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Analysts say Stojić predicts 1.5% deficit, Dolenec anticipates a 0.5% surplus, while Jović anticipates a mild 0.8% growth in GDP

Interview: Helena Budiša Every rise in direct taxation discourages investors forcing them to leave Croatia for countries with lower taxes

Banking For the first time a negative rate of private loans (-2%) has been seen at a yearly level

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Croatian Business & Finance Weekly Established in 1953 Monday / 1st October / 2012 Year V / No 0215 www.privredni.hr

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EXPORTERS’ CLUB MEMBERS MEETING WITH FINANCE MINISTER SLAVKO LINIĆ

Minister admitted tax load is a burden to Croatian exporters There will be no changes in state policy next year; tax will not increase but the economy will be additionally relieved by lower compensations of regulatory bodies Drago Živković dministrative obstacles and tax burden are the two heaviest weights on the shoulders of Croatian exporters. Finance Minister, Slavko Linić, so admitted during a meeting with members of the Exporters’ Club, founder of Lider magazine. Thus, the Government wants to help exporters in two ways. The first is to prevent further deterioration in terms of exports to CEFTA countries after Croatian EU accession. The main role will be played here by the Foreign Ministry, and Linić claims it is becoming more cer-

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Solving debts The Financial Business Act should introduce great changes with which the Government sends a clear message: it is determined to solve the problem of illiquidity. The total value of unpaid invoices now stands at €5.9 billion plus €2 billion in interest, of which the value of unsettled debts over 360 days overdue is €4.86 billion. Linić intends to solve the debt of 57,000 companies by the end of the first quarter of 2013, transforming tax debt into subscribed capital.

tain that Croatia will manage to transfer its favourable conditions of exports to CEFTA, to the EU. If this happens, Croatia could increase her exports to CEFTA, which could benefit total trade balance parallel to the opening of the EU market. The second approach is to make local exporters as competitive as possible through measures of internal economic policy. Within this context, Linić repeated he does not understand those who claim this Government made it difficult to operate in any way. According to Linić, the situation is completely the opposite. The economy was unburdened as a result of decreased healthcare contributions, monument tax and compensation for forests and water, while the price of electricity for business did not increase. The price of gas is higher, but Linić attributes this to the INA monopoly, and hopes the price will drop by the end of the year when the market becomes more open. The only new tax is the dividend tax, but it does not affect the economy, only owners withdrawing money from the company, Linić says. Fiscal consolidation Linić sees cancelling of tax relief on business cars and representation as necessary cuts, since the

Government believes everyone must save to enhance production competitiveness. On the other hand, the Government had done much in terms of solving the lack of favourable financing sourc-

Minister Linić announced property tax once again, but without concrete figures es. Hrvatska poštanska banka (Croatian Postal Bank – HPB) and the Croatian Bank for Reconstruction and Development (HBOR) have expanded their services for financing exporters; repayment deadlines have been

extended, and in co-operation with the Croatian National Bank (HNB) and other banks, €1.1 billion was made available for fiscal consolidation. During this process the state will take on 50% of the risk through HBOR, Linić pointed out. There will be no changes in state policy next year; tax will not increase, but the economy will be additionally encouraged with lower compensation of regulatory bodies. Minister Linić announced the property tax once again, but without concrete figures, confirming only it will substitute the utility fee; that it will be the income of local administration, and that the tax on property in use will be much higher than the tax on property not in use.


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Privredni vjesnik Year V No 215

Viljem Pšeničny, Dean, Doba Faculty

On the fringe of Europe

Global trend towards online degree programmes in Croatia

Croatia is joining a EU different from that with which she negotiated

e are continuously faced with a wide range of choices. We are witnessing a race against time globally, resulting in the sacrifice of our personal development where education and a degree qualification have a fundamental role. The acclaimed philosopher, Francis Bacon, once stated: “Knowledge is power”. You never know when a new business opportunity, leading to higher earnings or career advancement, will present itself. Education allows you a critical change for your business. We launched the online degree programme at the Doba Faculty 12 years ago, aiming to build degree programmes tailored to meet student requirements without the need for regular attendance at lectures. Doba Faculty is the only Faculty in South-East Europe currently providing online degree programmes through modern pedagogical practices such as constructivism, teamwork, case studies and the development of competencies. The entire online

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

degree programme is administered through ‘Blackboard’, a virtual classroom used by over 2,000 faculties worldwide. We are introducing the global trend of online degree programmes into Croatia. Online degree programmes have a variety of advantages compared with more orthodox studies, with flexibility being one of the fundamental benefits. Consequently, 34% of students at Doba faculty live abroad and regularly meet all academic obligations in their mother tongue. In addition, online degree programmes are intended for mothers who are often faced with the challenge of finding the balance between their personal and work commitments, as well as sportspeople and businessmen whose work regularly includes business trips.

Online degree studies administered through Blackboard, a virtual classroom is used by over 2,000 faculties worldwide During the academic year 20122013 Doba Faculty will provide online degree programmes for Croatian students, as well as obtaining an online masters degree recognised throughout Europe. The Masters programme in International Business in Croatian is primarily intended for those who are time-poor and yet are striving for development and career advancement.

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 Lučana Banek lucanab@gmail.com Mirjana Cibulka mirjana.cibulka@gmail.com

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

INTERNATIONAL OPERATIONS Ray Fletcher fletcher@privredni.hr

Money markets have become far more nationalistic compared with the pre-crisis period

Drago Živković ollowing Croatian EU accession overall incentives for small and mediumsized enterprises will certainly double, from €13.5 million, as planned for 2013, to between €30 million and €40 million in 2014, as announced by Gordan Maras, Minister of Entrepreneurship and Crafts at the EUforija conference. Nevertheless, small and mediumsized companies are an exception within the current recession, having seen 1.3% growth during the first six months, according to Maras who forecasted 3% growth in 2013. In addition, SME’s created 13,000 more jobs over last year, with investment rising by 5%.

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Doctors and nurses The impact of Croatian EU accession is currently uncertain. There are uncertainties concerning the regulation of cross-border services (particularly those provided by doctors and nurses, as well as those by architects), stated Lidija Švaljek, Director of the Business Information Centre at the Croatian Chamber of Economy. If there is a significant braindrain of Croatian doctors and nurses, their jobs could be taken by colleagues from EU member states having lower salaries such as Romania or Bulgaria. There are ample variations amongst banking regulations in

the EU and there is a long way before the unification of those regulations, according to AndreMarc Prudent, Board President of Societe General – Splitska Bank. Banks will need to increasingly rely on national savings, whilst simultaneously decreasing their reliance on foreign loans. Nevertheless, attracting national savings could adversely affect the life insurance market, opined Prudent. Entrepreneurs will tend to look increasingly towards alternative financing and consequently banks need to adapt by expanding the range of their services. Changes in banking market Preservation of the single European currency will require a broad range of reforms within the financial system that will result in significant changes in banking markets. Money markets have become far more nationalistic compared with the pre-crisis period, which has been confirmed by a substantially lower number of cross-border loans amongst banks within the EU, as stated by Vedran Šošić, Deputy Governor of the Croatian National Bank. Increased local market orientation threatens common monetary mechanisms and hence negotiations on the fiscal pact are in progress in order to limit fiscal sovereignty of single states. Šošić concluded that Croatia is joining a European Union that is wholly different from that with whom she negotiated.


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INTERVIEW: Helena Budiša, owner and director, UHY HB-Ekonom, Split

Not the right time to introduce new taxes Croatia and its taxes have long ceased to be competitive with neighbouring countries and soon with all European countries Jozo Vrdoljak rivredni vjesnik talked with Helena Budiša, Director of UHY HBEkonom, certified auditor and EU Ambassador of Female Entrepreneurship, about the influences of tax policy on entrepreneurs. UHY HB-Ekonom is one of two Croatian audit companies that is a member of the international organisation of audit companies UHY International from London.

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What will the introduction of fiscal treasuries bring? We hope the introduction of fiscal treasuries will legalise a substantial share of traffic from the grey zone, distributing the tax burden in a more even way. However, many problems will arise during the implementation process. Above all, all those bounded by this aspect will have considerable expenses when they introduce fiscal treasuries. These costs will be devastating for small hospitality businesses and it is likely that many micro businesses will be forced to shut down. It would be good if the state would cofinance a share of the expense. This is what Slovenia did.

Is now the right time to introduce property tax? The implementation of a property tax on the estimated property value is a very expensive and complex process that costs more than it will be able to collect. I think this is a bad time for a property tax since land registries are not organised, the majority of construction facilities not registered, and income out of which the public should pay this new tax is extremely low. Croatia already has five different property taxes – tax on vacation homes, turnover tax on property

It is crystal clear that every rise in direct taxation discourages investors forcing them to leave Croatia for countries with lower taxes in instances of inheritance and endowment, turnover tax on buying and selling property, tax on income acquired from leasing, and tax on income acquired from selling property. All these taxes comprise only 0.8% of all taxes

Are we competitive when it comes to tax? Croatia and its tax system have long ceased to be competitive with neighbouring countries, and soon with all European countries. VAT was increased to 25%, profit tax of 20%

collected in Croatia. Besides the mentioned property taxes, utility fee is also paid, which is the income of local administrations. How will this affect offer and demand? It will lead to an even larger offer of property on an already saturated market and sale at extremely low prices. This tax can be introduced when the situation changes, all property legalised and public standards increase, as in France for example, where property estimated over €1.3

was increased by the amount of the dividend tax of 12% plus surtax. Both taxes are higher than in most developed EU countries. Croatia has a higher profit tax than countries that have recently joined the EU (Bulgaria at 10% and Romania at 16%), and it is also higher than the rate of EU members in our direct vicinity: Hungary, the Czech Republic and Slovakia (all 19%), Slovenia with 20%. However, it is significantly higher than in Serbia and Bosnia and Herzegovina. It is crystal clear that every rise in direct taxation, such as profit tax, discourages investors, forcing them to leave Croatia for co-

million is subject to 0.55%-1.8% tax, or in Greece (€4 per square metre). The fact is that only a few European countries collect a general property tax. I think the Government should make a thorough financial analysis before introducing this complex tax which will be expensive to collect and will not make any significant profit. It would be cheaper to organise the market for property leasing by associating data of the Tax Administration and the Ministry of Interior.

untries with lower taxes, such as Serbia or Bulgaria. We are now in a situation where we have to look at Serbia as a positive example. Last year, it attracted more foreign direct investment than Croatia and Slovenia together. What is even more fascinating is that they concern industry, greenfield investment and production for export. The Government should also consider cancelling the dividend tax. This tax discriminates Croatian entrepreneurs in relation to EU investors since Croatians have to pay, while the investors from the EU will not have to pay it when Croatia joins the EU.


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Privredni vjesnik Year V No 215

“ Budget income grew, reflecting better tax collection and together with subsidies and capital expenditure.”

OUTLOOK FROM ECONOMIC ANALYSTS ON GDP FALL THIS YE JGL increasing staff numbers The Rijeka-based Jadran-Galenski Laboratorij (JGL) has employed 67 additional staff in Croatia and 93 in JGL representative offices in Russia, Kazakhstan, Ukraine, Slovenia, Macedonia, Kosovo, Bosnia and Herzegovina and in the USA irrespective of the recession. The number of employees in the company now stands at 581 (of which 335 in Croatia), which is 10% up in relation to 2011 and the number of the newly employed is expected to reach 14% by the end of the year. The average age of JGL employees is 36. Pevec revenue in 2012 almost €94.6 million During the first eight months in 2012, Pevec, which currently employs 884 staff, generated €58.9 million in revenue and expects to generate around €94.6 million by the end of the year. This year, revenue has risen by 10% compared with 2011. The shareholder meeting is scheduled on 31st October, with the majority shareholder being the Ministry of Finance with 21.57% ownership. Vessel delivery

The Pula-based shipyard Uljanik has constructed and delivered a vessel named Balaken for the transport of railway carriages for an Azerbaijan shipping company. It is the second of two contracted vessels for the Azerbaijan State Caspian Shipping Company. Carrying capacity of the vessel is 5,000 tonnes and is intended for the transport of railway carriages across the Caspian Sea. Its length is 154.8 metres and a beam of 17.5 metres. It will be powered by two MAN B&W 2,000 kilowatt-engines manufactured by Uljanik, reaching a speed of 14.5 knots.

Not even tourism can increase GD

Economists are not optimistic for 2013. The analysis of Hrvoje Stojić came in with a 1.5 Ivana Jović anticipates a mild 0.8% growth in GDP Igor Vukić roatia will finish this year with a fall in GDP, according to analysts of all major banks. Hrvoje Stojić from Hypo banka predicts a 2% fall; Hrvoje Dolenec from Zagrebačka banka corrected his previous outlook to -1.8%, while Ivana Jović from Privredna banka anticipates GDP to decrease 1.7% by end 2012. Stojić is not optimistic even for 2013. His analysis came in with a 1.5% deficit. Hrvoje Dolenec anticipates a surplus of 0.5%, while Privredna banka predicts a mild 0.8% GDP growth. Stojić, whose conservative (or pessimistic) outlooks for the past three or four crisis years proved to be right, anticipates a mild 0.3% growth by end 2013, with stronger recovery in 2014 or 2015. Stojić bases his analysis on decreased investment, aggravating external surroundings and negative influence brought on by the process of organising public finances. He points out that fiscal consolidation is more based on the efforts to increase income than to rationalise social rights. Restructuring of state owned companies is slow, unemployment is growing and income reduction is effecting personal spending.

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Follow the German example However, fiscal adjustment and implementation of structural reforms could yield good results in the medium period. In the 90’s, Germany was considered the pa-

tient of Europe; however it slowly implemented reforms, especially on the labour market. Now, during the crisis, this has proved to be an advantage. Croatia could

Stojić does not anticipate recovery in the economy follow this trend, according to Stojić, who has noticed a change in economic policy concerning some government measures. The Representativeness Act will, for example, will limit the role of unions in making macroeconomic decisions. The preconditions for the liberalisation of the labour market are being created and there are efforts to speed up the restructuring of public companies. Tourism should be additionally boosted by the decreased VAT rate at beginning of next year. The Government has already started to implement a certain internal devaluation (mini tax reform, announced faster restructuring of insolvent companies), which represents support for economic recovery. Despite everything, Stojić does

not anticipate any recovery in the economy. Hrvoje Dolenec from Zagrebačka banka points out that Croatia must not ignore the fact that the Syrian crisis had a negative impact on GDP, due to which the Croatian oil company INA lost a significant share of profits. Shipbuilding is undergoing the privatisation process, which is why results are poorer, as expected. It is also not easy to catch up with the delay in the work of Željezara Sisak and Dioki, a company that achieved considerable exports. Dolenec is more optimistic and anticipates recovery of economic activity through tourism. He also welcomes the systematisation of budget income. The measures of fiscal consolidation during the first half-year decreased the budget deficit. Income grew, reflecting better tax collection and a higher VAT rate. Expenditure decreased with a fall in subsidies and capital expenditure, Dolenec notices. After a significant recovery in shipbuilding, more attention should be paid to subsidising agriculture and railways, he added.


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higher VAT rate. Expenditure decreased

OVER 56.000 MICRO BUSINESSES REGISTERED THIS YEAR

Hrvoje Dolenec, Zagrebačka banka

EAR

m DP

Micro businesses attract banks interest

Credit for local micro businesses has not been popular; % deficit. Hrvoje Dolenec anticipates a 0.5% surplus, while however the majority of the banks will significantly increase credit lines for such companies in future

The budget for 2013 will be an important test for a positive economic situation during the next two years since it must include decreasing expenditure and expanding structural reforms. Mild optimism nevertheless Fitch’s credit rating had a positive effect, offering an opportunity to meet the requirements of the demanding programme of reforms, Dolenec concludes.

Privredna banka is mildly optimistic, anticipating slight signs of recovery during the second half of 2013. Economist Ivana Jović anticipates the announced investment projects should give the first results during this period as well as the stabilisation of negative movements on the labour market which would partly stop decreasing personal spending. However, the expressed risks, for example, the slow recovery of exports, could deteriorate the situation. Italy, for example, will probably register another fall in GDP. Negative influence could also be caused by the change in the customs regime with CEFTA countries, mainly B&H and Serbia. Therefore, Privredna banka’s outlook contains for now a significant dose of uncertainty. Growth can also be lower; however we do not exclude the possibility of pleasant surprises.

Šantić: GDP growth Considering inflation of 4% and an uncommon employment fall after the tourism season as well as a 12% decrease in economic activity in relation to the pre-crisis period (2008), tourism will not be enough to bring any considerable recovery in GDP. For this reason and since the international environment, which shows signs of recovery, but not a permanent solution, Croatia will finish the year with a 2% fall in GDP, Head Economist from Société Générale-Splitska banka, Zdeslav Šantić, estimates. The following year will be slightly better. Šantić anticipates 0.5% GDP growth during the first half of the year and Croatian EU accession should additionally boost recovery. However, this does not mean exports and the number of foreign investors will automatically increase, pointed out Šantić. Furthermore, Croatia is also expected to cancel zero VAT rates it now holds on certain products, which could lead to higher prices and less spending. Unemployment is also unlikely to fall this year and next. It would take GDP growth of 3% for something like that to happen. Therefore, the unemployment rate will be above 18.5% up to 2014.

Sanja Plješa Micro businesses in Croatia are an interesting group and an underestimated market segment, while their share of GDP totals 34%. Furthermore, these companies employ almost 45% of those employed. This proves this segment offers employees attractive business opportunities, but only if approached in the right way, Financial Consultant at Roland Berger, Hendrik Bremer said at a recent presentation of the study Retail Banking CEE – Exploiting the Potential of the Micro Business Segment. The report was put to-

Micro businesses are self-employed and companies with up to 10 employees (90% share in Croatia) gether by experts from Roland Berger and Efma. Efma is a nonprofit association which was founded by banks and insurance companies in 1971, and specialises in the retail segment of financial marketing and distribution. Micro businesses mostly cover self-employed and companies with up to 10 employees (90% of all companies in Croatia). Credit for local micro businesses has not been popular until now, primarily since the public does not perceive it as cost-effective due to high operating costs and risky loans. However, these companies will probably get a boost since most

banks in Croatia anticipate a high uptake in credit lines for these companies, as stated during the report’s presentation. Furthermore, the majority of banks in the region plan to increase their lending portfolio, and two-thirds of them predict this type of lending will continue grow. Specificity – lending in the sector of tourism and architecture The research revealed that the distribution of such lending varies significantly from country to country. Therefore, there is less interest in fragmented and more risky lending to micro businesses than in countries in which the corporative segment still offers substantial potential of meeting bank goals. The report showed Croatia is keeping up with European countries in the field of micro businesses. Over 56,000 micro businesses were registered in Croatia this year. Banks will soon start to highlight client segmentation with the distribution of services to mass and premium client groups; risk management adapted to specific needs and situations of each individual client, and the introduction of cross-segment offers, which will merge the services of the private, and business banking. This will decrease operating costs considerably and increase company efficiency. The report also highlights that Croatia distinguishes itself from other regional countries regarding the level in the production sector as well as dentists in the field of micro lending, while the specificity of the country concerns lending to small-sized enterprises in tourism and architecture.


6 WE PRESENT OPG NOVOSEL, VELIŠKOVCI-GAT

Privredni vjesnik Year V No 215

CALIFORNIA TRADE, SPLIT

Orders welcome California Trade has some 1,800 customers in Croatia and abroad and co-operates with 50 suppliers

One family – three activities 600 overnight stays per year mainly due to excellent quality and huge quantities of home-made food here is a tendency to suggest that rural life offers little potential, irrespective of a wide range of examples in Slavonia and Baranja, such as the OPG Novosel farm, showing the reverse. The farm is located in the Slavonian village of Gat. The farm attracted considerable attention last summer when it won multiple first prizes as the best kulen sausage producer in many major competitions: three gold and one silver medal at four local competitions in kulen production called kulenijada. Kulen sausage production requires deep knowledge and experience and it is only one of several activities undertaken by the family. “The business was started by my father several decades ago for crop farming but we subsequently expanded into cattle farming. Over the past few decades, we have specialised in pig farming and we currently rank as the highest ‘E’ class according to EU standards”, explained Slađan Novosel, adding that the family produces most of the livestock feed for its own requirements over some 30 hectares.

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Food as the main tourist attraction The idea behind Novosel rural tourism originated through demanding contacts with a large number of people throughout Croatia, Slovenia, Hungary and other countries in the region. “It seemed inconceivable that anyone would opt for a holiday in

a tiny Slavonian village. Nevertheless, top quality home-made food, comfortable accommodation, the close proximity of two rivers, as well as a forest, oppor-

OPG Novosel farm produces around 500 kulen sausages annually primarily for visitors

tunities for hunting and cycling, the vicinity of Đakovo, Valpovo, Osijek and the Kopački Rit Nature Park have all contributed to great success for our additional activity“, explained Slađan Novosel. He also added that his wife provides ample support and assistance in this area. Hence, in 2007 they began their ambitious rural tourism activity. They have had some 600 overnight stays per year, whilst excellent quality and huge quantities of home-made food are the main tourist attraction for visitors. Consequently, OPG Novosel farm, the mostawarded kulen sausage producer, provides around 500 kulen sausages annually, primarily intended for visitors. (S.S.)

alifornia Trade is a typical family business, employing five full-time staff. The company was founded in 1992 by the Nikolić family, who had previously had wide work experience in Jadrantekstil and Dalmacijavino, both large and once powerful companies. As these companies lost considerable market share and were increasingly affected by the crisis, the Nikolićs decided to venture into entrepreneurship. They signed a contract of co-operation with the Vetropack Straža company, a producer of glass packaging, and began distributing their products. During its start-up California Trade had small orders for several hundred bottles, and currently its annual sales total dozens of millions. “We distribute a wide range of glass packaging, equipment and packaging for the production of wine, edible oil, the beer industry, and spirit production. We also provide a wide range of olive oils, wines, processed fish products, as well as decorative souvenir bottles. We have an exclusive contract with Vetropack Straža, as well as an exclusive product range of wine corks from Portugal, Spain and Sardinia”, pointed out Rudolf Nikolić, Director of California Trade.

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24/7 availability by mobile “We used to operate solely in Dalmatia, but now we also have partners abroad. Our first expansion partners were on the Pelješac

peninsula. They were wine producers and were interested in glass packaging, corks and bottle caps and eventually we started selling their wines through stores and restaurants. We currently provide the best wines from Pelješac, Hvar, Korčula, Imotski and throughout Dalmatia, as well as wines from other Croatian regions. In addition, we provide the best olive oils, salted anchovies, canned and marinated seafood, as well as fish fillets”, he added. Nikolić emphasised that the company has terminated its co-operation with large companies, due to annual losses that once totalled around €67,500, which was a significant loss in relation to annual turnover of around €3.38 million.

Co-operation with large companies resulted in annual losses of around €67,500

California Trade currently has around 1,800 customers in Croatia and abroad and co-operates with 50 suppliers. “My mobile phone is always on and orders can be placed even at midnight, providing the customer is a regular payer”, stated Nikolić. (J.V.)


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CROATIAN FOREIGN CURRENCY MARKET Currency

AUD CAD JPY CHF GBP USD EUR Source: HNB

EUR

Kuna exchange mid-rate

7.46

6,018052 5,878439 7,413420 6,158851 9,339032 5,757145 7,449746

USD

5.80

25.9.

26.9.

27.9.

28.9.

6.16

7.44

5.78

6.15

7.42

5.76

6.14

7.40

5.74

6.13

7.38

5.72

6.12

7.36 24.9.

WEEK SEPTEMBER 29, 2012

CHF

5.70 24.9.

25.9.

26.9.

27.9.

28.9.

6.11 24.9.

25.9.

26.9.

27.9.

28.9.

::: news

CROATIAN BANKS ASSOCIATION ANALYSIS

Negative trends return to banks In line with slightly weaker economic movements in the second quarter of this year, the demand for loans decreased together with bank activity and profitability

Atlantic to refinance €300 million debt Atlantic Group started the process of negotiating the refinancing of their long-term claims taken over as part of financing the acquisition of Droga Kolinska, to restructure the balance and improve financing terms. The planned refinancing of the long-term claims would total a maximum of €300 million and would cover the Group claims in Croatia, Slovenia and Serbia. Agrokor to issue new bonds Agrokor intends to issue bonds with senior rights of €475 million to refinance existing debt. BNP Paribas, JP Morgan and Uncredit have been selected to arrange the issue. The bonds will be have a life of seven years, or by 2020, in euro or American dollars, or in a combination of both currencies. The planned total amount may be increased, depending on investor interest or the issuer’s decision.

he goal of the Financial Business and Pre-Bankruptcy Settlement Act, the Government wants to come into force from 1st October, is excellent, Director of the Croatian Banks Association, Zoran Bohaček, stated during the presentation of the HUB report on banks in 2010 and 2011, held recently. He added this Act would help identify whether a company should file for bankruptcy or whether it has a chance of recovery. Furthermore, this procedure will increase payment of creditors in bankruptcy proceedings, since before it was possible to collect only around 30% of the claims. The pre-bankruptcy deal could increase this collection to 70%. Bohaček also highlighted this would not be a forced settlement, but a business settlement. With the Act, the Government

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wants to reduce growing illiquidity and prescribe payment deadlines that cannot exceed 30 or 60 days (depending on the payer), and offers eight settlement options. The banks will certainly take part in the settlement, but this does not mean they will take part in the ownership structure, Bohaček said. He pointed out that the Croatian banking system currently has the highest rate of capital adequacy in Europe and can be regarded extremely safe. It will continue to be safe should the economic crisis continue. Increase demand for loans However, in line with slightly weaker economic movements in the second quarter of this year, the demand for loans decreased as well as bank activity and profita-

bility in relation to the same period of last year. As a consequence of this, bank profit and rate of return is yet again lower than the yield on the long-dated kuna state bond. At the moment there is not much manoeuvring room for a solution. Cost-efficiency increases are limited and time consuming, and since loan provisions still absorb 40-50% of nett results before provisions are made, it is clear the next change will happen only when this rate decreases significantly. However, there are no signs this decrease is likely to happen soon, he highlighted. Bohaček concluded that the key to recovery is higher demand for loans and those factors that the banks cannot influence; as they are structural reforms, solution to the crisis, EU accession and decreased risk premiums. (J.F.)

Erste recommends HT stock

In an analysis of the telecommunication sector in the region, Erste banka highlighted Turk Telecom, Hrvatski telekom and the Polish TPSA as their choice. Their recommendation for HT stocks was changed from “hold” to “accumulate”. However, they lowered the target price from €35 to €31.60 at the same time. The decision to change the recommendation is based on an estimate according to which the stock achieves an attractive yield of 9% - 11%, the best margin compared with similar companies as well as strong and growing monetary position, where cash reflects over 30% of total assets.


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Increased tourism revenue Total financial revenue from tourism generated through activities in accommodation, food preparation and catering, as well as through travel agencies and tour operators during the first seven months in 2012 totalled €1.67 billion, 3.5% up over the same period last year, according to the data provided by the Tax Administration. Across various categories, the highest revenue was generated by hotels and similar accommodation facilities that generated €0.7 billion revenue, 8.7% up over 2011. During the first seven months in 2012 tour operators generated revenue growth of 17%, with camps and camping sites generating 8% higher revenue compared with the same period last year. Tourist resorts and travel agencies generated revenue on par with the revenue generated in 2011. iNavis Maritime Innovation Centre in Šibenik iNavis Maritime Innovation Centre is opened in Šibenik as a result of co-operation between the city of Šibenik and the Norwegian Ministry of Foreign Affairs. iNavis primarily focuses on the maritime sector, aiming to provide support for the development of new products, services and companies. A Norwegian company manages the innovative aspects of the iNavis centre. The opening ceremony also covered several workshops on sustainable business development. Creativity in tourism Energo Media Servis Group has given its annual CBTour awards for the most creative and most innovative tourism projects in 10 categories for the third consecutive year, at the recent World Tourism Day. The Šibenik-based tourism company Solaris was the winner of this year’s competition and received a special award for its significant contribution to sustainable development in tourism nationally, the project Dalmatian Ethno Village.

Privredni vjesnik Year V No 215

INVESTMENT IN SPLIT AND KOMIŽA

€36.9 million for port infrastructure €5.5 million contract to finance the first phase of port reconstruction recently been signed in Komiža 166 berths and the necessary infrastructure, will consist of five phases and will be worth €21.6 million. Hajdaš Dončić highlighted the fact that Croatian motorways have allocated €1.22 million for the construction of the Vis-Komiža road, to be completed by the end of the year. Berket Bakota and Edo iniša Hajdaš Dončić, Minister of Maritime Affairs, Transport and Infrastructure, has recently announced that over €27 million are to be invested in the reconstruction of the Split cruise ship berths. Hajdaš Dončić attended the contract signing ceremony concerning the reconstruction of two berths in Split Port worth €4.3 million, financed by Split Port Authority. The reconstruction will provide two 140-metre quays, as well as two 30-metre embarkation/debarkation ramps. The contract was signed by Joško Berket Bakota, the current tem-

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porarily appointed Head of Split Port Authority and Nikša Musulin, the Split-based Pomgrad inženjering representative. Minister Hajdaš Dončić, Luka Brčić, Deputy Prefect of SplitDalmatia County, Berket Bakota and Tonka Ivčević, Komiža, mayor, signed the agreement on financing the first phase of the construction of the fishing port in Komiža worth €5.5 million. The Ministry allocated €3.24 million, the County €0.35 million and the Port Authority €2 million for the first phase of the construction. The entire construction project, which will result in the construction of

Croatian motorways have allocated €1.2 million for Vis-Komiža road Kos, Board President of Croatian motorways, have signed an agreement on the joint purchase for the construction of an access road to the fishing port. Croatian motorways will invest €0.68 million into the construction of a stretch of the road. Tonka Ivčević pointed out that the town of Komiža is planning to apply for the use of the EU Fisheries Fund with this project on 1st July 2013. (J.V.)

“36 HOURS IN DUBROVNIK”

Dubrovnik in the New York Times The New York Times has published an in-depth and an extremely interesting report on Dubrovnik entitled “36 hours in Dubrovnik”, including recommendations for hotels Excelsior, Bellevue and Dubrovnik Palace, by the eminent travel journalist Charley Wilder who visited Dubrovnik last summer. The report is the best invitation for readers to visit and explore this destination. “Dubrovnik is no longer anyone’s best kept secret”, stated the author of the article, describing his first impressions. He stated: “Dubrovnik is gridlocked with tourists during summer. Yet go in autumn and you’ll quickly see what the fuss is about”. “… many businesses unashamedly

cater to cruise ship passengers and other mainstream tourists, but there are plenty of creative local standouts”. The author then continued his report hour by hour for 36 hours over a weekend, recommending things to do and places to visit, such as a cable car ride, the tasting of local wines and exquisite gastronomic delicacies and ex-

ploring a wide range of shopping opportunities. He stated that: “In a city seemingly built to catch the nuances of an Adriatic sunset, finding the right early evening place is a serious business” and recommends the elegant Sunset Lounge at the Hotel Dubrovnik Palace, “an elegant hotel bar where panoramic windows show the light receding over the Elaphit Islands”. In addition, he proposes visiting the Dubrovnik Museum of Modern Art and praises the accommodation in the luxury hotels Excelsior and Bellevue owned by the Adriatic Luxury Hotels Group that has set new standards in the Dubrovnik luxury hotel market. (J.V.)

PV International 0215  

PV International - The first weekly newsletter covering the Croatian economy as well as that of the wider region, in English

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