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Zoran Popovac, Chairman, HŽ board Investment into railways is an investment into economic development

Marko Škreb, PBZ Zagreb chief economist, considers the new governmental programme Programme does not offer quick solutions

Croatian National Bank Downward trend in new lending. February the fifth consecutive month of reductions

INTERVIEW

STIMULUS PROGRAME

LENDING

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Croatian Business & Finance Weekly Established in 1953 Monday / 3rd May / 2010 Year III / No 0107 www.privredni.hr

S U P P O R T E D

A larger budget deficit Experts from The Institute of Economics estimate that the 2010 deficit might surpass estimated forecasts and amount to 3.5% of GDP. The Institute projections, in comparison with budget projections, presume a weaker economic state, which involves slower budget income flows as well as increased welfare spending. Despite the growth in the price of power, the inflation rate will remain low. The following year might introduce a slight increase, primarily due to increased domestic demand. Economic trends will face considerable risks and uncertainties. When asked how the government anti-recessionary programme could contribute to optimism and change negative trends, Institute experts point out that the international market has improved, albeit with continuing signs of instability. Further problems relate to closing the remaining chapters for EU membership.

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T H E

pvinternational pv international C R O A T I A N

C H A M B E R

O F

E C O N O M Y

INSTITUTE OF ECONOMICS, ZAGREB

A SLIGHT RECOVERY ON THE HORIZON The economy is facing a very difficulty year with a 0.7%decrease in GDP. In 2011, overall economic activity is expected to gradually recover with growth of 2.2% Vesna Antonić

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he last quarter of 2009 showed a 4.5% decrease in GDP in comparison with the same period last year. Seasonally adjusted data show that GDP decreased at a slower pace when compared with the previous quarter, which indicates that negative trends, whilst being very slight, will continue. The last quarter of the previous year showed a not unexpected significant decrease in personal consumption and investment, although imports and exports noted a moderate recovery. The most recent available information on the current state of economy indicate mild, positive trends in industrial production, stagnation in retail trade and an increase in negative trends in the construction industry. Considering such mixed signals, the predictions of The Institute of Economics from Zagreb, published in the latest issue of the Croatian Economic Outlook Quarterly, indicate a slight recovery in economic activities in the second half of the year. However, 2010 will be a more than difficult year for the economy, with a decrease in GDP of 0.7%. In 2011, total economic activity is antici-

pated to gradually recover, showing growth of some 2.2%. On the other hand, any recovery will remain unstable, showing every possibility of successive increases and decreases in activity, varying from one quarter to another. Increasing unemployment and a reduction in average income will postpone any enhancements in personal consumption until 2011 when negative trends on the labour market are expected to be brought to a halt. After facing a considerable decrease in 2009, investment may be expected to further reduce in the current year. Any degree of optimism is not expected before 2011, when

investment should increase by some 5%. Despite favourable international conditions, imports and exports will still be largely influenced by local economic activity. Thus, the current year results will remain below the 2009 average. Further growth in foreign trade is not expected before 2011. Such trends will ensure a continued deficit in the balance of payments of around 5% of GDP and decelerate growth in foreign debt. Although monetary policy measures are directed towards strengthening lending activities, a considerable increase in new loans for the private sector is still not expected.


2 VIEWPOINT

Privredni vjesnik Year III No 0107

BORIS SOLOMUN, CHAIRMAN, CROATIAN ENTREPRENEURS INITIATIVE

Small and medium-sized entrepreneurship must be consulted

New auto clusters

New incentives for Croatian car industry

Solomun is convinced he has found the solution to the financial crisis and a cure for economic depression hree years ago near Varaždin, Boris Solomun founded Novi život, a non-profit organisation which provides help for the elderly and the helpless. As the organisation started its activities a year ago, it was stricken by the global financial crisis with full force. The management turned to capable institutions for help, but, unfortunately, there was no response. As problems rapidly accumulated, Solomun almost closed the organisation. He also spent some time contacting other entrepreneurs and considering public statements made by many well-known analysts, politicians and businessmen. However, all they did was talk without providing concrete solutions. He then realised that not only he and his family but also the whole country were facing deepening, frustrating problems, but he could not accept such bleak future. The Initiative has been actively solving entrepreneurial problems as well as developing and establishing its position in the public domain. Croatian national economic policy does not provide for small and medium-sized entrepreneurship, unlike some European countries. Hence, the Initiative actively connects its members, provides development for both experienced and new entrepreneurs, enables normal and professional communication 365 days a year, lobbies government authorities, creates new jobs, searches for

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IMPRESSUM: Privredni vjesnik Kačićeva 9 10000 Zagreb +385 1 5600020 uprava@privredni.hr www.privredni-vjesnik.hr/ subscription

new markets and, most importantly, also for new export opportunities. The members have already introduced initiatives for solving various problems. Currently, they are consulting with the Ministry of Family, Veterans’ Affairs and Intergenerational Solidarity on the re-education of veterans as well as children of dead or missing soldiers, with the goal of fitting them for self-employment and entering the world of entrepreneurship. The Initiative members are to form a cluster in the area of energy and renewable energy resources as well as clusters relating to health food production and continental tourism. There are currently 2,200 Facebook members and 80 active members in the Initiative, who have accepted the Articles of Association and Code of Ethics. The Initiative gathers young and educated people who are eager to implement new concepts. Solomun is convinced he has the right answer for solving the financial crisis and curing economic depression.

FOR PUBLISHER Nikola Baučić +385 1 4846661 uprava@privredni.hr

IMC MANAGER Dea Olup +385 1 5600028 olup@privredni.hr

EDITOR IN CHIEF Darko Buković +385 1 5600003 bukovic@privredni.hr

TRANSLATION Tr@duco traduco@zg.t-com.hr

EXECUTIVE EDITORS Andrea Marić maric@privredni.hr Vesna Antonić antonic@privredni.hr

COUNSELLOR, INTERNATIONAL OPERATIONS, LANGUAGE EDITOR Ray Fletcher fletcher@privredni.hr

According to Autocluster executives, members’ year-on-year income increased to €0.27 billion, with exports totalling 90% Eleonora Dukavac otwithstanding the current financial crisis with trade in car components showing a decrease both nationally and at a European level, two new auto clusters have emerged in the Croatian market. Both the cluster of Automobile Component Manufacturers (KPA), supported by the Croatian Chamber of Economy, as well as Autocluster Croatia, a former member of Croatian Employers Association, have been founded as independ-

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We are currently developing new materials and technologies as well as considering environmental protection ent companies. “Both clusters are not in direct competition. AC Croatia encompasses some companies which do not deal with the manufacture of automotive components. The entire Croatian auto components industry includes some 20 companies, managing in the region of 3,000 employees. The eight companies within the framework of KPA, with a 70% industry share, is the only serious industry representative”, claims Josip Boban, KPA general man-

ager. The promotion of the motor component industry assets as well as reaching increased levels of competitiveness and innovation are their main goals. Industry trends “The leading automotive component manufacturers have been successful in overcoming the financial crisis, with some members expanding into the international market. Our efforts will be directed towards adapting to new market requirements and seizing new business opportunities. We welcome any new members, especially manufacturers”, says Boban, general manager of AD plastik from Solin. The development of new technologies which aim to build the Croatian car industry is one of the major AC Croatia goals. “Annual income of our members amounts to some €0.27 billion, with 90% of exports to western European markets. “This cluster has generated enormous potential for successful access to local and European funds. We are currently implementing new materials and technologies and also taking environmental protection into consideration. The cluster has successfully committed to several European projects, such as Autoclusters SEE and Pro-inno Europe”, points out Branko Mihalić, manager of AC Cluster.


www.privredni.hr Business & Finance Weekly

INTERVIEW 3

( 18,241 in HŽ Group

employees

ZORAN POPOVAC, CHAIRMAN, HŽ BOARD

INVESTMENT INTO RAILWAYS IS AN INVESTMENT INTO ECONOMIC DEVELOPMENT Bids for the privatisation of HŽ daughter companies to begin at the end of the year Croatia can manufacture all necessary infrastructure for railway development tured. Our corporate management model should comply with standards and principles of contemporary corporate management. The whole process should be brought to an end in 2010.

Jasminka Filipas ecently, HŽ (Hrvatske željeznice) celebrated the 150th anniversary of the opening of the first Croatian railway. Zoran Popovac, Chairman of the HŽ board, gives his views. Božidar Kalmeta, the Minister of the Sea, Transport and Infrastructure, claims that HŽ could have applied for more EU funds but unfortunately did not prepare project documentation on time.

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The Vinkovci-Tovarnik railway reconstruction, as well as countless other developments is largely funded through the ISPA and IPA programmes. Total investment is some €65 million, of which €28.8 million comes via the ISPA programme. According to plans, the project should be finished by the end of 2010 and if current construction work is taken into consideration, no major delays are anticipated. IPA has € 47.1 million of funding assured for the implementation of projects for which HŽ, as the implementing organisation, received approval in 2008. Which projects are to be funded through IPA? IPA funds are to be used for three different projects, one being the reconstruction of the signalisation and security systems of the Zagreb main rail station. Currently, formal bidding is being implemented and the first contracts should be drawn up in the first half of 2010 but construction work is not expected to start

before 2011. The second project includes the reconstruction of Novska-Okučani section. Currently, we are developing project documentation and applying for the required permits. Formal bidding is to be completed at the end of this year while construction work will begin in spring 2011. The final project involves the reconstruction of the single-track line Dugo Selo – Novska. HŽ is preparing bid documentation, as required for inviting foreign tenders. According to the National Programme, how much is planned to be invested by the end of 2015? The sum amounts to €2.05 billion. We believe this level of investment is justifiable as the improved infrastructure and the

acquisition of new trains will contribute to economic development. A very valuable aspect is that Croatia can manufacture internally all the necessary infrastructure for railway development. Hence, cohesion funds

More than €0.41 billion required for the purchase of new train sets provide the necessary funding for the implementation of those programmes which also provide a great opportunity for Croatia to improve the transportation of goods. Will HŽ Holding be reorganised? All companies which are part of HŽ Holding are to be restruc-

Does it include a significant number of dismissals? Regrettably, it does. We encourage our employees to use redundancy pay whenever possible. I would like to stress that the last decade has shown a decrease in the number of employees, from 22,908 in 1998 to 12,843 in 2009. 620 were foreseen under the Programme and 7,101 employees opted for redundancy pay. At the beginning of the year, HŽ Group managed 18,241 employees, of which 12,843 work for the parent organisation and 5,498 for subsidiaries. Previous rounds of bidding for the privatisation of HŽ offshoot companies proved unsuccessful. Will they be offered again and how many individuals will be affected? New rounds of bidding will be complete by the end of this year. Željezničko ugostiteljstvo (Railway Catering Company), PRO REG (Production and Regeneration Company), Pružne građevine (Railway Construction), Remont i održavanje pruga (Railway Maintenance Company), POSIT, RŽV (manufacturer of train sets) from Čakovec and Bjelovar will all be part of the privatisation process. Together, these companies manage 1,600 employees.


4 ::: news HT the most valuable Croatian corporate brand On the current list of the 100 most valuable Croatian brands, published by the business weekly Lider, Hrvatski telekom replaced the Croatian oil company Ina as the leading corporate brand in Croatia. Last year, the HT brand increased profitability by US$12 million, which now stands at US$603 million, thus exceeding its 2009 profit figure. Brand Finance calculated that the total value of the top one hundred local brands totals US$9.2 billion. Although the current financial crisis has not significantly decreased their overall value, 44 brands from the 100 list do note a visible decrease in the total value. The top ten companies do not show any other significant changes. Podravka, probably due to its many problematic affairs, has lost its position among the top ten with Jaminca taking its place. adriatica.net sells Sixt Recently, adriatica.net group finalised the sale contract for the rent-a-car company, Sixt, which conducted business activities as a part of the Atlas group. As part of the adriatica.net restructuring process, Sixt has been sold to the company which is its franchisor for Slovenia; by doing so adriatica.net has effected one of more important factors in its business strategy after implementing an equity increase. The sale contract states that Sixt employees will be working for the new company, to which all company rights have already been transferred. IN2 create a new company in Macedonia The leading regional software group IN2, after being present on the Macedonian market for several years, founded IN2 dooel Skopje in November 2009, which was officially opened last week and counts as one of the ten IN2 group members. As an independent company, this improves IN2 business activities on the Macedonian market, as they were previously conducted by the Zagreb parent company. IN2 would primarily like to improve the sales of their software solutions and IT services and provide the Macedonian market with expert knowledge and experience, based on an 18 year-long experience in the regional IT market.

Privredni vjesnik Year III No 0107

MARKO ŠKREB, PBZ ZAGREB CHIEF ECONOMIST, CONSIDERS THE NEW GOVERNMENTAL PROGRAMME

PROGRAMME DOES NOT OFFER QUICK SOLUTIONS According to Škreb, reaching broader consensus means a waste of time which currently cannot be afforded Vesna Antonić

discussed, since their implementation will ensure the accomplishment of this goal. Foreign investors and lenders will most assuredly welcome these measures, especially if rapid and appropriate changes are to occur. Specifically, the enormous external debt and its management on a short-term basis make Croatia dependant on external lenders and investors. This means that the price of external debt management could decrease.

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he new governmental antirecessionary programme certainly represents a significant economic event for Croatia. Its prompt and rapid implementation will not only influence short-term growth in the year to come but will also affect medium-term trends. More importantly, it does not include a very narrow set of anti-recessionary measures, but serious structural measures, changing the behaviour of all those who are economically active which is precisely what Croatia currently needs, according to Marko Škreb, PBZ chief economist in his review of the new governmental programme. A well-known fact is that the former growth model was largely based on excessive internal demand, including personal, capital and governmental expenditure, which finally led to an unsustainable medium-term external imbalance. As expenditure exceeded production, payment of bills showed an increased deficit whilst all economic sectors also increased their external debt, leading to the main restrictions for future development, according to the central bank. Škreb believes Croatia needs those measures which will generate additional exports and improve its competitiveness on the global market. Support for the Programme The programme should be supported, no matter what its deficiencies may be. According to Škreb, most of the measures may be described as “healthy economic policy”. The mediumterm benefits of their implementation will positively affect every Croatian individual, unlike shortterm benefits, which do not positively affect all interested groups.

The programme does not offer quick solutions, such as devaluation, which solves all economic problems, simply because current problems cannot be solved

A change in behaviour is the key to success as well as a major risk in such a manner, emphasises Škreb. In his opinion, the programme provides a range of measures which solve major economic problems and whose permanent implementation is a must. “No matter what political or economic views the current or future governments may hold, these measures are required both for accelerated economic growth and the survival of our economic independence”, believes the PBZ chief economist. He also adds that certain measures should be prepared in accordance with EU and EMU regulations, as membership of both institutions is a Croatian strategic goal. A wider selection of those measures should not be

Paralysis by analysis According to Škreb, negative remarks can be found for any programme. However, it is currently more important to define the general direction for reform as well as to ensure the effectiveness of individual measures and their urgent implementation. In his opinion, constant and detailed analysis of individual measures is currently not productive and would not result in anticipated changes in individual behaviour. “First of all, the term “paralysis by analysis” is well known in economic policy, meaning that further analysis can always be provided, but usually results in postponed implementation of individual reforms. Secondly, it is almost impossible to reach a broader consensus among all experts, let alone among all parties interested in reform. Hence, looking for wider consensus among experts means a waste of time, which is currently unaffordable”, says Škreb. “Eventually, there will always be unhappy parties, as every economic measure results in either positive or negative effects. The same will happen to the current reforms. However, the key is that the government controls reform as a whole, its trends as well as their influences on sustainable long-term growth” concludes the PBZ chief economist.


www.privredni.hr Business & Finance Weekly

5

CROATIAN MANAGERS THE MOST PESSIMISTIC REGIONALLY

ECONOMIC CONDITIONS WILL CONTINUE TO BE A DRAG Significant optimism in Croatia limited to the areas of capital goods consumption, such as equipment, IT technology and new commercial buildings

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roatian managers are still providing the most pessimistic forecasts in the region. The majority believe that general economic conditions will be a further aggravation in the next six months, with 20% endorsing a pessimistic view of the future, as stated in the survey entitled Opinion Indicators in the Business Sector, conducted by Deloitte, an audit and consulting company, covering six central European countries. Significant optimism in Croatia can be found only in the area of capital goods consumption, such as equipment, IT technology and new commercial buildings. Almost 50% of respondents replied that capital investment will increase in the following six months, with only 10% believing

on the market over the following year, decreased by 10%, from 67% to 57%. In addition, the risk assessment on either unpaid or uncollectible bills worsened significantly in the last three quarters. More than 75% of managers believe that companies have to wait too long for payment. On the other hand, they are as optimistic as their regional colleagues when considering the availability of bank lending with only one in three respondents showing any degree of pessimism. The possibilities for acquiring another company remain deeply negative within the central European average. Only 13% of Croatian companies would consider such a course of action in the year to come. (V.A.)

they will decrease. Regional as well as Croatian employment rates remain negative. 44% of managers anticipate a decrease in the number of employees while only 7% plan an increase in that area. Despite regional managers expecting sales income to increase in the following six months, 75%

44% of managers anticipate a reduction in the number of employees of Croatian managers believe this aspect will remain at the same level or even decrease. Moreover, the number of companies planning to launch new products

January external debt at €42.5 billion

Public debt

A SLIGHT DECREASE IN GROSS EXTERNAL DEBT

PUBLIC DEBT AT 50% OF GDP I

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roatian gross external debt, excluding ‘round-trip’ direct investment, amounted to €42.5 billion at the end of January, a decrease of € 0.6 billion when compared with the end of 2009. This trend is primarily reflected in bank debt reduction, with a minor share covering company debt reduction, although the public sector showed a slight increase in foreign liabilities, according to the Croatian National Bank Bulletin. After noting an increase in shortterm liabilities last December, commercial banks decreased their foreign liabilities by €0.5 billion at the end of January

2010, mostly through non-resident cash flow and deposits. The January reduction of bank foreign liabilities resulted in their reduced share of total Croatian external debt by less than 25%. Since the end of 2009, other public sector organisations, including mainly companies, non-bank financial institutions and the Croatian Bank for Reconstruction and Development, still showed a slight decrease in external debt but by a mere €0.2 billion. Non-bank financial institutions, especially leasing companies, show a considerable decrease as well as the Croatian Bank for Reconstruction and Development, albeit on a smaller scale. Both public and mixed companies saw a slight debt decrease, whilst companies with a public controlling interest recorded the same debt level as for December 2009. (V.A.)

n November 2009, total public debt, including both central and local government debts as well as those of non-budgetary funds, totalled €15.96 billion, some 35% of GDP. When compared with the end of 2008, this figure had increased by 16.3%. If government guarantees as well as Croatian Bank for Reconstruction and Development debt is included, public debt amounted to €23 billion or 50% of GDP, measuring a growth rate of 15.7% when compared with the end of 2008. At the end of November, central government debt, equating to 65% of total public debt, stood at €14.93 billion an increase of 16.7% when compared with the end of 2008. Data from the Croatian National Bank at the end of January 2010 show that central government debt has increased throughout December and January by €0.23 billion, now stand-

ing at €15.16 billion. Government guarantees totalled €5.11 billion or 10.2% higher in comparison with the end of 2008 and the debt of the Croatian Bank for Reconstruction and Development reached €1.89 billion, an increase of 27.6%. RBA analysts expect public debt will continue to grow in 2010 as a decrease in budget income, caused by negative economic trends, will increase government needs to refinance its budgetary obligations, taking nominal expenditure growth into consideration. (V.A.)


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Privredni vjesnik Year III No 0107

CROATIAN FOREIGN CURRENCY MARKET Currency

Kuna exchange mid-rate

AUD CAD JPY CHF GBP USD EUR

5,066825 5,409255 5,762556 5,051631 8,356637 5,440539 7,243533

Source: HNB

EUR

7.28

USD

5.52

27.4.

28.4.

29.4.

30.4.

5.08

7.27

5.50

5.07

7.26

5.48

5.06

7.25

5.46

5.05

7.24

5.44

5.04

7.23 26.4.

WEEK MAY 3, 2010

CHF

4.42 26.4.

27.4.

28.4.

29.4.

30.4.

5.03 26.4.

27.4.

::: news

FEBRUARY DATA FROM THE CROATIAN NATIONAL BANK

Increase in Atlantic Group Profit In the first quarter of 2010, Atlantic Group posted profits of €69.07 million with nett profit standing at €7.77 million, a 2.6% increase when compared with the same period last year, due to the nonrecurring sales profit of Neva, the Atlantic Group old manufacturing location. When this item is disregarded, nett profit amounted to €2.30 million and profit from business operations of €4.25 million shows a 2.8% increase. Operating profit excluding depreciation notes a 7.1% increase over the previous year and totals €5.89 million.

Downward trend in new lending

T-HT nett profit decreased T-HT revenue showed a 6% decrease in the first quarter of 2010, amounting to €0.27 billion. Nett profit decreased by 34.2%, standing at €52.60 million. Cash flow from normal business operations increased to €72.25 million, announced T-HT management. The new structure with two operating units – one for private and a second for B2B users – has been introduced. Podravka: nett profit up 23% Podravka operating activities accounted for a €4.45 million nett profit in the first quarter of 2010, an increase of 269% when compared with the same period of 2009, as stated in their business performance summary. Extraordinary items, totalling €3.41 million, had a negative influence on Podravka business results in the first quarter; these mainly refer to adjustments in bond values, amounting to €3.33 million. The reported nett profit figure of €1.04 million shows an increase of 23% over the same period last year, as stated in the report.

28.4.

29.4.

30.4.

February was the fifth consecutive month to show a decrease in the number of personal loans ccording to the Croatian National Bank, for the first time since April 2000, a year-onyear decrease in the number of personal loans was recorded in February 2010. The total amount of loans, issued by commercial banks, totalled €34.77 billion at the end of February, a year-on-year decrease of 0.8%, which was caused by both a depressed number of new personal loans as well as lending to financial institutions. The total amount of loans remains almost unchanged on a monthly basis. February was the fifth consecutive month to record a decrease in the number of personal loans year-on-year. At

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the end of the month personal lending amounted to €16.75 billion, a decrease of 3.5% when compared with the same period last year. After showing a mild increase in January, February also showed a 0.6% decrease on a monthly basis. On the other hand, housing credits, with 43.4% share in the total number of personal loans, still show a plus on an annual basis, but growth is extremely low at 0.2%. Increase in state financing The annual growth rate for corporate lending decreased by 1.1% and stood at €13.71 billion at the end of February. State financing showed an ex-

tremely high growth rate in the first half of 2009, with April and May each showing a 100% increase. However, as the Gov-

Analysts do not expect a significant increase in new loan applications ernment re-entered the foreign capital markets at the end of the year, it no longer required further financing from local banks. Hence, year-on-year growth in this area has gradually decreased; at the end of February lending to the state was €4.14 billion, an increase of 3.8% on an annual basis. (V.A. / RBA)


www.privredni.hr Business & Finance Weekly

WE PRESENT 7

ITS CONSULTING, ZAGREB

PALMA, KORČULA

Siberia also needs cooling systems ITS Consulting has been manufacturing air conditioning units for more than 30 years, accumulating experience in countries such as Russia, Belorussia and Turkmenistan

Liqueurs production based on recipes dating from the Dubrovnik Republic The recipe for a liqueur produced from red wine was discovered in church archives and successfully revived TS Consulting has been designing, assembling and maintaining air conditioning units for more than 30 years. From its first beginnings, this Zagreb based company has specialised in the manufacture of cooling systems for server rooms in IT centres. Goran Stanišić, General Manager of ITS Consulting, says the company has a long tradition which started in 1980’s when ITS (Engineering and technological maintenance centre), specialised in cooling systems, was founded. ITS Consulting was developed a few years later, in 1990. Their most valuable experience was accumulated while developing cooling systems for telecommunication centres in Russia, Belorussia and Turkmenistan. “When considering extreme climate conditions in Siberia and sparse population of the area, the experience we gained is unique and irreplaceable”, stresses Stanišić. ITS Consulting, providing services to customers 24 hours a day, has been distributing RC Group products for more than 25 years, units such as server cooling racks and cabinets of all sizes, special air-conditioning units for the telecommunications industry, cooling units as well as absorbing cooling units. In addition to running a representative office, ITS Consulting also

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distributes Prihod, Ventilclim, Mitsubishi Electric and Toshiba products. You get what you pay for According to Stanišić, the global financial crisis caused problems for this branch of industry, as well. “Production of air-conditioning systems is closely related to the construction industry, which was the first to experience the consequences of the crisis”, he adds. A decrease in business activity caused yet another problem. “Although healthy quality competition is always welcome, there are companies which compete with low prices, without providing the necessary knowledge and quality service required for a specific job, which is highly dangerous for investors. They should beware that they get what they pay for” stresses Stanišić. He is very happy with the market position that ITS Consulting currently holds, with the main goal of maintaining current business operations during the financial crisis. Although he appreciates steady yearly company growth, he is aware that such a trend is not constant. “Too accelerated a growth in results often shows in a quality decrease and a quick collapse which is very difficult to control”, concludes Stanišić. (B.O.)

ccording to Baldo Pavlina, the owner of Palma from Korčula, the idea for the production of local liqueurs from brandy and wine as well as of olive oil enriched with essential herbs first came into view when both he and his son lost their jobs. They use many other locally produced eco-products, such as figs, honey and almonds. Pavlina is particularly proud of his liqueur from red wine, whose recipe originates from the time of the Dubrovnik Republic. The recipe was discovered in the church archives and was very difficult to interpret. However, this liqueur as well as many others have become very popular and are in high demand not only by the American and German markets but also in other countries. However, he has not exported his products yet as he is currently negotiating with international partners.

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Souvenirs with a touch of history Glass souvenirs carry medallions representing famous Croats, such as the explorer Marco Polo, poetess and muse, Cijeta Zuzorić and composer Dora Pejačević. “Such quality products send a message about important individuals in Croatian history. We would be extremely pleased if somebody

shows interest in the opus of Dora Pejačević” stresses Pavlina. In addition to the renowned red wine liqueur, they also manufacture liqueurs from oranges, sour cherries, walnuts, carobs and many others. The Plavac varietal from Pelješac peninsula as well as Badel brandy is used in their production, with the Badel brand specifically intended for the production of herbal, anise, carob and fig flavoured brandies. “The complete production process is based solely on sun, without any artificial additives”, says Pavlina, also adding that their high quality olive oil is flavoured according to traditional recipes and can be used in the preparation of various Mediterranean dishes. Traditional recipes include a mix of oil and vinegar, freshly packed dried flowers of lavender, dried figs, fried salted almonds as well as many other spices growing in the area, such as oregano, basil, mint, marjoram, sage, anis, lavender and rosemary. Their products are mainly sold wholesale and can be found in many hotels, catering facilities, souvenir shops and Diona markets. “It is a wellknown fact that Korčula is one of the sunniest of Croatian islands which provides countless production possibilities and meets current market needs”, ends Baldo Pavlina. (J.F.)


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Privredni vjesnik Year II No 0107

Ugo Grupa

::: news Real estate market prices show slight decrease According to the CentarNekretnina index, April real estate prices in Zagreb have not shown a significant change in comparison with their March average, decreasing by only 0.3%. When considering year-on-year prices, they decreased by 3.4%. The average Zagreb price per m2 in April was €1,865, which almost equals the March level of €1,869. According to CentarNekretnina, prices decreased by 3.8% in comparison with the same period last year. In April, real estate prices along the Adriatic coast decreased insignificantly by 0.4%, although the year-on-year figure shows a 5.8% decrease. Croatian Employers Association (HUP) supports new investment cycle At its most recent meeting, the HUP Executive Committee discussed the importance of foreign investment for Croatia. Damir Kuštrak, HUP president, emphasised that the Association supports a new cycle of investment, such as the Ina/MOL/ government partnership, as both local and foreign investment is of major importance for Croatia. Kuštrak also referred to recent discussions related to energy prices. H1 Telekom notes more subscribers

H1, a local telecommunications operator, continues to increase the number of subscribers. A special spring offer, which started in April, increased the number of customers by 6,000. H1 provides a fixed price for services, with a continuous increase in the number of new customers. This is the result of H1 Telecom longterm strategic plan to become the leading telecommunication and broadband Internet provider for private individuals and smaller companies in Croatia.

Meeting the wishes of visitors and business partners is a priority

With the opening of the Milenij hotel in Opatija, Ugo Grupa, with some 1,200 employees, has entered the hospitality industry Sanja Plješa go Grupa from Zagreb was founded in 1988 with the prime goal of providing suitable equipment for various hotel and catering establishments, offices and premises. Since 1995, their business activities have extended to the design, construction and reconstruction of these facilities by providing a full service to their customers. With the opening of the Milenij hotel in Opatija in 2000, Ugo Grupa entered the hospitality industry and founded Ugo hotel, today more usually known as Milenij hoteli. When various organisations failed to sell Solaris, a multiple-hotel resort near Šibenik, Ugo Grupa bought a controlling interest in the company. Today, Ugo Grupa has some 1,200 employees spanning various companies, including seasonal workers. Its business activities include managing the Milenij hoteli in Opatija, with six four- and five-star hotels, as well as the Solaris hotels resort in Šibenik, with five four-star hotels, a marina and a familyoriented resort.

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Healthy competition always welcome As the majority of their visitors come from abroad, the company directs its business activities towards foreign markets. “The constant upgrading of service quality in our hotels cannot, and is not, allowed to wait as it cur-

rently contributes to positive economic effects. Everything we do complies with the wishes and expectations of our visitors and business partners. A new acquisition, the Royal hotel, in Opatija, is currently being prepared” says Branimir Jurišić, General Manager of Ugo Grupa. Without offering further details, he added this project is of a very high quality and will, with its copious facilities and attractions, significantly change the ‘Lungomare’, a well-known walkway by the sea in Opatija, as well as improving the whole area. When considering competition, Jurišić points out than several international hotel chains, having different ownership formats,

Scholarships provided for employees have been present in Croatia for some time. As they provide healthy competition, their presence is more than welcome. “If local and foreign hotel chains are to be mutually compared, I categorically state that Milenij hoteli with top quality service and facilities stands shoulder-toshoulder with many famous hotel brands. However, further personnel development as well as necessary changes are still needed” says Jurišić. Each year, Ugo Grupa employees visit distinguished international hotels, learn from their col-

leagues in foreign hotel chains and pass on their knowledge to their Croatian co-workers. International experts and hotel owners also visit Ugo Grupa hotels, in order to help with necessary changes and improve the service quality. Employees who are responsible for construction and providing equipment for various hotel and catering establishments, are also provided with similar forms of training. Young professionals wanted Ugo Grupa is specifically famous for offering leading positions to young, highly educated professionals. This business philosophy has proved itself successful more than once. The company provides scholarships for its employees, covering both secondary vocational and tertiary education. In such a manner, the company acquires a certain number of young professionals. “Young people, willing to learn, work and make progress, are always welcome in our hotels” emphasises Jurišić. Recently, Ugo Grupa has been granted services under the EBRD advisory programme, but it is too early to comment on first impressions, as the company has just made its first contacts. EBRD professionals will help Ugo Grupa explore all possibilities in implementing useful programmes and improving the quality of destination, wherever the group provides accommodation.

PV International 0107  

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