Absorption of EU funds 12% increase in absorption rate of EU funds over the first six months. It’s significant progress, says Minister Grčić
Interview: Dijana Antičić Tax forensics investigates the most common types of frauds. We interviewed one of top field experts in Croatia
Exotic fruit from Donja Bistra Owing to its vicinity and duty free regulations, Exotic King is competitive on the European market
PAGES 8 2008 2009 2010 2011
Croatian Business & Finance Weekly Established in 1953 Monday / 23rd July / 2012 Year V / No 0209 www.privredni.hr
S U P P O R T E D
T H E
pvinternational pv international C R O A T I A N
C H A M B E R
E C O N O M Y
BUSINESS SENTIMENT SURVEY FOR THE SECOND QUARTER 2012
Summer passes, pessimism lingers Business sentiment indicators in processing industry and in construction sector are down yet again, whereas in construction sector they have reached their lowest point ever Mirjana Čižmešija, Ph.D Faculty of Economics, Zagreb total of 416 companies, 175 in processing industry, 49 in construction, 66 in trade and 126 in services participated in the business sentiment survey conducted by Privredni vjesnik for the second quarter of 2012. Those surveyed generate 11.7% of total revenue and employ 10.18% of the total number of those employed in Croatian economy. According to the latest survey data, the overall assessments and expectations amongst Croatian businessmen are still
mainly pessimistic. Pessimism permeates Croatian economy, irrespective of slight optimism amongst businessmen in services and trade. Business sentiment indicators in processing industry and in construction recorded a fall yet again, whereas in construction sector they have sunk to their lowest point ever since the survey was introduced in 1995. Bleak days ahead According to seasonally adjusted data, business sentiment indicators in processing industry decreased by 6.2 points in relation to the first quarter of 2012 and currently stand at 8.45, primarily due to inaccurate assessment of orders and
stock. Following a slight increase during the first quarter, preceded by a decrease recorded for two consecutive quarters, the indicators saw a fall yet again with no recovery in sight by the end of the year. 63% of those surveyed expect no significant changes concerning their current business position in the next six months. Considering the arduous situation Croatian businessmen have been facing over the past several years, is it reckless optimism or careful pessimism? Pessimism is particularly prominent in printing and copying of recorded material, production of machinery and appliances, furniture and leather production, whereas optimism pervades businessmen in production of other non-metal mineral products. Business sentiment indicators in construction have shown substantial worsening concerning both expected construction projects and the current orders. Three quarters of those responding reported lower activity in construction during the second quarter (which is usually notably active) compared with the first quarter. Over one half of those surveyed were
faced with substantial difficulties in business, primarily due to financial issues and are anticipating a further decrease in construction activity over the forthcoming quarter. The current orders (indicating the business position in the near term) are assessed as unsatisfactory, whilst orders in the second quarter decreased by 57% over the first quarter. In addition, nearly one half of the companies participating in the survey have staff surplus and over 60% have been struggling with illiquidity. Slight optimism in services Business sentiment indicators in trade increased by almost 25 points and currently stand at 39.4. Nevertheless, a recovery in trade is not viable by the end of 2012, irrespective of the fact that over 70% of those responding assessed their current business position as favourable and saw a slight increase in turnover. Business indicators in services recorded a remarkable increase of 29 points, currently standing at 28.1 points, following a decrease for three consecutive quarters. Hence, this might mark the end of adverse movements in the services sector. Nevertheless, it is currently premature to talk about a revival.
Privredni vjesnik Year V No 209
Guest commentator: Marina Taslak, Consultant at Ramiro ABSORPTION OF EU FUNDS
Contract – not sufficient to guarantee job security Job security by increasing employability through commitment to work, lifelong learning and continuously acquiring new skills
Adaptability and continuous improvement are of fundamental significance for both companies and states on the global market against a backdrop of the crisis. Hence, resilience and flexibility are imperative to encourage rapid change within the system, creating a propitious climate for personal development and adaptability. Labour market flexibility has caused substantial controversy amongst various interest groups in Croatia. Considering legal and economic aspects, labour market flexibility can be defined as a set of effective collective responses to economic uncertainty of risk, where the concepts of collective and effective are essential. Consequently, various interest groups need to engage in joint action to find creative solutions to enhance the competitiveness of the state and the private sector. Adaptability and active approach are fundamental within companies, for individual employees, within teams and in public administration. Considering the psychological aspect, there are two major hurdles in finding the necessary solutions: human need for securiIMPRESSUM: Privredni vjesnik Kačićeva 9 10000 Zagreb +385 1 5600020 firstname.lastname@example.org www.privredni-vjesnik.hr/ subscription
ty implied in resistance to change and absence of constructive communication of the involved parties. There is a remarkable lack of job security within the current labour market circumstances with particular focus on individuals and companies and eventually the state. Companies can enhance job security by increasing their competitiveness through finding market niches, setting clearly defined goals and work standards, functional organisation of resources and continuous monitoring and improvement of effectiveness. In addition, active approach to employees, building partner relationship in achieving results, as well as continuous analysis of the current methods of work are essential, as organisational flexibility and adaptability create job security.
Lack of job security within the current labour market circumstances An employment contract alone is not sufficient to guarantee job security, since job security is primarily created by increasing employability through commitment to work, lifelong learning and continuously acquiring new skills. Motivated and responsible individuals who continuously focus on improvement (acquiring new skills, co-operating with others, solving problems) are highly valued by companies irrespective of the crisis.
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12% increase in absorption rate of EU funds over the first six months The largest increase of 24.5% or €23 million of contracted and paid grants in traffic (IPA component IIIA) he available budget for Croatia under IPA funding is currently €668.5 million. Nevertheless, Croatia had clearly defined plans concerning only 37.4% of this amount and hence contracted grants were not satisfactory, according to the analysis conducted by the Ministry of Regional Development and EU Funds. However, at the beginning of the year the absorption rate was 49.1%, due to contracts signed for projects worth HRK328.3 million which will be financed from EU funds. In addition, contracts for new projects were signed from January to June and a further €78 million will be withdrawn from IPA funds. The largest increase of 24.5% or €23 million in contracted and paid grants was in traffic (IPA component IIIA). Moreover, regional competitiveness saw a 21% rise in absorption rate, or new contracts worth €13 million (IPA component IIIC). A 15% increase in absorption rate was achieved in IPARD, or projects in rural development and infrastructure, which was the most lagging area, with €18.6 million new contracts.
Minister Grčić: Significant progress over six months “Significant progress was made over the first six months”, stated Branko Grčić, Government Vice-President and Minister of Regional Development and EU funds. “In 2011 we were grant-
ed €250 million, whereas six months later we were granted an additional €328 million, which was an increase of 12% in absorption rate. It is important to highlight that for one kuna invested in EU projects, the returns amount to a remarkable HRK60 and the funds are nonrepayable”, emphasised Grčić. He added that structural funds will provide some ten times more support and stated that he hoped Croatia will be as successful following the EU accession. The available budget for Croatia under EU funding between 2007 and 2011 for projects intended to enhance administrative capacity, cross-border co-operation, traffic, environment, regional competitiveness, human resources and agriculture was between €33 million and €201 million. Contracting deadlines have expired for projects financed from the programme for 2007 and 2008. The absorption rate stood at a remarkable 93% and 83% at the time when the available budget for Croatia under EU funding was €44.5 million and €42.3 million. Contracting deadlines concerning the programmes for 2009 will expire in 2013 and those for projects financed under IPA around mid-2015. According to the announcement made by the Ministry of Regional Development and EU Funds, 60% of IPA funds available for Croatia will be withdrawn by the end of 2012. (K.S.)
www.privredni.hr Business & Finance Weekly
INTERVIEW: DIJANA ANTIČIĆ, FORENSIC AUDITOR
Fighting against financial frauds Tax forensics investigates the most common types of frauds: corruption, asset disposal and falsification of financial reports. We interviewed one of top field experts in Croatia I have been working as a certified tax consultant for eight years, six of which I spent working as a partner in J.T.D. za porezno savjetništvo Antičić-JakovljevićKušeta (company for tax consulting). Forenzika Prima was founded several months ago for the purpose of formalising this one and other related services that cannot be provided by the public company and due to the limitations of the Tax Consulting Act. In addition to forensics, the new company specialises in audits, value estimates of companies and court expertise. We own all required licences.
Krešimir Sočković ax forensics is a consulting activity specialising in investigating, finding evidence and preventing economic-crime and other illicit actions. The three following types of fraud are most commonly investigated: corruption, asset disposal and falsification of financial reports. On of top experts in this field in Croatia is Dijana Antičić. She is the Director of Forenzika Prima, member of Udruga poslovnih žena Krug (Krug – Businesswomen Association) and the ambassador of female entrepreneurship of the European Network of Female Entrepreneurship Ambassadors.
What is the job of tax forensics and forensic accountants? Forensic accounting applies accounting terminology, understanding, solutions and techniques for solving legal matters. Forensic accountant investigates and searches for evidence of business and financial frauds or economic crime.
I started working spontaneously, through client queries Forensic Accountants may help management in realising legal procedures or acting in compliance with regulations. They become involved in various investigations after regular or special audits that discovered signs of frauds in business and financial transactions. After the investigation, Forensic Accountant draws up a report and presents its results to the client. Forensic Auditor specialises in
tax regulations and identifying frauds regarding tax calculations, tax evasions and similar. Who are your clients? The services of Forensic Accounting and Forenzika Prima are provided to various companies for investigating frauds involving their suppliers and/or buyers. The legal representative or state attorney may consult a Forensic Accountant to obtain an independent expert opinion on the incurred loss, fair price, value, compensation and asset relations or other fields of the legal profession, including
the ones subject to responsibility and obligations, ownership disqualifications and termination of contract. In criminal and legal investigations, Forensic Accountants analyse business and financial transactions as well as manipulations on capital markets. The clients can also include the private and public sector, the state in certain procedures and company owners. How long have you been working as a Forensic Auditor? My main activity has been tax consulting, and forensics is a new activity that resulted from it.
When did you start with tax forensics? I started working spontaneously, through client queries. One of my first assignments was to investigate for a client, who often spent time abroad on business, whether he was being financially damaged by people with authorised access to the gyro account and treasury in his Accounting Department. The review of the documentation confirmed his doubts. We had a recent case where a client bought a smaller company previously owned by a big-sized one, and upon the review of the company’s books we discovered some transactions were booked twice in order to damage the sold company. Before the sales, money was drawn out of the company through numerous claims. In this business, education is not enough. It takes business experience and knowledge of psychology. The offenders’ attitude and behaviour often gives away that something is not right and points to the place of error. This must be recognised.
4 ::: news
Privredni vjesnik Year V No 209
( €54 billion
total assets of Croatian banks
( €20.8 billion
assets of UniCredit, the biggest ban
DELOITTE’S SURVEY Inflation lower than in May June prices of goods and services for personal use, measured with consumer price index, were on average 0.6 lower than in May. Year-on-year, they are 3.8% higher, according to data provided by the Central Bureau for Statistics. The following sectors registered the biggest decrease: clothing and footwear (3.9%), traffic (2.2%), food and non-alcoholic beverages (on average 0.5%), living, water, energy, gas and other type of petrol (0.3% on average) – lower prices of fuel oil and gas in gas containers and cisterns – and prices of furniture, equipment for households and regular servicing (0.1% on average). Varteks: Income drops, losses reduce In the first quarter of this year, Varteks Group registered a 25% income drop. During the same period losses reduced by HRK1.5 million, totalling HRK15.1 million at present. The income drop was influenced by the crisis in the country due to which people spend less on clothing and textile products. Varteks announced it would continue its business and financial restructuring until the end of the year. Đuro Đaković takes over Ingra Đuro Đaković Holding d.d. expressed interest in the takeover of Ingra d.d., and pursuant to the Corporate Takeovers Act informed Ingra accordingly, as well as the Zagreb Stock Exchange and the Croatian Agency for Finance Services Control. Although Ingra has been faced with serious problems during the past several years, due to which their account was frozen for two months, we decided to take on the risk since we have a vision and strength to help Ingra. We believe most creditors and stockholders of Ingra will recognise this and accept it as the only exit from Ingra’s difficult situation, said Vladimir Kovačević, Chairman of Đuro Đaković Holding.
Poor credits shou be packaged up In the Adria region, the biggest banking group UniCredit is followed by Intesa SanPaolo to last year. Triglav group takes the lead in insurance Drago Živković he leading banking group in the Adria region for 2012 (countries of exYugoslavia, Kosovo excluded) is UniCredit again, with total assets of €20.8 billion. They are followed by Intesa SanPaolo Group
A series of changes expected on the insurance market after December 21, 2012 and NLB Group which switched positions in relation to last year. The insurance sector is dominated by the Triglav Group with €921 million of realised premium. The second position is held by the Croatia Group, while the third one is occupied by Adriatic Slovenica, according to the survey conducted by Deloitte. The banking sector in the region is burdened by a growing share of poor credits in balance sheets, forcing the banks to restructure. In most cases, this means selling property, even though according to Deloitte this cannot be a stable foundation in the conditions of poor liquidity, but only a way to fill in the holes in debt servicing. The alternative, supported by Ivan Fabijančić, Director of Financial Consulting in Deloitte, is to merge a large number of poor placements into one package the banks would then offer specialised funds at a considerable discount, after which they could clear them from
the balance sheet. Some regional banking groups have already done that in Hungary and the Czech Republic, so Fabijančić believes certain Croatian banks could do something similar by the end of the year. He finds the regulators’ lack of support and non-transparent tax treatment as an obstacle to such method of balance cleaning. System stability Last year significant changes occurred in the regional banking system when the biggest Russian bank Sberbank took over eight members of the Volksbank Group. Fabijančić says it will be interesting to observe how the new ownership structure will reflect on the business and market approach of the Group’s members in this region. As for several years now the biggest bank in Croatia is Zagrebačka banka, member of the UniCredit Group. It is followed by Privredna banka Zagreb, member of Intesa Sanpaolo and Erste & Steiermärkische Bank. With assets exceeding €54 billion,
the Croatian banking market is the biggest market in the region, where big-sized banks account for over 81% of assets. There were no demands for additional capitalisation, especially from system banks, which is confirmed by Croatia’s stable banking system, stated Juraj Moravek, Audit Partner in Deloitte. In terms of average assets per capita, Slovenia takes the lead, where NLB is the biggest bank with assets worth €12.98 billion. It is followed by two banks, mainly in local ownership, Nova kreditna banka Maribor and Abanka Vipa. Additional capitalisation of big-sized banks is the biggest problem in Slovenia since it is still uncertain whether they are heading for the Spanish scenario because the causes and scope of the banking crisis are considerably different. Unisex insurance As the in the case of banks, changes happened in the insurance sector since the Adriatic Slovenica Group took over the third posi-
No interest rigging There is no doubt that something similar to the Libor rigging-scandal in Great Britain also happened on the market of the Adria region, says Ivan Fabijančić from Deloitte. However, there is one difference to keep in mind. In order to achieve the goals of the monetary policy in this region, the regulators use different tools. They do not use the mechanism of changing the interest rate as in the case of Great Britain and the USA. Local banks are active on the money market, where speculations, cleaning or liquidity speeding up are undoubtedly present, but within an acceptable professional and ethical limits. There is no interest rigging detrimental for the debtor, that is, interest rates are the result of the market demand, Fabijančić is convinced. As far as the announced selling of Croatia osiguranje, there will be interested buyers, although it is still early to speculate about the price.
www.privredni.hr Business & Finance Weekly
5 APIPHARMA IN SLAVONIA
New facility and 50 new jobs
uld and sold Group and NLB Group which changed positions in relation Top 15 banking groups in the Adria region in 2011 Rank
Total assets 20.826 16.022 15.966 10.569 10.532 10.330 8681 5764 4215 3414 2747 2722 2491 2185 1947 118.413
1 Unicredit Group 2 Intesa SanPaolo Group 3 NLB Group 4 Hypo Alpe Adria Group 5 RBA Group 6 Erste Group 7 Societe Generale group 8 NKBM Group 9 A Banka Vipa 10 Volksbank 11 OTP Group 12 Komercijalna banka 13 Banka Celje 14 Hrvatska poštanska banka 15 Gorenjska banka Total Top 15
Share in Top 15 17,6% 13,5% 13,5% 8,9% 8,9% 8,7% 7,3% 4,9% 3,6% 2,9% 2,3% 2,3% 2,1% 1,8% 1,6% 100,0%
Top 15 insurance groups in the Adria region in 2011 Rank
Insurance company (group)
1 Triglav grupa 2 Croatia grupa 3 Adriatic Slovenica 4 Agram grupa 5 Zavarovalnica Maribor 6 Vzajemna Health 7 Generali grupa 8 Kvarner Vienna Insurance Group 9 Dunav grupa 10 Allianz 11 Grawe grupa grupa 12 Sava RE 13 Uniqua grupa 14 Merkur grupa 15 DDOR Total Top 15 Total in the region
Gross written premium (EUR, 000) 920.931 426.958 333.155 313.852 263.244 249.075 243.848 178.296 160.199 140.581 130.743 124.500 104.433 102.113 96.745 3.788.673 4.160.440
Share in Share in Top 15 the region 24,3% 22,1% 11,3% 10,3% 8,8% 8,0% 8,3% 7,5% 6,9% 6,3% 6,6% 6,0% 6,4% 5,9% 4,7% 4,3% 4,2% 3,9% 3,7% 3,4% 3,5% 3,1% 3,3% 3,0% 2,8% 2,5% 2,7% 2,5% 2,6% 2,3% 100,0% 91,1%
tion from the Agram Group. In the insurance sector, Slovenia is the leading country, way ahead the rest in terms of gross premium share per capita. The Croatian market is second in terms of size and development, but the premium continues to decrease, although at a slower rate than in the past. A total of 25 insurance companies operate on the Croatian market, five of which account for less than two thirds of the market. The biggest is Croatia osiguranje (€375 million), and it is followed by Allianz (€136.85 million) and
Euroherc (€134.54 million). The most popular subject-matter on the EU insurance market is the so called unisex insurance or the repeal of a EU Directive provision according to which the insurers would be exempt from the banned unequal treatment of men and women or use of gender as an actuarial factor. The provision will be repealed on December 21, 2012, after which a series of changes are expected to occur on the market, mainly higher price of life insurance for women and pension insurance for men.
Apipharma, a private limited pharmaceutical company, was founded 38 years ago in Zagreb. It has recently opened a new facility in Našice. Pharmaceutical products, food supplements and other food and cosmetic products by Apipharma are made mainly of natural ingredients and are primarily based on bee products. Hence, the new facility has been constructed near ingredient resources. “The newlyconstructed facility will employ 50 staff from the Našice area, has all the required documentation and will be primarily exportoriented. Apipharma’s annual exports to the markets of Bosnia and Herzegovina, Kosovo, Albania, Montenegro, Kuwait, Hong Kong, Romania, Turkey, Azerbaijan and Iran are worth around €2 million”, stated Tomislav Lalić, owner and Board President of Apipharma. The new facility was
opened by the Croatian President Ivo Josipović, who expressed his utmost satisfaction at the fact that new jobs are being created irrespective of the crisis. “Investment in production is fundamental, as it is the only exit from arduous times. The new facility in the Našice-based industrial zone indicates optimism and sends a crucial message to the entire country. Creation of new jobs is imperative throughout Croatia, as well as fostering a positive entrepreneurial climate with less administrative hurdles for investors”, concluded Josipović. (S.S.)
Market swept by liberalisation
Public companies and state institutions signed contracts on electricity supply worth HRK378.4 million in 2011, whereas suppliers from the private sector such as Korlea and Partner Elektrik became serious competitors to HEP, according to the latest analysis conducted by Briefing, a provider of e-services and a company specialising in monitoring, analysis and consultancy in public procurement sector. HRK200.2 million was the total value of contracts based on over 1 year frame agreements. The largest electricity supplier is HEPOpskrba, accounting for 63% of electricity supply on the market irrespective of liberalisation and
due to its HRK238.4 million of total contract value. It is followed by Korlea which has signed contracts with the public sector worth over HRK91 million, Partner Elektrik with HRK37.9 million contracts and Energija 2 Sustavi with the contract value of nearly HRK7 million. The remaining work worth around HRK4 million was contracted by 4 companies belonging to the HEP Group. The largest customers through public procurement are RijekaZagreb Motorway, Fina and the City of Osijek. According to the Electronic Journal of Public Procurement, the largest single contract was a 4-year HRK31.4 million frame agreement between Rijeka-Zagreb Motorway and Korlea. It was followed by contracts between HEP-Opskrba and Fina worth HRK30.9 million and Korlea and the City of Osijek with HRK20 million of total contract value, which are both 4-year frame agreements. (J.F.)
6 WE PRESENT OPG KALIĆ, SLATINA
Privredni vjesnik Year V No 209
ARAPSKI CENTAR, ZAGREB
Co-operation erasing boundaries
Summer delicacies as family business Josip Kalić successfully continued his family tradition of growing melons and watermelons in Slavonia wenty years ago Josip Kalić moved from the village Hrtkovci in Srijem to Slatina in Slavonia as a result of the Homeland War. He was stripped of his property and still he turned yet again to agriculture which was his family tradition. In addition to crop farming, he decided to engage in growing watermelons which he traditionally used to do in Srijem. Nev-
Sugar Baby Watermelons – this year’s favourite summer food ertheless, the soil in Slavonian Podravina was not as fertile as the soil in Srijem. Hence, in mid1990’s he purchased some land in the south of Osijek and transferred his business onto a more fertile soil, similar to his previously owned property in Srijem. Currently, OPG Kalić farm holds a market stall in Osijek providing top quality fresh watermelons and melons. Josip Kalić produces up to two tonnes of fresh watermelons and melons of some ten types daily on 2 hectares of land. Sugar Baby Watermelons are this year’s favourite food. In
addition, there are local Black Watermelons, Greek and Chinese watermelons and the type of watermelon locally known as “the stars and the moon”. With or without seeds? I used to sell watermelons without seeds during the past years, yet the demand for them is currently weak, due to significantly higher prices. The prices of my watermelons exceed those in the retail centres, yet their quality is also incomparable. In addition, I primarily provide freshly picked melons and watermelons”, explained Kalić. According to him, growing melons and watermelons is extremely demanding, due to substantial investment and immense work and commitment where human assets cannot be fully replaced by machinery. “We are currently facing a dry season and hence I anticipate this year’s yields will not exceed some 20 tonnes per hectare. Nevertheless, my watermelons are top quality and they are full of malt”, explained the 61-year-old Kalić who is planning to stay in this business as long as possible. He and his wife have managed to raise four children and have never had to take a bank loan. (S.S.)
The Zagreb-based Arabic Centre is a bridge to the Arab world, the Arabic language and the culture he Zagreb-based Arabic Centre was founded in July 2011 to build a bridge of co-operation and foster communication between Croatia and the Arab world and enhance the development of Arab culture and the Arabic language in Croatia and also between professionals. In addition, it organises and provides a wide range of training programmes, professional consultancy services, research, public information releases and engages in promotion of co-operation with other associations and companies. It currently employs two full-time staff, three translators and it also outsources several professionals for public relations. “The Zagreb-based Arabic Centre is intended for those who would like to improve their knowledge of and skills in the Arabic language. It provides deep insight into the Arab world, the Arabic language, the customs and traditions, as well as business opportunities in the Arab countries within the current business expansion of a wide range of Croatian companies towards the Arab countries”, explained Jasna Alajbegović, Manager at Arabic Centre and President at the Croatian-Arab Friendship Society, a unique centre of its kind in the region.
Multilingualism imperative The Arabic language course students receive a certificate upon completion. A remarkable 85%
of students who have completed these courses were given preference by employers operating with the Arab countries. “Knowledge of a Semitic language is a huge advantage for young people looking for their first employment, since they are able to work abroad and multilingualism is currently imperative”, emphasised Jasna Alajbegović.
We would like to encourage business co-operation between Croatia and the Arab world, stated Jasna Alajbegović She highlighted the importance of fostering co-operation between Croatia and the Arab countries and the need to encourage Croatian entrepreneurs to expand their business to the Arab world. Hence, the Croatian-Arab Friendship Society (HAKUC), a non-profit organisation, will start operating in September 2012. HAKUC will promote and affirm co-operation with the Arab countries and create room and a climate of co-operation with the Arab countries and NGOs. In addition, the centre will bring together local and international scientific institutions, associations, foundations and Chambers of Economy. (S.P.)
www.privredni.hr Business & Finance Weekly
CROATIAN FOREIGN CURRENCY MARKET Currency
AUD CAD JPY CHF GBP USD EUR Source: HNB
Kuna exchange mid-rate
6,380856 6,078951 7,798014 6,249062 9,620783 6,129605 7,503249
WEEK JULY 21, 2012
FISCAL POLICY IN CROATIA
OPPORTUNITY TO CREATE BALANCE
If budget estimates are realised, fiscal deficit might come close to zero, that is, they will almost be balanced, says the Director of the Croatian Banks Association Zoran Bohaček Boris Odorčić t is a rare moment a country gets an opportunity to completely overturn a negative fiscal trend that lasted for years. And Croatia has that opportunity. Zoran Bohaček, Director of the Croatian Banks Association, points out that a step in the right direction has been made regarding this issue. Fiscal adjustment has started as well as mild decrease of primary deficit or total deficit minus interests. The goal is to decrease primary deficit even further in order to balance it since that would lead to the reduction of total public debt. If budget estimates are realised, this year’s fiscal deficit will be even lower; it will almost reach zero, that is, it will almost be balanced, Bohaček explains. In order to start reducing the public debt, primary surplus of 1.2% should be realised, Bohaček points out. Doors of opportunity
In the new analysis of the Croatian Banks Association Fiscal Policy in Croatia and the EU: The direction is good, but the step is too small it is mentioned the government spent too much time ignoring the economists’ warning about the unsustainable direction of fiscal policy. The result did not
Bankers warn the government spent too much time ignoring the economists’ warning about the unsustainable direction of fiscal policy become visible until 2010 and 2011 when most western countries, especially new Europe (Estonia, Lithuania, Latvia, Poland, the Czech Republic, Slovakia, Slovenia, Hungary, Bulgaria and Romania) entered the phase of fiscal harmonisation. During that
period Croatia was seen as a rare country with an unrecognised fiscal responsibility and a deficit that failed to harmonise. However, the trends started to change when the Fiscal Responsibility Act entered into force and when the government continued with harmonisation in 2012. And all this directly after the investment rating was lost. The months ahead of us, when we will have a better idea of this year’s budget and plan for 2013 (2013-2015 period), hold the key that could open or close the doors of fiscal sustainability. These are the doors that ultimately lead to economic growth. By strongly persisting on implementing the Fiscal Responsibility Act, financing costs would gradually reduce. This would happen in the best possible political moment, parallel to Croatia’s EU accession, as mentioned in the analysis prepared for HUB by Arhivanalitika.
Year as a foundation Director of HUB Zoran Bohaček anticipates average Croatian GDP fall of 1.5%, and his opinion is shared by the economists of six biggest Croatian banks in the July edition of HUB Izgledi (HUB Outlook). If some bigger investment plans realise, this fall could be even weaker, Bohaček says. He also pointed out this year should serve as a foundation so that GDP could rise from 2013, but a little bit over the rate of 0.5% or 1%. The problem with investment is not in the money since banks are liquid. The problem is, as in other EU countries, there are not enough of good projects. The problem is also the investors’ fear of the present economic uncertainty, forcing them to postpone their investment and wait for better times, concludes Bohaček.
Privredni Pr P rivre ivre iv red dn ni vjesn vjesnik Year No 209 Yeeaarr V N Y o 20
( 90% of yield
exported to Italy, Belgium, the Netherlands and England
EXOTIC KING, THE ONLY CROATIAN PRODUCER OF EXOTIC FRUIT RUIT AND VEGETABLES
Exotic fruit from Donja Bistra for the EU market Cultures, so far unfamiliar to this area, proved ed to be quite resistant and extremely adapted to our climate, and tterms er of price their yield is high. Owing to its vicinity and duty free regulations, Exotic King is competitive in te and quality on the European market Andrea Šalinović hen Ivan Šulog as a student decided to invest all his money into purchasing seeds of exotic fruit like kiwano, his environment was not supportive. Everyone laughed at me, he remembers. I decided to
All our efforts are directed towards finding an international business partner, Ivan Šulog points out plant something in the middle of the corn field no one has ever seen before. I grew it on a surface of 1 hectare and produced yield of almost 50 tonnes. It took me days to transport the fruit home, and then after a few months I transported it back to the field because it spoiled. This continued for a couple of years until we mastered the technique of preservation, Šulog says. He added it all started by accident, when he was waiting for an exam at the university and spotted a text about the possibility of growing kiwano in Croatia. Today, Šulog d.o.o. is the only Croatian producer of exotic fruit and vegetables. Besides kiwano, he grows several varieties of butternut squash, hokkaido, crown prince, futssu and kabucho, seven varieties of sweet potato, jeju melon, feijoa, yellow water-
melon, habanero, o, jalapenos, maracu-ja, tamarillo, chillii pepper, goji berries,, horseradish, turnip,, carob, and soon hee intends to add indian an bananas and sweettberry honeysuckle. e. The trade mark Exotic otic King, under which they produce, has become me one of the best-known n on the market. Expanding to the European market When the production developed, they decided to export. Today they export over 90% to Italy, Belgium, the Netherlands and England, and they plan to expand on the markets of Germany, Austria and Russia. Butternut squash accounts for the highest export share, up to 100 tonnes a month. At the very beginning kiwano was the main product, but today we are able to produce and deliver more varieties of exotic produce to a very demanding market. The competition is fierce considering the production of exotic fruit and vegetables in their natural habitats and the fact that the biggest exporters from the countries or origin stand behind similar fruit. The difference in the quality of our products and products from the countries of origin is obvious: due to the vicinity of the production hall, quality losses due to transport are reduced to a minimum in our case, Ivan Šulog explains. Lower transport costs are ad-
ditional benefit as well as short-term storage. Šulog believes he will succeed on the European market since they export long-life products on the EU market within seven to ten days after the harvest which lasts from August to November. Afterwards, the goods are stored until the middle of February when the price rises up to 50%, and the losses due to deterioration and dehydration account for only a few per mille. EUR.1 for competitiveness Owing to the production in Europe, the Croatian product is not subject to additional duty charges, actually it owns EUR.1 certificate, which is a very important factor of competitiveness. Cultures, so far unfamiliar to this area, proved to be quite resistant and extremely adapted to our climate, and the yield is high per unit surface, producing extremely high-quality fruit, Šulog says. The company employs three additional workers, and since they plan to expand, the number could probably climb up to eight. A lot of time and effort has been invested in this business success even before Exotic King became recognisable in Croatia
a n d abroad since they personally ddeveloped the technology growing by method of trial or of growi error. H However, effort was not enough in the case of some varieties, for example Mangosteen, a tropical plant that grows 30 metres high. They grow various exotic fruit on around 100 hectares, and they cooperate with around 50 subcontractors. It is difficult to discuss their annual capacity since every fruit has different yields. In Croatia they distribute their products in local and foreign supermarkets and a number of smaller shops. All our efforts are directed towards finding an international business partner primarily since we want to export to the EU market. We are prepared to adapt to new conditions in short period of time. Our present experience in the production and our technology make us feel confident about our future development, Šulog says. What are his favourite products? We mostly eat kiwano since it contains a high level of vitamin C and its flavour is very refreshing especially during the summer. He also recommends sweetberry honeysuckle, Indian bananas, Maca turnip and strawberry guavas.