress. By the time of the Balkan Wars, on the eve of the Great War, just thirty families resided on Sveti Stefan. Just eleven of those remained in 1955, at which time they were relocated, by the State, to purpose-built houses on the coast. The Yugoslav Government, at first, intended to turn the now-deserted island into an artist’s colony but, after some

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consideration, decided instead to push ahead with plans for a town-hotel. It took five years of reconstruction and refurbishment (the sort of work that would warrant its own television series on satellite these days), but Hotel Sveti Stefan opened its doors in 1960. Marshal Tito, naturally, was the first to sign the guestbook. As a concept it was quite groundbreaking for its time, and over the decades it became a hallmark of the Yugoslav tourist industry. The island catered to both the socialist elite and the global jet-set alike. In addition to the numerous Soviet marshals and other Communists of note the island saw, as guests, a truly captivating parade of celebrities: Yuri Gagarin, Kirk Douglas, Sophia Loren, Mikis Teodorakis, Monica Vitti, Gina Lolobrigida, Claudia Schiffer, Jeremy Irons, and Sylvester Stallone are only but a few of the famous names who spent time here.

the five star present Sveti Stefan saw a decline in popularity following the breakup of Yugoslavia and was nothing more than a shadow of its former glory by the turn of the century. A fin-de-siecle destiny, if there ever was one. In 2008, however, a Singaporebased resort group (Āman) was awarded a 30 year concession – the maximum allowed by law – for the island and they began immediate extensive and painstaking works which gradually restored the island to former glory, and then some. The entire process cost the investors approximately 60 million Euros, but it may well have been a cost worth bearing as ‘The Saint’ was fully reopened in April of this year. After a drive that took us from Dubrovnik down the coast to reach the land bridge, we thought it only right that we kick back and enjoy a glass of brandy amidst the splendid surrounds of the cigar lounge: the weary driver settled for mineral water. We found ourselves recalling, if somewhat vicariously, the events of some years back when a colleague of ours found himself trapped by the huge wildfire that was sweeping the environs of Budva, as it drove a mass of unsettled tourists to take refuge, as others had done centuries before, on ‘The Saint’. Much has changed since: what was, ten years ago, a relatively dilapidated resort catering mainly to the (disenfranchised) Serbian and Montenegrin elite and the odd

What was, ten years ago, a relatively dilapidated resort, is now a top-of-theline hospitality industry affair. In other words, Sveti Stefan is what it should be. semi-wealthy Russian, is now a top-ofthe-line, well thought through hospitality industry affair. In other words, Sveti Stefan is what it should be. Having finished our drink (and a sly cigar) we felt obliged to take a stroll around the island, if only to witness, for ourselves, the famed white stone façade and red brick roofs of ‘The Saint’ shining once more in all their historic splendour. Later we were treated to a tour of the hotel’s interior which was, as explained to us, a blend of traditional detail and designer furniture, put together by Mary Lou Thompson and her team of Denniston architects. This sort of luxury is anything but tasteless. Having seen the entire island for ourselves it was wryly remarked that ‘The Saint’ might yet become a refuge once more, but this time not for the clansmen of Paštrovići or masses fleeing a wildfire: future refugees here are more likely to be global celebrities and the hoi polloi on the run from the camera-clicking paparazzi. Once again.

Aman Resorts

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Aman Resorts

chat, gave us a take on what Aman Resorts has planned for ‘The Saint’: “a small portion of the island is still undergoing some restoration and will be ready in time for the 2013 tourist season. We’ll also have the Queen’s Beach Hotel which, while not part of the resort as such, will be operated by the hotel management.” The Executive Director also informed us that the general response from the tourist industry was extremely positive and that a successful season is expected. The resort sees a number of off-resort guests making the trip to the island just to sample the menu at one of the island’s restaurants: The Olive Tree,

aman and the future: a dash of luxury The resort encompasses the islet and Villa Miločer, former summer residence of the Karađorđević family, together with two kilometres of coastline featuring pink sandy Miločer, Sveti Stefan and Queen's beaches. The tourist coming here is very much spoiled for choice – there are 50 locations to choose from on the islet, and eight more in Villa Miločer. These range from village rooms which cost 750 Euros per night, to separate cottages and grand suites with the most prestigious of all, the Sveti Stefan Suite, likely to set you back a cool 3,000 Euros per night. You get a private swimming pool with that, though. We were able to arrange a Skype conference with Aman Executive Director Mrs Trina Dingler Ebert who, in a friendly

We came, we saw, we enjoyed (and we want to come back). Suffice it to say, it is a magnificent destination, and we can only urge you to see for yourself.

THE FISCHER-SPASSKY REMATCH The most curious event related to Sveti Stefan took place in 1992, when the town-hotel became a venue for a chess match between Bobby Fischer and Boris Spassky. The match between the two grand masters was long in the waiting, ever since 1972 when Fischer had won the title of World Champion from Spassky in Reykjavik. Montenegro, as part of Yugoslavia, was under International sanctions, and the contest, though unofficial, was highly anticipated, not least of all on account of every manner of controversy Fischer had been courting for several decades. Openly sympathising with Milošević’s regime, avoiding to pay taxes every chance he got, Bobby Fischer would soon after the event be stripped of his US passport and live out the remainder of his days wandering the globe.

The Beach Club, The Queen’s Chair, and Loggia at Villa Miločer. We came, we saw, we enjoyed (and we want to come back). Suffice it to say, it is a magnificent destination. All those who have seen what we have seen will undoubtedly concur, and to those who have yet to enjoy Sveti Stefan we can only say this: we urge you to consider it for your next holiday. Time permitting, we’ll be back ourselves.

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good stuff

Tech & Trendy The summer is just around the corner and it’s not unlikely that many of you reading this will want to stay connected with home, or the office, but doing so from somewhere a little less dreary. We’ve picked out a few devices which might make keeping up with your work a bit more enjoyable. Smartphone » Samsung Galaxy S3 The Galaxy S3 is the latest in the series of Samsung smartphones, and will be debuting worldwide this month. This member of the Galaxy S family, a family which leads the way when it comes to smartphones, is, naturally, tied to the Android platform. It features enhanced voice-control capabilities together with a more powerful processor which will enable the user to operate more than one application at a time without running the risk of the phone freezing or crashing. It comes with a new face recognition system which monitors eye movement and which will keep the 4.8” screen from switching to standby if you happen to be looking at it – something which will be of immense benefit to anyone using it for lengthy PDF or Word files. There’s also Direct Call, whereby, by simply lifting the phone to your ear, it will dial the number of an incoming SMS. Now that’s a smart phone.

Tablet » Toshiba Thrive You can’t talk about gadgetry and not talk about tablets, and the Toshiba Thrive is one of the most versatile tablets available on the market. Coming in two sizes (10.1” and 7”), it exhibits exceptional versatility and power for a wide range of user-types. It can easily accommodate large amounts of external data thanks to its dual core processor, and it also has an inbuilt file manager application which makes information transfer and exchange as simple as it might be on a regular desktop computer. With stereo sound and two cameras (front and rear facing), it can also accommodate a number of USB driven peripherals, such as keyboards, cameras, printers, etc. While it’s not as slimline as some of its more ‘hip’ competitors, the Thrive will be getting an upgrade from the Android 3.2.1 platform to 4.0 sometime over the coming weeks.

Notebook » Gigabyte X11 Weighing in at just 975g the new Gigabyte X11 is the lightest notebook on the market, thanks to carbon fibre casing and aluminium hinges. This 11.6” notebook boasts 4GB of DDR3 RAM, an Intel Core 3 processor with HM77 Express Chipset, and Intel HD 4000 graphics card… in fact we could easily spend a page listing all of the cool stuff it has packed inside it. We’ll try and keep it a touch more simple and tell you that it can easily fit into the side pocket of a pair of cargo-pants. It’s comfortably the ideal choice for anyone who wants to keep an eye on their email whilst out and about, or for someone who, heaven forbid, wants to do some actual work.

Apple » iPod touch From its venerable beginnings when it was 'just an MP3 player', the iPod has evolved... and then some. This latest top-of-the-line version, marketed as the iPod touch, resembles (in its exterior) the ubiquitous iPhone, except for its distinctive chrome-plated back. Given that it’s just like the iPhone (only minus the GSM module), you just might find it ‘convenient’ to leave your phone at home and still be able to access email, surf, or use Facetime to message and video-chat with your friends. The iPod touch also utilises the iCloud feature so the device automatically syncs with your other Apple devices or your home PC.

june 14th

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to-do list

Radio And Juliet

Isak Adizes

Sting

June 15th - June 17th

June 21st

June 27th - July 1st

MESAP 2012

Ensemble Lucidarium

Rezidencija 55 Open

Nedelišće /

Ljubljana Castle, Ljubljana (19h) /

National Tennis Center, Zagreb /

14th International Entrepreneurship Fair

Italian ensemble performs medieval and renaissance music

ITF Nec Wheelchair Tour - international tennis tournament

June 16th

June 21st - June 24th

June 27th

German Authors Evening

3rd Vivaldi Forum

Sting

Contemporary ballet by Marco Goecke and Uwe Scholz

Mokra Gora School of Management Macroeconomic Forum

Pop music icon performs in Zagreb

June 18th

June 22nd

June 28th - June 30th

Radio And Juliet

HNK, Zagreb /

Mokra Gora /

Arena Zagreb (20h) /

Mestni trg, Ljubljana (21h) /

Ballet Gala Concert

National Theatre, Belgrade (20h) /

7th INmusic festival

Dance inspired by Shakespeare’s tragedy set to the music of Radiohead

National Theatre ballet orchestra concert

Biggest Croatian open pop/rock festival

June 19th

June 27th - June 30th

June 28th - June 30th

Business Lobbying

Hommage Tino Pattiera

53rd Ljubljana Jazz Fest

Rector's Palace Atrium, Dubrovnik /

Prof. Daniel Gueguen on lobbying in the EU

Dubrovnik International Opera Festival

Jazz festival: John McPhee, Neneh Cherry, Peter Evans and many more...

June 20th

June 25th - June 27th

June 28th - June 30th

Madlenianum Theatre, Belgrade (11h) /

Beton Fest 2012

Sarajevo /

Innovation Lab 2012

Sarajevo /

Lecture by Isak Adizes, the world's leading management expert

3D street paint festival

IT innovations conference

Serbian Chamber of Commerce, Belgrade (10h)

Profitable Growth Today

Jarun, Zagreb /

Križanke/Cankarjev dom/Šiška, Ljubljana /

june 14th

Men's strength in a capsule

FORMEN